Pension reform in New Zealand and Sweden – A comparative analysis of path dependent reform processes

63 Pension reform in New Zealand and SwedenNFT 1/2004 Over the past 25 years most industrialised countries have had an ongoing debate on public pension reform. Major reasons for this have been the visible pressure on existing solutions of retirement provision from their maturation, the slackening economic growth and the large population cohort born in the 1940s. It has been argued that the proportion of elderly living on retirement incomes would burden the working population severely for a number of years and that overall costs are rising.1 However, this is not the only reason for pension reform that has been argued for. Some scholars mean that pension reform was needed due to existent systems’ unjust distri- bution of both burdens and outcomes.2 Oth- ers have seen the globalisation of capital flows and labour markets as a threat to citizenship Pension reform in New Zealand and Sweden – A comparative analysis of path dependent reform processes by Lars Harrysson and Michael A O’Brien Michael O’Brien michael.obrien@massey.ac.nz Lars Harrysson lars.harrysson@soch.lu.se based “pay-as-you-go” systems.3 To many, not least economists, a more individual, con- tributions based and insurance like system has been promoted, that will, it is said, increase the transparency of the system4 or not distort the functioning of the labour market.5 All of these, however, are presented by economists and from their perspective are seen as efforts and ideas to reach a sustainable system for the future. Several signs in the recent political econo- The social right of a secured income enough for subsistence in old age is an important aspect of social policy. Our objective has been to discuss public pension reform in New Zealand and Sweden. Through comparison we have revealed in- herent forces fuelling as well as restricting pension reform. To better understand the political differences and counter forces an approach of “path dependency” derived from historical sociology, political science and new economic history was applied. Dr. Lars Harrysson, Lund University, School of Social Work, 221 00 Lund, Sweden. Associate Professor Michael A O’Brien, Massey University, Albany Campus, School of Cultural and Social Studies, Auckland, New Zealand. Paper presented at 4th International Research Conference on Social security, Antwerpen 5-7 May 2003. 64 Pension reform in New Zealand and Sweden my of retirement in New Zealand and Swe- den, whatever the strength of the arguments above, show a diverse picture of how neo- liberal economics has held certain solutions before others. We are also presented with a development wherein these solutions have been brought forward as “the single way” to confront the identified threats. In this process a very successful act of ideological enactment has passed by without much notice, namely a circular self-evident reasoning of problem definition and political action6 that can at least partly be described as myths.7 Follow- ing Adam Jamrozik it can be viewed in terms of how a professional group was allowed space to move the political question into a technical one for administrative attention.8 That allowed a focus of social equality to be replaced by one of efficiency. The particular professional group, neo-liberal economists, applied their economic analysis as a scientific judgement, thus legitimating increased indi- vidualism and market orientation. In other words: One solution to a social question of the greatest concern was allowed to be presented as an officially approved objective reality, even though it was no more than an assumed reality embarked from, in its promoters’ view, a desirable model. The speed and depth of change in the two countries discussed here, New Zealand and Sweden, varies consider- ably despite similar arguments behind the necessity of change. So does the outcome. In this context our objective when studying pub- lic pension programs in New Zealand and Sweden is to discuss traits of development and their possible impact on social inequality. Our approach By using a comparison we have had the op- portunity to reveal inherent forces fuelling as well as restricting pension reform. Compari- son between New Zealand and Sweden is motivated by the fact that the two nations are small open economies, with small popula- tions and a long history of public social wel- fare. Both countries have experienced power- ful pressure for reform from several sources, although the outcomes are not the same. Even though passing comparative references are often made between the two countries, exten- sive comparisons, apart from official statisti- cal surveys, are not common. Some excep- tions are Alexander Davidson’s9 welfare his- tory and a few articles by Herman Schwartz10 on the changes in economic and labour market policy in the 1980s and 1990s. Comparative research on a few cases, “small- N”,11 is a feasible way of generating under- standing of welfare change in contemporary society.12 The main disadvantage of this ap- proach is that with only a few cases it is difficult to provide any conclusive explana- tions. Many factors require consideration and in the short term they cannot be fully empiri- cally tested. As is clear from the welfare state retrenchment literature, there are a series of questions and hypotheses that require further research, preferably produced on an inter- disciplinary basis.13 The welfare setting New Zealand has been widely touted as one of a number of countries making substantial changes to welfare