August 25, 2009


Cameron’s Tories: the heirs to Blairism: Promoting patient choice, regulating our behaviour... Cameron is channelling New Labour circa 1997. (Rob Lyons, 8/25/09, Spiked)

Once upon a time, the UK Conservative Party proclaimed a mix of free-market rhetoric and social moralising. Under Margaret Thatcher, the message (more preached than practised) was that the state was ruining the British economy; the sooner government left business alone to get on with creating wealth, the better. But just as Tony Blair was the product of the domination of the Conservatives in the Eighties and Nineties, so David Cameron is now sounding more and more like a protége of New Labour.

Cameron’s speech to Conservative activists in Bolton, England, last week started by talking about ‘values’. There is, perhaps, nothing so quintessentially New Labour as talking about ‘values’. It’s as if Cameron had been taking advice from Labour deputy PM Peter Mandelson. ‘I know perfectly well that some of the changes we have made in this party over the past few years have not been easy for the party to accept’, Cameron said. ‘But there is one change we’ve made where, frankly, it has felt like pushing on an open door – and that is making crystal clear our wholehearted commitment to the NHS. Why? It’s not to do with ideology, or philosophy, or any abstract political theory. It is the simple, practical, commonsense, human understanding of a fantastic and precious fact of British life.’

In other words, the Conservatives don’t do ideology, philosophy or political theory anymore. All they have is the same pragmatic, managerial approach to politics that New Labour does.

Indeed, she practiced Pinochetism as Blair practiced Thatcherism as Cameron will practice Blairism...

A Working Model (Richard W. Rahn, May 16, 2008, Washington Times)

Thirty years ago, a young Jose Pinera, who had earned a Ph.D. at Harvard, was Chile's labor minister. He saw the coming disaster in the government old-age pension system.

Inspired by an idea from the late Nobel Prize winning economist, Milton Friedman, he developed a solution that empowers workers and gives them real financial security. Pinera-type social security systems have now been adopted by more than 30 countries and cover several hundred million people — for a very simple reason — it works!

Under the Pinera-type social security systems, workers are required to invest in highly diversified, qualified funds. Because they actually own their pension funds (like 401(k) funds in the United States), workers can choose their age of retirement, whether it is age 50 or 80. The longer they work, the more money they will have — but again each individual determines his or her own retirement age. (The very poor and those unable to work are still covered by a government system.)

Mr. Pinera is here in Berlin, selling his concept to German opinion leaders, as part of a multi-country "Free Market Road Show" sponsored by the European Center for Economic Growth and the Hayek Institute of Vienna, Austria.

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.

The Swedish Model (Richard W. Rahn, August 18, 2009, Washington Times)
One notable success has been pension reform. Sweden was the first nation to implement a mandatory government retirement system for all its citizens. Sweden, like the United States and most other countries, was faced with an increasing, unfunded social security liability as a result of low birthrates and people living much longer. After studying the problem in the early 1990s, the Swedes approved, in 1998, moving toward a Chilean private pension system, first developed by former Chilean Labor Minister Jose Pinera. (Seventeen countries have adopted variations of the Pinerian system, which has been very successful in Chile.)

The new Swedish pension system has four key features, including partial privatization, individual accounts, a safety net to protect the poor and a transition to protect retirees and older workers. The benefits have been substantial budgetary savings, higher retirement income and faster economic growth.

Those who wish to chase the Swedish model need first to decide which model they seek: The high-growth, pre-1960 model; the low-growth model of the 1970s and 1980s; or the reformist, welfare-state model of recent years. The irony is that the current Democratic Congress and administration are rapidly emulating the parts of the Swedish model that proved disastrous and rejecting those parts that are proving to be successful.

Posted by Orrin Judd at August 25, 2009 10:48 AM
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