Abstract: Capital Scarcity, Ideational Change, and the Pension Free-For-All

Natascha Van der Zwan


Recent historical scholarship has revealed how the deregulation of financial markets was U.S. policy-makers' solution to the capital scarcity experienced during the economic crisis of the 1970s, leading to massive inflows of foreign capital and—ultimately—America's debt-driven growth regime. Less explored in this scholarship is the search for domestic sources of private capital during this period, in particular the pension assets accumulated on behalf of millions of American workers. Between 1970 and 1985, such assets grew from $239.2 billion to $1.7 trillion, according to the U.S. Census Bureau—an attractive pool of capital for state and local politicians in need of closing public budgets as well as financiers hoping to make a quick buck out of the purchase of undervalued firms. Both groups of actors instigated a wave of pension plan terminations during the early to mid-1980s. This paper explains why workers' pension assets became such an economic free-for-all. I will attribute these changes not only to the changing economic circumstances of the 1970s and early 1980s, but also to the shifting notions of investment and ownership that legitimated the appropriation of workers' pension plans. Such ideas, however, did not go unchallenged, and the paper therefore reveals important opposition from labor unions, business actors, and politicians from industrial states.