Faculty of Economic Sciences NRU HSE Moscow PRIVATIZATION

Faculty of Economic Sciences NRU HSE (Moscow) PRIVATIZATION OF PENSION SYSTEM IN CHILE AND ITS ROLE IN THE FORMATION AND DIFFUSION OF NEW PENSION ORTHODOXY Miryakov M. Moscow, 2020

Faculty of Economic Sciences HISTORY OF PENSIONS 1) End of th 19 century – German Empire (1889), Denmark (1891) … 2) Mid of century – ILO and expansion of social security: the Declaration of Philadelphia, Convention № 109 … th 20 1) 1980 s – Chilean reform and new pension orthodoxy

Faculty of Economic Sciences CHILEAN PENSION PRIVATIZATION (1981) Analytical scheme of state-led pension system (Friedman, 2005) 1) Compulsory provision for old age; 2) Nationalization of the provision for old age; 3) A scheme for redistribution income.

Faculty of Economic Sciences ARGUMENTS OF NEW PENSION POLICY ADVOCATES 1) Macroeconomic argument: pension savings and economic growth. 2) Microeconomic argument: “The pay-as-you-go pension system that has reigned supreme through most of this century has a fundamental flaw, one rooted in a false conception of how human beings behave: it destroys, at the individual level, the essential link between effort and reward…” (Piñera, 1996, P. 1) 3) Population ageing: demographic trends toward decreasing fertility rates and lengthening life.

Faculty of Economic Sciences PENSION SYSTEM AND ECONOMIC GROWTH “Pension savings contribute to the development of the financial market and the creation of an effective channel for transforming domestic savings into investments" — this analytical scheme laid the foundation for the further diffusion of the Chilean model (especially in Latin America and post-communist countries in the 1990 -2000 s).

Faculty of Economic Sciences EMPIRICAL “EVIDENCE” FOR THE ANALYTICAL SCHEME 1) High income replacement rate for participant of previous system (80% of wage, 30. 06. 1978— 30. 06. 1979). 2) High return (~11% per year, 05. 1981— 12. 2000). 3) Stable economic growth (1984— 1998). The new pension policy has been supported by IFIs since the 1990 s. It was consistent with the general policy prescriptions within the framework of the Washington Consensus, one of the key objectives of which was economic growth (Ananyin et al. , 2010).

Faculty of Economic Sciences 2000 -2010: FIRST REAL RESULTS Analysis of pension savings shows that high returns in Chile can be explained by the specific conditions, and not by the structure of the pension system itself (Mittelstaedt, Olsen, 2003). There is nothing in the design of the pension system and financial market that in itself could explain such a high return on investment. Investments in Chile's economy are risky. The high rate of return of 1980 -1990 s to a greater extent can be explained by the privatization (Mittelstaedt, Olsen, 2003. P. 10, 23). The rate of return fell to 3% per annum in the 2005 -2015 s.

Faculty of Economic Sciences LITERATURE Ананьин О. И. , Хаиткулов Р. Г. , Шестаков Д. Е. (2010). Вашингтонский консенсус: пейзаж после битв // Мировая экономика и международные отношения. № 12. С. 15— 27. [Ananyin O. I. , Khaitkulov R. G. , Shestakov D. E. (2010). Washington consensus: Landscape after battles. Mirovaya Economika i Mezhdunarodnye Otnosheniya, No. 12, pp. 15— 27. (In Russian). ] Фридмен М. (2005). Капитализм и свобода. М. : Фонд «Либеральная миссия» ; Новое издательство. [Friedman М. (2005). Capitalism and freedom. Moscow: Liberalnaya missiya foundation, Novoye Izdatelstvo. (In Russian). ] Mittelstaedt H. F. , Olsen J. C. (2003). An empirical analysis of the investment performance of the Chilean pension system. Journal of Pension Economics & Finance, Vol. 2, No. 1, pp. 7— 24. Piñera J. (1996). Empowering workers: The privatization of social security in Chile. Cato’s letter, No. 10. Washington, DC: Cato Institute.