state and social policy under the neo-liberal umbrella. The changes of the 1980s and 1990s in New Zealand were pursued across the board in the core welfare state areas of health, education, housing, per- sonal social services and income support. The extent of the changes, their effect and the political and ideological underpinnings on which they were built are well set out in the literature.14 Alongside and as a result of the policy changes pursued by the Labour gov- ernment of the 1980s and its National (Con- servative) successor during the following de- cade, the welfare state changes generated both 65 Pension reform in New Zealand and Sweden significant widening of inequalities and polit- ical and ideological challenges to the assump- tions on which the welfare state in New Zealand has been built. Indeed, it is argued by a num- ber of commentators that the income inequal- ity gaps grew wider in New Zealand during the neo-liberal regime than in any other coun- try.15 However, the gap itself in New Zealand was still not as wide as in a number of other countries. The growth in unemployment, the cuts in income support in 1991 and the taxation chang- es throughout the 1980s and 1990s were the major factors in creating this wider inequality. Along with the introduction of market rentals for public housing (known as state housing) they were the major factors in creating and sustaining the substantial growth in pover- ty.16 These policy changes were built on arguments, assertions and assumptions that the welfare state was creating dependence, was too large and consuming too much in the way of resources and needed to be substantial- ly reduced. While economic considerations were given a high priority as the rationale for the change, it was the ideological and political arguments, which provided the most persis- tent and substantial rationale and the legitimi- sation for the new directions, particularly the directions proposed in 1991 by the newly elected National Party. Sweden, too, has experienced an increasing income inequality during this period of time.17 This is particularly visible between insiders and outsiders in the regular labour market, but also among those inside the social insurance system and those not eligible for such bene- fits.18 As in New Zealand tax reform has had an impact on the distribution of consumption possibilities.19 Along with increasing unem- ployment in numbers and duration, changes in the benefit systems have occurred, i.e. in the unemployment insurance and the social assis- tance system.20 These changes have primari- ly been directed towards compensation levels and harsher terms for the unemployed, groups marginalised or excluded.21 The main struc- ture of the welfare system is still intact apart from the earnings related public pension sys- tem that has been restructured. Our perspective The choice of whether welfare reform should be based around equality of treatment (for- mal/procedural – fixed) or of outcome (social – relative) is a value decision. Many of the changes, as well as proposed ones from the 1980s and onwards, have been based on a political encounter between these opposite beliefs. Several arguments used to promote a diversion from the universal welfare state model to a more individualistic and targeted approach could be considered as myths.22 These myths include arguments that the uni- versal welfare state does not redistribute wealth but only causes bureaucratic roundabouts23 or that strong arguments against the welfare state have been presented by making cleavag- es between exposed – unexposed, traded – non-traded sectors when discussing welfare state development.24 The neo-liberal agenda, as political para- digm, provides us with an important back- ground to the analysis of the pension reform process. To better understand the political differences and counter forces, however, we apply an approach of “path dependency” de- rived from historical sociology, political scien- ce and new economic history.25 By focusing on the asymmetry in power resources as an aspect backing the dependency culture26 we are partly leaving the more technical “path dependency” arguments aside. We argue that it is not plausible to view the political action only as effects of earlier political decisions, and without notice of a corresponding evolu- tion in material wealth, welfare institutions and the ideological base of political action over time. The level of restraints to change, 66 Pension reform in New Zealand and Sweden presented by existing institutions is not an objective phenomenon, but open to evalua- tion. Practically this call for an approach where a technical focus on political action is accompa- nied by a clear reference back to past and present social relations, ethos and myths, as well as corresponding ideology.27 Pension reform processes and outcomes The New Zealand Labour government, which was elected in 1984, introduced a surtax on the earned income of pensioners. That is, in addition to their ordinary tax rates older peo- ple earning above a given figure were re- quired to pay an additional tax on their other income. This surtax impacted on the incomes of approximately 35% of elderly who had a private after tax income of $7,072 for an individual and $12,012 for a married couple. The tax was set at 20%. It was the source of enormous political debate but remained in place throughout the period of the Labour government. While the introduction of the surtax serves as the first significant policy change in rela- tion to pensions, the National government’s changes of 1991 constitute the