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Handbook of Financialization Now in Paperback

Together with my co-editors Philip Mader and Daniel Mertens, I am very pleased that the Routledge International Handbook of Financialization (2020) is now also out in paperback. We are grateful that our joint efforts and those of the 60 contributors to our Handbook have been so positively received by a large, and still growing, readership. Please see the Routledge website for more information.

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Getting Rid of Fossil Fuels

A few weeks ago, Dutch pension giant ABP decided to divest from fossil fuels. But is this actually going to help the climate? With Arjen van der Heide and Philipp Golka (both Leiden University), I address this question in our new article for S&D. Here’s the English summary:

Photo by Pixabay on Pexels.com

The positive view on divestment is that it lowers stock prices and may reduce fossil extraction by reducing available capital and public shaming. It is also expected to free up capital for green investments. Moreover, divestment may reduce pension exposure to stranded assets. It may trigger other funds to divest, too.

But, so we argue, divestment is a double-edged sword: the threat of investors “exiting” may actually strengthen their positions in engagement with polluters. Yet, as as more sustainable investors divest, engagement opportunities decrease and less concerned investors may take over. Such a shift in fossil fuel firms’ shareholder basis towards less sustainable investors is problematic: financialization scholarship has shown investors’ large success in pressuring firms to maximize shareholder value. This may result in more fossil fuel extraction.

This is an actual threat, because many fossil fuel producers are owned by governments that are highly dependent on fossil fuel revenues. And big parts of fossil fuel extraction are not financed via equities, but via bank lending that shows hardly any signs of slowing down. This means that not only may the scope of divestment be too small to deliver meaningful change—by closing the door on engagement, it may also increase the voice of fossil-hungry investors who may pressure for more fossil fuel extraction.

While its effectiveness is up for debate, divestment decisions are hailed as successes for the climate movement and often garner significant media attention. But this may obfuscate our view of the problems of current climate finance, and how it can be improved. Even as ABP is a front-runner in sustainability, only a fraction of its assets are currently invested into green projects. Globally, the situation is most likely even worse, yet there is hardly any transparency regarding investors’ carbon impact.

The recent drop in (EU) green assets after the introduction of the EU Sustainable Finance Disclosure Regulation has shown that investors still have too much labeling flexibility. We therefore need portfolio-level transparency on scope 1-3 emissions as a first step to make finance 1.5°-compliant. Green finance has long been a tool for policymakers hoping to “leverage” public resources. But financial markets alone won’t transform our economies. Besides much stronger regulation, we need much more direct public investment into the green transition.

Read more here.

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2nd LawFin Workshop, December 13-14

On December 13, 2021, I presented the first research results of the ongoing project on internal supervision in Dutch pension funds (with Philipp Golka) during the Second LawFin Workshop. Themed The Metamorphosing Landscape of Investors’ Capitalism, the workshop brought together legal scholars, economists and political scientists to have an interdisciplinary discussion about new developments in contemporary investor capitalism. For more information on the workshop, see the program below or click here.

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New article in JESP

In a new article recently published online by the Journal of European Social Policy, Ville-Pekka Sorsa (University of Helsinki) and I argue against expert and scholarly understandings of pension sustainability as affordability and adequacy. Instead, we shift focus to political sustainability:  policymakers’ ability to maintain consensus around pension scheme parameters and avert pressures for change. The key question is: do policymakers have the willingness and the ability to sustain the pension scheme?

To answer this question, we compare the cases of Finland and the Netherlands: two mature three-pillar pension regimes characterized by the long-term survival of large-scale, funded and collective DB pensions. In both countries, we identify three historical waves of pension reform (see table 1 below). Each of the three waves is characterized by different political concerns over the long-term sustainability of collective DB pensions. For instance: during the first wave of pension reform, which took place in the formative years of both pension systems, policymakers were concerned about low coverage of collective DB pensions, which threatened the survival of the system. In later waves, sustainability concerns centered on the fiscal sustainability of the pension system (Finland) and low solvency of pension funds (Netherlands).

