Stephen Kay

Stephen J. Kay is a Ph.D. candidate in the political science department at the University of California, Los Angeles.

Recent Articles

The Chile Con

Advocates of privatizing Social Security point to Chile. But take a closer look at who's really benefiting from the Chilean system.

A dvocates of privatizing Social Security point to the success of Chile. In 1981, Chile replaced its inefficient state-run pension program with a private system where workers fund their own retirements through compulsory private savings. The Chilean solution has captured the imagination of free-market believers the world over. But a closer look suggests that Chile is no model for the United States. One problem is huge management fees. Up to 20 percent of worker contributions go to middlemen. A second failing is that only a little over half of Chilean workers make regular social security contributions. And even for those who do contribute, Chile's new private system provides little progressive redistribution of income. Chile has also benefited from fortuitous timing. Unsustainable high rates of return in both stocks and bonds have exaggerated its long-term success. Even more fundamentally, the two systems are not comparable. Chile's old system was an administrative mess. Like many...