second. The major change proposed was to move pensions to an income tested benefit. This involved three parts: a universal component starting at the age of 70, increasing age of eligibility to 65 occurring at a quicker rate than had been the case with the previous Labour govern- ment, and freezing the level of benefit for two years. However, faced with sustained pres- sure from older voters (particularly those who were more affluent and articulate), their pro- posal to move to a means-tested benefit was subsequently abandoned. Furthermore, the National government increased the level of the surtax which had been introduced by its predecessor. This increase was completely contrary to what had been promised during the 1990 election campaign. The increased surtax remained in place until 1998. A significant initiative of the 1990s was the referendum on the introduction and develop- ment of a scheme, which would create indi- vidual pension plans similar to those used in many European countries. These proposals received support from less than 10 per cent of the population at the referendum. The referen- dum proposal followed a series of Task Forc- es and working groups throughout the 1980s and 1990s focusing around the long-term vi- ability of public pension provision. One of the central considerations that led to both the establishment of the Task Forces and was reflected in their reports was the notion that New Zealand could not sustain public pension payments at the current level. The various Task Forces and Working Groups had initial- ly been established by the Labour govern- ment. They were continued by the National government often with the same personnel as previously. While there have been some policy chang- es, these changes have not fundamentally altered the scope and coverage of public pen- sions for the elderly. The age of eligibility has increased, the surtax has come and gone, there have been changes to the formula used to calculate the rate and the relationship of the rates to existing wages, changes to the floor below which provision cannot fall. Neverthe- less, it remains a universal payment to all those who reach the age of 65, with a regular review process which keeps the rate of pay- ment linked by a formula to existing living standards in the community. It is paid at a much higher rate than any other social securi- ty benefit. At the same time, the proportion of the population who are eligible continues to grow and National Pension draws on a sub- stantial proportion of government expendi- ture and of gross national product. That pro- 67 Pension reform in New Zealand and Sweden portion is likely to increase over the next two decades. The Task Forces, Ministerial argu- ments and arguments from the financial sec- tor pushed heavily for a move to some form of individual provision. These efforts to individ- ualise and privatise pensions were spectacu- larly unsuccessful. For the purposes of this discussion, the core question becomes: why, despite all the activity, did the changes of the 1980s and 1990s produce so little difference in pension policy? Why, then, did change occur in Sweden? Slackening growth, demographic awareness and political rhetoric opened the system for restructuring in the 1990’s. The public pen- sion system makes without doubt a large share of total public expenditures. In 1965 it was 4,3 % of GDP but in 1992 it was 12,2 % of GDP. It makes it a welcome target for financial cuts in times of public budgetary pressure. During the period of economic crisis 1991 – 1995 several cuts were made to save public spend- ing. This was despite the budget crisis being mainly an income crisis due to lowering of direct income taxation.28 During this period a parliamentary group of members from all major parties worked to form a proposal for an entirely new system. A preliminary decision on the direction was taken by the Parliament in 1994. Since then several parliamentary groups have worked with the technical devel- opment and implementing process of the new system.29 That process was completed by the end of year 2000, even though some aspects still had not found their final form. The re- structuring of the system was called for as a measure to reach future system sustainability. It was triggered by the fact that the former system had not covered its own costs since 1981 despite a favourable demographical sit- uation.30 The economic problems at the end of 1992 emphasised this problem. Combined with the threat from forecasts of the future demographical development, attention to the pension system was demanded. The adapted solution went along with sharp cuts for existing retirees. This is summarised by Karen M Anderson as: “These changes entail a significant decrease in nominal bene- fits for current pensioners, and future pen- sioners will be subject to a radically different set of rules governing finance, eligibility, and benefit indexing. As a result, the revamped system will lose much of its redistributive character and will play a much smaller role in generating publicly controlled savings.”31 The debate leading up to the decision was set by the identification of four major weaknesses. These were: the sensitivity of the former system to economic swings and slackening growth, the drainage of the reserve funds, the weak link between contributions and benefits, and the rising costs of the basic pensions.32 Benefiting from the turbulent economic times, groups with more explicit neo-liberal ideas of restructuring gained space in the reform process. The employers’ organisation (SAF) and its loyal ideologically