Crucially, policymakers in both countries responded to these concerns by making parametric changes to collective pensions. We find that, in our two cases, nine types of pension scheme parameters have been (re-)negotiated (see Table 2). For instance, sustainability concerns in the Netherlands during the late 1990s directly informed parametric changes, such as changes to the accrual rates (from final to average-salary DB) and the elimination of automatic adjustments of pension rights to wage or price increases (conditional indexation). Both adjustments successfully sustained the DB nature of collective pensions and averted a paradigmatic switch to DC pensions.  

Our comparison highlights the importance of governance practices for the possibility of adjustment. Both countries are characterized by long-standing traditions of corporatism in the pension system. Policymakers’ willingness to sustain stemmed from their perception of the key collective pension schemes as important power resources. The social partners did not only consider the schemes crucial for the legitimacy of corporatist governance, but also accepted compromises to improve or maintain their own status in pension governance. Governments of the two states, meanwhile, also considered collective pensions essential, often for economic reasons.  

Parameter
BenefitsPension salary
Accrual rate
Indexation of accrued pension rights
Eligibility Years of employment
Additional conditions for retirement
FinancingContributions by employers and/or employees
Investment policy and management
Investment regulations
GovernanceManagement and administration of pension plans
Table 2: Pension parameters

We draw two conclusions from our study. First, even perceived unsustainable features of pensions can be adjusted to changing circumstances, as long as policymakers and stakeholders regard all pension scheme parameters as negotiable. These findings inform our second conclusion: not just policy design, but also governance considerations are necessary for sustaining pensions. If stable political coalitions are central to the political sustainability of social policies, then governance interests and concerns need to be more seriously taken into account if policymakers wish to build sustainable pension schemes.

Even though our focus is on pensions, our findings are relevant for the wider scholarship of social policy. Sustainability offers a useful concept for understanding the long-term prevalence of social policies and institutions like pension schemes. However, without explaining why different actors maintain and renew some social policies and welfare institutions but not others, sustainability research will have little to say about the actual longevity of policies and institutions. Our findings can be summarized as the following maxim on sustainability: the capacity to sustain a welfare scheme is primary to any particular conception of sustainability based on a narrow set of policy indicators.

This has become apparent in the Netherlands, where a fourth wave of adjustment has moved the policy paradigm towards CDC pensions. The deviatingtrajectory of the Netherlands since the 2010s shows how the very process of sustaining can also disrupt existing pension policy. When cracks emerged in the consensus between the social partners, the state was able to increase its influence. State interventions either fixed some parameters or led social partners to consider certain parameters as non-negotiable. Once social partners become unwilling to negotiate particular pension parameters (the contribution rate for employers; the retirement age for unions), possibilities for parametric adjustments are closed off. The Dutch social partners choose to maintain collective administration of occupational pensions at the expense of the DB nature of the pension contract.

This leaves us with an important recommendation for future research on welfare sustainability: rather than conceptualizing sustainability as a ‘tick-box’ exercise of available policy instruments external to the policy process, scholars of social policy should consider how institutional capacities and governance practice shape the complex ways in which policymakers create sustainable welfare states.

Read the entire article here.

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Webinar on Sustainable Investing by Pension Funds

At the invitation of Netspar, Arjen van der Heide and I recently gave a flash webinar on sustainable investment by Dutch pension funds. Our webinar was part of the 11th edition of the Pensioen3daagse, an annual public awareness campaign organized by Wijzer in Geldzaken, an initiative of the Netherlands Ministry of Finance.

Pension is a difficult topic and many people don’t know the details of their own retirement savings. Each year, the Pensioen3daagse hosts special events to inform Dutch citizens in an accessible manner, in collaboration with Netspar and other partners. This year, more than 2.000 people signed up to attend the flash webinars on a range of current themes related to pension.

