1. Privatize social security!
This is a great idea given the many problems with government run social security. The Chilean example has been so successful that it has been adapted by other Latin American governments, and is now being studied by China.
How would it work? Jose Pinera writes about it here:
Under Chile's Pension Savings Account (PSA) system, what determines a worker's pension level is the amount of money he accumulates during his working years. Neither the worker nor the employer pays a social security tax to the state. Nor does the worker collect a government-funded pension. Instead, during his working life, he automatically has 10 percent of his wages deposited by his employer each month in his own, individual PSA. This percentage applies only to the first $22,000 of annual income. Therefore, as wages go up with economic growth, the "mandatory savings'' content of the pension system goes down.
Competition, innovation, good customer service, with some minor government oversight. Is this too hard for central planners in Canada and the U.S. to understand?
2. Privatize public transit: Santiago, and Chile as a whole, has the best system of intercity and intracity buses that I have ever seen in my, admittedly limited time travelling around Canada, the U.S., Latin America, and Europe. This is, of course, before it was usurped by a vicious and inefficient government monopoly, apparently for "making too much money". Yeah, profit is evil, right? Anyhow..
Mike Munger writes:
Hundreds of different bus lines, most of them entirely privately owned, operated freely throughout the city. Some of the lines ran on surface streets parallel to the Metro, adding transport redundancy in case the Metro was having mechanical problems or was simply overcrowded. Competition among bus lines kept fares low, and drivers were paid according to the number of passengers they transported. Other bus routes delivered riders to Metro stops, not because anyone had ordered them to do so, but because that is where passengers wanted to go. And there were several classes of service, ranging from posh express buses that charged high prices down to claptrap jalopies that charged pennies and stopped every few blocks.
Chile experienced the highest rates of growth in Latin America since instituting neoliberal reforms in the mid 1980s. It was the only country in the region (other than maybe Costa Rica) to embrace export led, free market-based economic policies. The results are clear. Chile is now a “developed country” and the first Latin American member the OECD. We could learn from some of these experiments.
So what happens to people who aren't able to work all the time, due to some ailment?
ReplyDeleteIs the only value of being a human in a community being able to work? If you can't, are you not able to be part of any community?
I like the idea of privatized public transit, although I may be a tad biased, as I am currently still living in the clutches of OC Transpo, easily one of the least efficient and most expensive and corrupt institutions in the developed world.
But as to the idea of privatized social security, it still maintains the same problems as no social security.
Namely, it only works best for those who need it least.
I can't offer a better solution, it's a tricky problem. Privatizing seems to hold some benefits, but still leaves many cracks for people to fall through, and the biggest savings seem to go to those who already posses enough to take care of themselves and others. (to an extent)
Well the state takes care of super poor people, at any age, I assume, under some sort of subsidy/welfare program that is separate from SS. in Chile:
ReplyDelete"A worker who has contributed for at least 20 years but whose pension fund, upon reaching retirement age, is below the legally defined "minimum pension'' receives that pension from the state once his PSA has been depleted. What should be stressed here is that no one is defined as "poor'' a priori. Only a posteriori, after his working life has ended and his PSA has been depleted, does a poor pensioner receive a government subsidy. (Those without 20 years of contributions can apply for a welfare-type pension at a much lower level.)
The PSA system also includes insurance against premature death and disability. Each AFP provides this service to its clients by taking out group life and disability coverage from private life insurance companies. This coverage is paid for by an additional worker contribution of around 2.9 percent of salary, which includes the commission to the AFP."
Assuming the welfare compensation is at all comprehensive, it looks okay to me.
ReplyDeleteBut really, your privatized system is still depending on the market to pay their labour enough to make enough to retire, otherwise the state is still paying for retirement.
The proof is in the pudding: "Pensions in the new private system already are 50 to 100 percent higher". What is more, they are completely sustainable because they encourage savings. B/c our social security is just a tax on the workers to pay for a subsidy to old people, it can't cope with changing demographic pressures (hence, the ponzi scheme analogy). Also, nobody saves. The fact is, people should be saving and shouldn't be relying on the state to pay for them in their old age. I'm not saying the state shouldn't take care of people when things go wrong, but rather that individuals should make plans to take care of themselves.
ReplyDeleteVery clever idea! 10 percent seems like a lot though, but only for the first 22K. Very smart.
ReplyDeleteAnd well done Chile, great case study.
I am disarmed on this one, assuming the pudding holds true.
ReplyDeleteThe elephant in the room for other countries I think is that all of this occurred under Pinochet and his small cadre of evil capitalist advisers from the University of Chicago.
ReplyDeleteWell, I can't help but wonder what great help it might be to a countries pension program if swaths of it's citizens who'd payed into it for decades suddenly went missing, and hence can be sure not to need the pensions later.
ReplyDeleteIn other words, it might help an investment if a percentage of the people paying into the investment suddenly disappear from that investment altogether.
Suddenly, you have more money with less payouts.
The proof of the pudding could come from the sustainability of this over several generations.
Pinochet killed all the pensioners! that bastard.
ReplyDeleteThe lesson here is even a terrible murderous dictator can have smart economic advisers. Of course, i'd resist the urge to conclude (as Klein does) that Pinochet was necessary for this to happen. There were plenty of dictators in Latin America that instituted bad policies (Argentina); and some democracies that instituted good ones (Costa Rica, Colombia, for example).
neo-liberalism ruined Latin America actually!
ReplyDeleteHM
HM: hardly. really terrible, corrupt government policies did. Where free markets were tried early (Chile) it worked out ok.
ReplyDeleteNot to mention many countries in SA went the ISI (import substitution industrialization) route which made them less competitive, efficient and highly protectionist. That was certainly not neo-liberalism.
ReplyDeleteIn response to your argument for privatizing transit, the case for why privatizing bus routes sucks is actually currently being made on an ongoing basis in London, England.
ReplyDeleteThe issue is that, because profit drives those transit systems now (as opposed to the duty to service the city), the routes that have less people travelling on them simply don't receive service anymore.
While your quote paints a rosy picture of the situation in Chile, the fact that "drivers [are] paid according to the number of passengers they transport" suggests to me that those who live a little off the beaten path would get the shaft, as is the complaint in London.
The question is: do you want to subsidize rural transit? If so, there are better ways to do it than a fully public bus system. You could, for example, have a public bus sytem that only services rural areas. I think that would be a good solution for Canada Post - private/public mix, with the public agency servicing rural areas at subsidized rates; and a private system operating in areas that are profitable.
ReplyDeleteOn the other hand, the market might do a pretty good job in rural settings. It's hard to say. In Santigo, rural routes were serviced, but they were more costly. After all, a private firm has to make up the cost of fewer passangers.