Privatizing Pensions

Mitchell Orenstein asks how pension privatisation, meaning the partial replacement of pay-as-you-go public pensions with individual funded accounts, spread from Chile in 1981 to more than thirty countries within two decades. His answer concerns transnational policy campaigns rather than domestic politics.

His argument is that the World Bank, particularly after its 1994 report Averting the Old Age Crisis, functioned as the organiser of a campaign that combined research production, technical assistance, conditionality on lending, and the training and placement of officials. Orenstein traces the campaign through three case studies: Hungary, Poland and Kazakhstan, each of which adopted individual accounts in the late 1990s. He shows how the reform coalition inside each country was assembled from finance ministries, central banks and emerging financial sectors, against opposition from labour ministries and unions, and how external actors supplied both the technical design and the political resources.

His analytical point is that policy diffusion is not the spontaneous spread of good ideas but the result of organised proponents with resources. He is careful to show that the campaign succeeded only where domestic coalitions could be assembled, so external influence worked through domestic politics rather than around it. The book was published in 2008, and the subsequent partial reversals, in which Hungary, Poland, Argentina and others reduced or eliminated their funded pillars after the financial crisis, fall outside it and complicate the story considerably.