The Chilean Model

IBD Editorials ^ | December 27, 2010 | Staff

[Kaslin]

Pensions: Nearly 30 years ago, on the very day Ronald Reagan was sworn in as U.S. president, Chile became the first nation to privatize its social security system. Three decades hence, it has surpassed all expectations.

Decades ago, Chile's then-military dictatorship shuddered at a proposal from then-Labor Minister Jose Pinera to privatize Chile's liability-laden pension system. The military men argued that the public was too ignorant to manage its own affairs and only government's firm hand could be trusted to provide.

Pinera explained that the pension liabilities the government then couldn't pay were not only perfectly payable, but could be converted into actual assets, which would become investment capital to develop the country.

All they needed to do was privatize the system.

The generals eyed Pinera balefully. But their worried junta chief, Generalissimo Augusto Pinochet, told the economist to go ahead.

Thirty years on, Pinera's plan, adapted from the ideas of Milton Friedman, is, along with free trade, one of the two pillars of Chile's success story, surpassing all predictions.

Pinera's proposal began with scrapping the payroll tax on the country's social security system and inviting all workers to take the money they were contributing and move it into a private pension.

[austingirl]

Interesting.

[Jim W N]

There's only one main difference between Milton Friedman/free-market economics and the Keynesian/socialist economic model the liberals espouse. The liberal model has in actual practice NEVER WORKED and free market economies in actual fact are historically and CONSISTENTLY VERY SUCCESSFUL.

The liberals are wrong and the conservative right is right. Other than that, there's no difference between the two.

[Brilliant]

I would like to call it the Milton Friedman Model. It was his idea.

[Jim W N]

I’d give the nod to Adam Smith since that’s who Friedman credited.

[April Lexington]

As I wipe the tears from my eyes...

[the invisib1e hand]

There are things to like about the Chilean model.

[Kaslin]

From the sixth paragraph

Thirty years on, Pinera's plan, adapted from the ideas of Milton Friedman, is, along with free trade, one of the two pillars of Chile's success story, surpassing all predictions.

[LastNorwegian]

Sounds interesting, but this article was too light on details to be useful.

[vladimir998]

We don’t have the guts here.

[MattinNJ]

Pinochet bttt

[ZirconEncrustedTweezers]

All that AND free markets? That settles it; I’m emigrating now! :)

[1rudeboy]

Huh?

[rdcbn]

This would never work in America.

Americans are too dumb to invest their retirement.

We need to entrust our future to smart people like Barbara Boxer, Patty Murray, Nancy Pelosi, Harry Reid, Maxine Waters, Sheila jackson Lee, Charley Rangell, John Conyers, Joe Biden, Olimpia Snowe, Susan Collins, Maria Cantwell, Loretta Sanchez, Ral Grijalva, William “Cold Cash” Jefferson, Steny Hoyer, Carl Levin, Patrick Lehey, Bernie Sanders......

[Tucker39]

Closer to home; I believe Houston, Texas opted OUT of the Social Security system many years ago, ran their own retirement fund for their gov’t employees, and at this date they have $$$$ out the gazzoooto!

[rawhide]

Wasn't there another South American country that confiscated all the private pension plans years ago? IIRC, it was Peru? Anyway, I wonder how that country is doing? And how are the people who lost their private pensions back then, doing today?

I know the dark side democrats would like to do this in America, to bail out the union/government pension plans that are failing.

[stickywillie]

Argentina, and oh what a mess

[Frantzie]

Chile is also a Christian nation. I saw it on TV. Th Chileans are not drooling idiots control by TV who vote for Muslims to destroy their country. They also have private property rights.

[Frantzie]

Nice maracas.

[rawhide]

Thanks for the correction!