Tuesday, January 10, 2012

Whither Goest Capitalism? The fading American Middle Class... and putting Nehemiah Scudder on your car

Re-lighting the political lamp, let’s commence with a crucial year in U.S. political history... by linking to a video that’s gone viral nationwide, “Capitalism Hits the Fan” by Professor Richard Wolff.

Now, from the title I expected something tinged a little pink. What I found instead was completely fascinating - and not really "leftist" at all.  In fact, Professor Wolff passionately defends the general notion of capitalism.  That is, a competitively creative marketplace that encourages entrepreneurial start-ups and innovation. A market that would please Adam Smith and continue the productive cornucopia that made all progress possible.


One of Wolff’s charts is incredible. It shows that real U.S. worker wages rose from 1945 till the 1970s in steady pace along with increasing worker productivity.  Only then, in the 1970s, the rise in middle class wages stopped, despite accelerating increases in worker productivity and corporate profits.

Huffington Post 3/19/2011
How could such a de-coupling have taken place? Wolff shows this is not about “left vs-right.” It’s about capitalism shifting from a traditional American model to one that far more closely resembles patterns described by... Karl Marx. Wolff is very good at explaining causes. Like a wise economist, he eschews predictions and prescriptions.

Screwed-Hartmann-Thom-EB9781576755297I’m less mature. So hence, I deem the solution to be political. Moreover you can play a large role. Start by sharing this video.  America’s salt-of-the-earth types know, deep down, that they’ve been betrayed. So far, they’ve been talked into blaming one group - civil servants -  for absolutely everything.  Well... also scientists, teachers, doctors, journalists... in fact, every bunch of “smartypants.”


But keep shining light. In time, some will realize that other power centers have been doing the most screwing... and benefiting.  That awakening is what Murdoch fears, far more than British subpoenas.


See also my blog posts: Who is Insulting the Middle Class?


as well as: Class War and the Lessons of History


=== The Ideal Bumper Sticker for 2012 ===




This is the year when author Robert Heinlein forecast that the U.S. would tumble into a vicious theocracy led by a fundamentalist, rabble-rousing preacher.  Which leads us to this year’s tastiest piece of rebel propaganda that you could possibly put on the bumper of your car. 


Most people pulling up behind you in traffic will experience flat-out, head-scratching puzzlement.

But for many, it will be a WikiPedia moment. When they get home, look up the name, and read about Heinlein’s dark future scenario, some will go “Oh, I see what that bumper sticker meant!”


Whether they nod in agreement or glower in fury, you’ll have made them read and think... and maybe even go pick up a little Heinlein!


Not bad for a simple bumper sticker.


==Looking Forward==


For 2012 and Beyond: Predict the future of computing. Enter your best guess about what we can expect in the years and decades to come. 



No doubt we'll be hearing enough dire, apocalyptic visions during 2012. Check out this lovely little epiphany...An Optimistic (super!) Look at the Next Forty Years, written by someone who hasn't had the joyful spirit of ambition snuffed by grouches of right and left. Marc Millis offers a vision of humanity exploring and expanding into the solar system and beyond...


49 comments:

TheMadLibrarian said...

Unfortunately, I suspect that the head-scratching moment will never progress beyond that. People will assume it's one of those oddball fringe candidates, running for the "Green" party or some such. They'll continue on to work, or to the grocery store for some beer, and drop it. The popular masses don't read, unless it's catchy or benefits them; our library has many informational signs which are ignored, including requests to use cell phones outside and signing up to use the Internet.

One atheist friend has often had his bumper stickers defaced, the ones that say "God, please protect me from your followers" and "Doing my part to piss off the Religious Right".

TheMadLibrarian

hotinge: discoloration caused by global climate change

sociotard said...

AI entities explain that the primal territorial and conquest instincts of animals (and humans) do not make sense for them. They do not die.

Balogna. Show me a computer that has survived 30 years. Robots die, and they die fast.

BackToBaseball said...

The divergence begins about the time that John C. Bogle first made index funds available to the individual investor. More generally, this was when middle class investors began to dramatically increase the allocation of their wealth into the equity asset class.

David Brin said...

