There is so much wrong with this article I hardly know where to begin.
First, it presumes a 19th-century separation of "capital" and "labor" where "capital" is a bunch of greedy pigs trying their damndest to exploit labor, with little crossover between the two groups. The modern reality is way more complicated. Almost every member of "labor" has some form of pension, 401(k), IRA, or personal stock holding, and even if they don't, their governments do. Huge pension funds like CalPERS are heavily invested in the stock market, which matters because (a) many state employees rely on them for income, and even if you don't work for the state, (b) your taxes are directly tied to the investment performance of these funds. Bottom line, it's complete folly to suggest the stock market is a "rich person's problem" even if you're poor. Anyone invested in the S&P 500 is going to have a large position (relatively) in Apple.
Second, this article makes no mention of Google's hiring of Ruth Porat or the recent moves to put better capital allocation processes in place. I, for one, wish Google would behave more like Apple. I think it shows admirable restraint that Apple can pay so much cash out without wasting it on dumb things.
Third, it's just a sloppy article in general. They make no mention of whether the "performance" of the two includes the cash thrown off by dividends, which in Apple's case, is significant. They also didn't mention the complex back-story of why the Irish subsidiary is used [1], nor any of the academic finance research suggesting that "Short-term" decision making actually benefits investors long-term.
I re-read the article and it only mentions labour vs capital once, in passing. Mostly it talks in terms of owners vs managers, and the principal-agent problem. You refer to "greedy pigs" and exploitation making it sound as though the author is anti-capitalist, but that does not seem to be the case).
(I was curious enough to look him up. He's a finance professor at HBS. That probably explains the different slant compared to other Atlantic articles).
It think it was more that the author is a supporter of real capitalism where you actually have to possess a conscience. But I think the population has a whole has abandoned this notion either out of ignorance or apathy. This is my lament for the current and future state of capitalism.
That data is almost 20 years old now. I don't know how much it has changed since then, though. It also only deals with 'private sector' labor, whereas the OP specifically mentioned state employees in the pool of 'labor'.
EDIT: Wait... The chart title says 1979-2013, which is what the chart says... but the source citation says it came from 1979-1998... which is why I thought it was 20 years old... not sure where they got the rest of the data from.
It also doesn't factor in the unemployed, which seems just as relevant a factor in the opposite direction, if you're going to claim everybody's interests are one in the same with business owners'.
You seem to be asserting that anyone who owns any stock is completely aligned with the interests of the respective corporation, regardless of proportionality.
To wit, If I own (say) $5k of Amazon stock as the result of being invested in a mutual fund, that is not sufficient cause for me to take time out of my day to call my representatives and actively lobby for Amazon.
80% of the value of stocks are held by the top 10%. The fact that 401ks which were initially retirement plans for executives have permeated labor is an indictment of the system. Capital owners have removed defined benefit plans forcing labor to jump into the same boat. But make no mistake about who really benefits from that convergence and who forced it in the first place.
For my money I would much, much rather own shares of stock in my retirement plan than have a state- or corporate-backed pension.
Have you seen the movie Casino? That actually happened, the Teamsters pension fund came under control of the mob.
What about Illinois, which is facing a $120 billion pension shortfall due to decades of accounting gimmicks?
What about the UAW guys, who were counting on pensions from the big 3?
All I'm saying is, look at how it _actually_ works, in practice, vs. how it _could_ work, in theory. The reality is, DB plans are getting phased out because they're too expensive to service, and too risky for employees.
You can make the argument that people aren't getting compensated enough, and maybe that's true, but that's not an argument about DB vs. DC.
The point is, there are no certainties in this world, and if someone tells you there are, they're lying.
Pensions aren't portable - in the modern labor market where people are expected to have multiple emplyers and possibly even career arcs, that's a pretty limiting. Personally, I feel that too many pensions plans (private and state) are at financial risk and have seen too many companies go under (wiping out pensions), or severely cut back (changing their payouts and coverage). Really, I'd prefer something more portable than even a 401k. Rolling over to an IRA after you change companies is ok, but I'd really rather have savings separated from employers to a greater degree even when it's accumulating.
