Thinking about pension plans: what are they?
NOTE: The final answer to the below poorly written discussion is here.
What is pension money?
There is a debate that I am trying to spark about whether pension funds (or, rather the money in them) are one of either:
- Capital
- Wages
- Loans
- Taxes
And/or, when are they each of the above, in what context, and what is the relation to these workers have who will receive a pension, pay into a pension, and/or get screwed over by the investment.
Mainly, I am interested in a pension fund dollar's relation to capital at each stage of its journey from capital to retired worker's wage.
I think that taking a classical view of money and finance (based on Shaikh's view of classical economics) shows us some interesting things on how we should orientate our fight around control and the limits of that fight within the "pension" world. I think it also answers some of the questions posed in recent articles about what happens if they are "bad" at investing and cannot fulfill the obligations to their members' future wages.
As a teaser: why do we not ask this above question this way of the market more generally, of banks, or of the government's (at least not directly) investments?
Pension monies are singled out for this I think because of some sense that they have an obligation that is different from these other things. I think this is problematic.
Esoteric stuff, but is there a different or the same demand?
The question of how any of this analysis might affect our demands around pensions is a good one. The response is that if pension money is just capital (read "profit"), then we cannot demand much of it except that they (capital) invest it in profitable industries – which is to say that we demand that capital be capital.
If pension money is something else – say wages or taxes – then the demand should be for nationalization of the plans because pension money (our wages in this case) is being used to subsidize profit through the financial system and that's not what workers want their money to be used for (mostly).
If pension money is (part of the) debt/credit (system) – then we should demand that they at least a standard rate of return on that credit from capital instead of subsidizing automation and outsourcing through artificially reduced debt costs.
But, it immediately is used to purchase something before it makes it into your pocket. Then it makes it into your pocket later, after it has been used to make an investment. We would not say that debt is wages. And, we would not say profit is wages. Why would pension money used in the same way be said to be wages?
For an RRSP, that's wages because it makes it to your pocket you are the person purchasing the investment. Is that different from someone investing that on your behalf and giving you a cut? Probably.
If the surplus product put into pension plans is simply used to create more surplus product, it isn't wages. And a defined benefit pension plan is promised later wages that are used to invest in producing surplus product now. In this way, they are not wages by definition.
It really does depend on how the investment is structured and who is buying it and with what money that will settle this. And, this all directly affects our relation to that dollar. And, it is why some pension money (most?) is used to extract more surplus value from workers (even yourself) as it seeks to fund the future wage promise through that surplus value. Again, not wages – by definition – if this is the case.
This might be all esoteric at some point, but there is a fundamental materialist analytical difference between DB plans, a DC plans, a public pension plan and an alternative public option (to be discussed later) in this case.
And, again, a huge difference between CPP and employer plans based on this. However, a "public pension plan" still denotes some longer-term investment program beyond simply the state paying you your money back later.
A public pension plan solution?
We are for public retirement income, but should we be for "public pensions"? I am not so sure.
If we believe in our money not subsidizing profit, then a public pension plan is almost worse than a DB plan if it is allowed to purchase private firms/stock/land/debt.
Then again, a social democratic policy frame might say CPP (a public pension plan) is the best plan if it is regulated to only be allowed to invest in national capital profit subsidies and infrastructure – leveraging capital growth that it, the government, supports. And, the only cost being of the workers making (the normal) ever smaller share of the surplus product produced by capital.
For DB plans, the guarantee is only as good as the economy that supports it. We tend to think of pensions as providing a guarantee irrespective of this and talk about pension funds differently from your RRSP that isn't guaranteed. But, we only because public sector workers have some idea that the state will guarantee our pension even if the plan goes bust. This just isn't the case in a crisis as the surplus (or that tax money to subsidize the private market loss) has to be paid by someone.
Do we demand an OAS-type solution?
What about Old Age Security type of deals? The proposal is that we want to capture some of the surplus created by private capital investment (or, rather that workers create and capital steals from us – because we are Marxists in the end) to pay for retirement wages. OAS is not funded this way as it is funded from general taxation and an expansion would be workers paying more – again, essentially subsidizing capital.
An alternative demand: public production
In burying the lede, the punchline of my thinking right now is: I think we want surplus product/value from public production to fund retirement wages.
This would be essentially (as in materialistically) redistribution of worker created surplus to workers. 100% redistribution of surplus, resulting in retirement wages being democratically set as a true deferred wage.
The best part is that we can (and do) do this right now. Sure sure, a revolution in thinking, but no different than minimum wage increases in attaining it.
So what does that mean concretely?
It means "nationalizing" the pension funds and putting that money into publicly owned productive (i.e., not public social services or roads or bridges) enterprises.
Funding retirees with a wage would come from the surplus created by those productive enterprises.
Concrete examples, please!
Build a public wind farm with nationalized pension plan money. Put the surplus generated by selling that power to the private sector into retirement wages. For this, building a wind farm meaning building all the parts and product of wind farm builds. Essentially, what capital does now when it builds a productive wind farm.
This does not have to all happen at once (though, it could in a crisis). One could do it for all "future" pension investment money. We are talking about 20-30-50 year time horizons and a standard surplus to retired wages transfer.
How do we get people to care about this?
You could probably measure the surplus that "our" pension money is creating for capital and it is likely on par with the the reduced wage share of regular capital. It might be even worse since it is similar to a subsidized loan to capital. This huge value would go a long way to convincing people to support doing something else with our money than just having it siphoned off into Musk's pockets.
Another offshoot of this thinking is rebuttal to how we currently think that we are gaining from pension investments in the market – that the "returns" pay for a chunk of our retirement wage. But, actually, it is the opposite of this. Our money is being used to make profits for capital and we are given the simple wage share of that surplus.
This is not the story we have been told. But, on a class level, I think it is closer to reality than pensioner simply "gaining from their pension plan investing in the market".