Alert! I am trying to come up with titles for the Uplift Omnibus trilogies that Orbit UK are putting out.

The second one works pretty well, it includes Brightness Reef, Infinity's Shore and Heaven's Reach:

EXILES: The Second Uplift Omnibus

But I am haveing trouble with a title for the first one , combining Sundiver, Startide and Uplift War.

Here are some suggestions, starting with the best... but there ought to be something pithier and better!


Earth Rise:
The First Uplift Omnibus

Wolflings Defiant:
The First Uplift Omnibus

Earthclan Rising:
The First Uplift Omnibus

Earth Against the Stars:
The First Uplift Omnibus

suggestions?

Anonymous said...

I used to teach astronomy and space science in both a museum and science center setting. As a result, I have plenty of resource material lying about; plenty of books, models, artwork. I'm also interested in the directions that we might have taken; I've been following space exploration since 1967 at least.
As a result, I've seen great plans come and go. To be honest, I am somewhat underwhelmed by some of the plans ("we're going back to capsules?!?") and inspired by others.
This is perhaps preaching to the choir, I know. This is why my work as a space advocate was so trying at times (especially where I lived).
It is a fun activity, though, looking back at the plans that were laid out and how they actually evolved. When I was eight, I was certain that the space shuttle was going to be straight winged with a flyback booster. When I was twenty, the space station would be a servicing facility for spacecraft in LEO and beyond. When I was twenty five, the shuttle would be accompanied not only by a cargo version (Shuttle-C) but a true spaceplane. All of those predictions about a decade out each. The shuttle that flew would end up being the politically-compromised delta design, the space station would be delayed almost another decade and used only for research, and neither the NASP nor the Shuttle-C flew.
Even "privatized" spaceflight, a frequent point of contention and one of the reasons I left the space advocacy gig, has not panned out the way we were led to believe it would.
But our move upward is an interesting one. It is clear that we are doing it, though I suspect the dominant players are changing in ways that are going make plenty of my fellow countrymen uncomfortable.

-The Vagabond

Rellativ - related to Ella Fitzgerald

Tim H. said...

30 year old computers? Wouldn't bet too much on not finding a working 8-bit of that era, Atari 400/800s approached milspec and Apple didn't build junk either. With a bit of masochism, one could write with them, if your publisher could deal with printed manuscripts or 5 1/4" disks.

"florders", defunct bookstore re-purposed as a florist's shop.

Hans said...

I'd just call it Uplift.

That's how I think of it.

Hans

Citizen Deux said...

I would be more cautious about wading into economic theory, especially when the source is EPI or reprinted on HuffPo, to quote Dr. Greg Mankiw (Prof of Econ at Harvard)

"There is heterogeneity among workers. Productivity is most easily calculated for the average worker in the economy: total output divided by total hours worked. Not every type of worker, however, will experience the same productivity change as the average. Average productivity is best compared with average real wages. If you see average productivity compared with median wages or with the wages of only production workers, you should be concerned that the comparison is, from the standpoint of economic theory, the wrong one."

In short, what are the odds that a left leaning publicaiton (HuffPo) and a progressive group (EPI) may have skewed the numbers?

http://gregmankiw.blogspot.com/2006/08/how-are-wages-and-productivity-related.html

Anonymous said...

@Sociotard...
Voyager 1, Voyager 2 (a stretch, I know), many computers on older jetliners. Personally, I have a twenty five year old Mac (an original beige Plus) and a twenty three year old Tandy Model 102 which still sees quite a bit of usage. Last year, I unloaded a perfectly good Apple II+ that was better than thirty years old.

@...uhm... me...
Unintentional rant; was supposed to post only part of that. My apologies.

@Tim H....
Yeah, I actually make those old computers work. They balk at times, but they still manage.

- The Vagabond

Guili - the window manager that makes you giggle.

LarryHart said...

Dr Brin,

The second Uplift trilogy is probably easier to give a unified name to, as it is essentially a single "novel" with suspense breaks in between books.

The first trilogy is less so. "Startide Rising" and "Uplift War" take place in essentially the same time frame, but from different points of view. "Sundiver" almost doesn't belong in the same mix, happening as it does 200 or so years previous, and to an entirely separate set of characters. While the other two books in the trilogy speak to an Earthclan mainly out of its league against Galactic society and technology, "Sundiver" is more about Earth society itself treating the alien Galactics with almost the same disdain as their own "probationer" underclass.

