Capitalists Want Your Retirement to Be Miserable

Finance’s conquest of the supports necessary to deal with the universal human fate of growing old spells certain disaster for our golden years. The retirement-financial complex should be fought tooth and claw.

Elder care in North America is in crisis — a consequence of years of downloading retirement costs onto the individual. (Bruno Aguirre / Unsplash)

In 1994, the World Bank released a report called Averting the Old Age Crisis: Policies to Protect the Old and Promote Growth, which outlined a series of privatizing policies that were designed to reduce state obligations for old-age support. As a part of the effort to slim down state apparatuses by skimping on public investment, states attempted to reorient retirement savings toward capital markets.

The combination of retirement crises and attacks on the welfare state provided a golden opportunity for neoliberals who sought to dismantle public systems of retirement and open up new possibilities for finance capital. Building on and globalizing the pension policy of Augusto Pinochet’s Chile, which privatized the state pension system into individual retirement accounts, the World Bank and its cronies put pension privatization on the global policy agenda. This led to the dismantling of state pension systems in numerous countries.

Nearly thirty years after the publication of the World Bank report, elder care in North America is indeed in crisis, but it is a crisis that was created by the type of thinking typified by the report itself. It is the consequence of years of downloading retirement costs onto the individual, at the expense of socialized systems for growing old.

The Retirement-Financial Complex

Across the industrial world, state pension privatization dovetailed with attacks on occupational pensions. Declining union density in the Global North created opportunities for capitalists to raid pension savings and download retirement costs onto their workers.

This was enabled by a shift away from defined benefit pensions toward defined contribution pensions. The difference between a defined benefit (DB) plan and a defined contribution (DC) plan is in the allocation of risk. The employer in a DB plan, in the event that the plan performs poorly in the market, is responsible for making up for shortfalls — the amount that will be paid to the worker as a benefit is set in stone. In a DC plan, however, all that is guaranteed is the initial contribution by the employer — if markets crash the day before your retirement, you’re shit outa luck.

DC plans are obviously very attractive to employers, which is why there’s been such a concentrated push from the business lobby to replace DB plans with DC plans. DB plans, so goes the rhetoric, are antiquated — a relic of the days of Big Steel and Big Auto. The future demands flexibility, and flexibility means risk. The result is that the corporation is protected — the worker is not.

Asset-Based Welfare

The replacement of DB plans with DC plans has been a huge part of the ongoing war on retirement waged by neoliberal governments and business. But it is certainly not the only way in which responsibility of retirement has been made a matter of individual responsibility.

Insufficient state pension coverage and scant occupational pension coverage means that asset ownership takes on a central role in providing for peoples’ retirements. The Thatcherite vision of the “society of owners” presupposed that the welfare state could be entirely replaced by individual property ownership.

But with housing integrated into global financial markets, access to ownership is out of most people’s reach. While many rely on homeownership as a substitution for a solid pension, pension funds have become big players in both luxury and residential real estate. Investments in Real Estate Investment Trusts and in direct property ownership have seen pensions take on a crucial role in the global financialization of housing. This has served to amplify a process in which homes are treated as items on balance sheets rather than places to live — and grow old — in.

Reverse mortgages prey on elderly people in dire financial straits by loaning money against their homes. These mortgages are a key tenet of the exploitative, individualized retirement system, where the absence of a proper pension opens up lucrative avenues for financiers to accumulate huge amounts of capital in the form of housing. In September 2021, the Ontario Teachers’ Pension Plan acquired HomeEquity Bank, Canada’s largest provider of reverse mortgages. The retirement savings of hundreds of thousands of Ontario teachers — workers who no doubt deserve a stable retirement — are contingent upon the lack of savings for others.

Pension funds, because of their transmogrification into investment capital, have played a critical role in financializing everyday life. This has rendered all of the commodities necessary for growing old increasingly expensive. The retirement of some hinges upon its impossibility for others, with the crisis of everyday life serving, paradoxically, as its bedrock.

Toward a Just Retirement

The specter of an aging population continues to haunt policymakers. In May 2021, the New York Times warned of a “long slide” in the world’s population, ringing alarm bells about our growing inability to support the global elderly.

However, these alarms serve to divert our attention from the root issue. What we are facing is a political problem masquerading as a demographic one. There’s no innate reason why an aging population cohort should be understood as a crisis — it only is one because growing old has become harnessed by finance into a profit-making machine while all the risk has been pushed onto retirees. There wouldn’t be a problem if the pension system was designed to serve the elderly rather than to serve capital markets. If “protecting the old” was afforded more importance than “promoting growth,” the coming catastrophe could be dealt with much more easily.

In part because of the World Bank’s best efforts, the “old-age crisis” is here. Fragile 401(k)’s, collapsing DC plans, and soaring housing costs are all coming together to make retirement a frightening prospect for many. The opportunity to grow old in leisure should not be the preserve of a select few. We all deserve to spend a significant portion of our lives relaxing and pursuing our passions, rather than stressing about our financial security.

Pension funds control trillions in assets, which means their hands are on the main levers of the global economy. This control should not be ceded without a fight — it should be a terrain of struggle. The labor movement must seek to shape retirement policy. Economic historian Sanford Jacoby has recently emphasized the political limitations of organized labor’s engagements with pension capital, but this does not necessarily need to be the case.

If unions had full democratic control of pension funds, a wholesale overhaul of retirement’s social infrastructure could be on the table. Pension capital ought to be invested in things like nonmarket housing and fully divested from the global financial system.

A world in which a pension is necessary only as supplementary income because peoples’ housing, health care, food, and pharmaceuticals are untethered from the market is a world worth fighting for. Pension funds reproduce their own necessity by participating in the financialization of everyday life, but they could also be at the core of a radical restructuring of retirement.