Privatizing Pensions: The Transnational Campaign for Social Security Reform (review)

Mitchell Orenstein’s book, Privatizing Pensions: The Transnational Campaign for Social Security Reform, focuses on the role of national and transnational actors in shaping pension and welfare state policy. It will be of interest to pension policy scholars, especially those interested in the recent spread of support for mandatory individual savings accounts.

Orenstein investigates the recent growth of pension reforms, including the introduction of individual accounts in the 1990s and early 2000s. He notes that in the past two decades, over 30 countries have implemented changes to their pension laws. He contrasts these rapid changes with the relatively slow initial adoption of social security pensions, which occurred primarily between the 1880s and 1990s. The introduction of social security pensions, as he shows, moved from place to place, with higher income countries adopting pensions in earlier decades, and lower income countries in later years. The dates that Orenstein provides regarding initial adoption of social security pensions, together with the dates of more recent privatization reforms, constitute significant contributions to pension policy research.

Most traditional explanations of welfare state and pension policies focus on the role of political actors within nations. Yet as Orenstein argues, many trans-national figures have been influential in privatizing pensions. Transnational policy actors have no formal decision-making authority in the countries whose policies they wish to influence, so they rely on informal means. This influence includes expert and moral authority as well as resource leveraging. Orenstein demonstrates that policy-making processes have distinct stages, including development, transfer, and implementation. The role of different actors, including transnational policy actors, change from stage to stage.

Orenstein explores three case studies of pension privatization in detail, namely Hungary, Poland, and Kazakhstan. These studies demonstrate conclusively that transnational policy actors have played a significant role in policy change. Orenstein also shows that of the 30 countries investigated, only three, Korea, Slovenia, and Venezuela, were able to rebuff transnational actors’ efforts. Moreover, two specific countries’ privatization programs, Sweden and the UK, had no apparent involvement of transnational actors. The fact that these latter are higher income countries than those where the transnational actors are more influential leads Orenstein to suggest that transnational actors may be more influential in middle and lower income countries.

Factors that make transnational policy actors particularly effective, according to Orenstein, are the abilities to unify disparate people around a distinct set of policy ideas, to use multiple lines of persuasion, and to adapt to changing political and economic pressures. The World Bank has been particularly successful in maximizing these abilities. As Orenstein shows, the Bank has typically used seminars and conferences to identify key officials in finance departments, and to persuade these officials to act as champions of pension reform in their countries. The Bank has also provided technical support to such figures so as to help them convince other key actors in their national government, as well as to argue persuasively in discussions with stake-holders and the public. In some cases the Bank has placed its staff in ministries so as to assist with reform processes. On occasion, leading staff of the ministries have been recruited to work for the Bank. And in some cases, the expert and moral leadership of the Bank has been rein-forced by making pension reform a condition of loans from the Bank or from the International Monetary Fund.

Transnational policy actors have tended to act in coalitions, and Orenstein identifies a number of actors who have supported the Bank in its reform efforts. These include the US Agency for International Development (usaid), the Organization for Economic Cooperation and Development (oecd), regional development banks, the former Chilean Labour Minister who introduced individual accounts in that country, José Pinera and financial institutions like ING and Citi Group which funded conferences, and think tanks like the Cato Institute.

Orenstein makes it clear that researchers should look beyond the role of domestic policy actors in trying to understand pension and welfare state reform. Thus he emphasizes the importance of...