The Global Financial Crisis and Changing Coalitional Dynamics in East European Pension Privatization

Abstract

Since the 2008 global financial crisis, those East European countries that had partly privatized their pension systems in the 1990s or early 2000s increasingly scaled back their mandatory private retirement accounts and restored the role of public provision. What explains this wave of reversals in pension privatization, but also variation in its outcomes? Proponents of pension privatization had argued that it would boost domestic capital markets and economic growth. By revealing how pension privatization helped increase sovereign debt and how large a part of pension funds’ assets was invested in government bonds, the crisis helped strengthen the position of domestic opponents of mandatory private retirement accounts. But these actors’ capacity and determination to reverse pension privatization strongly depended on the level of their country’s public debt and on pension funds’ portfolio structure. Empirically, the argument is supported with case studies of Hungarian, Polish and Slovak pension reform.