||Issue No. 139||07 June 2002|
Interview: Class Action
Safety: A Mother's Tale
Unions: The Hottest Seat in Town
International: Defensive Enterprise
Economics: A Super Deal?
History: A Radical Life
Media: Cross Purposes
Review: When the Force Is Unconscious
Poetry: Wouldn't It Be Loverly
The Locker Room
Week in Review
Latham Ad Nauseum
Our Home Is Girt By Wire
Hands Off Hooligans!
A Super Deal?
Collective involvement in ownership of capital is one way of looking at superannuation. There has been a massive extension of this form of ownership since 1987. However is it in reality just another version of Mark Latham's suggestion of having a first shareowners scheme? Slightly better for workers in that the risk is spread across a few different investments, but there is no emphasis on the collective outcome of this massive pool of savings. The emphasis is rather on the level of individual returns. The money paid into funds on behalf of individuals is allocated by fund managers using capitalist criteria ie return on investment. Any notion of the public good in any medium or long term does not get a look in.
Many workers will have seen a very disappointing rate of return in the last 12 months or so. Some funds have been total failures. The superannuation industry, according to Ian McAuley (in Dissent magazine), point to these failures as only being 0.004% of funds in the industry. However for the workers with savings in them, they represent 100% of their superannuation investment. Thus we see that the privatisation of retirement incomes (away from any universal pension entitlement that we are told is not affordable) is just another example of the risk being transferred to the individual taxpayer/worker, the person who is least able to afford to hedge against such risk.
Liberal theorists fashionably claim that we now live in a "risk society" where choice and risk are intertwined. I guess it's true if we look at Enron. As Slavoj Zizek puts it in the London Review of Books "Thousands of employees who lost their jobs and savings were certainly exposed to risk, but without any real choice: what was risk to those in the know was blind fate to them. Those who did have a sense of the risk, the top managers, also had a chance to intervene n the situation, but chose instead to minimise the risk to themselves by cashing in their stocks and options before bankruptcy - actual risks and choices were thus nicely distributed. In the risk society, in other words, some (the Enron managers) have the choices, while others (the employees) take the risks. " Extend this to HIH, One-Tel, National Textiles, Ansett.
Enron's collapse led to losses of between $US5-10b for public pension funds in the US, According to Robin Blackburn writing in New Left Review
Enron employees had more than half of their $US2.1b of assets in the 401(k) retirement plan invested in Enron itself. When board members sold over $US117m of stock between January and August 2001, employees found their assets frozen. Blackburn notes that one Enron concern, Portland Electric, showed the truth of the overall company reputation of being good to employees by hiring grief counsellors for those who had lost all. The biggest public fund in the US, California Public Employees Retirement System (CALPERS) also lost a great deal through its dealing in other complex financial products that Enron was trading in.
The collapse of Enron and other US bankruptcies highlighted that those in funds could suffer greatly even if their fund isn't going down the drain. It also showed that insider knowledge was crucial, and that not only workers were on the wrong side of the information divide about what was the real state of corporate finances, but that many shareholders were too. The creation of this investment culture has been highlighted and praised by John Howard, but it does not mean that shareholders are automatically in the know. Rather it pays those in control to ensure that they are not, and financial regulations allowed this situation to continue. The insider knowledge of trustees, often drawn from big financial institutions like the former Arthur Anderson, does not get in the public domain and compromises reporting and auditing, as we have seen all too clearly with Enron and HIH.
That the new shareholders are greatly disillusioned was highlighted by a Business Week survey in February 2002 where 81% said they lacked confidence in those running "Big Business".
Could a switch to socially responsible or ethical investment policies by a way forward? Blackburn reports that CALPERS has reviewed its permissible country criteria for the investments it makes. CALPERS size ($US151b) means that it can have a big impact on investment decisions by companies it invests in. Countries targeted are those with export processing zones where workers rights are non-existent and places that the anti sweatshop movement has been most vocal about. Another example of funds and groups of workers using their market power to possible change corporate approaches has been the ICEM group of unions targeting the policies of RIOTINTO.
The finance community tut tutted about Enron but generally its response came back to the point that there is risk involved in all investment and other pension schemes could also collapse as industries faded (the steelworkers in the US who saw their industry decline and their pension funds with it were used as the example).
This is true, as far as it goes, but it also brings us back to the point of the privatisation of risk into the hands of those who have the least assets and who depend on the jobs and these funds to ensure a decent retirement. Their risk comes with no choice as they have no control.
