Are we living in pension fund socialism?

In 1976 Peter F. Ducker wrote:



“If "socialism" is defined as "ownership of the means of production by the workers"-and this is the orthodox definition-then the United States is the most "socialist" country in the world. Through their pension funds, employees of American business own today at least 25 per cent of the equity capital of American business.



The pension funds of the self-employed, of public employees, and of school and college teachers own at least another 10 per cent more, giving the workers of America ownership of more than one third of the equity capital of American business.“



Today, most of the stock exchange in the US is owned by different types of retirement plans. Last week I wrote an article about how there exists massive democratic institutions that are massively under-utilised. Trade union pension funds are definitely one such example - it is common for trade union members to be able to democratically elect trustees in their pension funds in the US. Energising these democratic mechanisms has massive potential to make the economic system more democratic and revitalising unions.

Two basic tools

There are two basic ways for unions to wield power through pension funds :



1. Exit

The first is exit - refusing to invest if certain conditions are not met. An example includes a NYC public sector workers’ pension fund that refuses to invest in infrastructure projects using non-unionised workers. It is not just a principled choice, it is also a good choice from an economic perspective, as it helps the union finances by increasing its membership.



2. Voice

The second one is voice - attending shareholder meetings to put forward and vote on motions or board members. For example, there has been many instances of trade unions successfully voting down excessive pay for company directors. Especially in the last 10 years, unions have woken up to the possibilities of using these powers and are acquiring the experience and skills to wield them more effectively.

New approach - push for cooperative ownership?

Lancashire is home to Preston, a city known for winning the award of “Most Improved City” in the UK in 2018. Behind the success is a model, known as “community wealth building”, where public money is used to buy from local and ethical businesses, with support for cooperatives playing an important part.



It is also the home of the only example I could find of a potentially revolutionary new tool - using pension funds to invest in cooperative ownership, as the Lancashire pension fund invested £8 million to a local solar cooperative.



What if the pension funds would start transforming an economy through investing in unionised worker cooperatives? There is a “silver tsunami” of baby-boomer business owners retiring and having difficulties finding people to sell the business to. Perhaps trade unions could help their members who work in such businesses to buy them and convert them into worker owned cooperatives, with pension funds acting as investors?



Of course pension funds have to make sure that their investments make a profit. However, advancing employee ownership might combine the social goals of worker empowerment with the goal of profit-making. In the UK, companies that are more than 10% owned by employees or employee trusts will have outperformed the FTSE by an average of 10% a year since 1992.