driven “think- tanks” produced several attacks on the exist- ing system. Many of the arguments can be found among the ones that later have consid- ered at least as partial myths, some in favour of the design of the new system, some as arguments against the old. The opportunity for the Conservative government in office 1991-1994 to restructure from previously unacceptable ideas formed a base for its stand in the debate, while the Social Democrats searched for a reform strategy that would trim the weaknesses from the old system.33 The design work was, unlike earlier efforts, pro- cessed without the major labour market inter- est groups represented, although they were consulted. To define questions or problems for discussion these groups therefore had to put pressure on the process in other arenas.The new system has some distinct differences from the former one. First, benefit levels are based on lifetime earnings instead of the former 15/ 30 rule (15 best years out of 30). It contains a 68 Pension reform in New Zealand and Sweden move from a defined benefit system to a defined contribution system. This is pro- nounced in particular by the premium reserve part, discussed more fully below. The change was underpinned by arguments of a need for a tighter connection between contributions and benefits. Second, it was emphasised that the public should become more aware of the costs of their pensions. Splitting the contribu- tion payments between employee (payroll) fees and employer payroll taxes was the solu- tion. Earlier the payroll taxes were not visible to the employee. Third, taking up the argu- ment that one of the main weaknesses of the former system was its sensitivity to economic swings and by its consumer price indexing producing strange distributive effects between the active labour force and retirees, a new indexation system was introduced. This new index is linked to the development of wages and real economic growth, but also to more long-term changes in average life expectancy. It is expected that the system will be less affected by swings in the economy and in governmental finances. Fourth, pension rights are acquired through paid employment (labouring or self-employ- ment), but also child rearing, military service and tertiary education (with restrictions on duration). The rights may be moved between spouses on a yearly basis. However, they are not retrospective. Fifth, the new system con- tains a premium reserve module. While 16 % of the payroll goes to the PAYG system, 2,5 % of the payroll (total pensions contribution is 18,5 % of payroll) goes to the individual accounts based premium reserve system. In- dividuals are free to place these into accredit- ed funds, approximately 100 funds divided between 40 companies, domestic and interna- tional. Finally, the former basic pension is replaced by a raised guaranteed pension for those who have not earned or those who do not have enough earnings related pension. The guaranteed pension is paid from general rev- enue. The transition will take 20 years and people born between 1937 and 1954 are in- sured by both systems. A person born before 1937 continues in the old system and those born in 1955 and later are only in the new system. Discussion This paper pursues its argument using the framework developed by Paul Pierson.34 In his discussion of the dismantling of the wel- fare state, Pierson suggests that there are two important dimensions to the welfare state changes to examine. He distinguishes be- tween programme retrenchment and systemic retrenchment. The former refers to cuts in programmes, services or benefits. The latter includes three key dimensions, obfuscation, division and compensation. The first, obfuscation, refers to the ways in which proponents of change deliberately set out to create confusion and uncertainty among beneficiaries of services and the public gener- ally. We suggest in the following discussion that this dimension is not limited to the actions of policy makers and legislators, but is part of the practice of other policy actors attempting to shape the direction of change, or proposed change. The argument can be elaborated with help of Walter Korpi’s concept of an “aug- mented rational actor”.35 The second dimen- sion, division, refers to the ways in which the processes of change in themselves create dif- ferences and competing interests among those affected – in many ways it has elements of classical divide and conquer. The third dimen- sion, compensation, relates to the ways in which welfare state changes provide recom- pense for some of those affected thereby com- pensating for losses, even if the compensation is some distance into the future. Pierson states: “A common dynamic of retrenchment in- volves competing efforts of governments to 69 Pension reform in New Zealand and Sweden play one group off against another while pro- gramme supporters attempt to ‘circle the wag- ons.’”36 The focus in Pierson’s work is on what he calls “new institutional politics”, that is the way in which existing policy creates politics as a result of welfare state development (in contrast to the initial stages of welfare state development where politics creates policy). The welfare state creates its own sets of inter- est groups. It is an argument, which emphasis- es state centred approaches to politics and policy. Pierson argues that the approach to welfare state development cannot be replicated in examining the process of “dismantling” the welfare state. In essence the reason for this is that by its very life and development and its provisions the welfare state