I think of Sundiver as being a prologue within the first trilogy, but in fact, it might be better recommended as a prologue TO the SECOND trilogy. How many of your readers (who didn't happen to re-read "Sundiver" after "Brightness Reef") have no idea that the end of the first novel neatly sets up the premise of the entire second trilogy without regard at all to the rest of the first trilogy?

Point being--the first trilogy is harder to attach a common theme to. I'd expect the major point to be the Streker's mysterious discovery in the Shallow Cluster, but the first book isn't about that at all. It also seems to be about Earth colony worlds, but again, not "Sundiver" so much.

Yes, the trilogy about "uplift" and it's about "wolflings", but neither of those terms is going to be catchy to readers not already familiar with the work.

In the course of writing this, a word did pop into my head that just might make a good one-word title for the first trilogy, reflecting both Earthclan's position with respect to Galactic society (in books 2 and 3) AND the Galactics' position relative to Earth (in "Sundiver"). It also has a subliminal meaing regarding the Streaker's seeking and finding important information--that is, if you'll allow a pun.

My suggestion...

PROBATION:
The First Uplift Omnibus

Rob said...

Why not just go with "EARTHCLAN: The First Uplift Omnibus"?

LarryHart said...

sociotard:

"AI entities explain that the primal territorial and conquest instincts of animals (and humans) do not make sense for them. They do not die."

Balogna. Show me a computer that has survived 30 years. Robots die, and they die fast.


But they don't CARE if they die. Survival (individual or clan) is not the imperative for artificial beings the way it is for living ones. They could, of course, be PROGRAMMED that way, but that's an artificial constraint, not an inherent one.

LarryHart said...

TheMadLibrarian says of "Scudder 2012" bumper stickers:

Unfortunately, I suspect that the head-scratching moment will never progress beyond that. People will assume it's one of those oddball fringe candidates, running for the "Green" party or some such. They'll continue on to work, or to the grocery store for some beer, and drop it.


Possibly, the right sort of graphic could be included on the bumper sticker that would make the fictional character interesting enough for someone to remember and Google later--even if they might initially think they'd be in FAVOR of the candidate. Something that evokes the adult Damien from the third "Omen" movie, perhaps, or the Martin Sheen character from "The Dead Zone".

Thomas T. Thomas said...

Wolff says that wages stopped growing in the 1970s while productivity continued growing. His interpretation seems to be that mean-spirited boards of directors simply decided not to pay workers more. But in a marketplace, the price of labor (wages) is set by supply and demand, not greed.

Instead, what we've been experiencing is growth of productivity that no longer needs so many human hands. Productive machines are outrunning the need for workers to tend them. Automation is now accounting for its own productivity. Jobs and wages haven't gone to China or India, but to factories full of robotic machines run by computers. This has become a recurring theme with me. See "The Coming Robotics Age" at www.thomastthomas.com.

sociotard said...

Yes, there are some 20 yr+ computers still going. Their 'long tail' for lifespan may turn out to be okay.

But compare the percentage of computers built 30 years ago to the percentage of people built 30 years ago. There's no comparison.

sociotard said...

Yeah, Sundiver was an Agatha Christie plot set in the uplift universe (a bunch of people stuck in the same mansion-sized space and one of them is a killer, dun-dun-dun). It doesn't fit with any of the other novels really.

If you were trying to attract new readers, I'd say Earthclan Defiant would work well.

Anonymous said...

@Sociotard
We're comparing Apples to oranges... or IBMs, Tandys, et al. The IBM PC celebrated 30 years of existence in 2011. It, like its 8-bit competition, was simple, and actually fairly open architecture. They are like little electronic cockroaches; their simple design seems to assure long lives. Look at their motherboards; no surface mount technology (something that would not be common until 1987 with the Macintosh IIce and IBM PS/2 Model 50z leading the way). If you blew a resistor, you could replace it. But they seldom blew! The real problem is a lack of storage; 5 1/4" floppies are scarce, and I am probably hoarding the last 3 1/2" 720/800kb unopened disks in my state. Hard drives are a whole other matter; the first generation IBM 8088/8086 machines needed RLL/MFM hard disks or early SCSI implementations. The Apple II and TRS machines were similar.
But... they... still... work.

