How to Bring Back Collectivism
Blackburn, Robin, New Statesman (1996)
You thought pension funds were for capitalists? Robin Blackburn argues that they could provide a new chance for the workers to take over the economy's commanding heights
We are told that socialism is dead; yet everywhere we see signs of the return of collectivism. A recent Guardian poll, for example, revealed 73 per cent support for a return of the railways to public ownership. We think of the US as a nation dedicated to private enterprise. Yet its water supply remains in public hands, as do some important rail lines; and there are no plans to privatise the federal mails. US college education -- which covers a higher proportion of the population than any competitor - is mostly underwritten by public finance, and even "private" universities are organised on a not-for-profit basis.
Further, when economists scrutinise the remarkable US boom of the 1990s, they discover that its secret includes a series of lavishly funded public programmes for education, health and pensions. Though healthcare provision in Britain is more collectivised, and far more efficient, than the US system, public spending in the US is greater, as a proportion of national income (let alone absolutely) than in the UK. Britain's pharmaceutical companies and medical equipment manufacturers would be thrilled if the NHS achieved levels of spending anywhere near those sponsored by Medicare and other US public healthcare programmes.
By far the most dramatic portent of a revived collectivism has been the rise of funded pensions, whether public or private. Milton Friedman's nightmare has always been that some demagogue would persuade congress "to (1) fully fund obligations under social security (ie, pensions) and (2) invest the accumulated reserve in the capital market by purchasing equity interests in domestic corporations". Friedman calculates that if the US system had been fully funded from the beginning (1937), and if those funds had been invested in the equities market, then the US economy today would be wholly socially owned. Now his nightmare has, at least partially, come true. President Bill Clinton proposes that the state-managed retirement pension should indeed accumulate a big fund (with $2,800 billion to be pumped in over the next 15 years) and that a portion of it should be invested in the stock market. In Friedman's view, this plan, which has been taken up by both Al Gore and Bill Bradley, the front-runners for the Democrati c nomination in the forthcoming presidential elections, threatens "social security socialism". And the New York Times fears that Congress would use the funds for political ends, steering them "into environmentally friendly companies rather than, say, tobacco companies".
In Britain, as in the US, we tend to think that the pension and insurance funds which now dominate the capital market are wholly private. But they are not. They depend heavily on state funding - in the disguised form of tax breaks which, according to a recent official estimate, cost as much as [pounds]17 billion a year. Here we find what may be called weak collectivism because the funds, despite their huge public subsidies, are not required to display any sense of responsibility, either to policy-holders or to society at large.
Hayek was not wrong about everything. He argued that in the absence of responsible links between agents (managers) and principals (owners), there would be scope for every type of feckless and self-interested mismanagement. Today the financial institutions that, with government encouragement and subsidy, own more than a half of all British companies, constitute a looming grey cloud of unanchored property rights, blown this way and that by every puff of speculation and vulnerable to the electronic storms of globalisation. Since most of this money is in pension funds it is doubly appropriate to call this "grey capitalism" and to point out that it is at the beck and call of managers who, even if capable of better things, are structurally condemned to the dictates of short termism and the herd instinct. …