Privatization of pension system in Chile and formation of new pension orthodoxy

Abstract

In 1981 in Chile the Pinochet regime reformed the state-led PAYG pension system into the private pension system. Chilean experiment attracted the attention of both politicians and experts around the world and laid the foundations for the new pension orthodoxy. As a result, more than 30 countries (mostly in Latin America and in the former Soviet bloc) followed the Chilean model and privatized pension systems. The paper considers the design and results of the Chilean pension reform. The aim of the paper is to show the specific path of transformation of theoretical concepts into actual economic policy. The research provides two key results. The first is that although pension reforms of recent decades were influenced by the ideas of liberalism, their design and implementation in fact suited the pattern of the new paternalism characteristic of “neoliberalism”. The second is that implementation of the Chilean model in other countries was due to the persuasiveness of the discourse of the new pension orthodoxy rather than to actual performance of the Chilean pension system.