By the 1970s and 1980s, policy investments in German, U.S., and Canadian public pension financing had unraveled. While policy investment in the U.S. quickly proved defenseless against political attack, the German financing regime buckled after three decades under the combined strain of economic distress and political temptation. Canadian policy investment in pensions, on the other hand, was allowed to die of benign neglect as provincial and federal policy makers left contribution rates untouched as expenses rose. Though the timing varied, each of these three countries eventually converged with Britain on a pay-as-you-go (PAYGO) path.

In the decades of rapid wage and population growth following World War II, PAYGO financing could support a comfortable political and social equilibrium. As contributory pension programs matured, expenditures automatically rose, but so too did the flow of revenues from an expanding and increasingly affluent workforce. Governments could even raise benefit and payroll tax rates without undue impact on workers' take-home pay. And in an era of relatively easy fiscal choices, political conflict over the basic principles of retirement security was supplanted by a broad consensus in support of existing programs – even, in some instances, with competition between parties of right and left to promise the elderly ever-more-generous pensions.

This fiscal and political dynamic, however, relied on a transient set of economic and demographic conditions. Payroll tax rates in a PAYGO scheme depend heavily on trends in aggregate real wages, and by the mid-1970s aggregate wages would suffer a double blow.