Interesting thing about blogging... normally, with other web pages, I'd just edit my previous post to clear up the confusion that I've caused over my muddled thinking/writing/both. However, in the spirit of full disclosure, I'll just post the corrections here.
- My first point was just that if the private investments were so beneficial to the Chilean people, it should have affected the underlying poverty rate in the past 30 years. It hasn't.
- A corollary to my first point was that if the you really did end up with a huge windfall (as a % of base salary) at the end of your work, it seems to me people would be falling all over themselves to work in ANY job as long as they could participate in the retirement plan at the end (rather than working in the cash economy). However, given the breadth and depth of that cash economy (according to the article), Chilean citizens still appear to be choosing the cash economy over a government endorsed one. Note: This could be for ANY reason (availability, benefits, salary, etc) but if the market works as it should, and the government package is better end-to-end, the cash economy jobs would slowly fall out of favor.
- My second point was that if the private savings accounts are so much better at generating returns, why not take the existing social security surpluses and put them into the same private savings accounts that we are suggesting for individuals. You get instant benefits and no additional problems. No one is suggesting that because a) the government is using the surpluses today for other things and b) you can't have higher returns without higher risk.
Hope that cleared it up.