The Political Economy of Private Pension Funds Around the World

Richard Deeg
Session Organizer:
Marek Naczyk
Ewald Engelen
Thursday, 2 July 2015: 10:15 AM-11:55 AM
CLM.7.02 (Clement House)
Over the past few decades, governments around the world have increasingly reduced the generosity and size of public pension plans, and promoted the expansion of private pension funds – typically defined-contribution private retirement accounts. This is a very significant change because old-age pensions have typically constituted – together with healthcare – the largest item of social expenditure in affluent and middle-income democracies. In addition, pension privatization has very important implications for the functioning of different countries’ financial systems and systems of corporate governance: Private pension funds are indeed among the largest institutional investors in domestic and global capital markets, and, through their equity holdings, they can exert an important influence on investee companies’ behavior.

This panel aims to contribute to our understanding of the process of pension privatization and of its implications. The panel’s specificity is that it will try to take a more global view on these developments. Whereas comparative political economy scholars and students of pension reform have tended to narrow the scope of their studies to – and engaged with literature focusing on – specific groups of nations (e.g. the “affluent democracies” of North America and Western Europe as distinct from “emerging markets” in Latin America, Asia or Central and Eastern Europe), this panel will gather papers on a variety of countries and therefore allow scholars working on different regions of the world to connect with each other.

The panel’s papers will address three main themes. First, they will revisit the issue of the political drivers of pension privatization. While students of pension privatization in emerging markets have shown how finance ministry bureaucrats (Brooks 2002; 2009) or international financial institutions such as the World Bank (Orenstein 2008) have actively promoted the expansion of private retirement accounts, existing studies on the politics of pension reform in affluent democracies have primarily focused on the retrenchment of public pension provision and have assumed the development of private pension funds is a secondary outcome of cuts in public pensions. Yet, policy-makers in affluent democracies have also actively promoted the expansion of private pension plans through the introduction of tax incentives or of possibilities for individuals to opt out of public pension provision. It is therefore important to understand what political factors have pushed policy-makers to encourage pension privatization (cf. papers by Anderson and Naczyk).

A second theme that will be examined is the regulation of private pension funds and, in particular, the “welfare-finance nexus” (Estevez-Abe 2000, i.e. the links between the pension system and the functioning of the financial system (cf. papers by Datz and Tuytens). Last but not least, the session will examine the more recent reversal of pension privatization in a number of Latin American and East European countries (cf. paper by Kay). Pension privatization is far from being uncontested. Studying these more recent reforms is important as they shed light on the changing preferences and power of international financial institutions and of different domestic actors.

The Politics of Choice in Occupational Pensions
Karen Anderson, University of Southampton
See more of: N: Finance and Society