has created partic- ular sets of alliances and interests, the influ- ence and actions of which have to be consid- ered in any work which focuses on the “dis- mantling” of the welfare state. By their very nature, these alliances and interests were not operational during the development stage. He also refers to what he calls “de facto privatisation” which incorporates two ele- ments. First, states may act to reduce the available revenue through tax cuts thereby implicitly and/or explicitly encouraging peo- ple to pursue private provision. Second, pub- lic provision may be reduced by such mea- sures as changing or breaking the rules for benefit uprating thereby reducing the real value of those benefits. Again, citizens are pushed towards privatisation. While the aim of welfare state “disman- tling” has been to reduce public support for state services, the critical question is whether the level of support has actually fallen and if public opinion has changed. Pierson argues in fact that retrenchment has actually not been particularly successful, an argument that is supported by the thesis in this paper concern- ing pensions in New Zealand. Sweden, how- ever, show some different results that do not entirely support that hypothesis.A significant element in his argument is that historical fea- tures associated with the initial development of the welfare state have an important impact on subsequent efforts to re-commodify it. Castles has argued in a similar vein that the early origin sets the base for much of the subsequent policy development because of the way in which it creates boundaries.37 The significance of the historical issues in shaping subsequent policies is even more clearly artic- ulated by Pierson: “One simply cannot make sense of the contemporary politics of the wel- fare state without considering how the conse- quences of pre-existing policies structure strug- gles over social policy reform.... Scholars working on a range of empirical issues have begun to emphasise that “policies produce politics. The massive twentieth century ex- pansion of the public sector has clearly con- tributed to this new orientation. Increasing government activity made it harder to deny that public policies were not only the result of but important contributors to the political pro- cess, often dramatically reshaping social, eco- nomic, and political conditions.”38 Many of the changes made in Sweden alter the redistributive features of the system. The shift from defined benefits to defined contri- butions, the introduction of lifetime earnings and the premium reserve module, as well as the lifted ceiling of maximum benefits mini- mise horizontal distribution. This has been one important aspect to many promoters of change since it enhances individualism. To achieve this politically a “carrot” is needed. Therefore, following social justice logic from John Rawls,39 a formula where the worst off would get it better was formulated. The pro- cess is well formulated by Pierson’s second argument, division, above. The guaranteed pension, financed from general revenue (the former basic system had payroll financing with a general revenue guarantee), was in- 70 Pension reform in New Zealand and Sweden creased and employers let off the hook. How- ever, the guaranteed pension is targeted to- wards lower income groups, not, as earlier, a social right as such. If an increasing share of the population fall into the group that need guaranteed pension, either fully or as topping up, redistribution will take place. But the level of redistribution is also dependent on the organisation of the tax system, especially the balance between direct and indirect taxation. Lower income households spend a larger share of their income on consumption40 and thus pay more tax, relative to high income house- holds, if indirect taxation is used. Further, it is shown in studies made by the National Insur- ance Board (RFV) that about two thirds of the studied population will lose in the new sys- tem, mainly lower level salaried employees and women working part-time and less than 40 years. To receive the same benefits in the new system as in the old it requires 40 years, i.e. 10 years more. The loss among large groups is enhanced by the new indexation rules. About 80% of the population will lose 7-8 % in pension value due to this.41 The indexation rules are devices to balance “un- fair” redistribution between generations. The reliance on an actuarial fairness argument, i.e. the basis for individually contracted rights, stating a strict connection between contribu- tions and outcomes increase the tensions be- tween generations. All earnings-related sys- tems have this tendency, funded or not, since individuals can, based on property right logic, produce obligations on the not yet born col- lective. The argument is opposite to the com- monly used critique of PAYG systems. It can be described as what Elchardus42 refers to as the “divorce of solidarity and self-interest of well understood”. The important aspect here is basically that the argument is a technical one, while the subsistence of the elderly to which pensions are aimed43 is real. Since the early days of social insurance, the problem in modern societies of providing subsistence individually after a long working life has been positioned politically in an administrative/ technical arena (see the discussion in relation to Jamrozik and others above). That arena has not, however, been independent from aug- mented rational actors who have been able to put pressure on the process of design of earlier as well as existent pension