That's why pensions should be provided by the government, as one of the things paid for by all those taxes you paid over the years.
Which is why I get really mad when the current Australian government tries to spin it that retirees are 'bludgers' and are a drain on the system when they draw their (paltry) pensions. No, these people paid 40 years' worth of taxes to the government, and being supported by the government after they retired was part of that deal.
You can't offer to pay me tomorrow for a hamburger today, and then when I ask for my money tomorrow, call me a beggar.
How about lowering taxes and let people be adults and plan for their own retirement? With those 40 years of taxes invested in an index mutual fund, I’d be a millionaire many times over rather than hoping for a paltry check each month.
Any retirement plan dependent on government means that you will get less value out than you put in. Think about “management fees” on an index fund – a fraction of a percent generally. Think about the de facto management fee taken by government – orders of magnitude more. Not to mention your return on “investment” is rather low and you can’t pass on a government pension to your children. So if you die at 50, the government keeps all that excess you “paid in.” That isn’t fair. People ought to have the freedom to opt-out.
A compromise might be to require paying in to a system, but you get to direct where that money is invested. Somewhat like a mandatory IRA. In the US, you are forced to pay into social security – why not “force” people to have an IRA instead? However I think the real reason that doesn’t work is that it would make people less dependent on particular political parties – because the government no longer has as much power over your survival. “Vote for us or else <the other party> will cut your benefits and make you starve.
Unfortunately, with all the talk of freedom, it’s mostly just talk. Actual freedom means being able to make your own decisions as well as living with the good or bad consequences of those decisions.
Sure, if you're starting on that basis. But it's a different thing entirely if you start out with an explicit deal saying "you pay 30% of your income to the government, and you get a pension when you retire" and then after you fulfill your part of the bargain, the government says "oh uh, that money you paid, we spent it."
We now have mandatory superannuation contributions which work pretty much how you're suggesting, and the government is pushing towards getting rid of pensions in future.
1) there's spartan explicit connection between the taxes paid then and the pensions paid now: most governments did not put that money in an explicit infrastructure or investment fund, the revenue from which explicitly pays for pensions. Additionally, we generally do not (in Australia) connect how much you paid in with how much your taking out, so we have no way to even ethically or materially judge whether someone really is our isn't "taking out more than they put in"
2) in the real economy, pensions are not paid for by your past taxes, but from future income derived from the level of capital investment and infrastructure and the labor force at the time of your retirement. The Australian pension system contracts a population of post boomer children to pay a debt they were never party to agreeing to pay: and chicken the general demographic numbers, aren't liable to be able to pay it given the relative size of the two populations.
3) from a normative point if view, the Australian system is quite generous (not as generous as some of the European ones). It is, dare I say it, unsustainable. Not only do you have to adjust for the pensioner discounts and additional payments offered to get it's true value, but it is much greater in volume compared to all other dole payments. With no means testing for your primary property, it's both a subsidy to the rich, encourages over investment in property, and has basically set us up to escalate inter generational war fare.
My advice to everyone is to assume it won't be there for anyone not already collecting it.
Don't get me wrong, I have some sympathy for the boomers who thought it would be available. But, they got to effectively overconsume by not putting sufficient away to invest for it, and in a competition between economic reality vs "what I'm supposed to get on my defined benefit pension", reality will win every time. Government isn't god.
Your first two points relate to what the government actually did with those payments, and not with the social contract between taxpayer and government.
I'm not sure I follow your third point. The pension system is far from generous - it's ~72% of after-tax minimum wage. Pensioners generally live in the same house they've lived in for decades, if they haven't downsized, and it's only the primary property that's not means tested so it's not like they're hoarding investment properties.
