Pinochet Pointer: On the Social Security System We Should Have

Although this morning’s Washington Post editorial on the death of Augusto Pinochet (also discussed in the final item at this post earlier today) gave proper credit to Chile’s economy as “leaving behind the developing world, where all of its neighbors remain mired,” it did not specifically mention one of the biggest, if not THE biggest contributors, to that success: its privatization of what had been a Social Security-like retirement system.

This BizzyBlog blast from the past (2nd item at link) will make you wonder why Chile listened to the late Milton Friedman, and we haven’t (the pre-TimeSelect NYT link below still works, but may require free registration):

Why won’t the supporters of Social Security privatization say more about Chile? A New York Times (!) writer (link requires free registration) went there and found that if he had invested his Social Security money in the privatized social pension system (reflecting real results in real mutual funds since 1981’s privatization there), he would be able to retire with benefits nearly triple that of what he’ll get from the US Social Security system.

Chile has had problems with participation by self-employed people and day-laborer types, but the fact is that it has undeniably worked out marvelously for those who are in it. I personally feel robbed by Alan Greenspan, who, though a supporter of private accounts, did not push for them when Social Security was fixed band-aided in the early 1980s.

There’s still a window of opportunity to make this kind of increase in benefit levels possible for retirees 20 years or so from now by taking action quickly. Or we could dither for 5-10 years, and turn into Germany, where the situation is about as intractable as it can get.