The Chilean privatized system began in 1981, exactly 100 years after Bismarck instituted his system in Germany. It has been 29 years since the system went into effect in Chile so Mr. Pinera now can answer his critics, not only with theoretical arguments, but with hard data.
The results are remarkable. Chile's citizens have on average experienced a 10 percent per year, above inflation, compounded growth rate in their pension funds for the last 29 years. The result is most Chileans are no longer poor, but are, in fact, "small capitalists."
The Chilean government, increasingly freed from paying pensions out of tax funds (almost all Chileans have moved into the private accounts, though they could have stayed in the old government system), is now running a budget surplus of 10 percent of gross domestic product (GDP), which could pave the way for the abolition of the income tax.
The new Chilean system has provided so much investment capital that Chile moved from being a poor country to being a solid middle-income country with the highest per capita income in South America. Critics in the U.S. and elsewhere claim investing pension funds in stocks and bonds is risky, but the real risk to the elderly is being trapped in government social security schemes headed toward insolvency.
Politicians seem to have an aversion to evidence so I have no hope that this will actually happen in the US, but shouldn't we at least have the debate?