May 1st will forever mark a wonderful day for the United States (enjoy hell, OBL), but it was also a historical anniversary for Chile – marking thirty years since Chile became the first nation to privatize social security. Designed to replace unsustainable public pensions, Chile’s private pension system has successfully weathered the global economic crisis and contributed to the country’s economic growth. According to Investors Business Daily, Chilean retirees have enjoyed a 9% rate of return on their private accounts, while Americans under Social Security have averaged a 1% to2% rate of return.
In the 1970s, Chile began to move away from socialist economic principles and adopted a free market system, resulting in vigorous economic growth. Today, they are a Latin American leader in economic freedom, human development, competitiveness, incomes per capita, and low crime and corruption.
Democrats are often quite fond of comparing the United States to other countries, and invariably finding the United States wanting. According to President Obama, Canada is a bastion of efficient healthcare, Spain is a green-jobs innovator, and China is an exemplar of superior infrastructure. While these particular comparisons are all wildly mistaken, it would be worth studying Chile’s methods as we continue to debate our budget and the virtual Ponzi scheme that is American Social Security.