Feed the Beast: Finance Capitalism and the Spread of Pension Privatisation in Europe

Why, since the mid-1980s, have so many European governments decided fiscally to support the development of private retirement savings accounts? Whereas analysts of pension reform in affluent democracies have traditionally considered the development of private pensions as a secondary outcome of welfare state retrenchment, we argue that governments have actively promoted their expansion as a result of financial industry lobbying. In the context of heightened competition between European financial centres that has accompanied the liberalisation and internationalisation of capital markets since the mid-1970s, stock exchanges, together with other financial services organisations, have started arguing that, by creating a vast and steadily growing pool of financial capital, private pension funds could play an essential role in strengthening the competitive position of their home country as a financial centre. Politicians have in turn been attracted to pension privatisation because a strong domestic financial sector could provide their country with greater investment capacities and help create new jobs at a time of deindustrialisation. As both market and political actors have observed policy developments in peer countries, the politics of pension privatisation has been marked by strong international interdependence and patterns of international diffusion. We support our argument through comparative process-tracing of pension reform in three very different cases, namely Great Britain, France and Germany.