Coinciding with the COP26 climate summit in Glasgow, the Pensioen3daagse offered a great opportunity to shed additional light on sustainable investment by Dutch pension funds. To introduce our audience to an otherwise very technical topic, Arjen and I organized our lecture around five questions:

  1. What are the origins of sustainable investment?
  2. What does sustainable investment entail?
  3. Is sustainable investment profitable?
  4. What are the pros and cons of sustainable investment?
  5. What can pension plan members do themselves?

Broadcasting from the Aegon studio, we answered each of these questions in a 20-minute presentation. Aalt-Jan Smits assisted as online moderator.

For more information on our ongoing research on sustainable pension investment, click here.

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Roundtables on Internal Supervision Pension Funds

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Together with Philipp Golka and Aalt-Jan Smits (both Leiden University), I recently participated in two roundtable discussions with trustees and internal supervisors from the Dutch pension sector. During the roundtables, organized by Monitoring Commission of the Dutch Pension Fund Code (Monitoringcommissie Code Pensioenfondsen), my colleagues and I presented the first results of our research project on internal supervision in Dutch pension funds. Internal supervision is a control function of pension fund boards that has been introduced by the legislator in 2014.

Drawing on a survey as well as in-depth qualitative interviews, the Leiden team described the experiences of internal supervisors in safeguarding participant preferences, diversity, and the learning capacity of their organization. In addition, we led a discussion among pension fund board members and internal supervisors by presenting a number of dilemmas that, according to our research, internal supervisors face as part of their responsibilities. The findings from these round table discussions will inform the final research report that aims at serving as a scientific basis for future improvement of the Dutch Pension Fund Code.

The roundtable discussions were held on September 22 and 28 2021 in Utrecht, The Netherlands. More information regarding the research project on internal supervision can be found here.

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Appointment as Associate Professor

I am happy to share the news that I have recently been promoted to Associate Professor in Public Administration at the Institute of Public Administration as of September 1, 2021. My thanks goes out to my colleagues at the Institute of Public Administration for their support and these wonderful flowers.

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Socio-Economic Review Editorial Board

As of January 2021, I will be joining the Editorial Board of Socio-Economic Review. I am very honored to be able to contribute to a journal that has been so important to my career!

Socio-Economic Review is one of the top journals in political economy and economic sociology. It’s currently ranked 11/180 for Political Science and 6/150 for Sociology, with an impact factor of 3.774 (2019).

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CES Political Economy and Welfare Research Network

I’m currently one of three candidates nominated to replace Julia Moses as co-chair of the CES Political Economy and Welfare Research Network. As requested, I had written a few words on my vision for the network, when offering my candidacy. If you’re a member of this network and the ideas below appeal to you, please vote for me! Voting is possible until Wednesday, October 23.

“The strengths of our network are its openness to theoretical and methodological pluralism as well as its broad comparative approach to the study of political economy and the welfare state. If elected co-chair of the Network, I would like to strengthen ongoing activities in the three focus areas of this network (education and social policies; the comparative political economy of regime formation and change; cross-border connections). At the same time, my own interdisciplinary research interests make me particularly well-suited to appeal to colleagues working on new approaches to political economy, including junior and emerging scholars. As our profession is rethinking its strong reliance on face-to-face meetings for scholarly exchanges, I’m interested in developing new and inclusive ways in which our members can engage with or participate in this network, such as through social media. I would also like to continue ongoing collaborations with other CES research networks, including those currently in formation. Having divided my professional life between the United States and the European continent, I feel particularly well-suited to foster the ongoing dialogue between our network’s members on both sides of the Atlantic.”

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Handbook of Financialization: Table of Contents Now Available!

We’re delighted to share publicly (for the first time) the Table of Contents of the forthcoming International Handbook of Financialization (Routledge 2019)!

Thanks to the great many positive responses, which exceeded even our highest expectations, a superb group of scholars has come together to make the forthcoming Handbook an already widely-anticipated success.

