Social Security Lessons
(They still search for ways to privatize)
Of all the efforts made by George W. Bush
to impose his version of crony capitalism, none was dearer to
the hearts of economic conservatives than privatization of the
Social Security system.
This was, after all, proposed in 1962 by
free market godfather Milton Friedman.
What could be more satisfying for a
conservative than to destroy the signature creation of the
president who gave us the American "welfare state," Franklin
Mr. Bush and many other advocates pointed
to Chile's privatized system, imposed by the rightist dictator
Augusto Pinochet, who, years before Mr. Bush promoted an
"ownership society," wanted Chile to become "a nation of
Now, however, as reported in The New
York Times, "Responding to growing complaints that the
privatized pension system is failing to deliver adequate
benefits, the Chilean government has recommended that it be
supplanted by a system in which the state would play a much
In describing government under Gen.
Pinochet, Mr. Friedman once used the phrase "the Miracle of
Chile." As it turns out, the miracle is that good sense is
returning before too many of Chile's citizens have been
Larry Rohter reported last week in the
As things now stand, about half of the
Chilean labor force will not qualify for a pension or will
receive only a minimum payment, for a variety of reasons that
include not having paid into the system for the minimum 20
Commissions to the pension fund industry,
according to some studies, have run as high as one third of
workers' total contributions, and yield the funds a return on
assets of as much as 50 percent annually.
Advocates of the current system consider
the Chilean government's proposed new minimum pension, about
$143 a month, too generous, because it would amount to what
one conservative economist called "a disincentive to
contribute" to private accounts.
All of which illustrates the risks of
privatizing social insurance.
Both Mr. Bush and Democrats are holding out
hope that divided government could produce a bipartisan
solution to Social Security's problems.
Americans should hope so -- and that Mr.
Bush learned something when his 2005, 60-cities-in-60-days
crusade for private accounts utterly failed to convince the
He, Ronald Reagan, Mr. Friedman and Gen.
Pinochet may have believed that government is the problem, but
when it comes to Social Security, the American people don't.
The system must be strengthened, but not simply handed to