-The Vagabond
Pyrole - Serving the remainder of your sentence in Hell.

Rob said...

Physics lovers will love this:

http://vimeo.com/33741260

Slow motion videos comparing three balls to a skipping stone, thrown into water. Fun!

john newman said...

I can't wait to listen to the rest of Wolff's talk tonight, from you synopsis he appears to be on a similar track to the one I've been on lately. This is a series of essays I've recently finished on the etiology of the phase shift I think we are now entering: http://cobblehillbilly.blogspot.com/2011/11/sting-of-success-or-why-powerful-prefer.html

Tony Fisk said...

I thought the first set of novels was already released as 'Earthclan'?

If you're going with 'Exiles' for the second trilogy, I would try and stick to a single word as a theme.

eg:
- Earthclan
- Wolflings
- Uplift (possibly 'Downcast' for the second trilogy would work then?)

@TheMadLibrarian: defaced stickers is proof that they work

sjmalarkey said...

An Ai is a program, not a computer. Programs frequently outlive computers, particularly programs for supercomputers.

Anonymous said...

In the 80's and 90's workers gave back. Wages, benefits, retirmenet. They took cuts. But as companies posted ever larger profits and CEO's salaries went thru the roof, the workers were asked to give more. So say what you want, it is greed that drives it.

I worked in a bookstore when What Color Is Your Parachute came out and for the first time, I wanted to burn a book. It was a manual for greed, both individual and corporate.

I also think that the 2012 elections will be more of the same. Republicans will drive their base with fear mongering about social issues. The Democarts are too inclusive and no one wants to wait to be second to have thier issue addressed.

The middle class isn't scared enough to make the required changes. Maybe 2016.
But then again, I believe most corporations have mistakedn Dogbert's Top Secret Management Handbook is a joke.

Tony Fisk said...

That Wolff video is very interesting and informative.

(I was particularly struck by the parallel drawn between the Marshall Plan and the way China has been propping up the US recently.. do they have a GI Bill as well?)

Stefan Jones said...

"Terragens Chronicles"

David Brin said...

Misc answers: Re titles I proposed Earthclan... but that had already been the title of an omnibus with just Startide and Uplift war in it. They don't want any confusion. Sigh.

Triple-T said: "Wolff says that wages stopped growing in the 1970s while productivity continued growing. His interpretation seems to be that mean-spirited boards of directors simply decided not to pay workers more. But in a marketplace, the price of labor (wages) is set by supply and demand, not greed."

No Tom... that is how capitalist markets are SUPPOSED to work. It's how they work if transparent and regulated in order to eliminate cheating. The cheating that prevailed in 99% of human cultures across 6000 years. The kind of outright cheating currently inflicted on us by 5000 conniving golf buddies and their petro-prince pals.

Sociotard re Sundiver as a mystery: exactly right. When I teach writing I always say start with a murder mystery!

Had an Apple II with integer basic and a serial # in FIVE digits. Wrote several novels on it. My brother let it get stolen. $%$##!

rewinn said...

A title challenge? In descending order of reasonableness ....

* Exeunt: The First Uplift Omnibus
( Parallellism with the 2nd title; "Exeunt" = Latin for "They go out there")

* Earthclan At Bay: The First Uplift Omnibus
(Unifying theme of the 1st 3 novels)

* The Coming of the Earthclans
( A Robert Adams approach)

* The Sun Tide War
( Straddling the 3 titles uncomfortably)

* Ooops, They Found Us! Now What?
( What We Thought When We First Learned What the Galactics Were Really Like )

Rob said...

Re titles I proposed Earthclan... but that had already been the title of an omnibus with just Startide and Uplift war in it. They don't want any confusion. Sigh.

This from a cohort more than happy to print "STEPHEN KING" so huge on the cover that you can't actually tell what the title is?

OK, they're silly, why not me, too?

"LIBRARIANS; The First Uplift Omnibus"... nothing more heroic than a cornered librarian!

