Pension fund capitalism: a causal analysis

Abstract

Since 1980, UK individual pension and retirement assets have increased about twelvefold to around £1.5 trillion. Over the same period, US household retirement assets have increased about tenfold to more than US$7 trillion. High rates of asset growth have also been observed for Australia and Canada. Notwithstanding their current high standards of living, countries in much of continental Europe have not shared in these extraordinary rates of growth of pension assets. In fact, many analysts believe that their long-term prosperity is threatened (relatively speaking) by inefficient, institutionally cumbersome finance sectors. While saving now for retirement has significant advantages for beneficiaries, less recognized is the fact that the growth of pension assets in the Anglo-American economies has profoundly changed the financial structure of these countries. In this paper I explain how and why pension assets have grown so large in the Anglo-American countries, beginning with a historical account which helps to identify the reasons why German and continental European countries (excluding The Netherlands and Switzerland) have not shared the same rates of growth in pension assets. In doing so, the paper develops a causal model which discriminates between various causes of Anglo-American pension fund capitalism: structural determinants (institutional framework), secondorder determinants (postwar conditions), and third-order determinants (the flow of contributions). The identified causal logic integrates structure with historical and geographical contingency. Implications are also drawn regarding the significance of Anglo-American pension funds for global capitalism.

Varieties of Power in Latin American Pension Finance: Pension Fund Capitalism, Developmentalism and Statism

“…In order to capture this diversity and track evolutionary patterns of relative convergence and marked divergence in pension finance, a new typology is suggested here. It departs from the Anglo-American notion of 'pension fund capitalism' (Clark 2000) and further specifies pension finance as also revealing dynamics best described as 'pension fund developmentalism' and 'pension fund statism'. The typology is not only aimed at capturing more empirical nuances in Latin America; it can also serve as a reference for cross-regional analyses, much as pension fund capitalism has inspired investigation and 'translation' beyond its original case studies.…”

“…They do so as consumers of financial products, promoters of financial innovation and supporters of the development of global financial flow management and accounting (Clark 1998: 150). Importantly, pension funds significantly 'affect the structure and performance of nation states and the global economy' (Clark 2000: ix;Clark et al 2009). In fact, in this view, pension fund capitalism is both a product of the retreat of the state in financial institutions and a development that further undermines 'the nation state's status as a significant economic agent' (Clark 2000: 37).…”

“…For him, pension funds are ‘an essential component’ in securities markets, responsible for the ‘incredible accumulation of capital pools’ that can substantially influence local markets (Clark et al 2009: 4). They do so as consumers of financial products, promoters of financial innovation and supporters of the development of global financial flow management and accounting (Clark 1998: 150). Importantly, pension funds significantly ‘affect the structure and performance of nation states and the global economy’ (Clark 2000: ix; Clark et al 2009).…”

Value Judgments at the Heart of Green Transformation: The Leverage of Pension Fund Investors

“…Large-scale institutional investors managing pension funds initially emerged and shaped Anglo-American economies (Clark 1998). Since around the turn of the last century, a shift toward a global model of capitalized pension arrangements has been seen (Dixon 2008).…”

“…These altered conditions within so-called pension fund capitalism (Clark 1998) demand new competences and practices. Fund strategists need to understand and account for overarching shifts in politics, legislation, and the environment and segmental developments in the market in terms of the social, economic, and technical developments that will affect how we live and what we value in the future.…”