POOR PENSION PLANS
Essay
Russia does not need a Pinochet, but it does need the Chilean economic model. For Russia to grow at self-sustaining annual rates of seven to ten percent for a decade or two -- the only way it can pull itself out of poverty -- it needs much more economic liberalization. Four reforms inspired by Chile's dramatic turnaround can help Russia out of its doldrums: pension privatization, tax reform, radical deregulation of coddled industries, and the replacement of the ruble with the euro. The indispensable element is not a strong four-star general but a team of determined economic policymakers who know that freedom works.
To the Editor:
Few would doubt that the social security systems of Latin America and Russia need reform. But before getting swept up in Jose Piñera's enthusiasm for privatizing these systems along the lines of the Chilean model, one should note a possible unintended consequence of doing so ("A Chilean Model for Russia," September/October 2000).
According to a study by Chilean economist Alberto Arenas de Mesa and American sociologist Veronica Montecinos, the privately managed pension system in Chile has increased gender inequalities in that country since the program's inception in 1980. Because of the way the system calculates benefits, all the disadvantages that women, particularly poor women, suffer in the labor market directly affect the accumulation of funds in their individual retirement accounts. Thus the privatized system yields lower pensions for women than did the state-run program.
DOROTHY DILLON
Former Director for Latin America, U.S. Information Agency
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