Privatizing Social Rights: The Law and Political Economy of Chile’s Pension Transformation

Abstract Chile’s pension privatization represents one of the most radical neoliberal experiments in social security reform, reshaping welfare from a collective right into a market-driven, property-based entitlement. This Article examines how the constitutionalization of pension privatization entrenched inequalities, shielding the system from democratic contestation and embedding a logic of over-propertization, where private property rights supersede social rights. Drawing on a Law and Political Economy (LPE) approach, explicitly concerned with the distributional consequences of legal design, this study traces how, during the Pinochet dictatorship (1973–90), Chile’s 1980 Constitution, and Decree Law 3500 institutionalized financialization and individual responsibility, transforming social security into an asset class managed by private pension fund administrators (AFPs). By legally structuring private capitalization accounts as financial assets with attributes such as ownership, transferability, and enforceability, these frameworks granted private actors control over investment management and risk distribution. The analysis highlights challenges to reversing this model, as judicial claims, pension fund withdrawals during COVID-19, and two failed constitution-making processes reveal legal and political constraints on reform. It examines legislative efforts, judicial interpretations, and collective mobilizations—such as the No+AFP campaign—seeking to restore solidarity. It also explores legitimation strategies, including the discourse of “popular capitalism” and the institutional entrenchment of AFPs within Chile’s political economy. By framing pension privatization as a constitutional and legal project rather than mere economic policy, this Article underscores the global consequences of over-propertization and the urgency of reimagining social rights. In doing so, it contributes to a growing body of LPE scholarship that treats constitutions as terrains of economic power, exposing how legal frameworks both encode and contest neoliberal orders.