Nobel Economist and 100 Experts Condemn Corporate Action against Argentina and Bolivia after Rollback of Failed Pension Privatization Joseph Stiglitz, Juan Somavia, Jeffrey Sachs, Jose Antonio Ocampo and 100 experts

Nobel Laureate Joseph Stiglitz, Juan Somavia, Jeffrey Sachs, Jose Antonio Ocampo and more than 100 high-level development experts have issued a statement protesting insurance corporations suing Argentina and Bolivia over the reversal of their failed pension privatizations at closed sessions of the International Centre for Settlement of Investment Disputes (ICSID) of the World Bank. If Argentina and Bolivia lose the disputes, it means that impoverished citizens and elderly pensioners will have to compensate wealthy financial corporations. Read their letter:

“We the undersigned —economists, social security and development experts strongly condemn and oppose the cases:

• Metlife Insurance vs. Argentina
• BBVA Bank vs. Bolivia
• NN Insurance International vs. Argentina

Private insurance corporations are suing Argentina and Bolivia for loss of potential profits as a result of the reversal of privatization of pension programs.

Financial corporations started administering the pensions of Argentinians in 1993 and of Bolivians in 1996. Argentina and Bolivia are among only 30 countries (of the world’s 192) that experimented with privatization of their pension systems. Today, the majority of these countries are reversing the privatization of pensions. In accordance, the Government of Argentina returned to a public pension system in 2008 and Bolivia in 2009.

Pension policy is not about securing profits for private insurance corporations. Pension systems exist to provide income security in old age—to ensure that older persons retire with adequate pensions.

It is the duty of the governments of Argentina and Bolivia to best ensure the welfare of their citizens. In 2008-09, this involved reinstating a public pension system. They did not act alone; other governments also reversed pension privatization because of demonstrated inadequacies/failures in the private pension system:

• Coverage rates decreased or stagnated under private pension systems.
• Pension benefits deteriorated, making private pensions very unpopular.
• Old-age poverty worsened due to low pensions.
• Gender and income inequality increased.
• Private systems were expensive: The high transition costs of privatization created large fiscal pressures.
• Private pension administrators incurred high administrative costs and extracted excessive profits through these extraordinary administrative fees.
• Financial and demographic risks were transferred to individuals; pensioners had to suffer the loss of benefits when these risks occurred, such as during the global financial crisis.
• Social dialogue severely deteriorated.

The governments of Argentina and Bolivia took legitimate decisions in the interest of their citizens that must be respected, as part of a country’s sovereignty. It is reprehensible that investment treaty arbitration allows corporations to initiate dispute settlements against governments and ultimately people in order to continue profiting.

We also oppose the lack of transparency of the process at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). While corporations may argue that procedural protections are needed, these cases affect the lives of millions of Argentinians and Bolivians. They must be open and transparent.

If Argentina and Bolivia lose the disputes, it means that their citizens ordinary people who have had to suffer low pensions because of the privatization— will now have to pay millions of dollars to wealthy financial corporations.

These legal cases should serve as a warning for the majority of countries of the world that have not privatized mandatory pensions but may have pressures to do so: On top of suffering lower pensions, more old-age poverty, and high fiscal costs, you may be sued by the private insurance administrators. We hope that other countries are dissuaded from pension privatization by this corporate attack on government’s right to set policy to promote the welfare of their citizens, an attack made in pursuit of profit and at the expense of impoverished citizens and elderly pensioners.

Signatories:

