Using Surpluses to Socialize the Economy (RE: RIP, JohnMaynard Keynes

Nathan Newman nathan.newman at yale.edu
Fri Jan 28 12:17:35 PST 2000



> On Behalf Of Doug Henwood
> >
> >The lesson of the Swedish wage-earner funds should be chastening to
> >pension-fund reformers
> >Why did they fail? For at least two reasons. First, business
> >correctly saw the initial version as a challenge to capitalist
> >ownership, a reminder that finance is central to the constitution of
> >a corporate ruling class. And second, they never attracted popular
> >support - essential to any serious challenge to a corporate ruling
> >class - because they were so abstract...More direct interventions are
required - active public
> >industrial policy and greater worker control at the firm level - if
> >ordinary people are to get interested. The stock market, on the
> >other hand, is the home turf of financiers, and any games played on
> >their turf usually end up being played by their rules.

If this criticism is valid, then it is the capitalists' argument against socialism, ie. that average folks cannot be trusted to directly or through their representives care enough about allocation of investment capital. Your argument seems perfectly in line with the view that only large, direct owners of capital will care enough about this "abstract" problem to assure efficient resource allocation.

Your argument that "direct interventions" such as industrial policy would catch their interest is no answer, since people still have to care about the abstract choices between what industries to invest in and which make the most sense.

If all pension funds or social security funds do is pick stocks, you probably are correct, but the 1990s has seen the rise of active, institutional investors like CALPERS who have asserted far more discretion in choosing management and arguing for various kinds of social policy. It is limited at this point, but then the funds involved are limited.

The total dollar value of AFL-CIO controlled pension fund assets was only $350 billion by the last number I checked. It a bit more now no doubt, but still little more all told than the recent AOL-Time-Warner merger.

I have not studied the Swedish experiment - however aborted - in depth, but the very stability of firm management in Europe makes investment-based control of firms quite limited. The very fluidity of stock sales in the US makes stock-based control of investment the primary method of decision-making, so there is a reasonable argument that pension funds or social security-based funds would have a much more dramatic effect in the US context.

I have no disagreement that greater control at the firm level is key to making any investment-based system both attractive and feasible, but in a global economy it is also clear that without some control of capital, workers have an extremely tough time controlling firm level decisions through bargaining.

That business resists worker control of their own capital assets is obvious. But that merely argues for fighting for that control as a top priority. The UPS strike was hailed for its focus on the status of part-timers, but it was equally important as a fight by the Teamsters to maintain control of their workers pension fund assets in a fight where UPS wanted to take control itself of those funds. That success had dramatic direct financial consequences for Teamster retirees but it also has a real effect on the ability of the Teamsters to launch corporate campaigns in the future.

Returning to the social security investment argument, there is a rather interesting economic result. Since roughly fifteen percent of all investments in US labor return to the overall social security system in the form of social security taxes, the "prudent return" view of the overall system should be biased to fuller employment. Now, this is the kind of analysis that the capitalists will fight with a passion, but would become inevitable if the government was investing large surpluses in the economy. It is inevitable that social returns from investment would have to be calculated and discussed in relation to the basic finance returns.

I am not a believer that "pension fund socialism" is the answer unto itself, but I am a believer that the fight of workers to grab control of as much social capital as possible will be a key tool in any kind of socialist transformation in the future.

And just because a Swedish plan launched straight into the face of the rightwing assault of neoliberalism was not successful, that does not mean that no variation on worker-controlled investment funds can play a role in the future in the United States. Given the daily fascination with day traders here, it seems hard to argue that the right plan could not catch the interest and enthusiasm of US workers.

-- Nathan Newman



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