"WARRIORS: TFUO", to give them a chance that it will be confused with the childrens series about feral housecats

"CASH REGISTER: ...", too obvious?

"AUGMENTS: ..." 'Cause the dolphins have to strap on these brain-interfaced thingies to turn a page...

"GADFLIES: 'Streakers' On the Run"

"UNDERDOGS: Here They Come to Save the Day"

"Gillian's Castaways"

I'd give you more but the rest are just silly.

Eve said...

I like the idea of Scudder bumper stickers, but aren't you afraid that'll give them bright ideas?

Newt "Defender of Civilization" Gingrich has an app for that.

TwinBeam said...

"Wolflings: TFUO" seems the best - parallel to "Exiles", it's the best description for the Terran races and their situation in the first novels.

Ian said...

One major impact on the average level of wages in the US since the 1970's has been the increased participation of women and non-whites in the formal economy.

Prior to the 1970's most middle class women of working age were not in the work force, now most of them are.

Similarly, t6he participation rate of African-Americans in sectors such as manufacturing and services has increased dramatically (and the proportion employed in areas like agriculture and domestic servants has declined).

Since women and non-white Americans have typically been paid less than white males, increasing their participation in the work force has the effect of decreasing the median wage.

(Oh and if not for the increased labor market participation rate, unemployment would be around the same as it was in "The Good Old Days".

The increased number of two income families also helps explain why household consumption has continued to rise faster than median wages.

To clarify: I'm not criticising increased participation by women in the work force I am saying that people's myopic and idealized view of the past tends to overlook how bad things were for many groups back then.)

Tim H. said...

For many women, the decision to enter the workforce was forced by the decline in jobs that could support an entire family. This happened through automation, outsourcing and "The golf buddies" continuing jihad against labor. There's no going back, but a new balance would be worthwhile. As far as "brown people", I'm too pale to say much, but might a diverse workforce look more target-able to someone with sympathies to folks who are confused about where bedsheets are used?

LarryHart said...

Dr Brin:

Sociotard re Sundiver as a mystery: exactly right. When I teach writing I always say start with a murder mystery!


That seems to be a time-tested route to go, from Asimov's "The Caves of Steel" through the groundbreaking graphic novel "Watchmen".

Mitchell J. Freedman said...

Bravo to Dr. Brin for promoting a Marxist's video on capitalism--and finding that the Marxist is actually quite reasonable in his analyses and even sympathetic to basic capitalist principles.

Bravo to Mr. Thomas for recognizing the role of automation, though I am of the view that it is not as major a factor when I see the link of jobs that went to Mexico, Guatemala, China and Vietnam. Automation, however, is still a factor to consider.

And bravo to Ian for recognizing that the good old days of the US meant women and blacks need not apply for most jobs.

As usual, the past contains a plea that we strive to be better today and tomorrow. And the past contains a basis for recognizing that we need a mixed economy, not one ideology or another.

LarryHart said...

Mitchell J Freedman:

Bravo to Mr. Thomas for recognizing the role of automation, though I am of the view that it is not as major a factor when I see the link of jobs that went to Mexico, Guatemala, China and Vietnam.


Well, technology does make it EASIER to outsource labor. Lower production costs for Guatemalan or Vietnamese payrolls wouldn't be nearly so attractive if the products then had to be dragged to North American by travois.

As a liberal who thinks we've been on the wrong economic track for 30 years, I will grant that automation lowers the cost of labor. However, I think that argument misses a much larger point.

A ridiculously simple example which nonetheless illustrates my point: were all of humanity to awaken from a bad dream and find ourselves living in a Garden of Eden big enough for eight billion inhabitants, the fact that food is available for the picking would reduce labor costs to zero. What this SHOULD mean (in my opinion) is that everyone has food available to them. What it should NOT mean (in my opinion), is that someone gets to claim ownership of ALL the food, and that everyone else must starve because they are of no imaginable USE to the owners.

