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Pension Reform and Financial Investment in the United States and Canada

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  • Daniel Beland

Abstract

This paper explores the meshing of pension politics and financial investment in Canada and the U.S. during the 1990s. Drawing on the institutionalist literature, the paper focuses on the relationship between ideas, finance and institutional legacies in the debate over the reform of earnings-related pension schemes (Canada/Quebec Pension Plan and Social Security). In Canada, the existence of a public investment board in the province of Quebec facilitated the advent of state financial investment as part of the 1998 reform of the Canada Pension Plan. In the U.S., policy learning -- the process by which experts and state officials evaluate the performance of previously enacted policies -- involved mainly a comparison between public and private pension benefits, as the growth of 401(k) and other savings schemes combined with exceptional stock- market performances stimulated financial optimism and legitimized what is commonly known as pension privatization (diverting contributions to individual savings accounts). As opposed to the situation prevailing in Canada, the idea of investing Social Security surpluses in equity faced overwhelming opposition in the U.S., despite the efforts of President Clinton to promote it, notably in his 1999 State of the Union address. Although pension privatization appeared as the most debated policy alternative in that country, the conjunction of divided government, the lack of trust between the President and the Republican majority in Congress, and the absence of short term "fiscal crisis," prevented the enactment of such a reform.

Suggested Citation

  • Daniel Beland, 2004. "Pension Reform and Financial Investment in the United States and Canada," Social and Economic Dimensions of an Aging Population Research Papers 120, McMaster University.
  • Handle: RePEc:mcm:sedapp:120
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    File URL: http://socserv.mcmaster.ca/sedap/p/sedap120.pdf
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    References listed on IDEAS

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    1. repec:cup:apsrev:v:98:y:2004:i:02:p:243-260_00 is not listed on IDEAS
    2. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
    3. Glenn Drover, 2002. "TILTING TOWARD MARKETIZATION: Reform of the Canadian Pension Plan," Review of Policy Research, Policy Studies Organization, vol. 19(3), pages 85-107, September.
    4. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    pensions; Social Security; privatization; policy learning; politics;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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