Fast Track: Patron saint of privatization spreads gospel solo

William Shipman, patriarch of Social Security privatization, has cut his tether to the financial services industry and founded his own consulting business to push his ideas.

Mr. Shipman, 57, was eligible to retire last year after putting in 10 years as a principal of State Street Global Advisors, the Boston-based asset management company, and he decided to do so.

He since has started CarriageOaks Partners LLC, a consulting firm in Manchester-by-the-Sea, Mass., devoted to working on privatization and other retirement issues.

Mr. Shipman has been an unflinching advocate of privatization for a decade. Following his 1994 testimony on Capitol Hill laying out a privatization proposal, he was contacted by the Cato Institute, the libertarian Washington think tank that has been pushing individual accounts since the late 1970s.

Most of his efforts at State Street involved advocating retirement reform. He also developed marketing and investment strategies.

Mr. Shipman has been co-chairman of the Cato Project on Social Security Choice since 1995. In that period, he says, “This issue went from being verboten to an open dialogue throughout Europe,” as well as the United States.

A book he co-wrote with former State Street Corp. chairman Marshall Carter, “Promises To Keep: Saving Social Security’s Dream” (Regnery Publishing Inc., 1996), now is being published in Chinese.

Mr. Shipman has been working with the government of China to find ways to move from a pay-as-you-go type of government-financed pension system to a market-based system, as well as ways to administer a market system.

The Chinese also have appointed him visiting professor to their Social Insurance Institute.

Mr. Shipman has lectured extensively across the world on the subject of privatizing government pension plans.

He has spoken at the Gref Institute, a Moscow think tank devoted to free markets and the development of capitalism. He also has been appointed to a supervisory council advising the Russian government on the pluses and minuses of pay-as-you-go social security systems versus market systems.

One of the hardest things about switching to private accounts is paying ongoing benefits during the transition. But Mr. Shipman doesn’t think that’s the most difficult issue.

“I think the hardest thing about moving [to a market-based system] is really the process of educating people,” he says. “It takes time to explain all this stuff.”

“In some countries it’s more difficult than others, because they may not have markets,” Mr. Shipman says. “From my point of view, that doesn’t really matter because they could invest in markets outside their country. But that often becomes a political issue. Countries tend not to want capital to leave a country.”

Investing solely in one country leads to “country-specific risks,” he says. “If a country in question were friendly to capital, not only would the capital not want to leave, but foreign capital would want to come in,” he argues. “The amount of capital that can come into a country is well in excess of the amount of capital that can leave a country.”

Michael Tanner, director of the Cato Project on Social Security, describes Mr. Shipman as being in the “top tier” of experts on the complex Social Security system and on plans to move to a market system.

Mr. Tanner says Cato hopes to stage a number of domestic and international events in which Mr. Shipman will be involved. “It is an active partnership,” Mr. Tanner says.

Mr. Shipman is optimistic.

“As these pay-as-you-go systems react to the demographics, the increasing life expectancy and the decreasing birth rates, what governments have done historically is raise taxes,” he says.

“At some point this increase in taxation begins to hit a wall. People get a sense that their taxes are not buying the same security as the same amount of resources invested in professionally managed portfolios of stocks and bonds.”