programs. Exper- tise, such as that of actuaries, statisticians, economists and others, forms a strong force in de-politicising and removing matters from the political arena.44 This has not least been the case concerning pensions on several occa- sions. It is obvious that in the Swedish case the path followed has produced some clear de- pendency characteristics, such as the pay-as- you-go basis of the new system and a clear publicly controlled system.45 However, as a result of a policy reform process during an era of quite clear influence of neo-liberal eco- nomic thought, aspects of change in the new system in Sweden are not motivated by the clear need of a sustainable pension system for the future, but were rather ideologically driv- en changes. In this respect the individual accounts and the premium reserve might serve as examples. They are, to use the perspective adopted here, outside the path dependency pattern. In the New Zealand example on the other hand and particularly from 1986 onwards, the state’s social, economic, ideological and po- litical framework was built around notions of limiting state involvement and maximising individual responsibility. State provision had been widely identified as bad, private provi- sion as good, an argument that was canvassed extensively during the 1980s and 1990s. More- over, over recent years particularly, there has been a very powerful rhetoric focused on benefit groups, other than superannuitants, around the notion of dependency. Benefit receipt has been ipso facto seen as dependent and therefore bad by definition.46 Here we 71 Pension reform in New Zealand and Sweden see what has been characterised elsewhere as “a failed marketization”47 , failed in the sense that the efforts that have been made to estab- lish marketization have been unsuccessful in moving from a state provided, taxpayer fund- ed pension scheme to an insurance based scheme connected to lifetime earnings. As we noted above, promises of compensation were unacceptable. There have at various times been powerful employer, financial and polit- ical voices which have argued that the current National Pension scheme is financially unsus- tainable for both fiscal and demographic rea- sons,48 but many of these voices were op- posed to the scheme proposed in the 1997 referendum because that scheme was consid- ered to be unsatisfactory. Nevertheless, these voices have been unsuccessful in shifting the ideological parameters of the debate; there is much stronger public support for a pension than there is for other social assistance pro- grammes. For example, in the 1988 Royal Commission on Social Policy study, there was significantly stronger support for govern- ment use of taxation for income support for the elderly than for any other social assistance groups, with the exception of the sick.49 The historical framework of provision through the state remains the dominant expec- tation. Ideology has been unsuccessful thus far in producing significant policy change, other than to increase the age of eligibility and to reduce the relative level of benefits. How- ever, even the latter has been increased since the election of the Labour government in 1999 and the current Parliamentary Opposition has indicated that it does not intend to change the relationship between pension level and the average wage. In their study of New Zealand politics at the turn of the century, Perry and Webster demonstrate that there has been an increase in the levels of support for govern- ment spending on pensions over the last de- cade of the 20th century, the period of the most significant efforts to contain and review expenditure on government pension. In their survey in 1989, 52% said they should either be some increase or a great increase in spending on pensions. In the subsequent survey nine years later, this had risen to 59,6%.50 It is a picture similar to that identified by Pierson who notes that popular support for social provision is more solid than a decade ago. His argument that “far from introducing a self reinforcing dynamic of retrenchment leading to greater political alienation from social pro- grammes and further retrenchment, the con- servative assault generated a backlash in sup- port of the welfare state”51 is equally applica- ble here. The outcome of this ‘failed marketization’ thus far has been that pensioners with limited additional income have been protected, albeit with a weakened floor. That is, a consensus remains about the right to a pension on retire- ment and on the role of the state in providing that pension. However, the strength of that consensus has not been tested by significant economic or political opposition and it re- mains to be seen how strong that consensus will be when such opposition develops. An emphasis on personal provision and on the superiority of the market over the state as a form of social organization is likely to place the poorest elderly under some financial pres- sure as increasing proportions of the most powerful and affluent make their own volun- tary provisions for pension. There has been much less attention to the adequacy of the level of national pensions for those older people who have little or no additional income in New Zealand. In Sweden on the other hand a new income support system (äldreförsörjn- ingsstöd) for those not eligible for a full pen- sion has been introduced. The system makes it possible for elderly persons not to be depen- dent on means tested social assistance. This is to be considered a political realisation that subsistence is not a sole question of individu- ally pre-funded social or private insurance. 