Hightower Lowdown

George W called it "a great example," declaring that our country should "take some lessons."

The paradigm that has so enamored George is the privatized social-security system that was imposed on the people of Chile 25 years ago by dictator Augusto Pinochet. His scheme of having workers pay into personal pension accounts managed by private investment banks is called the Chilean Model, and it has been hailed by laissez-faire think tanks and the Bushites as a model for privatizing our own nation's Social Security program.

Ask the people of Chile how they have fared under this model's marketplace magic, and the answer is not well. Chilean workers who participate have 10% of their paychecks handed to the private-pension bankers. Because half of the Chilean people cannot afford this deduction, they end up with no old-age pension whatsoever. For those who do participate, the rules are so rigged that 40% cannot accumulate enough money in the system to have a livable retirement.

As a top official of the U.N.Economic Commission for Latin bluntly puts it, "The bottom line is that this system does not work."Well, it might not work for the people, but it's working very nicely for the bankers. The six funds now running the privatized system are enjoying an average annual profit of 50%!

The reason for such astonishing profits is, of course, the same reason that U.S. banks are riding high: exorbitant fees. The World Bank finds that Chilean pension managers are ripping off between a fourth and a third of the workers' payments in the form of commissions and other fees. Compare that to our own Social Security system, which takes only 1% for administrative costs and covers everyone.

Bush is rightwe can "take some lessons" from the Chilean Model. Lesson Number One: Forget it!