When the crisis hit later in the 2000s, governments were under pressure to consolidate public finances, and the temptation to seize the assets of private pension funds grew. In 2010, the Hungarian government effectively raided private pension funds. In Poland, a renationalization of private pensions is currently under discussion. Last year in Slovakia, the government reduced the ratio of contributions to private pension funds, thereby increasing the revenue of the government-run pay-as-you-go scheme.
However, such a scenario was avoided in the country that pioneered private pensions in 1980: Chile. Though Chile has experienced a series of center-left governments over the past twenty years, the private pension system put in place by José Piñera is still running, largely unchanged. The key difference between the Chile and Central Europe cases lies in the fact that Chilean reformers privatized pensions fully, leaving no role for government other than a backstop for people who have not been able to save for themselves for whatever reason.
This insight is directly relevant to the reform challenges facing Arab countries. The current Egyptian government, for example, favors a gradual elimination of subsidies. However, such gradual moves were tried -- and failed -- many times before. Therefore, if a reform of Egypt's unsustainable system of price subsidies of fuels and food is to occur at all, it will need to be rapid and all-encompassing -- as I argue in a forthcoming Cato paper, Solving Egypt's Subsidy Problem.
At the present time, one does not see a lot of reform momentum in the Arab Spring countries in spite of their mounting economic problems. These range from an unsustainable state of public finances to byzantine regulation and omnipresent corruption, which all cripple market competition and keep large segments of their populations in poverty. But when the time to undertake economic reforms comes, reform design will be as important as the political willingness to undertake them. Unless potential Arab reformers can convince their electorates that they are serious about putting in place institutions and policies conducive to economic prosperity by introducing far-reaching systemic changes, Arab countries will continue to muddle through, from one crisis to another.