With Pension System a Mess, China Calls Cato

This article originally appeared in the Washington Post on August 21, 2001 at http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A38468-2001Aug20.

First Nixon went to China, and now the Cato Institute is heading to the Middle Kingdom to promote a pension plan that potentially could transform the world's largest communist state into the world's largest stockholding nation.

Cato will co-sponsor with Peking University a conference Nov. 8 on China's collapsing pension system. Ed Crane, Cato's founder and president, and pension experts Jose Pinera and Michael Tanner are featured on the program.

The closing address will be given by Liu Mingkang, governor of the Bank of China and the country's Alan Greenspan.

Whatever do these communists see in Cato's free market-loving, government-hating, individual-rights promoting Libertarians? Apparently quite a bit.

China's interest in Cato is born of necessity. The country's pension system is in chaos. The government provides nothing except free rice to elderly rural residents. In urban areas, state-owned businesses provide pensions -- but many are going bankrupt and the government can no longer subsidize old-age benefits.

The Chinese rejected a U.S. style pay-as-you-go pension system a decade ago. Their search for something different brought them to Cato, a leader in thinking on free-market pension plans. That first Chinese delegation apparently liked what it heard: In the past six years, a dozen more have dropped by Cato headquarters in Washington to talk pension reform, said Tanner, Cato's director of health and welfare studies.

Chinese officials are intrigued by a Singapore-style pension system, he said. It would allow workers to set up individual accounts, and the money from these pooled accounts would be invested by a single financial institution, probably the government-controlled central bank.

That's hardly a free-market solution, Tanner said. Instead, Cato has been promoting a system in which individuals would be allowed to set up retirement accounts and decide themselves how to invest the money.

The Cato plan has important advocates within the government -- and powerful detractors. "It would be quite a change," Tanner said, instantly "making the worker's paradise into a nation of capitalists."

ALL IS VANITY: How much would you pay to cruise the nation's highways with personalized tags reading ECONGOD or ME-SMART? That's a question state government might want to ask, says John Gear, an adjunct scholar at the Michigan-based Mackinac Center for Public Policy. He says the state could raise some needed cash by auctioning off prime vanity license plates.

Right now in Michigan, it's first come-first served if you want a particular vanity tag. If the person behind you in line would have paid $1,000 for the KISS ME plate you just snagged for $35, tough luck. Gear says this "is inefficient because it ignores the market-based reality that many fractured phrases and bon mots [he suggests EYE DOC, GOFISHN and GO BLUE] are desirable to a number of people and companies."

Gear's solution: "The legislature should have the secretary of state set up an online auction system so that any Michiganian can bid on any available anagram, with each one going to the highest bidder each year." He suggests two weeks of Internet bidding, after which the winner would get rights to the plate for a year.

PAYING FOR PROTECTION: The world spent an estimated $194 billion on policing last year, or about $32 for every man, woman and child on Earth, according to Graham Farrell of the Police Foundation.

That's equal to less than one-third of total government spending on public health -- $631 billion -- but five times the $38 billion the world spent at McDonald's restaurants in 1999, Farrell said.

"The United States spends by far the most of any country on public policing: about $40 billion" each year, he said. "But on a per-capita basis, it ranks eighth" with spending of about $180 per person last year.

Troubled Northern Ireland appears to be the world's biggest spender, paying out an estimated $668 per capita, Farrell and his research team reported in the latest issue of the International Journal of Comparative Sociology.

Second in police spending, at least among the countries and regions his team studied: tiny Switzerland, which spent an estimated $347 per capita. Farrell noted that the biggest per-capita spenders tended to be relatively small, wealthy countries. In third place was the Netherlands ($237), followed by Liechtenstein ($220).

Among the world's cheapskates: Japan, which spent $21 per person for police, and India, which spent about 23 cents, Farrell said. Farrell, the foundation's deputy research director, moves in the fall to the University of Cincinnati to teach in the division of criminal justice.

ELECTION? WHAT ELECTION? Talk about voter apathy. A survey sponsored by the Asia Foundation in East Timor in late May found that only 5 percent of its citizens knew why their country was having an election this year. For the record, the Aug. 30 vote is to elect a Constituent Assembly that would draft a constitution.

Other poll results plus detailed informa- tion about the upcoming elections in Indo- nesia's East Timor province are available at www.easttimorelections.org.