Social Insecurity

By Abby Scher

This article is from the January/February 1999 issue of Dollars and Sense: The Magazine of Economic Justice available at

This article is from the January/February 1999 issue of Dollars & Sense magazine.

issue 221 cover

Those hopeful that last October's stock market drop will stop talk of privatizing social security should think again. More and more members of the business class are uniting against the program, and they're backed by an international wave of interest in channeling social security taxes into private retirement accounts.

Their growing unity is disturbing. It's no accident that in 1934, when Social Security was created, the business world was divided. Big corporations like GE backed its formation (perhaps since many already offered pensions of their own). By allying with reformers, they offset the opposition of the small business people in the National Association of Manufacturers (NAM).

By 1939 NAM came on board, and its support continued—until recently. In September, right before the stock market drop, NAM announced it was forming a coalition of businesses to push for personal retirement accounts. That same month, the U.S. Chamber of Commerce issued a study supporting privatization written by Peter Ferrara, chief economist at the right-wing Americans for Tax Reform and Cato Institute fellow.

The big financial houses are, of course, the front runners in the fight, greedy for the fees they'll receive from the personal accounts. American Express Financial Services, Fidelity and other Wall Street companies shamelessly cosponsor the libertarian Cato Institute's campaign for privatization, cochaired by Jose Pinera. Pinera was the minister of labor and social security under Augusto Pinochet, the Chilean dictator now charged with the murder of dissidents during his regime. Pinera oversaw the privatization of Chile's system in 1981, which has since staggered under charges of corruption and inefficiency.

With the closing of the Main Street/Wall Street divide in the U.S., it seems we're close to business unity in support of privatization. Whether the labor unions (whose voice is not loud enough on the issue) and the American Association of Retired Persons will have the clout to fight this array of forces remains to be seen. Back in 1995 French unions managed to block their conservative government's move to privatize, and elsewhere in Europe popular support has slowed privatization.

In general, more democratic countries haven't taken the privatized route in the '90s (with the exception of Australia in '96). But the World Bank is promoting the scheme, and countries more vulnerable to its influence are falling for it. In Eastern Europe, Hungary was the first to set up private accounts, beginning in January 1998, as did Peru in 1993, Argentina and Colombia in 1994, and finally Mexico, Bolivia and El Salvador in 1997. Mexico was the big shocker, when its ruling party pushed through private accounts despite strong pressure from oppositional labor unions and others. Hopefully we will build a more effective coalition in defense of social security here.

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