Obama praises Chilean economic progress but leads US in opposite direction

March 22, 2011 08:15

One thing that should come of the trip to Latin America is for Obama to take his own advice on Chile and look closer at its economic lessons.

IBD Editorials


President Obama had nothing but praise for Chile’s democracy and economic miracle, declaring it a model “for the region and world.” So why is he obstructing the same reforms in the U.S. that gave Chile its success?

The country was the first nation to try free-market reforms as articulated by the great economist Milton Friedman, whose ideas were still new in 1974.

The Chicago Boys rescued their country with three critical economic reforms: fiscal control, privatization of social security and free trade. It not only worked, it quietly freed the nation from even the military dictatorship and created the vibrant democracy Chile is now.

In the first four years of the new government, Chile’s economy surged 32%.

Next, economist Jose Pinera, Chile’s Labor and Social Security Minister, privatized social security. The plan helped the government balance its books and let workers choose between personal retirement accounts or the bankrupt state-run pension system. Workers could keep their own money, invest it, decide when to retire, and, best of all, owned their pensions as property they could leave to heirs. Some 97% of Chileans switched.

Pinera’s privatized accounts not only outperformed the state system by a factor of 10, but the savings they created provided capital to rebuild the country.


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