Skip to comments.Chile's Private Social Security System Turns 30
Posted on 04/30/2011 6:52:33 AM PDT by IBD editorial writer
May Day socialists' paean to class warfare evokes memories of Soviet tanks in Red Square and leftist radicals rioting. But Chile celebrates the actual empowerment of workers.
May 1 marks the 30 years since Chile became the first nation to privatize its social security system. By turning workers into investors, the move solved an entitlement crisis much like the one America faces today.
"I like symbols, so I chose May Day as the birth date of Chile's 'ownership society' that allowed every worker to become a small capitalist," wrote Jose Pinera, former secretary of labor and social security and the architect of this pension revolution. He is now a senior fellow at the Cato Institute in Washington, D.C.
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General Pinochet’s tactics to crush communism can be debated, but this move during the time of his rule was something commendable.
Prior to Pinochet, Somoza forced out the capitalists by stopping up the sewers of their mansions.
The Arab spring offers an opportunity for NGO’s to implement similar economies, yet Obama is too afraid to meddle for fear of appearing imperialist. He de-funded all the ME democracy movements that Bush supported. This is the greatest human tragedy since Islam was invented.
The neocon plan cannot be allowed to succeed or Bush would be hailed for thousands of years.
Over the last three decades these accounts have averaged annual returns of 9.23% above inflation. By contrast, U.S. Social Security pays a 1% to 2% (theoretical) return, and even less for new workers.
In 2005, New York Times reporter John Tierney worked out his own Social Security contributions on the Chilean model and found that his privatized pension would have been $53,000 a year plus a one-time payout of $223,000. The same contributions paid into Social Security would have paid him $18,000.
JUST DAMN. This is exactly the kind of thing we need to be looking at.
This is probably the most important thread on FR today. Perhaps this entire year. And 99% of freepers are probably going to miss it.
The Chilean Model has been discussed extensively here in the past.
Comparison of returns is meaningless. The essential comparison is a sustainable (privatized system) versus an unsustainable model (US Social Security). One factor that makes Social Security unsustainable is the CPI-W COLA. Who is not for a CPI-W COLA? Everyone is for it except that it is not sustainable. Who will fund the CPI-W COLA especially when a nasty bout of inflation occurs? Obviously the Social Security model is also broken because there is no asset pool to fund benefits. Comparisons of returns assumes that both systems are sustainable. We will never win a debate on Social Security unless we can convince the public that Social Security is not sustainable. Unfortunately, phony government accounting obscures the unsustainability. Seniors (especially the greatest generation) has been a solid voting block resisting change. Of course, the greatest generation was on the front end of the scheme, protecting intergenerational theft.
Was this not what GWB was proposing in his attempt at SS reform? Or something similar?
Agreed. He wasn’t ruthless enough.
Pinochet has an interesting story. While I generally don’t want to support a military dictator, he ultimately saved his country from falling into a Chavez-style crypto-Communist hellhole...and even his democratically elected successors have been smart enough to continue his policies, more or less.
Isn’t Sebastián Piñera a pretty decent guy? Seems to be and he’s definitely a capitalist.
The left is guilty of using the defense that a bad person (or whom they percieve as bad) can never have a single good idea.
Similar to how most of Africa is commie now, they felt that since Capitalism was the idea of white colonists (or so they thought), that it must be bad and therefore abandoned...and look where that got them.
The hardest part of selling it is the fact that it was implemented by a dictator.
We’d just have to emphasise that even bad people can have good ideas and this just happens to be one that worked out well. The evidence speaks for itself.
Imagine what a free nation could do with such an idea!
How could we launch a campaign to convince younger voters that they’ve been effed over by Grandpa?
In all honesty, there would have to be a phase out where people recieving SS today and those scheduled to in less time than they could build a sufficient balance in their private account would likely have to be set up to get something under the current system.
Incredible story - thanks for telling it, did not know this. Might just give Sharron Angle a call. The garbage hurled about Pinochet needs to be disposed of properly. I’d like to know who hurled it.
That’s correct, you can’t cut the old people off - they have paid in - and with cash they could have been saving in a more profitable 401k, and they had no say in whether to pay of not. The old people are not the enemy and they should not be threatened.
The problem is socialism, the disgusting redistributionist nature of the system. Everyone over age 55 should be told no worries, carry on as you planned. Everyone UNDER that age should be offered a CHOICE: private accounts (plus a recognition bond of what they already paid in to be invested in them) or same old Social Security system as usual - $18,000 vs $55,000, whichever they prefered.
In Chile, 97% of workers opted for that private system of their own free will over the existing public system. Union thugs howled but workers did as they pleased, paying no attention to them.
Thanks. I agree with you.
Not to nitpick but the 1980-2005 returns were extraordinary. See how much we got for the past decade, or Japan for the past two.
But for young people the age will be increased so they’ll probably get 5-10 years of social security, if that.
Didn’t Milton Friedman have a hand in creating that system?
I believe he worked on a school voucher system for Chile.