And they didn't get to 'overconsume by not putting sufficient away' - they did put that amount away, as part of their tax payments. What the government did with the enforced payments is a different matter.
Late response: I assume you've done the calculations right regarding the minimum wage, and that you've taken into account the additional payments not included under the label of pension.
To get an accurate view of the value of the pension though, you have to take the dollar face value and apply both pensioner discounts (practically everywhere in Aus, you will get discounts on your rates and utilities at the very least, in practice substantially more such as transport and consumables). In addition most also get to consume their imputed rent.
Don't get me wrong, I'm not saying all pensioners are "living it large". It is miserable to be a pensioner that doesn't own their home. But their true consumption possibilities are several multiples in practice of all our other social security payments, say for the unemployed or people on minimum wage for example, who don't own their own homes.
Given the demographic boom of the boomers, we are effectively paying living wages to the group that statistically hold the most wealth of any age group, and that we don't means test against the primary store of that wealth, I predict this system cannot last.
The government can enter into a defined pension scheme that proclaims it will be summer forever, and people can complain that they were promised that it would be summer forever, but a wise man knows that winter is coming...
> Pensions aren't portable - in the modern labor market
> where people are expected to have multiple emplyers and
> possibly even career arcs, that's a pretty limiting.
Which is the cause and which is the effect? Do workers want to have multiple employers and career arcs?
Portability is nice. I’ve seen so many people in government just trying to ride it out until they qualify for the pension. They don’t really care about the job and are just trying to avoid having to do anything until it’s time to retire. Long-standing structural problems just get covered up and ignored for the next chump to deal with.
It also represents a huge tax on people who want to be able to change jobs. I would prefer a world where people feel more free to leave jobs that suck or aren’t good fits for them. Locking them down with pensions, options plans, or 401k matching programs that vest over time are all mechanisms for employers to recapture what would have been paid out as wages from employees who leave early (who often tend to be younger).
A UBI that puts you somewhere above the poverty line supplemented with a forced savings program seems like the best move. It gives you portability, simplifies the system and administrative burden, and offers a hedge against the vagaries of the market.
I don't think they necessarily want to, but I think it's often needed for reasons mostly tangential from pensions. But if you accept that multiple jobs/careers are a reality, then pensions plans, as traditionally constructed, don't do much for workers.
Companies used to provide pensions as an incentive to stay at the company long term and not change employers, but really most of them don't care to plan for employees to stay and be developed long term.. so accordingly no pension plan is offered either.
Even ones that still offer pensions, if the support isn't there then it's in conflict with how a pension matures it's benefits. Many companies treat workers as interchangable cogs and don't provide/encourage for any exceptional wage or career growth or training. So to move upward one has to change companies - dropping (or at best pausing) the pension.
Not all companies are like this, but many (most) are. I thought this all was pretty widely understood?
So...it's not that people have to change jobs because pensions don't really exist anymore, it's that there aren't really pensions because companies don't give a shit about employees anymore?
I guess that's a reason other than pensions, technically.
Moving companies is the only way to get a promotion or a substantial raise in the current business climate. Had I stayed at the same company I'd be the highest paid developer but making 40-50% less than what a competitor has paid for my skillset.
Actually, you mean "pensions are defined in the US" aren't portable.
Employer and pension are not tied together in a great deal of countries - for example: state-controlled. So even if you switch jobs, the plan remains the same. (Also relevant is that most countries have a single state, so state-controlled means you can actually move anywhere inside the country and keep the same plan).
And effectively all guarantees (be they government or private) are probably better understood as guarantees conditional on institutional survival risk.
Sure but if you look at how 401ks and IRAs _actually_ work you'll see people being broke in retirement as well and the idea that DB is more risky than DC for employees is just totally backward. The fix here is more transparent DB, not shoving people into DC plans which were never meant for them.
