[stop-imf] ICFTU: World Bank involvement in the privatisation of public pension systems in developing and transition countries

[Robert Weissman]

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 Content: 'World Bank involvement in the privatisation of public pension
systems in developing and transition countries'
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 Dear PRS-Watchers, This ICFTU paper written by Dean Baker and Debayani
Kar critically assesses the World Bank arguments for pension
privatisation; whether it is sustainable, the impacts on savings and
growth, and the poverty impacts of such privatisation. Drawing on
specific case studies, in particular the lessons learnt from Latin
America and Central and Eastern Europe, it concludes that the World Bank
push for privatisation is ideologically as opposed to practically based;
that private initiatives have failed to deliver the benefits promised by
the Bank, and that private initiatives have in fact eroded the much of
the security and benefits received by the elderly (especially women)
under former PAYGO public pension systems. Below you will find a more
detailed summary of paper and a link to the Eurodad website where you
can download the full paper in PDF format.


     Over the last decade, more than a dozen countries in Latin
     America and Central and Eastern Europe have partially or
     completely replaced public pay-as-you-go pension systems with
     funded systems managed by private financial institutions. The
     World Bank has been a major catalyst for this shift, providing
     loans and technical support. The authors argue that the World
     Bank arguments for this shift have largely misrepresented the
     problems of pay-as-you-go systems and distorted and
     exaggerated the benefits of private accounts. This they say
     has occurred as the result of an overly ideological approach
     to 'reform' from the Bank based on a belief in the 'inherent
     superiority of private providers in each and every
     circumstance'.

     The paper examines the transition to funded systems in a
     number of countries and outlines a number of deficiencies in
     the funded systems as compared to the pay-as-you-go systems
     they replaced. Among these deficiencies are: * they have
     generally delivered lower benefits to retirees
       and disproportionately so to women * they have been
     designed, in most cases, to lead to lower coverage of workers
     than under the previous programmes * they have proven to be
     highly inefficient in their
       administration * the transition from public to partially or
     wholly
       privatised plans has posed enormous fiscal strains on
       governments most dramatically so in the case of
     Argentina. There is also an account of the transition in each
     of the
     countries where it has been implemented, examining how the
     previous systems have been modified and the main features of
     the new systems that have been established. The full paper in
     PDF format can be downloaded from the Eurodad website via this
     link: http://www.eurodad.org/articles/default.aspx?id=474