Deficit Jimbo Now Considers Privatizing Pensions — Another Harpercon Following the Worst Examples

Indeed, he is entertaining the very idea of privatizing all that fun retirement stuff.  

The plan would be administered by regulated private-sector institutions, according to the policy draft.

The focus on a new private-sector fund is only one of two options that a majority of the finance ministers agreed to when they last met in June in Prince Edward Island. The second option was to bring in “modest” enhancements to contributions and benefits under the existing, mandatory Canada

Ain’t that comforting?  

Regulated, my ass. Stevie spiteful, like his ol’ idol Dubya, doesn’t believe in regulation. Don’t be fooled.  All will be forced to contributing to some corporations, thinking they’re investing in their own retirement; that they would never see this money again, particularly when the markets tank, as they always seem to do, without fail. It did happen in Poland, starting  in the late 90s under the right winged coalition led by Jerzy Buzek when he was on a kick to privatize just about eveything that was Polish economy.

One of his major reforms was to introduce a so-called ‘second-pillar’ of the national pension system. This in effect meant creating a private pension fund into which taxpayers are compelled to pay into and whose funds are invested on the stock-market – thus ensuring growing pensions for all (the hen really would lay golden eggs.) Now here’s the puzzle. Perhaps it would be a good idea to invest part of the state pension money in the stock-market in an attempt to valorise the pensions. This is of course a risky business – but some limited and safeguarded investments could be worth doing. Surely however the government could do this themselves – even paying some bright young things to advise them and oversee these investments. No. What we needed was to pass these funds over to private pension companies who we would then pay large sums in order to do this for us.

Can you say Ponzi scheme, boyz ‘n’ girls?

Oh, and apparently,  the OFE (Otwarty Fundusz Emerytalny-Poland’s privatized pension system),  as usual the biggest winners out of this scheme were Polish pension companies, who made a net profit of 766$ M in 2009.  Quelle Surprise. Furthermore, the OFE is also partially the reason why Poland’s public debt is increasing.

During the eleven years since the formation of OFE, Polish public debt has risen by around 13% of GDP. Prof. Leokadia Oreziak estimates that the pension system built around OFE has contributed to public debt growing by around 2% of GDP annually. This situation has not only been noticed by critics of the system but also by some in the government

Well, well, well…but did the OFE get scrapped? Of course not! Apparently, much like the US and in Canada, the Poles make for some very powerful lobbiests as well. Like everywhere else, they’re calling for a hike in retirement age as a measure to lower their debt, up to age 67 or 68. Theblogger I have linked to,  cited 71.3 as the average life expectancy of a Pole; imagine, it’s work til you die.  Sound familiar? It should, just another measure to keep the working class desperate.

Lessee who ol’ deficit Jimbo could be emulating now, besides Jerzy Buzek, that is. Oops! Tea-baggin’  Sharron Angle was talking about doing that very same kinda thing with Social Security in the US during that ol’ mid-term campaign.  It was also something Stevie’s idol, ol’ dubya championed as well. Double whammy.

“When I said privatize, that’s what I meant,” explained the Senate contender. “That I thought we would just have to go to the private sector for a template on how this is supposed to be done. However, I’ve since been studying and Chile has done this.”

Ah, Chile!   Another country folks look to when privatized pensions are being flirted with. A privatized pension scheme established by none other than everybody’s favourite dictator, General Augusto Pinochet in 1981, which did end up being expanded later on to include public funding.

Also, according to economist Manuel Riesco, Chile’s privatized pension system failed most of its’  retirees.

The consensus among experts in Chile today is that the country’s private pension system provides for only the upper-income minority of its affiliates. Even this group has complaints that the system is highly unsatisfactory, mainly because of the stiff fees charged by private pension administrators. Six companies administer the pensions and they have become the single most profitable Chilean industry. These companies reaped an average return on assets of over 50 percent a year from 1999 to 2003, even showing themselves to be immune to recession.

Meanwhile, recent studies by the State Regulator of the private pension administrators, Superintendencia de Administradoras de Fondos de Pensiones, conclude that over half of the affiliates of the system will never be able to save enough in their pension accounts by retirement to fund even the “minimum pension,Ó which is currently set at about $130 a month. Not only that but this majority of the workforce is not entitled to the complementary public social security “safety net” either. Two other studies by the government administrator of the public pension system Instituto de Normalizaci—n Previsional conclude that about two-thirds of worker affiliates will be unable to save enough for the minimum pension.

All of the studies concur that the government’s guarantee of a “minimum pension” is ineffective, because very few affiliates in need of that guarantee will qualify for its prerequisite of 20 years’ contributions to the system. Most affiliates do not apply for the non-contributive “assistance pension” offered by the state, which currently amounts to about $65 a month, because it is subject to quotas and targeted toward the extremely poor. This leaves most of the Chilean workforce with no pension entitlement at all — except withdrawing the meager funds accumulated in their individual pension accounts.

These results have been confirmed by none other than the World Bank, an institution that during the past decades championed Chilean-style pension reforms all over the world. In a recent book, suggestively entitled Keeping the Promise, the bank acknowledges that private pension systems are not able to provide income security for old age for sizable portions of the workforce. It suggests that the state should provide some kind of basic pension entitlement that is not subject to any sort of quotas.

Read the rest of Riesco’s article here. It is well worth the read.

Well, boys ‘n’ girls,  we have seen how privatized pensions only profit pension companies in both Poland and Chile, according to the Blogger at “Beyond the Transition”  and Manuel Riesco, respectively, how even government figures, some financial institutions and some of the very wealthy have come out and criticized these pension schemes.  If a mere blogger such as myself, could find the nasties of Privatized pensions without too much difficulty, then how come it is missed on Deficit Jimbo and his minions? Or, as usual, is this simply ideologically driven in an effort to further strip what little power the working class already had?

Case and point, would Deficit Jimbo and his minions invest in the same privatized pension system the rest of us would be potentially forced to contribute to?  Not likely.

And from whom has Deficit Jimbo learned economics? Bernie Madoff and Earl Jones?

And no,  skapegoating civil servants from any level of government simply won’t do.

However a great start would be for these politicians, starting with Deficit Jimbo, to renounce their gold plated pension plans.  Just imagine the good it would do for the economy and the folks they’re supposed to serve.