Monday, February 01, 2010

Fiji Breaks its Own Contract

By Michael Field - February 1, 2010
As a junior officer, Voreqe Bainimarama spent a year serving with the Chilean navy, at the worst time of the brutal Augusto Pinochet regime. Bainimarama's response, including fatal torture of soldiers who opposed him, suggests he learned the arts of oppression there. Now, he is cancelling the pensions of those senior citizens who are suspected of opposing him.

This is one lesson he did not learn from Pinochet; in fact even Pinochet was not as stupid as this.
Pinochet's regime, which came into place with the 1973 coup against President Salvador Allende, who killed himself, was catastrophic for Chile, but with one notable exception; pensions. Controversial Chicago School of Economic's guru Milton Friedman arrived in Chile and recommended the creation of Sistema Previsional, a national pension scheme. Without going into detail, the scheme is compulsory for all civilian employees who opt into a defined-contribution system under private management. A government agency supervises the behaviour of the private funds. It's not perfect and the scheme does leave out some people, but it has created a vast and comprehensive social contract with the nation.

Pinochet has gone and democracy has returned, and Chile has found itself, thanks to Sistema Previsional with a saving system that now has accumulated wealth to around 70 percent of the gross national product. Chile is hugely wealthy, thanks to the savings of its own people. It's a remarkable reflection on the Chilean people, that even under the adversity of military rule, they were able to create this. It also says something about the greater society and culture that rises above its politics to create an inter-generational contract worth something. When you are young, pensions seem far away and not worth worrying about. Its why, then, that it is useful to have an element of compulsion; you must invest five percent or 10 percent - whatever, and we, the state and/or employer will match that. It is a social contract that in due course rises about politics. As it is generational in nature, there has to be trust.

The consequences of meddling with the contract, or simply breaking it as Bainimarama is now doing, are frightfully serious. Long after Bainimarama has joined Pinochet in the Valhalla of dictators, Fiji will have to deal with the outcome of the breach of social contract occurring now in Fiji. Like the original contribution a worker makes to superannuation at the beginning of their career, the breach in contract at the beginning seems small, and convenient, but the cumulative effect is major.

Bainimarama cut Sitiveni Rabuka's pension, presumably because he did not like him. That is thuggery, not because Rabuka may or may not be a nice guy, but because his contract was not with this regime, but with the people of Fiji as a whole. In a way, Bainimarama has created the same contract himself; when he is unable to work and is old, the state will, in some way, contribute to his care. Now Bainimarama is going after other pensioners and while stopping a payment is an easy bureaucratic process, the fact is he now has Inland Revenue and the Corruption Commission (the ever vigilant goons on the watch for people running restaurants without a license) attacking the pensioners.

Trumped up charges are investigated and people at the end of their lives suddenly find themselves in a fight with young civil servants who shamefully abuse the old. One wonders at the morality of Fiji civil servants who follow orders and attack the elderly like this; it has a kind of "only obeying orders" quality about it. And of course, all those loyal little workers at Inland Revenue and Corruption must now know this too -- their own pensions are worthless. They too can be written off by direction and whim of who ever is in charge. What's good for the goose....

The Corruption Clowns can freeze bank accounts and starve people. The cruelty is obvious, and barely rates further comment. I wonder if the Hong Kong lawyers who set up the corruption commission are now content to know that after all these years, the best it can do is prosecute restaurants for having no licence and stealing walking-sticks from the elderly.

But my point in raising Pinochet is a simple one; with pensions he could have created a greater Fiji, but instead he has used them to create a mean, frightened and ultimately sad Fiji.

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