A little over 25 years ago, two loony leftists, Jeremy Rifkin and Randy Barber, published a book called The North Will Rise Again: Pensions, Politics and Power in the 1980’s. It reads quaintly today. The first chapter hymns the inevitable demise of capitalism; within a generation, it will vanish from the earth. The rest of the volume stridently urges labor unions to help the inevitable along by wielding their power over pension plan assets for left-wing political ends. The authors are aware that federal law prohibits investing those assets other than for the “exclusive benefit of participants and beneficiaries”, but they scorn the law, in a couple of instances commending conduct that landed union officials in jail. It’s clear that they think of the fiduciary standards of ERISA as just another reactionary plot – doomed, of course – to thwart the march of Progress.
The strategy advanced by Rifkin and Barber did not lead to socialism in the 1980’s. Not only were the labor leaders of that era insufficiently radical, but union influence over pension investments is less formidable than often imagined. It can be exerted only over collectively bargained, multiemployer plans, which account for a small minority of total plan assets. Moreover, the Taft-Hartley Act requires that employer appointees comprise at least half of every multiemployer plan’s board of trustees, providing a check, though often not an especially vigorous one, on union appointees’ schemes. Nonetheless, as organized labor has lost much of their demographic strength (only about one in 12 private sector workers is now represented by a union), its chieftains turn to the weapons that remain in their arsenal. Thus we see a Rifkin-Barber-style campaign to stifle support for Social Security reform by threatening investment managers with the loss of multiemployer clients.
Today’s Wall Street Journal reports on union financial intimidation in “Social Security Change Faces Labor Muscle” [link for on-line subscribers only]. The focus of the story is William Patterson, head of the AFL-CIO Office of Investment, who, at age 55, belongs to the generation of then-young radicals who swallowed books like The North Will Rise Again. Echoing Rifkin and Barber, he has contempt for legal technicalities that interfere with the progressive (that is, reactionary) agenda. He “has been warning financial firms that embracing President Bush’s top domestic priority could become an issue when pension trustees review fund managers”, blandly asserting that giving politics priority in portfolio management is “not illegal for us. We have a responsibility to support Social Security against efforts to weaken it.”
Mr. Patterson probes for ways to push financial firms away from supporting the White House plan to overhaul Social Security through private investmentaccounts. . . . [His] tactics begin quietly with an exchange of letters, but can escalate quickly into old-fashioned, noisy street demonstrations.
Next week, the AFL-CIO plans more protests in California, Pennsylvania and elsewhere outside the offices of Charles Schwab Corp. and Wachovia Corp., which both belong to lobbying coalitions backing Mr. Bush's Social Securityapproach. . . .
The pressure isn’t subtle. Three New York City Employees’ Retirement System trustees warned J.P. Morgan Chase & Co. and five other investment houses that their positions on revising Social Security may be considered in reviews of fund managers.
The article reports that pressure of this kind has achieved a degree of success in muting its targets.
The effort has had an impact. At the Alliance for Worker Retirement Security, an umbrella group of Bush backers, Director Derrick Max says his original pool of investment firms now contributes about 8% of his budget, roughly half of the percentage before labor went on the offensive. Mr. Max says, however, that he has more than made up the lost revenue with bigger checks from other coalition members and new recruits from the investment industry.
“This campaign is ill-conceived but it’s to our benefit,” Mr. Max says. He and other Bush supporters call Mr. Patterson’s effort tantamount to blackmail.
Of course, Mr. Patterson and his buddies deserve no credit for being ineffective. They want to stifle their opponents, just as their more grandiose predecessors wanted to establish socialism. When AFL-CIO officials prate about democracy (which they still profess to support outside of Iraq), we should keep in mind what they think of free and open debate on issues of public interest.
Addendum: An amusing sidelight on labor-backed demonstration, from National Review’s Beltway Buzz, attributed to an “Administration source”:
While the president was traveling through the Southwest a few weeks ago promoting Social Security reform, the White House team encountered a group of about a dozen protestors outside an event in Albuquerque.
“There were twelve to fifteen of them outside. They were holding signs and heckling us as we went into the event. I didn’t think much of it, because you see this sort of thing happens almost anytime you are traveling for town hall type events.”
But what happened next is what caught our source’s attention:
“I was walking through the Dallas airport with some colleagues and one of them recognized two of the same protestors we had seen outside the event in Albuquerque. We had some extra time, so we decided to talk to them. They were very polite and explained to us they had just come from protesting an event nearby. One of them very quickly identified themselves as professional protestors.”
“Not that they just liked to protest, but that they actually got paid by liberal interest groups to travel the country protesting. Here they were, sitting in the airport TGI Friday’s having a burger and getting ready to travel to New Orleans for another protest. They were good kids and wanted to talk. We tried discussing some of the benefits of Social Security reform. They listened, but weren’t too interested. Not because they had opposing views, they just said they weren’t too educated on the details. They even admitted they didn’t know who it was they were going to protest in New Orleans.”
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