Feudal society is structured around a tiny minority owning/controlling the means of human survival ("means of production" doesn't do it justice) with the masses earning their living by serving those masters. Laissez-faire capitalism of the type Ron and Rand Paul advocate maintains much of that structure without the reciprocicy. In the same way Rick Perry can be called "George Bush without the intelligence", unrestrained capitalism is "Feudalism without the compassion." It glorifies the rights of the owners to keep more and more of the wealth of the planet while allowing mere human beings NO rights to the means of their own survival except what they can trade for with the owners. As the owners require less and less human labor fewer and fewer humans can earn their right to life.

It does not need to be like that. Technology should free human beings FROM the requirement to do drudge work to earn their right to life. It should not "free" them from the ability to earn a living at all. If unregulated capitalism doesn't have a way to make that happen, then that's an indictment of the economic system.

Robert said...

Here's something to consider: if someone were to discover a source of plentiful, cheap, accessible and non-polluting energy, and widescale distribution of three-dimensional printers became possible, what would the end-result be for capitalism? (Personally I see capitalism remaining, but becoming dependent on the harvesting of resources needed to supply the printers. And maybe food. Though how would you pay the miners? What point would there be?)

Rob H.

sociotard said...

FEMA to Katrina Victims: Give the Money Back

Tacitus2 said...

In a technological sense there is very little difference between a "lit lamp" and a Molotov cocktail!

I went back to the source of the graph demonstrating stagnant employee compensation. It just seemed a little off. It mentions that it includes employee retirement benefits, but I was not able to tease out details. How can you project the cost of your future pension obligations without knowing how long your employees will live? How can you estimate the sufficiency of your funding without some data on what projected rate of return on investments is being used to calculate? Or on the future performance of the stock market? In particular seeing public employee compensation below private struck me as fishy. There are some whopping underfunding issues lurking in the weeds.

And even in the private sector.

My friends, I hesitate to pass along news that will darken your day. News that will cast a pall over your world. But duty demands:

"NEW YORK (AP) -- Hostess Brands Inc., the maker of Twinkies and Wonder Bread, is seeking bankruptcy protection, blaming its pension and medical benefits obligations, increased competition and tough economic conditions."

and

"In its filing with the U.S. Bankruptcy Court for the Southern District of New York, Hostess disclosed that its biggest unsecured creditor is the Bakery & Confectionary Union & Industry International Pension Fund, which it owes approximately $944.2 million.

Its second-largest unsecured creditor, Central States, Southeast and Southwest Areas Pension Plan is owed far less, about $11.8 million."

A billion dollars, give or take a smidge....

And they used to say that candy and alcohol were recession proof products! Alas, farewell Twinky, another bit of Americana fading away.

Tacitus

LarryHart said...

Tacitus2:

And they used to say that candy and alcohol were recession proof products! Alas, farewell Twinky, another bit of Americana fading away.

As far as I'm concerned, both Twinkies and Skittles represent man's complete triumph over nature.

And somehow, I don't see Twinkies disappearing from store shelves any time soon. Won't they simply be produced by whomever Hostess has to sell the brand off to as part of a bankruptcy procedure?

Tacitus2 said...

The end of an era. But I still have the memories...


http://detritusofempire.blogspot.com/2012/01/egyptian-junk-food.html


T

Robert said...

My friend (who is a staunch conservative who I've mentioned before on this site) works as a shipper for the parent company. It is quite likely his job is on the line. And while I personally think it would do him a hell of a lot of good to go back to school and get into a profession which uses his intelligence (which is squandered where he works) and a schedule that is human (ie, not third shift), he just sees he'll likely lose his insurance... and the means of paying child support or providing insurance for himself and his children.

Though the real reason the company is going under is that the executives keep making boneheaded decisions that have driven people to the competition while encouraging an environment which looks to the short term instead of long-term goals. He might be a staunch conservative, but he knows that it's the business execs who are responsible for the company's second bankruptcy... and ongoing failure.

Rob H.

Anonymous said...

Twinkies will never really go away. Given their halflife (which could potentially be decades), Hostess could potentially have a few years worth in storage.

-The "Channeling WALL-E" Vagabond

Tim H. said...

Wouldn't be surprised if Hostess tries to pin the bankruptcy on union labor, 40 years ago didn't GM try to pin vega failures on the UAW, rather than their poor choices of radiators, head gaskets and valve stem seals?

LarryHart said...