• Joseph E. Stiglitz, Nobel laureate in Economics, Professor at Columbia University, and Chief Economist of the Roosevelt Institute, USA.
• Jose Antonio Ocampo, former Under-Secretary General of the United Nations Department of Economic and Social Affairs (UN DESA), currently Professor in International and Public Affairs, Columbia University, USA.
• Juan Somavia, former Director-General, International Labour Organization (ILO), Switzerland.
• Jeffrey Sachs, Director of the Center for Sustainable Development at Columbia University and President of the UN Sustainable Development Solutions Network, USA.
• Sir Richard Jolly, former Deputy Executive Director UNICEF and Principal Coordinator Human Development Report, United Nations Development Program (UNDP).
• Sandra Polaski, former Deputy Director-General for Policy ILO, currently Senior Research Scholar, Boston University Global Economic Governance Initiative, USA.
• Jayati Ghosh, Professor of Economics, University of Massachusetts at Amherst, USA.
• Isabel Ortiz, former Director at ILO and UNICEF, currently Director Global Social Justice Program, Initiative for Policy Dialogue, Columbia University, USA.
• Michael Cichon, former Director of Social Security ILO and former President of the International Council on Social Welfare, currently Professor Emeritus Maastricht Graduate School of Governance, United Nations University.
• Carmelo Mesa-Lago, Professor Emeritus of Economics and Latin American Studies, University of Pittsburgh, USA.
• Andrea Cornia, former Director of the United Nations University World Institute for Development Economics Research (UNU-WIDER) and UNICEF Office of Research, currently Honorary Professor of Economics, University of Florence, Italy.
• James Heinz, Professor of Economics and Chair, Department of Economics, University of Massachusetts at Amherst, USA.
• Gibrán Ramírez Reyes, former Secretary General of the Inter-American Conference on Social Security (CISS).
• James K. Galbraith, Professor, The University of Texas at Austin, USA.
• Anis Chowdhury, former Director, Macroeconomic Policy and Development Division, United Nations ESCAP, currently Adjunct Professor, Western Sydney University, Australia.
• Frances Stewart, Professor Emeritus of Development Economics, University of Oxford, UK.
• C. P. Chandrasekhar, Professor and Executive Committee Member, International Development Economics Associates (IDEAs), India.
• Sakiko Fukuda-Parr, former Director of the United Nations Development Program’s Human Development Report, currently Professor of International Affairs, The New School, USA.
• John Langmore, former Director at the United Nations Department of Economic and Social Affairs, currently Professorial Fellow, School of Social and Political Sciences, University of Melbourne, Australia.
• Yilmaz Akyuz, former Director United Nations Conference on Trade and Development (UNCTAD).
• Deepak Nayyar, Emeritus Professor of Economics, Jawaharlal Nehru University, New Delhi, India.
• Oscar Ugarteche, Profesor, Instituto de Investigaciones Económicas UNAM, Mexico.
• Daniela Gabor, Professor of Economics and Macro-Finance, University of Bristol, UK.
• James Midgley, Professor of the Graduate School, University of California Berkeley, USA.
• Manfred Nitsch, Professor Emeritus of Economics, Lateinamerika-Institut, Freie Universität Berlin, Germany.
• Sarah Cook, former Director of the United Nations Research Institute for Social Development (UNRISD) and UNICEF Office of Research.
• Krzysztof Hagemejer, former Chief Social Security Policy at ILO, currently Economist, Collegium Civitas, Poland.
• Manuel Alcántara Sáez, Professor Universidad de Salamanca, Spain.
• Alfred de Zayas, Professor of Law, Geneva School of Diplomacy, Switzerland.
• Oguz Oyan, Professor Emeritus of Public Finance Policy, former President Social Sciences Association, Turkey.
• Diane Elson, Emeritus Professor, University of Essex, UK
• Kevin Gallagher, Professor and Director Global Development Policy Center, Boston University, USA
• Valpy Fitzgerald, Professor, University of Oxford, UK
• Naila Kabeer, Professor of Gender and Development, London School of Economics, UK.
• Radhika Balakrishnan, Faculty Director at the Center for Women’s Global Leadership, Rutgers University, USA.
• Guy Standing, Professor SOAS, University of London, UK
• Ilene Grabel, Distinguished Professor, Josef Korbel School of International Studies, University of Denver, USA.
• Deborah S. Rogers, President, Initiative for Equality.
• Kunibert Raffer, former Professor of Economics, University of Vienna, Austria.
• Rubén Lo Vuolo, Director Académico e Investigador, Centro Interdisciplinario para el Estudio de Políticas Públicas, Argentina.
• Korkut Boratav, Professor, Turkish Social Science Association, Turkey.
• Lena Lavinas, Professor of Economics, Federal University of Rio de Janeiro, Brazil.
• Odile Frank, former Chief, Social Integration UN DESA, currently Executive Secretary, Global Social Justice, Switzerland.
• Trevor Evans, Professor Emeritus, Institute for International Political Economy, Berlin School of Economics and Law, Germany.
• Gursharan Singh Kainth, Director General, Guru Arjan Dev Institute of Development Studies, India.
• Andrew Cornford, Counsellor, Observatoire de la Finance, Switzerland.
• Guillermo Hang, Director, Central Bank of the Republic of Argentina.
• Kolawole Subair, Professor of Economics, Yusuf Maitama Sule University, Nigeria.
• Hari Roka, former Member of Parliament, Nepal, Member of Constituent Assembly, Nepal.
• Siobhan Airey, Research Fellow, University College Dublin, Ireland.
• Karolína Silná, Director Ekumenická Akademie, Prague, Czech Republic.
• Machiko Nissanke, Professor Emeritus of Economics, SOAS, University of London, UK.
