Pluralistic: Union pensions are funding private equity attacks on workers (05 Oct 2023)


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An altered pulp image; in the original, one man menaces another, holding him by his bunched shirtfront and menacing him with a fist. The image has been altered so the aggressor's head has been replaced with a Red For Ed teacher's strike sign. The victim is wearing a beanie with a PetSmart logo.

Union pensions are funding private equity attacks on workers (permalink)

If end-stage capitalism has a motto, it's this: "Stop hitting yourself." The great failure of "voting with your wallet" is that you're casting ballots in a one party system (The Capitalism Party), and the people with the thickest wallets get the most votes.

During the Cultural Revolution, the Chinese state would bill the families of executed dissidents for the ammunition used to execute their loved ones:

https://www.quora.com/Is-it-true-the-Chinese-government-makes-the-families-of-executed-people-pay-for-the-cost-of-bullets

In end-stage capitalism, the dollars we spend to feed ourselves are used to capture the food supply and corrupt our political process:

https://pluralistic.net/2023/10/04/dont-let-your-meat-loaf/#meaty-beaty-big-and-bouncy

And the dollars we save for retirement are flushed into the stock market casino, a game that is rigged against us, where we are always the suckers at the table:

https://pluralistic.net/2020/07/25/derechos-humanos/#are-there-no-poorhouses

Everywhere and always, we are financing our own destruction. It's quite a Mr Gotcha moment:

https://thenib.com/mister-gotcha/

Now, anything that can't go on forever will eventually stop. We are living through a broad, multi-front counter-revolution to Reaganomics and neoliberal Democratic Party sellouts. The FTC and DOJ Antitrust Division are dragging Big Tech and Big Meat and Big Publishing into court. We're seeing bans on noncompete clauses, and high-profile government enforcers are publicly pledging never to work for corporate law-firms when they quit public service:

https://pluralistic.net/2023/09/09/nein-nein/#everything-is-miscellaneous

And of course, there's the reinvigoration of the labor movement! Hot Labor Summer is now Perpetual Labor September, with 75,000 Kaiser workers walking out alongside the UAW, SAG-AFTRA and 2,350 other groups of workers picketing, striking or protesting:

https://striketracker.ilr.cornell.edu/

But capitalism still gets a lick in. Union pension plans are some of the most important investors in private equity funds. Your union pension dollars are probably funding the union-busting, child-labor-employing, civilization-destroying Gordon Gecko LARPers who are also evicting you from the rental they bought and turned into a slum, and will then murder you in a hospice that they bought and turned into a slaughterhouse:

https://pluralistic.net/2023/04/26/death-panels/#what-the-heck-is-going-on-with-CMS

Writing for The American Prospect, Rachel Phua rounds up the past, present and future of union pension funds backing private equity monsters:

https://prospect.org/labor/2023-10-04-workers-funding-misery-private-equity-pension-funds/

Private equity and hedge funds have destroyed 1.3 million US jobs:

https://united4respect.org/press-release/people-who-work-at-walmart-sears-amazon-formerly-toys-r-us-more-join-forces-together-as-united-for-respect-2-2-2-2-5-3/

They buy companies and then illegally staff them with children:

https://www.dol.gov/newsroom/releases/whd/whd20230217-1

They lobby against the minimum wage:

https://pestakeholder.org/wp-content/uploads/2021/04/Insire-Brands-memo-on-15-wage.pdf

They illegally retaliate against workers seeking to unionize their jobsite:

https://www.hoteldive.com/news/dc-hotel-workers-enlist-us-representatives-to-fight-sofitel-union-busting/650396/

And they couldn't do it without union pension funds. Public service union pensions have invested $650 million with PE funds. In 2001, the share of public union pensions invested in PE was 3.5%; today, it's 13%:

https://docs.google.com/spreadsheets/d/1B0vv26VEFmwtfw5ur6dSDMY8NftvZKij/

Giant public union funds like CalPERS are planning massive increases in their contributions to PE:

https://www.calpers.ca.gov/page/newsroom/calpers-news/2023/calpers-preliminary-investment-return-fiscal-year-2022-23

This results in some ghastly and ironic situations. Aramark used funds from a custodian's union to bid against that union's members for contracts, in an attempt to break the union and force the workers to take a pay cut to $11/hour:

https://www.bloomberg.com/news/articles/2012-11-20/pension-fund-gains-mean-worker-pain-as-aramark-cuts-pay

Blackstone's investors include the California State Teachers Retirement System (CalSTRS). The PE ghouls who sucked Toys R Us dry were funded by Texas teachers.

