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Ladies and gentlemen, please welcome Don Esra.

Don Ezra: You know how sometimes you're asked two of the three people you'd most like to meet? Well, in my case, I've met one of them, and I've got to know them a little bit. Yes, you know who I'm talking about; Placido Domingo. No, no, I don't mean Placido Domingo, I don't actually want to meet him; he's very talented, very famous, but he's not the person. The reason I mentioned him is that is that the economic editor of London's Sunday Telegraph Newspaper has said, "Dr. José Piñera is the Placido Domingo of the pension world. Grab, beg, borrow or steal a ticket to hear him speak." Well, that's the treat you've got in store for you.

Part 2: http://www.youtube.com/watch?v=A5q74h0aoaU

Part 3: http://www.youtube.com/watch?v=g9JIAu_ptAU

Part 4: http://www.youtube.com/watch?v=rlexnGn7hMc

Part 5: http://www.youtube.com/watch?v=ApTEX-pjjvg

Part 6: http://www.youtube.com/watch?v=NgBKQ9PCn6g

Part 7: http://www.youtube.com/watch?v=nfpNEXb3pBU

Part 8: http://www.youtube.com/watch?v=TiP5M0JNoys

Dr. Piñera is the architect of the world's first privatized Social Security System in Chile while he was minister of labor and Social Security from 1978 to 1980. So why did we ask him to be our keynote speaker? Because we want the same thing in The States? No, we are neutral in that debate. Some years ago George Rustle and Mike Philips identified Social Security reform as potentially a huge change-agent as to how Americans think about retirement, how we think about investing. Just as the introduction of Social Security itself way back in the 1930s changed the perception of the nation and the actions of the nation. And as a player in the financial field, we want to understand the different possible directions that Social Security reform can go in, so we can prepare ourselves, in advance, for success in every scenario. Well, like it or not, one possible direction is the creation of individual accounts. Dr. Piñera has not only done this successfully 25 years ago, he's been asked for input, he's been asked for advice by scores, literally scores of governments all over the world. United States under President Clinton, United States under President Bush; both, the U.K. under Prime Minister Blair, Russia, where he held a 4 hour meeting with President Putin at his dacha outside Moscow. China, Poland, Sweden, Mexico, you name it, they've asked him for input and advice. We bring you the best, he is the best.

One of the ways that I've analyzed Social Security myself, is that depending on its design, it can made subject to basic forms of risk. One is market risk. What if the markets fall, when would you stop withdrawing money from individual accounts? That's a risk. The other risk is political risk. Given that the "pay as you go" arrangements by definition are greatly underfunded and, therefore, subject to amendments periodically by the political process, how are so called promises going to be changed in the future, as is inevitable.

Those of us making up this audience today live with market risk. We're familiar with it, we understand it, we cope with it, it doesn't terrify us. For us, political risk is probably much less manageable and much less predictable. But you know, there's another world. I was a delegate at a recent White House conference on aging and most of the delegates there worked directly with the elderly and the poor. Now what I learnt from them is they know nothing about markets. Markets terrify them. They fear losing everything, yes everything; a 100%. They fear losing it all to a force they don't understand and are forced they can't control. In contrast, they understand the political process very well. They know how to petition for what they want. They know what gives them mental comfort. For them, individual accounts are very worrisome things to contemplate. My point is, remember, we in this room are not a typical consumer of Social Security.

So, because we in the States have never been exposed to individual accounts in Social Security, we've known 70 years of defying benefits. We haven't been exposed to individual accounts, so we bring you in person, the person who can explain how it all works better than anybody else: Dr. José Piñera.

José Piñera: Thank you very much, that was a very generous introduction and I feel very honored to be able to speak at the … summit and have all of you as my audience. It is true I come from Chile, a very long and very narrow country at the end of South America. But please, I do not want to tell anybody a lesson. I do believe that globalization also means the exchange of ideas. I do believe that there are universal ideas. I do believe in the power of ideas. And that's why let me tell you what we did in Chile 25 years ago, and you will be able to decide whether it's useful for your country.

I studied economics in the University of Chile that at that time was almost a fully owned subsidiary of Chicago Economics. So I had very good free market economics. And I leant how free markets, private enterprise, individual responsibility can create prosperity and democracy. At that time, I remember that during my years there, I was always worried about the problem of poverty. We were, of course, a very poor country. But more than poverty in young age, when even a poor person can work hard and maybe get a better wage if he is a good worker … I was terribly worried about the problem of poverty in old age. A person who is 75, 85 years old, especially if she is a woman who live much longer than men, they do not have the ability to work. The physically, the psychological possibility of earning another income. So they depend completely on Social Security. And I was amazed that after a lifetime of paying, in Chile or in other countries, 10%, 15%, 20%, 30%, in some countries even 35% of their income, to some sort of Social Security system, they will end up in old age living in quiet desperation.

So I decided to study this problem in depth, and then I went and had my master's degree in economics at Harvard University and I spent a lot of my time precisely thinking about the problem of poverty in old age. And my conclusion was that there was an enormous mistake in the essence of an unfunded defined benefit, pay as you go, Social Security System. I thought that that system … is not a Chilean or an American idea. You may know that that idea comes from Chancellor Bismarck in Prussia. That is why I always say nowadays Marx is dead but Bismarck is still very alive all over the world. Chancellor Bismarck created the first pay-as-you-go system. Now he was a very good politician and therefore in an age in which the average expectance of living of a Prussian was 45 years old, he set the retirement age at 65. That is, he promised great benefits, but with the hope that nobody will receive it. But a great Austrian economist, Friedrich Hayek, spoke about the law of unintended consequences. Sometimes politicians, leaders do an action - they say, "We'll create this little government program", and they do not know how that program can eventually become a huge problem for the country. So Bismarckian idea spread around Europe, came to the U.S and then President Roosevelt, of course, in very difficult time with the great depression, capital markets were not working. So nobody could criticize President Roosevelt for not having begun a different sort of system at that time.

And, of course, it came also to my country, incidentally, ten years before the U.S. We began in 1925. So by 1980 our system was going bankrupt. A defined benefit, especially at a national level, has what I call a "fatal flow" in destroying the link between contributions and benefits. Benefits are defined by different laws than contributions, and the contributions ...