• Balancer Singh Tiwana, Professor (Read.), Punjabi University, Patiala, India.
• Arthur MacEwan, Professor Emeritus Department of Economics, University of Massachusetts Boston, USA.
• Eleutério Prado, Professor of Economics, Faculty of Economics and Administration, University of São Paulo, Brazil.
• Oudebji Mohamed, Professor, Faculty of Law and Économics, University of Marrakech, Morocco.
• Roberto Bissio, Executive Director, Third World Institute, Uruguay.
• Biswajit Dhar, Professor Jawaharlal Nehru University, and Head Centre for WTO Studies, Indian Institute of Foreign Trade, India.
• Jens Martens, Executive Director, Global Policy Forum.
• Jürgen Kaiser, Coordinator Erlassjahr, Germany.
• Galip Yalman, President Turkish Social Sciences Association, Turkey.
• Lara Merling, Senior Research Fellow, Center for Economic and Policy Research, USA.
• Rebecca Riddell, Co-Director of the Human Rights and Privatization Project, New York University School of Law, USA
• Alicia Puyana, Profesora e investigadora, FLACSO México.
• Mel Cousins, School of Social Work and Social Policy, Trinity College Dublin, Ireland.
• Bodo Ellmers, Director, Financing for Sustainable Development Program, Global Policy Forum.
• Maria S. Floro, Professor of Economics, American University in Washington DC, USA.
• Sergio Cesaratto, Profesor of Economics, Università di Siena, Italy.
• Vikas Rawal, Professor of Economics, Jawaharlal Nehru University, New Delhi, India.
• Saul Keifman, Professor of Economic Growth, Universidad de Buenos Aires, Argentina.
• Rania Antonopoulos, former Alternate Minister of Labor of Greece, currently Senior Scholar, the Levy Institute of Bard College, USA.
• Matthew Martin, Director, Development Finance International, UK.
• Kavaljit Singh, Director Madhyam, India
• Hee Young-Shin, Professor Economics Department, Wright State University, USA.
• Barry Herman, former Senior Advisor, United Nations DESA; Member, Board of Directors, Social Justice in Global Development.
• Alex Izurieta, Senior Economist, UNCTAD.
• Sabri Öncü, former Head of Research, CAFRAL and former Senior Economic Affairs Officer, UNCTAD.
• Noemi Levy Orlik, Profesora, Facultad de Economía, Universidad Nacional Autónoma de México.
• John Willoughby, Professor, Department of Economics, American University, USA.
• Ritu Dewan, Director and Head, Mumbai School of Economics & Public Policy, India
• Gustavo Indart, Professor, Economics Department, University of Toronto, Canada.
• Al Campbell, Emeritus Professor of Economics, University of Utah, USA.
• Venkatesh Athreya, Honorary Professor, Gulati Institute of Finance and Taxation, India.
• Werner Raza, Director, Austrian Foundation for Development Research, Austria.
• Barbara Fritz, Professor Economics, Freie Universität Berlin, Germany.
• Thomas Pogge, Professor Yale University, USA.
• Moshahida Sultana, Associate Professor of Economics, University of Dhaka, Bangladesh.
• Luiz Vieira, Director, The Bretton Woods Project, UK.
• Rajiv Jha, Associate Professor, Sri Ram College of Commerce, Delhi, India.
• Sevinc Rende, Associate Professor Kadir Has University, Turkey.
• Rosario Arias Peña, Profesora, Departamento de Análisis y Economía Aplicada, Facultad de Economía, Universidad de Panamá.
• Francisco Louçã, Professor School of Economics and Management (ISEG), Lisboa, Portugal.
• Alan Cibils, Chair Political Economy Department, Universidad Nacional de Sarmiento, Argentina.
• Pramod Junankar, Professor University of New South Wales, Australia.
• Lena Dominelli, Professor, University of Stirling, UK.
• Omar S. Dahi, Associate Professor of Economics, Hampshire College, USA.
• Francine Mestrum, Chairwoman of Global Social Justice, Belgium.
• Gregory Andrusz, Emeritus Professor, Social Sciences Department, Middlesex University, UK.
• Fadhel Kaboub, Associate Professor Economics, Denison University, USA.
• Juan Pablo Bohoslavsky, former United Nations Independent Expert on Debt and Human Rights.
• Maria Claudia Camacho, Labor and Employment Section Chief, Organization of American States (OAS).
• Pinar Bedirhanoglu, Associate Professor, Middle East Technical University, Turkey.
• Yavuz Yasar, Associate Professor of Economics, University of Denver, USA.
• Paul Robert Gilbert, Senior Lecturer in International Development, School of Global Studies, University of Sussex, UK.
• Gilberto A Libanio, Professor of Economics, Universidade Federal de Minas Gerais, Brazil
• Gita Sen, Distinguished Professor, Public Health Foundation of India.
• Elissa Braunstein, Professor and Chair of Economics, Colorado State University, USA.
• Jenik Radon, Adjunct Professor, Columbia University, School of International and Public Affairs, USA.

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(This article was originally published in Inter Press service (IPS) news on March 29, 2021)

¹ In Argentina, coverage rates for men fell from 46% (in 1993, prior to the reform) to 35% (in 2002) and for women to only 31%; in Bolivia, they stagnated.
² In Bolivia, after privatization, the replacement rate fell to 20% of the average salary during working life; this is far below ILO international standards.
³ In Bolivia, the proportion of elderly women receiving a contributory pension fell from 23.7% in 1995 to 12.8% in 2007 as a result of privatization.
⁴ In Argentina, initial estimations put the cost at 0.2% of GDP; later the World Bank increased the cost estimate to 3.6% of GDP, 18 times the original estimate; in Bolivia, the actual transition costs of the reform were 2.5 times the initial projections.
⁵ In Argentina, administration costs jumped from 6.6% of contributions in 1990 before privatization to 50.8% in 2002; in Bolivia, from 8.6% in 1992 to 18.1% in 2002 after privatization.