72 Pension reform in New Zealand and Sweden Concluding remarks Pierson’s argument about changes to the wel- fare state have considerable merit when con- sidering pension changes in New Zealand since the late 1990s, somewhat less in Swe- den. In particular, the creation and articulation of “the problem” of pensions and the range of measures proposed and taken to deal with that “problem” reflect a range of dimensions which Pierson’s descriptions of division particular- ly, and compensation to a lesser extent, pro- vide adequate description and characterisa- tion of. Alongside these processes, including the process of obfuscation, must be placed a consideration of the ways in which the actual “politics of pension reform” operated and reflected the historical development of pen- sion. In line with Pierson’s general thesis, it can be argued that they reflected and repre- sented the sets of interests which had been created as a result of the historical and policy decisions and processes throughout the pre- ceding years. The sustained efforts to move to a model of privatisation proved unsuccessful in New Zealand but partially successful in Sweden with its emphasis on a process of individualisation and increased reliance on pre-funding. In this sense they both contrast with52 recent discussion of pension’s policy in Latin America in which they emphasised the role of private financial interests. It should be noted, however, that at the same time they identified the importance of attending to local dimensions of policy change, a focus which is reinforced by the New Zealand experience. Certainly too their emphasis on the role of privileged groups is reinforced by any analy- sis of the processes of change. Pierson’s over- all assessment of the forces of change is re- flected in this case study when he argues: “Social forces are important, because advo- cates of retrenchment are unlikely to succeed in the face of substantial political opposition. Nevertheless, institutional factors – including the structure of formal institutions, but espe- cially the consequences of previous policy initiatives – are central in determining wheth- er this political opposition actually emerg- es.”53 Notes 1 Söderström, L et.al. (1999), ’Från dagis till service- hus: välfärdspolitik i livets olika skeden’, Välfärd- spolitiska rådets rapport, 1999, SNS, Stockholm. Kruse, A (1994), ‘The Pension System’, in Bengts- son, T (ed.), Population, Economy, and Welfare in Sweden, Springer-Verlag, Berlin. 2 Kruse, A (1997), ‘Ekonomiska och politiska risker i offentliga system’, in Ekonomisk Debatt Vol. 25, No. 7, Stockholm; Ståhlberg, A-C (1991), ‘Les- sons from the Swedish pension system’, in Wilson T & D Wilson, The State and Social Welfare: The Objectives of Policy, Longman Group, London. 3 Lindbeck, A (2003), ‘Improving the performance of the European social model – the Welfare State over the life cycle’, Seminar Paper No. 717, Insti- tute for International Economic Studies, Stock- holm; Lindbeck, A & M Persson (2002), ‘The Gains from Pension Reform’, Seminar Paper No. 712, Institute for International Economic Studies, Stockholm; Persson, M (2000), ‘Five fallacies in the social security debate’, Seminar Paper No. 686, Institute for International Economic Studies, Stock- holm. (http://www.iies.su.se). 4 Kruse, 1997. 5 Lindbeck & Persson, 2002. 6 Hugemark, A (1994), Den fängslande markna- den:ekonomiska experter om välfärdsstaten, Arkiv, Lund. 7 Orszag, P & J Stiglitz (2001), ‘Rethinking pension reform: ten myths about social security systems’, in Holzmann R & J Stiglitz (eds.), New ideas about social security: toward sustainable pension sys- tems in the 21st century, The World Bank, Wash- ington DC; Mesa-Lago, C (2002), ’Myth and Real- ity of Pension Reform: The Latin American Evi- dence’, in World Development Vol. 30 No. 8. 8 Jamrozik, A & L Nocella (1998), The Sociology of Social Problems. Theoretical Perspectives and Methods of Intervention, CUP, Melbourne. p50; also Rose, N & P Miller (1992), ’Political power beyond the State: problematics of government’, in British Journal of Sociology, Vol. 43 No. 2. 73 Pension reform in New Zealand and Sweden 9 Davidson, A (1989), Two Models of Welfare. The Origins and Development of the Welfare State in Sweden and New Zealand, 1888-1988, ACTA Universitatis Upsalensis, No. 108, Uppsala; David- son, A (1994), A Home of One’s Own. 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(Full text version from Ebsco 00104140_2000_33_6-7/ 3363188). 14 Boston, J., Dalziel, P. (1992), The Decent Society?, Auckland: Oxford University Press; Cheyne, C., O’Brien, M. and M. Belgrave (2000), Social Policy in Aotearoa New Zealand: A Critical Introduction, 2nd Edition, Auckland: Oxford University Press; Easton, B. (1997), The Commercialisation of New Zealand, Auckland: Auckland University Press; Hills, J. (1995), Inquiry into Income and Wealth, York: Joseph Rowntree Foundation; Kelsey, J. (1995), The New Zealand Experiment, Auckland: Auckland University Press; O’Brien, M. (1998), ‘Changes in Social Security and Pension Provision in New Zealand. Background Paper prepared for ISSA’, Unpublished. 15 The Economist (1994), ’Inequality – For Richer or Poorer’, The Economist 333(7888): 13;19-23. 