Pensions: "Captives of Wall Street"
We revisit Marc Weiss’ take on pensions and power in this 1979 review of the book The North Will Rise Again by Rifkin and Barber.
In These Times Editors
The Employee Retirement Income Security Act (ERISA) passed in 1974, codifying a paradox: To protect pensions, union funds increased investment in the same corporations that “put our own people in unemployment lines,” in the words of Lloyd McBride, president of the United Steelworkers of America, shortly after the law’s passage.
Union pensions now amount to at least $7.8 trillion, but, “like so many aspects of our society, have become captives of Wall Street,” according to advocates with Bargaining for the Common Good. Marc Weiss dug into these issues with his 1979 review of the book, The North Will Rise Again: Pensions, Politics and Power in the 1980s, by Jeremy Rifkin and Randy Barber.
In 1979 Marc Weiss wrote: ERISA mandated greater solvency and increased funding for private pension plans. Today the total of all private and public employee retirement funds is over $500 billion, with billions being added every year. Pension funds now have more assets than all of the savings and loans and mutual savings banks in this country and also more than all the life insurance companies, traditionally very important sources of long-term capital.
Most of the half-trillion dollars in pension funds are invested in the stocks and bonds of America’s largest multinational corporations.
With the passage of ERISA, conservative corporate cheerleader Peter Drucker moved to head off criticism. In “Pension Fund Socialism,” Drucker pointed out that employee pension funds owned a huge chunk of the equity capital of American corporations. In Drucker’s mind this made “the U.S. the most ‘socialist’ country in the world.” Now that the workers “owned” industry, he gleefully asserted, they would willingly submit to productivity measures and lower wage increases.
The problem with Drucker’s often inaccurate analysis is that ownership normally entails control.
Even if workers did want to control their collectively-owned corporate equity, however, they face a prior obstacle — in most cases they do not even control their pension funds.
Some unions do control their pension funds directly, but the vast majority are legally controlled by corporations or, for public employees, by various government bodies. Regardless of the legal structure, two things are true: 1) control over investment decisions has generally been turned over by corporations, government and unions to bank trust departments and portfolio managers who recycle the money back into the coffers of corporate America; 2) money in pension fund accounts is the deferred wages of workers, who have a right to assert control over its management.
Rifkin and Barber see the growing interest in pension investments by unions and community groups as the first stirrings in a “battle for control over social capital.”
Judging from the comments generated by The North Will Rise Again in business periodicals, corporate leaders seem to have drawn sharp battle lines on the pension issue. Business Week quotes an oil industry executive as saying that union assertion of pension power “simply is not going to happen. If it does happen, it will be after a holocaust that will make the 1930s look like an ice cream parlor.”
The capitalists that are bleeding the “Graybelt” dry are building
nuclear power plants in Colorado, supporting right-to-work laws in
Arizona, and killing workers through coal mine shaft explosions in
Kentucky, exposure to Kepone in Virginia, and cotton dust in North
Carolina. But J.P. Stevens and Duke Power, as well as many other
“Southern” companies, are headquartered in New York or Boston.
Fundamentally, the question posed by the “pension power” issue is this: who should control the capital resources of our society? The Graybelt-Sunbelt controversy obscures this. The problem we face in every region is lack of control over investment — and this is true whether a steel mill is leaving Youngstown or a liquefied natural gas terminal is arriving in Long Beach.
