Benjamin Braun Profile picture
Dec 6, 2021 11 tweets 9 min read Read on X
For New Labor Forum I wrote about what’s wrong with funded pensions. It's a crucial question for many countries, and yet the debate is often confused.

I focus on one issue: Pension funds are financialization machines.

Open-access link & a short 🧵
journals.sagepub.com/doi/10.1177/10… Image
Some context: The dream of wielding labor’s capital in the interest of workers is old, see Barber/Rifkin 1978.

And it's true that capital stewardship has often delivered results for US workers, see @DavidWebber's excellent Labor’s Last Best Weapon.
hup.harvard.edu/catalog.php?is… ImageImage
But there are structural reasons why, despite the best meso-level efforts, at the macro-level the weapon is bound to misfire.

As @ewaldeng once put it, pension funds are structurally pressured to "push the envelope", investment-wise.
journals.sagepub.com/doi/abs/10.106… Image
The core of the paper is this stylized history of US pension fund investments.

At every turn, pension funds pushed the envelope: From public to private securities, from direct investment to delegation to asset managers, from mutual funds to predatory hedge and PE funds. Image
I made three charts to illustrate this. The first shows the evolution of the asset side of pension fund balance sheets since 1945. This story is well known. Image
This one's more interesting. The growth of mutual funds – and thus of the asset management sector as we know it – is largely a function of the growth of pension fund assets, and especially of IRAs and DC plans since the 1990s. (@its_mccarthy, you had asked about this.) Image
The grimmest picture is this one. US public pension funds, big or small, have roughly tripled their alternatives share, from under 10 percent in 2001 to 30 percent in 2020.

Labor's capital *made* the hedge/PE/VC fund billionaire class, and it's own expense. Image
I'm not making a new argument. The pension financialization veterans @NataschaZwan, @its_mccarthy, @MNaczyk , @DrAdam_Dixon, @TobiasWiss loom large, as does the recent "Fiscal mutualism" piece by @SeanVanatta and @m_r_glass. (Many more I couldn't cite to due space constraints.) ImageImageImage
There's also lot of excellent work on funded pensions & financialization in EMEs (this part got cut in the editing process). These two pieces by @BrunoBonizzi, @jenchurchill79 & Diego Guevara, and by @felipe_ruizb are excellent.
academic.oup.com/ser/article-ab…
link.springer.com/chapter/10.100… ImageImage
To sum up: In a liberalized financial system, "pro-labor financial capital" is an oxymoron – a meso-level dream turned into a nightmare by macro constraints.

For alternatives, look to the work of, among others, @lenorepalladino, @rch371, and @Cmmonwealth. Also: PAYGO is good.
On the path to an alternative regime, funded pensions are an obstacle rather than a stepping stone.

There's a sequencing problem: For things to get better for labor, they'd have to get worse for capital first – including for labor's capital.

PAYGO systems are good. /END ImageImage

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More from @BJMbraun

Mar 25
The @economyandspace theme issue I've been editing with Brett Christophers is out: 'Taking stock [sorry couldn't help it] of asset manager capitalism'. Open access!

It's been a privilege working with these scholars – we're *very* happy with the result! A 🧵 on the contributions. Image
Brett and I have tried to condense our combined thoughts into 10 introductory pages: What is asset manager capitalism, who are the actors, what are their business models, and what the sources (and limits) of their power? A 'very short introduction'.
journals.sagepub.com/doi/full/10.11…
Image
Albina Gibadullina maps global share ownership & control using Orbis data. This could have been a book, and indeed is part of her PhD on the evolution of finance in the age of asset manager capitalism. A truly impressive piece that we're proud to feature.
journals.sagepub.com/doi/full/10.11…

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Read 10 tweets
Jan 20, 2023
Man muss etwas weiter ausholen, um die polit-ökonomischen Konsequenzen der Aktienrente zu erfassen – für das Machtgefüge zwischen Kapital und Arbeit, und für die Finanzialisierung der Grundlagen für ein gutes Leben im Alter. Das mache ich hier. Mini-🧵
jacobin.de/artikel/aktien…
Rentenfinanzierung ist nicht nur Rentenpolitik, sondern die politische Stellschraube schlechthin, um das Ausmaß der Finanzialisierung zu steuern.