16 Boston, J. and St.John, S. (1999), ‘Targeting versus Universality: Social Assistance for all or Just for the Poor?’, in J. Boston, Dalziel, P., St.John, S. (ed) Redesigning the Welfare State in New Zealand, Auckland: Oxford University Press; Easton, B. (1995), ‘Poverty in New Zealand: 1981-1993’, New Zealand Sociology 10,(2): 181-213; Howden- Chapman, P., Tobias, M. (2000), ‘Social Inequal- ities in Health: New Zealand 1999’, Wellington: Ministry of Health; Kelsey, J., M.O’Brien (1995), Setting the Record Straight, Wellington: Angoa; Mowbray, M. (2001), ‘Distributions and Dispar- ity:New Zealand Household Incomes’, Welling- ton: Ministry of Social Development; O’Brien, M. (1996), ‘New Zealand Children and Families. Facts we should all know and act on’, Auckland; St John, S., Dale, C., O’Brien,.M., Blaiklock, A., Milne, S. (2001),Our Children. The Priority for Policy, Auck- land: Child Poverty Action Group; Waldegrave, C., Stephens, R., Frater, P. (1996), ‘Most Recent Findings in The New Zealand Poverty Measure- ment Project’, Social Work Review 8(3): 22-24. 17 Fritzell, J (2001), ‘Still different? Income distribu- tion in the Nordic countries in a European compar- ison’, in Kautto, M, J Fritzell, B Hvinden, J Kvist, and H Uusitalo, Nordic Welfare States in the Euro- pean Context, Routledge, London; SOU 2000:3; Halleröd, B (1996), ‘När har Sverige blivit nog ojämlikt? De svenska hushållens ekonomi 1985 och 1992’, Ekonomisk debatt, vol. 24 no. 4 pp. 267- 279. 18 Salonen, T. (1997), Övervältringar från social- försäkringar till socialbidrag, Meddelanden från Socialhögskolan 1997:8, Lund. 19 Halleröd, 1996. 20 Elmér, Å., Blomberg, S., Harrysson, L. & Peters- son, J. (2000), Svensk soclpolitik, Studentlittera- tur, Lund. 21 Sunesson, S. et al, (1998), ‘The Flight from Univer- salism’, in European Journal of Social Work, Vol. 1, No 1; Salonen, 1997. 22 Orszag & Stiglitz 2001 provide some examples from pension reform. 23 See Rothstein, B (1998), ‘The Universal Welfare State as a Social Dilemma’, downloaded from 74 Pension reform in New Zealand and Sweden homepage at http://www.pol.gu.se, April 1998 for a discussion. A version published in Rothstein, B and S. Steinmo (2002) (eds.), Restructuring the Welfare State. Political Institutions and Policy Change, Palgrave, London. 24 Pierson, 2000. 25 See for example Tilly, C. (1998), Durable Ine- quality,University of California Press, LA; Papa- kostas, A (1998), ’Tröghet och anpassning i stater och företag’, in Ahrne G (ed) Stater som organisa- tioner, N&S, Stockholm; Rothstein, B (1994), Vad bör staten göra – om välfärdsstatens moraliska och politiska logik, SNS, Stockholm; Pierson, P. (1994), Dismantling the Welfare State?, Cambridge, USA: Cambridge University Press; Esping-Andersen, G (1990), The Three Worlds of Welfare Capitalism, Polity Press, London; North, D G & R P Thomas (1993), Västerlandets uppgång : Europas ekono- miska historia 900-1700, SNS, Stockholm. 26 Korpi, 2001. 27 Davidson, 1989:27 and note 99. 28 Ljunggren, S (1995), ‘Blåst på tusen miljarder’, in Internationalen No. 35; Söderström, H T (1995), ’Realräntechock, skuldsanering och budgetunder- skott: en balansräkningsanalys av den svenska depressionen’, SNS Reprint series 20, Stockholm. 29 Sandh, J (1999), Politiskt samförstånd i det reform- erade pensionssystemet : en granskning av hur eniga de politiska partierna blev angående pre- miereservsystemets utformning, Master Thesis, Socialhögskolan, Lund University; Palme, J (2001), (ed.) Hur blev den stora kompromissen möjlig? Politiken bakom den svenska pensionsreformen, Pensionsforum, Stockholm. 30 Scherman, K G (1993), En ny socialförsäkring, Rapport till Ekonomikommissioonen, RFV, Stock- holm. 31 Anderson, K M. (2001), “The Politics of Retrench- ment in a Social Democratic Welfare State. Reform of Swedish Pensions and Unemployment Insur- ance”, in Comparative Political Studies, Vol. 34, No. 9, 1063-1091. p1076. 32 Anderson, 2001; SOU 1994:20. 33 Palme, 2002. 34 Pierson, 1994. 35 Korpi, 2001. 36 Pierson, 1994, p23. 37 Castles, F. (1985), The Working Class and Wel- fare:Reflections on the Political Development of the Welfare State in Australia and New Zealand, Sydney: Allen and Unwin/Port Nicholson Press; Harrysson, L (2000), Arbetsgivare och pensioner, Värpinge ord & text, Lund, show how these struc- tures may work in private arrangements. Also Heclo, H (1974), Modern social politics in Britain and Sweden : from relief to income maintenance, Yale University Press, New Haven for an early path dependency analysis. See also Myles and Pierson, 2001, p306. 38 Pierson, 1994, p39. 39 Rawls, 1971, in Rothstein, 1994. 40 Hjort, T & T Salonen (2000), Knapphetens bonin- gar : om fattiga barnfamiljers boende och ekonomi, Meddelande från Socialhögskolan 2000:8, Lund University, Lund. 41 Anderson, 2001. 42 Elchardus, M (2004), “The New Social Question – A Conceptual Analysis and Pessimistic Diagno- sis”, forthcoming in Glorieux, Jönsson and Little- wood (eds.)“The future of work”, Ashgate. 43 Långtidsutredningen 1999/2000 Bilaga 9, En åld- rande befolkning – Konsekvenser för svensk eko- nomi, Stockholm, p62. 44 Rose & Miller, 1992, p197. 45 Lundberg, U (2001), ”Socialdemokratin och 1990- talets pensionsreform”, in Palme, J, (ed.) Hur blev den stora kompromissen möjlig? Politiken bakom den svenska pensionsreformen, Pensionsforum, Stockholm. 46 O’Brien, 1997. 47 O’Brien, M. (2001) ‘A Hydra-Like Creature? The Marketization of Social Security in New Zealand’ in Dixon, J., Hyde, M. (eds) The Marketization of Social Security, Westport, Connecticut: Quorum Books. 48 See discussion in Else and St John, 1998. 49 Royal Commission on Social Policy (1988 ), ’The April Report’, Wellington: Royal Commission on Social Policy. 50 Perry, P., Webster, A. (1999), New Zealand Poli- tics at the Turn of the Millenium, Auckland: Alpha Publications. 51 Pierson, 1994, p162. 52 Mesa-Lago, 2002. 53 Pierson, 1994, p50.