In the UK there has also been a clamour to privatise retirement, as in Australia, and the backers of private super or pension schemes all claim higher rates of return than public ones. McAuley shows this is a pretty far-fetched claim in Australia, and Blackburn shows that it is a trick with figures and tax laws in the US and the UK.
However the momentum in the US is to divert their existing method of funding one level of pensions - payroll tax - from a social security system to individual accounts.
These schemes and taxes paid by workers have been seen to date as a way of contributing to their parent's retirement and they see their own retirement based on the continuation of such methods. However the way finance capital operates with a big claim on supposed future returns, and large fees for operating funds makes it difficult to see this as being a way to ensure secure retirement incomes in the US and UK. It also, as Frank Stilwell argues, ensures that the inequalities during peoples working lives are perpetuated and magnified on retirement. The well off are able to use super as a way of minimising tax during their careers and afterwards, by diverting a sizeable part of their disposable income into super investment schemes. The privatisation of pensions in this manner is at odds with the supposed aims of a universal work based superannuation system, the excuse given for its establishment by Hawke, Keating and Kelty in 1986. Also forgotten are the many who are not in superannuation funds.
How then to ensure a fairer scheme without making inroads into existing tax revenues, which are already facing big demands and face resistance from tax payers at any suggestion of increases?
Stilwell argues for a change in the tax advantages that are biased to the wealthy in superannuation tax arrangements, thus using the extra revenues to improve state provided retirement income.
He also argues for collectivist approach to investment. A substantial portion of savings should go to a national investment fund. Workers capital could be invested with a view to long-term aims. Here the ethical approach mentioned above could come into play with priority given to ecological sustainability. Clive Hamilton from The Australia Institute has proposed another supplementary method using revenue from a carbon tax to contribute $500 each year everyone's retirement savings. He doesn't say it should be used collectively, but these is no reason why not, as this would sit very well with ethical investment criteria for collective worker funds.
The Howard government has openly expressed its concern about workers super funds having "undue influence" in the stock market. So the idea is clearly on the right track. After all, as Felicity Wade says in a talk on the Perspectives program on ABC Radio National, "Why shouldn't workers' investments insist that workers' interests are served?" What a radical idea?! Her gripe was the fact that union officials refuse to see the sense in the idea, and act just like any capitalist investment manager, the only thin we need to worry about are unit returns. "There was a time when workers had interests beyond simply acquiring wealth" as Wade put it.
It also links in with the craze for public private partnerships. If these things are on the agenda, then lets look at ways they could be done that are really in the public interest, rather than the way they operate now to transfer vast tranches of public money to a few shareholders, with little responsibility. If we had ethical driven, superannuation funds with a longer than five minute view of investment, then investments in schools, hospitals, universities and public transport for example, would be truly publicly owned and not driven by the bottom line of a corporate construction company.
Blackburn goes further than this. "Unwittingly, senior executives have themselves come up with a device--the stock option--that could raise the huge sums necessary to cover future pension provision, both for company employees and for the citizenry as a whole. In effect these stock options, often combined with soft loans, represent a gift from the company to its senior executives and favoured employees. While severely restricting such options, legislation could require that all publicly listed companies issue shares equivalent to 10 or 20 percent of annual profits to the Social Security trust fund (in the US), or to a mixture of national and regional pensions boards (in both UK and US)." The pension boards would have control over their own investments, but close social auditing would be used to ensure that it follows ethical criteria on sustainability. This is in effect a way of using the employer contribution, as we have in Australia, as a collective investment, rather than it going to individual accounts, as it presently does.
Blackburn notes that this is similar to the Swedish plan of the 1980s, developed by Rudolf Meidner. This scheme foundered in the face of corporate resistance, which just goes to show that it was a system that worried capital, unlike the current Australian system, where, despite the various statements that its workers control by stealth, the control by capital is not challenged, and in fact is given a vast pool of money to play with, with all the risk borne by the workers.
Robin Blackburn (2002). The Enron Debacle and the Pension Crisis. New Left Review; 14 (March-April).
Frank Stilwell (2002). "Labour's Capital: individual or collective?" Arena magazine; no 57, February-March. (reproduced in Workers Online no 126 )
Ian McAuley (2001-2002) "Superannuation and the Public Purpose", Dissent, no 7 (Summer)
Felicity Wade (2001). "Another Interesting Story About Superannuation"; Perspective, 26-11-01. ABC Radio National.
Clive Hamilton (2002). "The Super-Carbon Scheme-saving the environment, saving the environment", The Australia Institute (TAI)
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