José Piñera, Augusto Pinochet's former labor minister, has spent recent years in self-imposed exile at the Cato Institute extolling the virtues of the privatization of Chile's Social Security system. Last week, the New York Times op-ed page allotted him abundant space for his now familiar rap about why the United States should follow Chile's model of pushing workers to depend primarily on personal investment accounts for their retirement income. But notably, he provided no facts or figures about what the upshot has been in Chile since it began privatization in 1981.

Piñera didn't mention, for example, that a report this year from the World Bank, once an enthusiastic privatization proponent, expressed disappointment that in Chile and most other Latin American countries that followed in its footsteps, "more than half of all workers [are excluded] from even a semblance of a safety net during their old age."

Other cautionary factoids from recent reports by Stephen J. Kay of the Federal Reserve Bank of Atlanta about Chile's experience:

• Investment accounts of retirees are much smaller than originally predicted—so low that 41 percent of those eligible to collect pensions continue to work.
  
• Voracious commissions and other administrative costs have swallowed up large shares of those accounts. The brokerage firm CB Capitales calculated (see english language discussion by Stephen Kay here) that when commission charges are taken into consideration in Chile, the total average return on worker contributions between 1982 and 1999 was 5.1 percent—not 11 percent as calculated by the superintendency of pension funds. That report found that the average worker would have done better simply by placing their pension fund contributions in a passbook savings account.
• The transition costs of shifting to a privatized system in Chile averaged 6.1 percent of GDP in the 1980s, 4.8 percent in the 1990s, and are expected to average 4.3 percent from 1999 to 2037. Those costs are far higher than originally projected, in part because the government is obligated to provide subsidies for workers failing to accumulate enough money in their accounts to earn a minimum pension.

The World Bank report paid particular attention to the relatively positive experience of Brazil in alleviating poverty by making adjustments to its existing defined benefit retirement program rather than pursuing privatization. In classic bureaucratese, the report concluded: "Countries such as Brazil that have well-developed capital markets may well choose to change the parameters of their public PAYG pension systems rather than switch to a mandatory funded scheme." In other words, maybe privatization isn't such a good idea for advanced countries after all.

Greg Anrig is vice president of programs at The Century Foundation.