Uh-uh. This is an excellent article because it accomplishes 100% of what it set out to do:
Put the words "Apple" "vs." and "Google" in the headline to generate some pretty good clicks.
The rest of the words are just to fill the rectangle the headline sits over. They just need to be formed in a way that doesn't distract from the main purpose.
>First, it presumes a 19th-century separation of "capital" and "labor" where "capital" is a bunch of greedy pigs trying their damndest to exploit labor, with little crossover between the two groups.
If you're talking about Marxism, you're misunderstanding the division between bourgeoisie and proletarians; stocks, pensions, 401k, whatever, does not count as means of production; the division is between the proletarians, who almost always have nothing to sell but their labour-power and the bourgeoisie, i.e a class of people who own the means of production.
Further, you're using "exploit" as a prejorative, which it isn't necessarily; Marx's idea of exploitation is removed from what we think of as exploitation (in a negative sense); it's exploitation just as you'd exploit a car or something like that - you make use of it, use it up. Machines are also exploited in the same way. Nevertheless, the goal of the Marxists and indeed Communists in general is to abolish this exploitation.
Your simplification does not make the anti-capitalist plight any weaker, and in fact it just goes to show how much the ideas of the Communists are miscommunicated and misinterpreted. It could be said, with the shrinking of the number of people who are self-employed (actually, things like freelance programming forming an exception) that the model of proletarians and bourgeoisie is just as relevant if not moreso today than it was in the 19th century.
I advise you to read modern Marxist works, such as Spectres of Marx, The Society of the Spectacle by Guy Debord, and particularly almost all of Zizek's work (in particular The Sublime Object of Ideology), which I must recommend. Of particular note is The Culture Industry by Adorno, commonly associated with the Frankfurt School.
Thank you for this comment. I'm sorry it got downvoted and I disagree with much of what's written, but I appreciate the thoughtfulness and general tone.
I have actually read and thought about the Communist Manifesto quite a lot, but not the later works you cited. I'll add them to my reading list.
The biggest problem I have with classical Marxism is that it presupposes a sort of material capital that can be accumulated. While there are certain sectors in which "assets" in the traditional sense, whether physical ones like timber, rental real estate, etc. or the softer "intellectual property" play a dominant role, this doesn't seem to be what's driving the world forward today.
I think "reputationism", or maybe "Hollywood capitalism", is a better descriptor for how Hollywood or SV work today. Witness the sky-high compensation of CEOs, athletes, actors, real estate developers, financiers, and others whose reputations give them access to opportunities most traditional "labor" can only dream of. In fact, if you read Piketty, he makes the point that capital's share of income relative to labor has actually decreased in the past decades, even as very highly compensated labor's share has skyrocketed.
The real enemy, IMO, is "empty suits" with no skin in the game (borrowing from Taleb) - people like analysts, non-founding CEOs, private equity/VC managers who commit only 5% of the capital of their funds, and others in positions of "heads I win, tails you lose". I really admire people who stick to their beliefs and bet with their own money/credibility (like this http://longbets.org/362/) - I have much less respect for the guys blabbing on CNBC every day who just talk, talk, talk.
> If you're talking about Marxism, you're misunderstanding the division between bourgeoisie and proletarians; stocks, pensions, 401k, whatever, does not count as means of production; the division is between the proletarians, who almost always have nothing to sell but their labour-power and the bourgeoisie, i.e a class of people who own the means of production.
Can you explain what you mean by this? If you own stocks, pensions, 401k, whatever, you pretty definitionally have more to sell than just your labour-power right? I guess I don't understand how it's not gradated ownership over the means of production.
Without a citation, that seems right, in the narrowest sense of "owning single shares in a company".
Keep in mind that "owning stock" isn't well-defined though, that could mean (a) own individual shares (narrowest), (b) owns shares or ETFs (broader), (c) owns mutual funds.
But that still doesn't address my point. It's a lot bigger when both private sector, and public, pensions are included.
