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The politics of a broken promise: Risk shifting reforms in Bismarckian pension policies

The politics of a broken promise: Risk shifting reforms in Bismarckian pension policies
 Furio Stamati

2015

Department of Political and Social Sciences, European University Institute, I-50014 San Domenico di Fiesole (FI), ITALY.

ABSTRACT

This thesis deals with a broken promise: namely, a broken pension promise. Looking at Italy and Germany in particular, it tells a story that is fairly common to retirement systems across the OECD. Over the last forty years, pension institutions have been facing major economic and demographic challenges. This 'affordability crisis' has slowly eroded the confidence of large segments of the population in the old pension contract, while paving the way for the anti-welfare rhetoric and initiatives of more than a conservative policy entrepreneur. Cost containment reforms took root and clamped down on pension spending and, what is more, on public responsibility for individual welfare after quiescence. As a result, pension income is lower and riskier now than was expected when today's pensioners entered the labour market. Most notably, it will be even more meagre and uncertain for tomorrow's retirees. By comparing the Italian and German reform patterns, this thesis suggests that answering the puzzle requires focusing on two sets of interrelated transformations: the prominence of so-called 'systemic risks' and the changing ways of political representation.

Risks hereby defined as 'systemic'first emerged in Western political economies in the 1970s, only to turn into a recurring malaise during the following decades (Streeck 2011). Unlike the risks central to the post-war welfare state model, they far outreach the individual level, being borne by the community or by society as a whole. Furthermore, those risks proved somehow resilient to traditional means of public intervention and management. Systemic risks, in sum, have originated a distinctive combination of functional and political effects, ultimately providing a functional as well as a political rationale to risk shifting reforms. Again, since the 1970s political representation has also changed. On the one side, the traditional mass party model has been replaced by new organisational forms, while new parties and party families have emerged, activating novel issues and cleavages. On the other side, industrial representation in the corporate arena changed as well, becoming less organised all over the industrialised world. Systemic risks, then, have further influenced transformations in both the electoral and the corporate arenas, further eroding the political consensus for expanding social responsibility and socialising risks.

It was, in other words, the co-evolution of problems and politics (to put it in Kingdon's terms) to lead popular and strongly institutionalised pension systems to challenge the basic tenets of their pension promises, although this common story played out very differently across different countries as a result of the action of national institutional filters (policy legacies and the functioning of the electoral and corporate arenas).