Ein Blick ins Ausland hilft, die Rolle der Kapitaldeckung als Treiber der Finanzialiserung zu verstehen: journals.sagepub.com/doi/10.1177/10…
Wer meint, ein Land mit stärkerer Sozialdemokratie als die USA könne Kapitaldeckung so organisieren, dass Pensionsfonds nicht zur größten Kundengruppe von Hedge und Private Equity Fonds werden – I give you: Finland.
Read 5 tweets
Dec 17, 2022
Starke Recherche über einen heftigen Fall von #MeTooScience. Die @UniCologne sieht extrem schlecht aus, die Argumentation ihrer Justiziarin bei der "Vernehmung" ist ein Skandal.

Hoffentlich bald ohne Paywall, @derspiegel? Bis dahin, das wichtigste im 🧵.
spiegel.de/panorama/bildu… Image
Erste Beschwerde 2019. Bis heute kein Resultat. Dabei gibt es sogar Chat-Protokolle (s.u.). ImageImage
Der Mann ist weiterhin Prof und beschäftigt weiterhin wissenschaftliche Mitarbeiterinnen an der @UniCologne ImageImageImage
Read 8 tweets
Oct 18, 2022
Are asset managers powerful? I'm excited that my attempt at an answer is now published (open access).

Summary:
1) Exit-based power is down
2) Control-based power is up
3) ...but also more visible: AM power is constrained by politics.

More in 🧵
journals.sagepub.com/doi/10.1177/00…
We theorize the structural power of finance as being based on exit. But the primary function of finance has been shifting from financing to asset management, which reduces exit options.
-> Financialization and rising financial-sector power are *not* two sides of the same coin. /2
Here's 'The end of exit', told for the US economy in three charts:

1) the declining importance of external financing for corporate investment
2) and especially of the stock market
2) the declining importance of banks & of corporate lending for banks /3
Read 14 tweets
Feb 14, 2022
Thank you, @adam_tooze! Couldn't have wished for a more cracking summary of my thoughts on asset manager capitalism. I'll take the opportunity for a brief 🧵on recent work on the topic by stars such as @adribuller, @MadisonECondon, @franziscooi, @lenorepalladino & @NataschaZwan.
Someone who knows everything about index funds, ESG, and climate is @adribuller. Her recent @DissentMag piece on private climate finance is excellent and has links to her other work. Incredibly, Adrienne is writing two (2) books, both scheduled for 2022. dissentmagazine.org/article/the-li…
The sharpest mind on all things universal owner, externalities, fiduciary duty, and other asset manager incentives, legal or otherwise, surely is @MadisonECondon. "Externalities and the Common Owner" is an instant classic (also on my #IPEofMoFi syllabus). scholarship.law.bu.edu/cgi/viewconten…
Read 7 tweets
Dec 8, 2021
China will prohibit its firms from using variable interest entities (VIEs) in offshore jurisdictions. What, you ask.

@m_maggiori et al have done incredible work showing the giant impact of VIEs on bilateral investment positions. Quick IPE data explainer.
academic.oup.com/qje/article-ab…
FT visual on VIEs. To deal with this, Coppola et al. match "the universe of traded securities issued by firms in tax havens with their issuer’s ultimate parent" to restate bilateral investment positions.

The issue: So far, data on bilateral positions has been residency-based.
Residency-based: US Treasury International Capital (TIC) & IMF Coordinated Portfolio Investment Survey (CPIS) -> red columns

Coppola et al. use firm-level securities data to restate this as nationality-based positions -> purple

Restatements are huge for bonds & equities.
Read 8 tweets

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