Pluralistic: 06 Jun 2022


Today's links


A lush lawn and garden hedge wall; through the gate and over the hedge, we see a smouldering, apocalyptic landscape. Desperate hands reach over the wall. In the foreground is a No Trespassing sign.

Podcasting "Against Cozy Catastrophes" (permalink)

This week on my podcast, I read my recent Medium column, "Against Cozy Catastrophies: Cowering in a luxury bunker is a lousy retirement plan." It's a column about the failure of a market-based, individual based approach to the collective problem of retirement savings.

https://pluralistic.net/2022/05/29/against-cozy-catastrophies/

One of the major contributors to the national wealth of the world's "advanced economies" after World War II was the advent of universal retirement programs. Some of this came from the private sector: employer-provided defined-benefits pensions (guaranteeing a proportion of your final salary from retirement until death). Some of it was public: Social Security programs.

The revolutionary idea was to treat retirement as a social problem, not a personal one. It acknowledged that people with low wages will struggle to put away enough for retirement, forcing them to stay in the workforce (making harder for their kids' generation to get jobs), or to rely on their families for support (hamstringing their kids' generation as they launched their careers).

In the 1970s, Jimmy Carter's IRS created a new kind of pension: the 401(k), a tax-sheltered, personally directed "market pension." In other words, it was a way for the government to encourage workers to gamble in the stock market.

At first, this seemed like an attractive proposition: employers made generous matching payments to their workers' 401(k) contributions and the IRS gave generous benefits to workers who used their savings to gamble on stocks.

As Tom Fraser writes for Jacobin, the shift from employer-based, defined-benefits pensions to market-based, speculative pensions was key to neutralizing union demands for good employer pensions, and labor demands for good Social Security benefits:

https://jacobin.com/2022/06/capitalism-retirement-financial-complex-pensions-old-age-crisis/

This was a catastrophe. Today, most young workers have little or no pension savings (indeed, most American households have less than $400 in savings overall). Workers who are forced into retirement by layoffs or exhaustion have to liquidate their family homes and/or burden their children.

These workers – who will soon be forced into an impoverished, precarious retirement – weren't reckless spenders whose lack of foresight led to their inadequate savings. Rather, 40 years of wage stagnation and spiraling housing and education costs left many workers with no discretionary income to put into market pensions.

Even for workers who did manage to save, disasters like the Great Financial Crisis of 2008 forced many to liquidate their pension savings (selling into a weak market and incurring huge penalties). All this highlights how lucky those of us with savings really are.

In my column, I describe one of the classic cons: you get a phone-call from a stranger who predicts that a certain team will win tonight's sport's match. The prediction comes true, and you get another call from the same tipster, with another tip. That one comes true, too. Then another, and another. Finally, the tipster calls and says, "Now that you've seen how good I am at this, I'm not going to give you any more tips for free. The next one costs $100,000."

This is pretty convincing, from the mark's point of view – but once you know how the scam works, it's obvious that the con artist has no special insight. Rather, he starts off by making 32 phone-calls and predicts a win for one team with 16 of them, and a loss with the other 16. After the first match, he discards the 16 marks he gave bad advice to, and splits the remaining 16 in two groups. Eight of them get calls with a win prediction, and 8 with a loss. After that match, he does it again, discarding the 8 bad prediction marks and splitting the remaining 8 into two groups of 4. Then again. Finally, there's just two marks, and each of them gets the $100,000 demand. The con artist nets $200k from 62 brief phone-calls.

As the mark, it's easy to think you're watching a dazzling demonstration of skill. As the scammer, you know that it's just dumb luck. Those of us with pension savings lucked out. We had a job that produced discretionary income surpluses we could invest. We made bets that didn't sink our savings. We avoided forced liquidations during the 2000 and 2012 and 2020 crises.

But even though we're lucky, we are by no means guaranteed a comfy retirement. J Paul Getty said, "If you owe the bank $100, that's your problem. If you owe the bank $100 million, that’s the bank's problem." The corollary is that when one person lacks retirement savings, that’s their problem; when most people lack retirement savings, that’s everyone’s problem.