This issue is near and dear to my heart because I grew up in Illinois (now living in California) and am watching the budget battle unfold there. They have a huge pension funding gap, and the returns of the stock market are going to have a very direct, real effect on how much tax the state has to collect to fund the pensions.
I was born and raised in Illinois too, but live in California now. Mind explaining how the third-largest metro economy in the country is ruining our state?
How about having a massive murder rate? Having a great train system is great, but it's not exactly something to brag about and definitely something someone is going to overlook the murder rate for.
and if you look at half the workforce at these companies,Labor- the ones not making 6 figures- like couriers, personal shoppers, cafeteria workers, content reviewers, helpdesk, customer support, admins, security- they are contractors that don't get 401k, IRA and live hand-to-mouth and always precariously poised to be fired anyday. They can't afford, can't buy and never benefit from stock price increases.
Pensions have largely gone away, replaced with 401k's which for the average person will not have the yield a pension would and just makes business' look like they care without actually making any real investment in a person's future. The stock market is largely a rich man's game as you have to have the money to invest so their are only the ones' on top who really have the money to put into a system and can afford others to manage it to ensure financial gain. The 401k is worthless if you don't know how to manage it and the employer is only to eager to outsource that to lowest bidder who taxes people with fees for doing nothing and promising even less.
Given the state of the IPO market its not obvious to me that you are right about public markets. MSFT is trading at 30000% IPO price. Facebook, having delayed its IPO to the last possible minute so private equity & VCs can maximize their returns, is trading at 500% IPO, so will need to grow 60x for the common man to see similar returns as MSFT, is that possible in any amount of time? I'm no economist and my analysis is surely bunk but am i in the ballpark? Income inequality is a tricky issue and parent analysis doesn't even come close to a compelling argument in either direction.
Why should the poor give a damn about the stock market, though?
Every time a bubble pops, they're the one's left holding the tab.
How many of those 401ks and IRAs were wiped out and the "owner" left with nothing after Madoff, housing bubble, etc.
IMO, it's a fools errand as a figurative little person on the totem pole to babysit the wealth of the rich who leave them dangling in front of the fan that just had shit splatter all over it.
>How many of those 401ks and IRAs were wiped out and the "owner" left with nothing after Madoff, housing bubble, etc.
I assume almost none of them.
People with most of their wealth in a 401k probably didn't have a lot of money in Madoff's hedge fund and the housing bubble also likely didn't wipe out retirement funds for the people that just left their retirement alone.
why would the people who have no money to give be the ones held to account? if your political views can't pass a simple sniff test like that, what hope do you have of enacting them?
First, it presumes a 19th-century separation of "capital" and "labor" where "capital" is a bunch of greedy pigs trying their damndest to exploit labor, with little crossover between the two groups. The modern reality is way more complicated. Almost every member of "labor" has some form of pension, 401(k), IRA, or personal stock holding, and even if they don't, their governments do. Huge pension funds like CalPERS are heavily invested in the stock market, which matters because (a) many state employees rely on them for income, and even if you don't work for the state, (b) your taxes are directly tied to the investment performance of these funds. Bottom line, it's complete folly to suggest the stock market is a "rich person's problem" even if you're poor. Anyone invested in the S&P 500 is going to have a large position (relatively) in Apple.
Second, this article makes no mention of Google's hiring of Ruth Porat or the recent moves to put better capital allocation processes in place. I, for one, wish Google would behave more like Apple. I think it shows admirable restraint that Apple can pay so much cash out without wasting it on dumb things.
Third, it's just a sloppy article in general. They make no mention of whether the "performance" of the two includes the cash thrown off by dividends, which in Apple's case, is significant. They also didn't mention the complex back-story of why the Irish subsidiary is used [1], nor any of the academic finance research suggesting that "Short-term" decision making actually benefits investors long-term.
[1] https://stratechery.com/2016/apples-eu-tax-problem-how-apple...