But it’s not just E.U. nations that have private Social Security. Robert O’Quinn and I just authored a study for the Fraser Institute about retirement systems in member states of the Organization for Economic Cooperation and Development (OECD).
As far as I’m concerned, the most valuable information in the study is Table 4, which shows that personal retirement accounts based on private savings also exist in countries such as Australia, Chile, Iceland, Israel, South Korea, Norway, and Switzerland.
What makes this data so useful is that some of our leftist friends like to assert that personal retirement accounts are unworkable and impractical.
Yet the Fraser Institute report shows that such systems already exist and are working very well in nearly half of OECD nations.
Here some of what Robert and I wrote in the study.
Even more dramatic, 16 of 38 OECD member states have shifted at least in part to “funded” plans based on private savings. This approach is automatically immune to demographic changes. …Pension policy has important economic implications. Government retirement systems usually involve tax-and-spending burdens that can undermine economic vitality. And with demographic changes, those burdens in many cases will become more onerous, and are often accompanied by risky levels of government debt. …Funded systems have several economic advantages, most notably because there do not create fiscal burdens. People save, and their savings are invested to create an asset portfolio that will, in time, generate income for their own retirement. Consequently, funded systems generate savings that finance additional business investment and boost long-term real GDP growth.
By the way, we also note that most OECD governments have taken steps to control the fiscal burden of government-run pension systems.
25 of the 38 OECD member states have taken at least some steps to restrain the growing fiscal burdens of government retirement plans. Nineteen OECD member states are implementing—or have implemented—increases in the normal retirement age. Nine OECD member states are implementing— or have implemented—automatic indexation of the normal retirement age for changes in life expectancy. Five OECD member states have replaced government defined-benefit plans with government notional defined-contributions plans with implicit adjustments for changes in life expectancy.
Since America’s Social Security system is wildly out of balance, something big eventually will have to happen.
*I included an asterisk in the title because none of this good news applies in the United States. America’s outgoing president has a head-in-the-sand approach to Social Security and America’s incoming president has a head-in-the-sand approach to Social Security.
Dan Mitchell is co-founder of the Center for Freedom and Prosperity and Chairman of the Board. He is an expert in international tax competition and supply-side tax policy.
