December 19, 2011

WE ARE ALL PINOCHETISTS NOW:

In economists' paradise, lessons for US (Edward L. Glaeser, DECEMBER 19, 2011, Project Syndicate)


After General Augusto Pinochet took power in 1973, he eventually turned to a cadre of free-market economists, the "Chicago Boys'' who, like me, received their PhDs at the University of Chicago. Chile's subsequent rapid growth allowed economists to retain some influence. Chile's current president, Sebastián Piñera, taught economics after earning his PhD at Harvard, and his administration has consistently engaged American economists, including me, to provide advice. As a result, policy ideas that would be hard to pursue in the United States have become reality in Chile.

The Chilean government is a model of fiscal prudence. During boom years, it ran significant surpluses, which covered deficit spending during the recent global downturn. Yet Chile's fiscal health also owes much to its aggressively free-market approach to infrastructure, education, and retirement savings. Large infrastructure projects are provided by public-private partnerships and funded, at least in part, through user fees. Chile's children receive vouchers that allow them to choose private or public schools. Instead of relying on a program like our Social Security, workers are required to save for retirement by investing in privately managed pension funds.

In a similar spirit, public pensions in Chile are essentially a defined-contribution system, not a defined-benefit one. So Chile doesn't face a vast unfunded pension liability. The system's transparency means that, unlike our leaders, Chilean politicians can't promise golden retirement packages that will be paid for by future taxpayers. The American cities and states that face a multi-trillion dollar pension shortfall for their public employees should follow Chile towards a defined-contribution system. [...]

Since highways aren't built to eliminate social inequities, Chilean infrastructure policies seem more unambiguously successful. Public-private partnerships have transformed Chile, and, to date, they have invested about 5 percent of Chile's current GDP, primarily in roads. The great benefit of this system is that infrastructure is paid for largely by user fees, which limits giant boondoggles in which taxpayers foot the bill for ever-longer commutes.

The Ownership Society is, literally, fascist.

Posted by at December 19, 2011 10:44 PM
  

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