PeopleProfitsPensions.com

In the current American presidential campaign, much has been made of NAFTA (the North American Free Trade Agreement) and the loss of manufacturing jobs.

NAFTA makes a tempting target, but the wrong one. Autoworkers searching for the real reasons for job losses might starting looking closer to home —real close to home. They will find details in the new book by Alan Greenspan, the former Fed chairman.

In The Age of Turbulence, Greenspan devotes a paragraph to what might have been a book in itself. But that paragraph is telling.

Greenspan writes about the state of General Motors in November 2005, pointing out that GM was planning to lay off as many as 30-thousand employees and close 12 plants in the next three years.

Why? Because billions of dollars in profits that might have been reinvested in new plants or products were going in a different direction. And where was that? To the pension and health benefit funds for current and retired employees. In other words, GM couldn’t afford to create new jobs because it had to meet the pension and health obligations owed to its current and retired employees.

So, while it’s unfortunate that manufacturing jobs are disappearing, it’s certainly not because of a free trade, a conspiracy, or globalization. Jobs are disappearing because of a history manufacturing workers themselves created and insist on maintaining.

They hope to have it both ways, to have rich wages and benefits, and at the same time, keep all their jobs. That’s a miracle that won’t materialize any time soon.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

I see there’s been a tempest over pensions in Greece lately, and it’s a familiar story in several senses. A story that’s played out in various parts of the world, well beyond Greece, and in many different forms.

But, the essence remains the same: The need to curb pension costs, and resistance from the left and unions, which never seem to be able to resist the urge to kill the golden goose.

And, reform was needed. An OECD survey from last year was titled, “Pensions: a comprehensive reform is urgently needed.” It warned that the Greek pension system would not be sustainable unless spending was curbed and disincentives were removed for older workers.

Spending control involves more than just the amount of pensions paid out. For example, with the reform bill being passed, more than 130 pension and social security funds of various kinds will be consolidated into just 13 funds. That should reduce overhead and administrative costs significantly.

No doubt every one of those 130 plus funds has its own cadre of staffers, starting with receptionists and going all the way up the hierarchy to the presidents (or their equivalents). And every fund no doubt has actuaries, investment advisors, treasurers, and so on. Of course, once you have an organization with more than a few staff, you add a human resources department to hire, fire (well not very often, I’m sure), and help manage the staff.

Result: Overall the pension system spends far more on administration and overhead than it should. The unions don’t mind, though. They get to put all those people into their organizations and collect the monthly dues. It also gives them extra clout when negotiating collective agreements. After all, if the people who process pensions go on strike, seniors can be expected to put added pressure on the government to settle quickly, and to settle the way the unions would like.

Similar kinds of dynamics play out around the developed world, with the left and unions putting the interests of select groups of public employees before the interests of those who collect the pensions.

Fortunately, the Greek government has won its battle, and Greek pensioners, especially those who will retire in the future, can look forward to getting their pensions, and getting bigger pensions than they would had the system not been reformed.

But that’s just one battle, expect more battles in more countries as the pension efficiency battles continue.

You’re reading the commentary section of People, Profits, & Pensions. There’s also a book section, where you can read excerpts from my forthcoming book by the same name, visit http://www.people-profits-pensions.com . In addition to reading, you can also be a book critic and give me your thoughts on what you’ve read.

As I was listening to the news - the regular news, not the financial news - I heard about ExxonMobil’s quarterly profits. Very high profits.

And, that was followed by an interview with a well-intentioned spokesman for a well-intentioned organization who deplored those profits. It was a shame, he said, that ExxonMobil (stock symbol XOM) was making such an enormous amount of money while regular folks were paying so much at the pumps.

But something was missing from his comments — the identity of the big oil company’s owners. Had he identified these greedy owners, his opinions might have changed, and changed a great deal.

You see, much of ExxonMobil (and most other big oil companies) is owned by those very same regular folks who the well-intentioned interviewee thought he was representing.

Yes, it’s true. Much of big oil is now owned by working people, through their pension funds, mutual funds, and whole life insurance.

Take for example California’s public employees, both past and present. The California Public Employees’ Retirement System (CalPERS) owned 30-million shares of ExxonMobil, worth a whopping $2.5 billion in May 2007. That represents slightly more than 1% of its entire portfolio of assets. Or to put it another way, ExxonMobil’s profits matter to the people who have or will retire from state and local government service in California.

Sure, some rich people do own oil stocks, and they’ve done very well, too. But, it’s a fact of life that rich people are vastly outnumbered by working people (most of whom usually don’t know they’re owners, either).

The 800 pound gorillas of the investing world these days are pension funds and mutual funds, known collectively as institutional investors. With billions and billions of dollars at their disposal, they invest widely and deeply. In other words, they invest in a lot of companies, and invest a lot in many of them.

Bottom line: Much of the profit earned by ExxonMobil and other oil companies will end up funding the pensions of working people across the USA and other countries.

Don’t be misled by well-intentioned critics of the oil industry or business. If their came true, we’d all have less prosperous retirements.

Almost every day, we hear complaints about corporate profits: about oil companies with windfall earnings, about pharmaceutical companies with monopolies on new drugs, and many others.

But, do you know who owns the corporations that make those big profits?

Well, you’re probably one of them. If you belong to a pension plan, invest in mutual funds, or own a whole life insurance policy, you’re one of the capitalists getting those huge profits.

Working people — through those pension funds, mutual funds, and insurance companies — now own much, if not most, of big business. Simply put, modern corporations exist to make it possible for you and me to enjoy a retirement income beyond what the government pays.

Actually, many government pension funds now invest in corporations, too, so even your government pension may depend in part on corporate profits.

This blog explores the connections among working people, corporate profits, and pensions (retirement income, whether formal pensions or not). As the title of the blog suggests, I’m interested in the ways that working people get the profits of big corporations through their pension plans: People, Profits, Pensions.