UNIVERSIDAD CATÓLICA SANTA ROSA INGLÉS INSTRUMENTAL I

ESCUELA DE COMUNICACIÓN SOCIAL PROFESOR: MSC. JACINTO PABÓN

3rd PERIOD
READING Nº2: SOCIAL SECURITY IN VENEZUELA
Social security programs operated by governments often create more problems than they solve. All too
often, the social welfare programs in Latin America and elsewhere serve the interests of the
bureaucracies that administer than rather than the people the programs were designed to help. These
programs are often plagued by inefficiency, corruption and special interest pressures (in some
Venezuelan social welfare programs, administrative expenses consume 50 to 70 percent of the budget).
And as these programs grow in size, the tax burden needed to fund them increasing discourages work
and production and encourages dependency.
What do Venezuelans get for their social security? Not much. Although Venezuelans who use the
government´s health services can get medical care for free, the quality of service is so bad that anyone
who can do so pays for care in the country´s small, private medical sector. For example, it is not unusual
for state hospitals to require patients to provide their own sheets for their hospital beds and even to
furnish their own needles, bandages and other basic things. Confidence in the state´s retirement
pension system is so low that 60 percent of the population manages to avoid paying social security
taxes. Because pension benefits for their retirees are low to begin with and not indexed for inflation,
many retirees don´t bother to make the effort to pick up their monthly benefit check.
Two-thirds of all social security service centers in Venezuela are in some form of disrepair and the
system seems more designed to pay salaries to bureaucrats than to provide services to poor people. In
the first phase of the government´s job grants program, the goal was to train and place 28,000 young
workers in new jobs. It succeeded in placing 500. The one program which actually puts money in pockets
of poor, the nutritional grant, at least achieves the goal, but it threatens to expand without limit. The
government keeps redefining eligibility in order to expand the number of recipients and there are now
proposals for a “flour grant”, a “rice grant” and a children´s school uniform grant.
The biggest problem with Venezuela´s social security is that it focuses attention and resources on
programs that work poorly and encourage dependency rather than focusing attention on the only anti-
poverty program that really works: economic growth. If Venezuela could maintain a real economic
growth rate of 6 percent (not inconceivable considering the country´s resources) national income would
double every 12 years and quadruple every 24 years. In other words, each new generation would have
four times as much income as the previous generation. There is no social welfare program that can ever
begin to match that in terms of relieving suffering and eliminating poverty.
The second biggest problem is that most social security programs put power and resources in the hands
of bureaucrats rather than in the hands of individual citizens. Venezuela´s social security retirement
system, for example, takes taxes from workers today in return for a promise to pay benefits tomorrow.
But since the taxes collected are immediately spent, and no funds are being set aside to pay future
benefits, workers can have little confidence that the promises will be honored or that the benefits they
receive will maintain their value, after adjusting for inflation. Because Venezuela´s health care system
gives control over resources to the health care bureaucracy rather than to patients the system responds
more to the needs of the bureaucracy than to the needs of patients.
Privatization could solve both problems. If workers were allowed to maintain private savings accounts as
an alternative to depending on the state to pay retirement pensions, they would have property rights in
the assets that would furnish a retirement income. Not only would they have direct control over their
individual accounts, the increase in real savings would provide a source of new funds for investment and
economic growth. If workers could maintain private medical savings accounts and private health
insurance as an alternative to participating in the health care portion of social security, the medical
market would be forced to respond to patient needs and another source of savings would be created for
new investment and economic growth. Venezuela and other Latin American countries will be far better
off if they reform their social security systems in a way that is consistent with individualism, personal
liberty and economic growth.