Chile’s system of privately managed pension funds, which has now grown to quite impressive global proportions, appears to be a technically astute—if not, of course, socially neutral—solution to the far-reaching crisis of state pensions. The man who originally devised it, José ‘Pepe’ Piñera, is the foremost of the ‘Chicago Boy’ economists, minister of labour under the Pinochet dictatorship and now advocate-general for the pensions system. Clearly he has reason to feel proud of its incredible success.

The current crisis affecting state management of the most diverse economic activities is an example of how broad socio-economic tendencies usually impose themselves on human beings—with the force of climatic cycles or street fashion, as mysterious as the ways of the Almighty. The pension reform in Chile, however, once had a rather more straightforward origin: the old system, with its hundred or more different schemes that never satisfied anyone, had reached the point of bankruptcy and it simply could not struggle on.

Once such new realities appear, however little they may be to our liking, we have no option but to try to understand their dynamic and subject them to critical analysis. At least this may help other countries to come up with less socially regressive variants—something we can already see, in fact, from items of legislation recently adopted in a number of developed countries. The same critique may further show that the realities in question are, as always, complex and contradictory and may well contain elements which go beyond their apparent parameters. In the words of the old popular saying, they may even prove to be a ‘a blessing in disguise’.

The new Chilean pension system is sufficiently well known for a lengthy account to be unnecessary. Its essential feature is that the future pensions of Chilean workers will be financed out of a fixed part (10 per cent) of their gross pay, to be individually deposited in investment funds. These funds are managed by private companies known as Pension Fund Associations (Asociaciones de Fondos de Pensiones—or afps), which were specially created for this purpose and are strictly regulated by the State.

The efficiency of the system is assured by the fact that the depositor is free to choose and switch between rival afps. Daily information is provided on the performance of the pension funds, as well as on additional payments such as the around 2 per cent of gross pay currently charged as the afp company’s commission, and approximately 1 per cent for disability insurance negotiated by the afp on the depositor’s behalf. These two deductions, together with the 10 per cent accruing to the pension fund as such, make up the rough average of 13 per cent that Chilean wage earners are presently contributing to the afp system.