Chapter 9: Financial Markets and Social Security
John Grahl INTRODUCTION 9.1 The increasing salience of financial markets and the rapid growth in many countries of institutional investors channelling household savings onto these markets have been pointed out in earlier chapters. These developments form the background to a political project to transfer responsibility for important welfare functions from the state to the market. The two most important examples are probably health care and retirement pensions. In both cases, throughout Europe, provision today is very largely a public function. But there is a strong drive to limit or reduce public responsibility both for health care and for pensions, and to make households, using private insurance companies and privately managed pension funds, take over a large part of the responsibility. The argument for this kind of change is one aspect of a general assault on public services and social security which tries to call many public goods and social services into question and to privatize broad areas of the public sector. The present chapter concentrates on the pensions issue. It makes a critical assessment of the moves towards market-based provision in the European Union and of the arguments on which these moves are based. It is suggested that these arguments fail in three key respects: firstly, they are conceptually incoherent in that they do not address the resource issues involved; secondly, they fail to recognize the efficiency of public provision and the inefficiency of most private provision in the field of pensions; thirdly, they promote changes which must aggravate social...
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