Domonkos: Cure or Kill – The Global Financial Crisis and the Changing Domestic Politics of Pension Privatization in Central and Eastern Europe

From the Introduction:

Between the mid-1990s and the early 2000s, a significant number of countries in Central and Eastern Europe – but also in other regions of the world such as Latin America – decided to  partially replace their public pension systems with mandatory individual retirement savings  accounts managed by the financial services industry (Müller 1999; Orenstein 2008; Guardiancich 2013; Madrid 2003, see also; Weyland 2007; Brooks 2009). Yet, in the wake of the 2008 global financial crisis, policy-makers in those countries began scaling down these private “second pillars” and restoring the role of public provision. They did so in different ways: Thus, for example, Hungary almost entirely nationalized and suppressed its private pension savings plans in 2010-2011. By contrast, Poland kept its mandatory second pillar operational, but started decreasing the level of contributions paid into them from 2011. Finally, a country like Slovakia saw its governments alternate between a willingness to maintain or to weaken the role played by mandatory private pension funds. How can we explain this weakening of the earlier trend towards radical pension privatization? But also why have countries’ trajectories diverged so dramatically?

 

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