The privatization of basic public services has become a central issue on the political agenda, both in industrialized and developing countries. Over the last few years policies to privatize water, energy, health, social security and education have given rise to political controversies and social mobilizations in many countries (see Tim Kessler document
, Social Watch, pdf format).
It is in this context that a heated debate is taking place over social security reforms that are currently being implemented in a number of countries, and planned in others. These reforms, which have been especially widespread in Latin America, began in Chile in 1980 and used as their basis the model promoted by the World Bank, as defined in its 1994 book "Averting the old age crisis". Social security reforms have now been passed in a number of Latin American and several Central and Eastern European countries.
Pressure to adopt these reforms has been brought to bear on governments through the structural adjustment programmes imposed by the World Bank and the International Monetary Fund (IMF). Nonetheless, there is an alternative current of opinion, which argues that it is the International Labour Organization or the World Health Organization that should decide the quantity and quality of health and other social services, in order to avoid social rights from being overridden by financial and trading rights. According to a range of social organizations and the ILO itself, the current reform programmes do not comply with the basic principles established by the ILO: solidarity, equity, universality, equal treatment and State subsidies.
The new pension schemes, based on the capitalization of long-term pay-as-you-go systems and individual pension plans, managed by private financial institutions, are based on the idea of the right of ownership over contributions, in the understanding that workers defer part of their current salary for future use, along with the interests due. But, according to analyses and assessments carried out to date, no one can guarantee the security of this future income.
The ILO made the following observations in its news bulletin 2003/1: "We are continuing to witness all over the world a marked tendency towards the privatization of retirement pensions, although it is too early to measure the total impact of these reforms on the income security of pensioners.
In addition, the shift towards contribution-based pension schemes increases insecurity. In Eastern Europe in particular, there are problems relating to the lack of regulation of the private pensions market and of transparent rules for calculating annuities.
The general repercussions on the level of pensions will become more apparent in 20 or 30 years' time, but the introduction of individual savings accounts has already brought into sharp relief significant defects in the system."
According to a document by Ernesto Murro, the complete text of which is available in this report, lately in Latin America there has been a slow-down in the rate of implementation of individual saving plans. In 2002 no new legislation has been passed relating to this matter, in Brazil non-structural reform is being consolidated, and non-structural reforms have also been approved in Venezuela. In August 2002, the new Argentine Minister for Social Security, called on a broad cross-sector of political and social actors to debate reform of the current mixed social security system, on the understanding that it has not fulfilled either its objectives or expectations. In Chile, the Lagos administration has initiated a general debate on the social security system. In Uruguay, the perspective of a changeover in government in 2004, the Alternative Proposal drafted by workers and the fact that public opinion surveys consistently show that the new system has not taken root, also point to a possible future change in policy.
Now that reforms have been implemented in several countries and the debate continues to rage in many others where governments have expressed their intention of introducing such reforms, such as France (where there have been strikes and huge demonstrations against the reforms) and Germany, several analyses and evaluations of the results of this kind of reform are available. As early as October 2000, a statement by the Diakonisches Werk of the Protestant Church in Germany took the following position on this issue: "Due to its different functional logic, private provision cannot replace statutory provision. There are two key arguments in favour of providing reliable safeguards of living standards for middle and lower income groups: private insurance is rarely taken out by persons whose pension provision is inadequate. Voluntary provision-even if subsidised by the State-is rarely an option for persons on low incomes because the population groups at greatest risk of being impoverished consume all their available income." (Social Watch, complete text
in pdf format).
Another important contribution to the debate was made at the 89th ILO International Labour Conference, in its third conclusion relating to social security (see below link to the full text), which states that "When properly managed, social security increases productivity by providing health coverage, income security and social services. In conjunction with a growing economy and active labour market policies it is a tool for sustainable economic development. It facilitates structural and technological changes that require a flexible and mobile workforce. It is important to note that social security, even if it implies a cost for companies, also represents an investment in people, or support for them. In the face of globalization and structural adjustment policies, social security is more necessary than ever (...)