Then there's KKR, one of the most rapacious predators of the PE world. Half of the investors in KKR's Global Infrastructure Investors IV fund are public sector pension funds. Those workers' money was spent to buy up Refresco (Arizona Iced Tea, Tropicana juices, etc), a transaction that immediately precipitated a huge spike in on-the-job accidents as KKR cut safety and increased tempo:

https://www.osha.gov/ords/imis/establishment.inspection_detail?id=1675674.015

Petsmart is the poster-child for PE predation. The company uses TRAPs ("Training Repayment Agreement Provision") clauses to recreate indentured servitude, forcing workers to pay thousands of dollars to quit their jobs:

https://pluralistic.net/2022/08/04/its-a-trap/#a-little-on-the-nose

Why would a Petsmart employee want to quit? Petsmart's PE owner is BC Partners, and under BC's management, workers have been forced to work impossible hours while overseeing cruel animal abuse, including starving sick animals to death rather than euthanizing them, and then being made to sneak them into dumpsters on the way home from work so Petsmart doesn't have to pay for cremation. 24 of BC Partners' backers are public pension funds, including CalSTRS and the NYC Employees' Retirement System:

https://prospect.org/culture/books/2023-06-02-days-of-plunder-morgenson-rosner-ballou-review/

PE buyouts are immediately followed by layoffs. One in five PE acquisitions goes bankrupt. Unions should not be investing in PE. But the managers of these funds defend the practice, saying they "facilitate dialog" with the PE bosses on workers' behalf.

This isn't total nonsense. Once upon a time, public pension fund managers put pressure on investees to force them to divest from Apartheid South Africa and tobacco companies. Even today, public pensions have successfully applied leverage to get fund managers to drop Russian investments after the invasion of Ukraine. And public pensions pulled out of the private prison sector, tanking the valuation of some of the largest players.

But there's no evidence that this leverage is being applied to pensions' PE billions. It's not like PE is a great deal for these pensions. PE funds don't reliably outperform the market, especially after PE bosses' sky-high fees are clawed back:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3623820

Pension funds could match or beat their PE returns by sticking the money in a low-load Vanguard index tracker. What's more, PE is getting worse, pioneering new scams like inflating the value of companies after they buy and strip-mine them, even though there's no reason to think anyone would buy these hollow companies at the price that the PE companies assign to them for bookkeeping purposes:

https://www.institutionalinvestor.com/article/2bstqfcskz9o72ospzlds/opinion/why-does-private-equity-get-to-play-make-believe-with-prices

To inject a little verisimilitude into this obvious fantasy, PE companies sell their portfolio companies to themselves at inflated prices, in a patently fraudulent shell-game:

https://www.ft.com/content/646d00f4-af5d-4267-a436-54fb3bc1697b

What's more, PE funds aren't just bad bosses, they're also bad landlords. PE-backed funds have scooped up an appreciable fraction of America's housing stock, transforming good rentals into slums:

https://pluralistic.net/2022/01/27/extraordinary-popular-delusions/#wall-street-slumlords

PE is really pioneering a literal cradle-to-grave immiseration strategy. First, they gouge you on your kids' birth:

https://pluralistic.net/2021/10/27/crossing-a-line/#zero-fucks-given

Then, they slash your wages and steal from your paycheck:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3465723

Then, they evict you from your home:

https://pluralistic.net/2023/06/05/vulture-capitalism/#distressed-assets

And then they murder you as part of a scam they're running on Medicare:

https://pluralistic.net/2023/08/05/any-metric-becomes-a-target/#hca

As the labor movement flexes its muscle, it needs to break this connection. Workers should not be paying for the bullet that their bosses put through their skulls.

Hey look at this (permalink)


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This day in history (permalink)

#10yrsago Prison Profiteers: extracting billions by exploiting prisoners and their families https://www.thenation.com/article/archive/prison-profiteers/

#10yrsago Silk Road prosecution: how does the US criminal justice system actually work? https://www.popehat.com/2013/10/02/the-silk-road-to-federal-prosecution-the-charges-against-ross-ulbricht/

#5yrsago Now in print: William S Burroughs’ lost guide to overthrowing a corrupt government https://ohiostatepress.org/books/titles/9780814254899.html#tabs-4

#5yrsago US governmental requests for comment are routinely flooded by pro-corporate bots https://www.techdirt.com/2018/10/05/fake-comments-are-plaguing-government-agencies-nobody-much-seems-to-care/

#5yrsago Some important technical (and skeptical) notes about the Chinese-backdoored-servers story https://memex.craphound.com/2018/10/05/some-important-technical-and-skeptical-notes-about-the-chinese-backdoored-servers-story/

#5yrsago Congrats to this year’s MacArthur “geniuses,” including the amazing Kelly Link! https://www.macfound.org/fellows/class-of-2018/kelly-link#searchresults


Colophon (permalink)

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