If tens of millions of people who worked all their lives are forced out of the labor market and into precarity and poverty, burdening their children or being forced to choose between food, heat and rent, they won't take that lying down. They won't dig holes, climb meekly inside, and pull the dirt in on top of themselves.

Your retirement savings won't buy you a ticket to a comfortable dotage – it'll buy you a front-row seat to a cozy catastrophe. "Cozy catastrophes" are Brian Aldiss's term for post-WWII English sf novels in which middle class people weather disaster from behind the walls of fortified country farms, while gangs of proles maraud through the land (think Day of the Triffids).

The only thing worse than retreating to your walled retirement compound and trying not to hear the cries of your former co-workers who are clawing at the gates is to be those retired co-workers. That's why I have a retirement savings account – for the same reason I have private health insurance. The only thing worse than having it is not having it.

But I don't kid myself that because I've "solved" this as an individual, I've actually solved anything. Like public health, retirement is a social problem, not a personal one. Your first class berth on the Titanic may guarantee you a seat in one of the half-empty lifeboats, from which you can listen to the pleas of the steerage passengers as they run out of energy and drown. But no one with an iota of compassion can say that this is a good outcome.

Here's a link to the podcast episode:
https://craphound.com/news/2022/06/05/against-cozy-catastrophies/

And here's a direct link to the MP3 (hosting courtesy of the Internet Archive; they'll host your stuff for free, forever):
https://ia601409.us.archive.org/19/items/Cory_Doctorow_Podcast_427/Cory_Doctorow_Podcast_427_-_Against_Cozy_Catastrophies.mp3

And here's a direct link to my podcast feed:
https://feeds.feedburner.com/doctorow_podcast

(Image: Djuradj Vujcic, CC BY 2.0; Gerald England, CC BY-SA 2.0; modified)


A business-man in a suit whose head has been replaced with a money-bag sports a graduate's mortarboard. He stands atop a pile of skulls. Blurred in the background is Yale's Old Campus.

MBAs and wage stagnation (permalink)

Before the Great Resignation, there was the Great Stagnation, a 40-year relentless decline in workers' compensation, no matter whether the economy was booming or busting. This was a sharp change from the historical norm in which rising profitability translated to rising wages.

There are lots of explanations for wage stagnation. The most obvious one is the decline of unions, which is the result of changes to labor law that make it much harder to form a union, win a contract, and enforce that contract (this, in turn, is largely the fault of the Democrats' abandonment of labor causes in a bid to appeal to the professional and managerial class, which created a bipartisan, anti-union coalition).

But in "Eclipse of Rent-Sharing: The Effects of Managers' Business Education on Wages and Labor Share in the US and Denmark," a March 2022 National Bureau for Economic Research paper, Daron Acemoglu (MIT econ), Alex He (U Maryland business), and Daniel le Maire (U Copenhagen econ), we get a more complex explanation:

https://www.nber.org/system/files/working_papers/w29874/w29874.pdf

The paper makes a somewhat nuanced and technically complex argument, but let me paraphrase its conclusion: Going to business-school makes you the kind of person who cuts wages in bad times and refuses to increase wages in good times. When companies are run by MBAs, their workers' wages decline.

The methodology behind this conclusion is really clever and goes to some lengths to rule out other possibilities:

  • Perhaps this is just a US phenomenon? (Nope, it's also true in Denmark);

  • Maybe the kinds of companies that hire MBAs to run them are the kinds of companies that cut wages? (Nope, they control for this);

  • Maybe greedy dickheads are more likely to get MBAs (Nope, they use clever controls from the same high school classes to rule this out);

  • Maybe it's not business education that makes you a dick, maybe it's economic doctrine? (Nope, companies run by economists don't screw over their workers the same way).

In other words, all those cliches about your boss's MBA giving them brain worms that make them into wage-slashing monsters? They appear to be true.

What's more, the authors estimate that this is a sizable contributor to wage stagnation, which sounds plausible: wage stagnation is correlated with the growth of MBAs in top management positions.

