Updated pension investment points

The final logic/verdict of the previous debate on CPress can be summed-up as this:

Pension fund money is invested as capital, not as a pool of “deferred wage”.

• Most pension fund money paid out to workers is from “investment returns”, not from the original money “put into pension fund accounts”.
• Pension money paid to retired workers is counted as part of capital’s “wage bill” at the time that it is paid out, and not the time it was collected from worker paying into their pension.
• Pension funds do not pay out all their money to retirement wage because they hedge through actuarial statistics of how much they will not pay out to you.
• The “leftover” pension fund money continues to be invested as capital.
• Public and private pension funds receive special tax status to give pension funds a leg-up in their competition with other pools of investment capital.
• Since only part of the pension is paid out, the money invested is capital, and the government and workers subsidize the fund's investment activity, we can say pension fund money is simply subsidized investment for capital and therefore a profit subsidy.
• If pensions fund money that is invested is subsidized profit to capital, it cannot also be a “deferred wage” (since wages are in conflict with profit).

Said another way:

• Wages are from capital’s activity of extracting surplus value and providing only a portion of that to the workers who created that value.
• Pension funds pay out retirement wages from revenue from capital it owns, revenue that is in competition with wages of the workers employed by those firms.
• The pension fund obligation is to pay the pensioner clients a retirement income, and so this money is paid before the wages of their current workers, just like other debt and investor obligations.
• Pension funds operate in the same private markets as other capital, with the same options for investment, loss or return as any other capital.

The above results in an analysis of pension investment different from the current story based on the “workers’ capital” analysis that pension funds are just pools of “our” money waiting to be directed.

The above analysis outlines that pension money is not similar to government tax revenue. Government investment is not capital as it seeks no profit.

Pension fund money as capital means:

• Invested pension fund money is just collected pools of (financial) capital.
• The rules of the financial capital system is that investment will flow from areas of lower profitability to areas of higher profitability.
• Forcing capital to invest in areas of low levels of profitability will do nothing to enhance economic growth of that region, since capital already has access to where pension funds would invest.
• If Canada is an area of lower profitability, forcing any capital to invest there reduces returns for that forced capital and simply displaces the capital that was already there. Nothing new is created.

Since there are only so many places to invest (i.e., capital flow has limits), there is always a spread of private capital even in areas of lower profitability.

The result of forcing pension funds to invest in areas of lower profitability makes pension funds swap areas of high profitability for low profitability, undermining their ability to meet their retirement wage obligation. However, because this is an obligation paid before wages, it will also put a downward pressure on regular wages in those industries. While this is similar to how the rest of capital works, the subsidy makes this a strange government policy.

And, since we subsidize pension funds to out-compete for higher areas of profitability, the subsidy is wasted if we force it to seek out lower areas of profitability.

As soon as we understand that pension fund money is capital and not pools of “deferred wages”, we cannot get to a point where we can force it to have outcomes different from all the other kinds of private capital out there.

The only way for a government to entice private capital investment is to do it in a way that entices all of capital to invest or to do it directly.

The two neoclassical investment programs for enticing private capital to invest are:

1. privatization (wealth is transferred, but there is no gain in growth)
2. profit subsidies (of one kind or another)

Privatization is a dead-end for profitability as it is just a short-term wealth transfer from the public (workers) to capital.

Public subsidies for profit are already provided to pension funds as a way to subsidize their seeking of the best capital returns. This does nothing to advance profitability generally.

Why does this work in Quebec?

One could argue that it doesn’t. Pension fund monies are simply renationalized in Quebec through an expensive financial scheme that undermines Quebec pension plans but pays out larger profit subsidies to specific local companies.

This is a very expensive (and frankly rather corrupt) way to subsidize Quebec companies with no evidence that there are broader positive economic benefits.