Capitalist Crisis and Pension Insecurity

This chapter develops the conceptual approach used to explain pension marketization. It first discusses how Americans, relative to their counterparts in other advanced capitalist countries, have had their retirement income more greatly exposed to capitalist market processes and pressures. It then reviews the historical evolution of private pension system in the United States since the New Deal. It draws on crisis management theories to understand the development of pensions in the Unites States. Next, it presents three arguments about how the pension system was changed and oriented toward the market. These arguments serve two functions. First, taken together, they explain each of the episodes of change in the private pension system. Second, they also form the conceptual framework for thinking about the structural contingency of welfare state change.

Reconversion and the Origin of Bargained Plans

This chapter offers a explanation of the proliferation of occupational pension plans after World War II. Principally, it shows that private pension development was neither the result of policy interventions before the end of the war nor the simple result of union strength in postwar collective bargaining disputes. Instead, the turn to occupational pensions was caused by policymakers intervening in labor-management disputes—not principally to compel businesses to adopt occupational pension plans, but rather to establish labor peace in order to capture capitalist growth opportunities abroad. The chapter begins by considering why the Congress of Industrial Organizations was unable to expand the pension benefits offered by the Social Security program after the New Deal, roughly between 1939 and 1968, before turning to the expansion of private pensions.

Conclusions

This concluding chapter returns to the broad question motivating the core analyses of this book: Why, since the New Deal, has the market played a growing role in the distribution of retirement income in America? It draws out the book's main contributions and concludes with some brave speculation on its political implications for the future of retirement security. It argues that in order to exact solidaristic changes in the U.S. system of old-age security alongside progress in other welfare institutions, unions and working people should take a lesson from that past era. Though small, the organized and unorganized alike acted collectively and militantly and used one tactic that has today faded into memory—the strike—to spur policymakers into action. Although we are not locked into a path of marketization, only large scale collective action can get us off it to begin to build a system that ensures that our retired can live financially comfortable and stable lives.

Toward the 401(K) Ownership Society

This chapter explains the rise of defined-contribution plans, such as 401(k)s, after the late 1970s. In the postwar period, policymakers were determined to quiet labor-management conflicts and establish a regularized labor peace that could take advantage of opportunities in war torn markets. As the capitalist context changed, so did this orientation. By the late 1970s policymakers moved to restrain and depress wages to counter a growing inflation crisis. The chapter shows that the rise of 401(k)s, on the one hand, and the decline of defined-benefit plans, on the other, was the inadvertent result of policymakers attempting to revive America's stagnating and inflationary economy.

Turning Labor Into Finance Capital

This chapter discusses how employers gained control over pension fund investment decisions and why, once private pension plans were established, they directed their assets into the stock market. The financialization of retirement funds between 1950 and 1980 was driven by a series of political interventions into the management of pensions by policymakers who were primarily concerned with promoting capitalist growth. Starting in the postwar period, lawmakers on the right argued that the best way to end labor-management conflicts was to drastically roll back the gains made by unions in the Wagner Act. With overwhelming support from business associations, Northern Republicans and Southern Democrats passed the Taft–Hartley Act in 1947. Taft–Hartley conferred much greater capacity to capitalists to follow the best practices on Wall Street when it came to investing their union pension funds.

The Retirement Puzzle

This chapter provides an overview of the book's main themes. This book analyzes the three paths followed by the development of old-age income security over the half century since the New Deal: occupational plans were adopted as a supplement to Social Security; their assets were invested by employers into the stock market; and, most recently, they were turned into 401(k) plans. In particular, it addresses three historical questions: Why was the collectively-bargained occupational pension system established after World War II in the place of real increases in Social Security benefits? Once these private systems were established, what explains the subsequent employer consolidation of pension fund control and the shift of their investment into the stock market, mimicking the investment trends in corporate finance? Why, within the system of employer-provided pensions, was there a subsequent shift toward much riskier defined-contribution plans, such as 401(k)s, away from the traditional defined-benefit plan in the late 1970s and 1980s. The book offer answers to each of these questions and provides a more general explanation of pension marketization through the use of comparative historical analysis.