JosePinera.org

Remarks at Cato’s 20th anniversary

by José Piñera (May 1, 1997, Washington D.C.).

For me it is a great honor to be one of the 2,000 people here tonight to celebrate the 20th anniversary of CATO. It came as some surprise when I was asked to be one of the speakers for this event. I do not have a long history with CATO. Nor am I an influential Washington insider. In fact, I cannot even vote in U.S. elections.

Perhaps, I am here tonight because I can give testimony to what can be accomplished in 20 years through the power of ideas. I am here to tell you that a country can be transported from the depths of misery to manifest success in just two decades through the extraordinary power of ideas to move people, to shape events and to change the future. I know this because I have seen it happen in Chile.

In the 1950’s Theodore Schultz and Arnold Harberger of the University of Chicago began a remarkable intellectual partnership with a group of economics professors at the Catholic University of Chile. The best Chilean economics students would be sent to graduate school in the United States, and then would return to teach. For 20 years, multiplying and re-multiplying, this process went on. Yet 20 years passed without the opportunity for any of those ideas to be applied.

Moreover, during those first 20 years, even as the free market ideas of the Chicago school were being taught and learned, the Chilean state continued to move farther and farther toward collectivism. Massive confiscations of private property were carried out, first by U.S. –sponsored government, then by a Soviet-sponsored government.

In the long struggle for freedom, there will always be moments of self doubt. When you think of all the forces working against the future that you want, you may ask yourself, what difference can CATO make, what difference can be made by ideas, by the creators of ideas, by missionaries of ideas?

Well, the answer is all the difference in the world. That is not a theoretical answer, but one that I base on my first-hand experience. In the history of Latin America, there have been countless military governments. So there was nothing uniquely auspicious when a military government took power in Chile, and at a time when the political, legal and economic institutions of the country had been devastated. Yet within that apparent vacuum there was something solid. The work of 20 years to build a platform of free market ideas and to train the team capable of putting those ideas into practice and presenting that vision to the people. In other words, it was two decades of labor in the vineyard of ideas that permitted the Chilean experience to completely transcend the typical tendency of military governments in Latin America.

From that time, a new 20 year journey began. The results are well known to you. The freest, most successful economy in Latin America. A model that is helping to promote a capitalist revolution in developing countries around the world. Innovative reforms that are being studied today in Washington and other world capitals, that may offer solutions also for developed countries.

You may ask yourselves: what can we, in the United States, hope to accomplish in the next 20 years. Today, the US face an unfunded Social Security liability equal to 110% of GNP. You feel your country in the throes of a fiscal crisis and an intergenerational conflict. Today, that great source of American power –your young people—have little faith that they will ever see a government retirement check, yet we are told that they have a rising belief in the existence of UFO’s.

I can tell you that the situation faced in Chile, just 20 years ago, was far worse. From the depths of despair, a new system was born, exactly 16 years ago today: on May 1st, 1981. With this system, Chile has accumulated pension savings rate on the level of the Asian tigers, and given workers the greatest ownership share in the productive economy of any country on earth. During the last 12 years, our economy has grown, in real terms, at a 7% annual rate. At that rate, the Chilean economy will quadruple in size in two decades. In recent years, this new pension system has been sweeping through Latin America, and has now been adopted in seven other countries.

Tonight, you may ask yourselves: What can the U.S. accomplish in the next 20 years? Well, if I may make a suggestion: a good start would be to privatize the Social Security system.

In the coming decades, one of the mayor elements that will determine leadership in the planetary race for economic competitiveness will be which countries have been able to solve what has been called “the global pension crisis”. For the United States, there is a window of opportunity. To compete with Asia you must raise your saving rate. Meanwhile, the major economies of Western Europe face an extreme situation: an unfunded social security liability equal to 250% of their GNP’s.

This is a moment for leadership. If the United States and all the other countries of the New World, North, South, an Central America, make this transition in the next decade, the result will be extraordinary: A hemisphere of prosperity and freedom unimaginable anywhere else on the planet.

That is the opportunity that is before you. The battle will be fought with ideas. The CATO Institute will be leading the charge. I am immensely gratified to see this army of 2,000 lovers of liberty here tonight. And I am honored to stand among you.