Posts in "Chile"

By Julie Borowski at 2:38PM

Aug 26, 2010

America Needs to Take Social Security Lesson from Chile

In the current Social Security debate, the left often attempts to label those in favor of private accounts as loony. Typically, supporters of the Social Security status quo use scare tactics in efforts to convince the American people that private accounts would be “risky” by “gambling your Social Security on Wall Street.” President Obama pledges that he will “continue to fight to make sure we do not jeopardize the future of Social Security with risky schemes that leave our seniors vulnerable."

In America, how risky would private Social Security accounts be? For this answer, we can look at the country of Chile for some insight. Chile once had a Social Security system similar to what the United States has now. Prior to 1981, Chile’s Social Security system faced a crisis— its Social Security deficit rose to about 25 percent of the country’s economic output. Chile’s efforts to “fix” Social Security by rising the retirement age and cutting benefits proven unsuccessful. Finally, in 1981, Chile emphasized individual liberty by allowing workers the choice to invest in personal Social Security accounts.

In Chile, 93 percent of workers have voluntarily chosen personal accounts rather than government controlled accounts. On the other hand, Congress has trapped all American citizens in the compulsory government run Social Security with no other retirement savings options. Those Chileans who opt for a personal account contribute 10 percent of their wages to one of 20 pension funds of their choice. Unlike the United States, Chileans are able to pass the remaining balance in their pension funds to loved ones upon their death.

False Compassion: Not Compassionate at All

Much has been said about the difference in death tolls in the Haitian and Chilean earthquakes: Though the quake in Chile has considerably stronger, tens or possibly hundreds of thousands fewer people died. While some of this is due to physical factors such as the distance of the quakes from the surface and from large cities, many have also drawn connections between the types of economies in each country and their ability to deal with these tragedies (Chile has a much stronger free market).

But regardless of whether that connection is causation or simply correlation, any time is a good time to pause and consider the effectiveness of our charity. A new article at Civil Society Trust argues from a Christian -- though in this case probably universally applicable -- perspective that a necessary component of true compassion is effectiveness:

At the end of the day, most of the programs and policies of government initiated in the name of helping people amount to rounding up resources from the private sector and redistributing them to others. And there are plenty of people who argue we need to do more of that. But if these programs and policies are in fact not working, or perhaps even making things worse, and yet we continue to do them, I would suggest that we are ignoring the original goal of helping others and instead focusing on how these programs make us feel instead....