Please note that this table of contents may be subject to some changes before the anticipated publication date in early 2019.

Phil, Daniel & Natascha

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TABLE OF CONTENTS (as of July 2018)

 

1. Phil Mader, Daniel Mertens & Natascha van der Zwan: Introduction

 

Part A – Finance and Financialization: Taking Stock

2. Brett Christophers & Ben Fine: The Value of Financialization and the Financialization of Value

3. Christoph Deutschmann: The Socio-Economic Foundations of Financialization

4. Sheila Dow: Financialization and the Monetary Authorities: Post-Keynesian and Other Perspectives

5. Paul Langley: The Financialization of Life

6. Ismail Erturk: (title TBC)

 

Part B – Approaches to Studying Financialization

7. Ève Chiapello: Financialization as a Socio-technical Question

8. Samuel Knafo & Mareike Beck: Financialization and the Uses of History

9. Stefano Pagliari & Kevin Young: How is Financialization Reproduced Politically?

10. Dimitris Sotiropoulos & Ariane Hillig: Financialization in Heterodox Economics

11. Hadas Weiss: The Anthropological Study of Financialization

 

Part C – Structures, Spaces and Sites of Financialization

12. Manuel Aalbers, Rodrigo Fernandez & Gertjan Wijburg: The Financialization of Real Estate

13. Sarah Bracking: Financialization and the Environmental Frontier

14. Bruno Bonizzi, Annina Kaltenbrunner & Jeff Powell: Subordinate Financialization in Emerging Capitalist Economies

15. Rodrigo Fernandez & Reijer Hendrikse: Offshore Finance

16. Ewa Karwowski: Variegated Financialization in the Global South

17. Engelbert Stockhammer & Karsten Köhler: Financialization and Demand Regimes in Advanced Economies

18. Yingyao Wang: The State and Financialization

19. Brigitte Young: Financialization and Gendered Inequality

 

Part D – Actors, Agency, and Politics of Financialization

20. Benjamin Braun & Daniela Gabor: Central Banking, Shadow Banking, and Infrastructural Power

21. Jan Fichtner: The Rise of Institutional Investors

22. Felipe Gonzalez: Household Debt and the “Retailisation” of Finance

23. Brooke Harrington: Trusts and Financialization

24. Johannes Petry: Exchanges and Financialization: From Marketplaces to Agents

25. Dennis Stolz & Karen Lai: Philanthrocapitalism, Social Enterprises and Global Development

26. Lena Lavinas: The Collateralization of Social Policy in the Global South

27. Lisa Adkins, Kavita Datta & Vincent Guermond, Michael McCarthy, Paul Thompson & Jean Cushen: DISCUSSION FORUM on Labor and Financialization

 

Part E – Techniques, Technologies, and Cultures of Financialization

28. Rob Aitken: The Cultural Economy of Financial Subjectivity

29. Nathan Coombs & Arjen van der Heide: The Calculative and Regulatory Consequences of Risk Management

30. Laura Deruytter & Sebastian Möller: Financialized Practices and Rationalities of Local Authorities

31. Max Haiven: Culture and Financialization: Five Approaches

32. Jeanne Lazarus: Financial Literacy Education: A Questionable Answer to the Financialization of Everyday Life

33. Johnna Montgomerie: Debt Dependence and the Financialization of Everyday Life

 

Part F – Instabilities, Insecurities, and the Discontents of Financialization

34. Gerald Epstein: The Bankers’ Club and the Financialization of Crises

35. Beat Weber: (title TBC)

36. Andreas Nölke: Financialization and the Crisis of Democracy

37. Sunanda Sen: Uncertainty and Financialization

38. Matthias Thiemann: Why is There No Anti-Cyclical Regulation of Finance?

39. Christina Laskaridis, Nathan Legrand & Eric Toussaint: Struggles against Illegitimate Debt

40. Olivier Godechot: Financialization and the Increase in Inequality

 

Epilogue (TBC)

 

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