Imagine it is the year 2025, and you are walking through a sea of professionals, crossing downtown streets quickly in dark business suits, talking on whatever futuristic device has replaced Blackberries. Construction cranes, new condo buildings, modern skyscrapers and help wanted signs are evidence of a booming economy, individual opportunity and a low unemployment. Economic growth has been significantly higher here than most other countries for decades, and editorial pages across the nation give due credit to innovative thinkers like Milton Friedman for having developed the intellectual foundation for a national economic policy based on low taxes, market competition, and individual ownership. There is still heated political debate, but most citizens, and even some members of the intelligentsia, now acknowledge that freedom works.
With government spending escalating, Congressional unwillingness to shift from Social Security to an ownership-based retirement program, and failure to permanently maintain tax reforms that eliminate the death tax and cut tax rates on capital and dividends, the scenario described above may seem like a libertarian pipe dream. But it is not, because the intellectuals and citizens described are not American and the editorials are not printed in English. They are printed in Cantonese, Estonian, Hindi and Spanish, in countries where U.S. free-market ideas are today being successfully imported and implemented.
In the last decade alone, dozens of nations have enacted the best policy recommendations of our brightest minds. The trend started in the 1970s, when Dr. Friedman and the “Chicago Boys” successfully began exporting the ideas of individual ownership and Personal Retirement Accounts (PRAs) to Latin America. The young Chilean labor minister Jose Pinera boldly ran with the Chicago vision in 1981 and the results can be seen and felt in the streets of Santiago today.
Compared to our negative national savings rate, Chile has a national savings rate of 21 percent. Following the passage of their reform, their economy soared past their South American neighbors.
Encouraged by Dr. Pinera, the PRA revolution spreads unabated, with more than 30 countries having replaced their failed defined benefit pension systems with some level of individual ownership and control, including left leaning nations such as Denmark, Sweden, and even Bolivia.