Back in 1976 a smart business analyst named Peter Drucker noticed that a steadily increasing amount of stocks in American companies were held by pension funds.
He wrote a book entitled The Unseen Revolution: How Pension Fund Socialism Came to America, which argued that, if things kept going the way they were then, pension funds would own a majority of publicly-traded stocks.
Thus, he argued, the United States was quietly becoming a socialist country, in which workers owned the means of production.
The flaw in his argument was that, although the pension funds were owned in the name of workers, they did not control the funds, and the funds were not necessarily managed in their interest.
Since 1976, private companies have been dumping defined-benefit plans and switching to plans in which workers take on the burden of saving and the risk of investment. I left the paid work force in time to get a defined-benefit pension (with no cost-of-living adjustment, however). If I were young today, I would not be so fortunate.
The exception is government pension plans, but now state and local governments, through a combination of corruption and ignorance, are allowing Wall Street speculators to put employees’ pension money into the kind high-risk speculative investments that caused the latest stock market crash.
My e-mail pen pal Bill Harvey sent me a link to a good article about this, which is copied below.
When the next crash comes, the employees will be out of luck and the fund managers will walk away after pocketing high fees.
This reflects two great weaknesses in American society.
One is a moral weakness, that financiers regard it as ethical to profit at the expense of those who trust them.
The other is an economic weakness, that financial manipulation is more profitable than creating value in the real economy.
Wall Street Is Taking Over America’s Pension Funds by Murtaza Hussain for The Intercept. (via Bill Harvey)