Some specifics from the paper's conclusions:

  • Five years after the appointment of a business manager [ed: that is, a manager who's gone to business school], wages decline by 6% and the labor share by 5 percentage points in the US, and 3% and 3 percentage points in Denmark (relative to firms operated by non-business managers);

  • Business managers are not more productive: firms appointing business managers are not on differential trends and do not enjoy higher sales, productivity, investment, or employment growth following their accession;

  • Non-business managers share greater sales and profits with their workers (in fact with fairly high elasticities), business managers do not;

  • Our estimates correspond to causal effects of practices and values acquired in business education—rather than the selection of individuals averse to rent-sharing into business education.

(Image: Ad Meskens, CC BY 3.0, modified)


This day in history (permalink)

#20yrsago Will the music industry turn into the book industry? https://web.archive.org/web/20020802105058/http://www.newyorkmag.com/page.cfm?page_id=6099

#20yrsago MC Escher lizard tesselation paving stones https://web.archive.org/web/20020603035241/http://www.paverdepot.com/3-dstone/3-d-stone.html

#20yrsago We’re suing on behalf of ReplayTV customers, and Hollywood is steamed https://web.archive.org/web/20020617210642/https://www.eff.org/IP/Video/Newmark_v_Turner/20020606_eff_pr.html

#15yrsago See no evil: Against Internet filters https://web.archive.org/web/20070609213946/http://commentisfree.guardian.co.uk/cory_doctorow/2007/06/see_no_evil.html

#15yrsago Scotty vs Kirk: Engineers need to say no to DRM https://web.archive.org/web/20070609181014/http://news.zdnet.com/2100-9588_22-6189011.html

#10yrsago Internet privacy: a hard bargain https://web.archive.org/web/20120615084509/https://www.technologyreview.com/news/428045/the-curious-case-of-internet-privacy/?nlid=nldly&nld=2012-06-06

#10yrsago Recreating iconic Banksy images as photos https://web.archive.org/web/20120607065033/https://www.thisblogrules.com/2012/06/you-are-not-banksy-street-art-turns-real-life.html

#10yrsago Religious statues in superhero costumes https://collabcubed.com/2012/06/05/igor-scalisi-palminteri-superhero-saints/

#10yrsago Trinity: the birth of nuclear weapons in graphic novel form https://memex.craphound.com/2012/06/06/trinity-the-birth-of-nuclear-weapons-in-graphic-novel-form/

#5yrsago Stanford Libraries post digital archive of drafts of Allen Ginsberg’s HOWL https://library.stanford.edu/blogs/stanford-libraries-blog/2017/06/allen-ginsbergs-howl-goes-online

#5yrsago The Kill Society: Sandman Slim meets Mad Max…in hell https://memex.craphound.com/2017/06/06/the-kill-society-sandman-slim-meets-mad-max-in-hell/


Colophon (permalink)

Today's top sources: Naked Capitalism (https://www.nakedcapitalism.com/).

Currently writing:

  • Some Men Rob You With a Fountain Pen, a Martin Hench noir thriller novel about the prison-tech industry. Friday's progress: 523 words (11934 words total)

  • The Internet Con: How to Seize the Means of Computation, a nonfiction book about interoperability for Verso. Friday's progress: 527 words (8433 words total)

  • Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. (92849 words total) – ON PAUSE

  • A Little Brother short story about DIY insulin PLANNING

  • Vigilant, Little Brother short story about remote invigilation. FIRST DRAFT COMPLETE, WAITING FOR EXPERT REVIEW

  • Moral Hazard, a short story for MIT Tech Review's 12 Tomorrows. FIRST DRAFT COMPLETE, ACCEPTED FOR PUBLICATION

  • Spill, a Little Brother short story about pipeline protests. FINAL DRAFT COMPLETE

  • A post-GND utopian novel, "The Lost Cause." FINISHED

  • A cyberpunk noir thriller novel, "Red Team Blues." FINISHED

Currently reading: Analogia by George Dyson.

Latest podcast: Against Cozy Catastrophies https://craphound.com/news/2022/06/05/against-cozy-catastrophies/

Upcoming appearances:

Recent appearances:

Latest book:

Upcoming books:

  • Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin, nonfiction/business/politics, Beacon Press, September 2022

This work licensed under a Creative Commons Attribution 4.0 license. That means you can use it any way you like, including commercially, provided that you attribute it to me, Cory Doctorow, and include a link to pluralistic.net.

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