Tacitus2:

How can you project the cost of your future pension obligations without knowing how long your employees will live? How can you estimate the sufficiency of your funding without some data on what projected rate of return on investments is being used to calculate? Or on the future performance of the stock market?


I know this is way tangential to your point, but it's one I want to make anyway. Businesses received decades of labor in exchange for promises of pensions and medical benefits in the workers' retirement years. Now, those companies plead "reality" as if the mathematics let them off the hook for theft of labor.

If these people had any consistency at all, they would have to allow that individuals who took out mortgages too big for them to pay off should receive amnesty on the same grounds that businesses who received the benefit of many years of labor in exchange for (essentially) a bounced check get amnesty because they are unable to cover the obligation.

rewinn said...

@Tacitus2 reasonably asked:
"... How can you project the cost of your future pension obligations without knowing how long your employees will live? How can you estimate the sufficiency of your funding without some data on what projected rate of return on investments is being used to calculate? ..."

I used to write software for a large pension management firm. We got fees to answer exactly those questions, using actuarial statistics and so forth.

The usual reason that pension plans are underfunded has nothing to do with malfeasance or misfeasance on the part of the actuaries (... although such is possible of course ...) but rather the clever ways in which our customers got around fully funding their plans with actual assets. One of my buddies' specialty was examining financial instruments to find out how much of the asserted value was (A) real and (B) not connected to the customer. I'm not naming any names (...would have to struggle to recall them at this date anyway anyway...) but people would want to do things like fund the plan with the current real estate value of their factory parking lot, which had a facial plausibility until you think about the change in the value of the asset should the factory's operations be shipped overseas.

As LarryHart suggests, pensions are a contract; labor gives the owner something, the owner promises to give labor something. Now that it's time to pay up, the owners want to change the deal. If they miscalculated the cost, why is the it the workers who should suffer?

Tacitus2 said...

I think there is an enormous amount of rot in the pension funding system. It's a bad deal for employees if a company goes bankrupt and the assets are no longer there to pay retirees. It is a bad deal for shareholders if a company makes bad bets on pension obligations, either counting on a boom market or being spineless in negotiations.

In the special case of public employee pensions, those of us who pay taxes are the "shareholders". And spineless negotiations have become the norm here in Wisconsin, where the public employee unions a a powerful political force, and use their muscle to almost have veto power over the actions of one of our two distinguished political parties.

If the graph in the original post were honest it should show public employee compensation relatively rising in the last couple of decades. (If for no other reason because private pensions were evaporating in that time span). Since it does not I assume it does not reflect pension obligations.

How many labor actions of the last twenty years have even been about wages? It's mostly benefits issues, so if the graph is not fully reflecting this it "might" be GIGO data. As I said, my perusal of the primary source did not fill me with confidence on its inclusive nature.

Of course when speaking on subjects where I am but the tyro I defer to our more experienced posters such as ReWinn

Tacitus

Tony Fisk said...

Tacitus' news puts me in mind of the country town of Ballarat, which was founded and built on the gold rush. When the gold ran out, it turned to... Mars bars!

David Brin said...

onward...

rewinn said...

@ Tacitus2 said...
"It's a bad deal for employees if a company goes bankrupt and the assets are no longer there to pay retirees...."

Precisely. That's why pension plans are supposed to be funded by assets that are out of the ownership and control of the company: when the company goes tits-up, the assets remain. Creditors can't get at them because they aren't company assets, but rather, assets of the company's pension plan.

However, too many companies (and governments) opted to self-fund the pensions, in effect saying, "We don't have to fully fund the pensions in advance because we promise always to be around to make up the difference." Then when the time comes to pay up, they start whining.

This is bad faith bargaining. The free market depends on honest dealing, and severely penalizing cheaters. When you take labor promising to pay for it in the future, but don't set aside assets to pay for it, you are cheating.

Notice that I am taking the free-market, pro-capitalist position here. The system works, except when there is no penalty for cheating. The CEOs (or, in the case of governments, politicians) who set up the pension systems to fail are suffering not at all, so why should they not do it again?

Chet Mosher said...

http://1962-2012.blogspot.com/2011/07/schumpeter-70s-economic-growth-part-2.html?zx=bc9204c39b845ffe