Missiles and Metalworkers: A Case Against Imperialist Pension Funds
On October 18, 2007, the Italian television-show Annozero, hosted by the avowed communist Michele Santoro, exposed an ugly truth of the neoliberal period. Italy’s metalworkers, known for their militancy and working-class consciousness, had unknowingly become cogs in the machine of financial oligopoly. During the episode, it was revealed that 46 percent of the metalworkers’ pension fund, COMETA, had been assigned to Duemme – Mediolanum and Mediobanca – financial institutions with dubious recent histories and close ties to former Prime Minister Silvio Berlusconi (Annozero, 2007). FIOM-CGIL, the largest of the three confederal metalworkers’ unions, retorted, once in a press release and a second time in a memorandum, that this was misinformation (Ferrante, 2007; FIOM-CGIL, 2007). According to them, only two percent of such funds had been assigned to Duemme – in consortium, as it turns out, with Societé Generale Asset Management, a subsidiary of the French bank which had recently been implicated in what the Financial Post reported to be “the biggest trading scandal in banking history” (Kar-Gupta, 2008) – and all funds are managed with transparency.
An important issue raised by this whole affair seems to be that, as John Kenneth Galbraith recognized in The New Industrial State, to the extent that ownership becomes dispersed, the right by the owners to intervene in the management of a company becomes illusory (Galbraith, 1985, pp. 81-82). Nay, that the more such a right is insisted upon by the professionals of the trade – according to Galbraith those intellectuals dedicated to the promulgation of vulgar economics, and in this case those responsible for managing the pension funds as well as the union officials promoting them – the more we can rest assured it has substantially waned. The implications of this modus operandi of modern capitalism are of course not limited to the working class, let alone to the more militant segments of that industrial working class, as in the case of Italian metalworkers, which in the core of the international capitalist system is on the decline. The implications affecting metalworkers do, however, render the contradictions of the modern capitalist system more strident, and underline its systemically exploitative nature.
The issue of pension funds began with Italy’s commitment to join the EMU, which meant conforming to Maastricht’s criteria and schedules, and thus adopting austerity measures to balance the country’s accrued public debt (Ferrera and Gualmini, 2004, pp. 23-24). Along with these measures came a restructuring of the country’s pension system, which bifurcated what had previously been a uniquely state-managed system into a system based on private-public partnership. Under a ‘first pillar’ workers would continue to receive a minimum pension guaranteed by the state. In addition, under a ‘second pillar’, workers were given the option to contribute portions of their income throughout their careers into funds that would renumerate them upon retirement depending on market performance. Why then the sudden popularity of the issue? As of 2008, Italy’s pension reform enables workers to utilize their severance pay, an amount known as the trattamento di fine rapporto (TFR) which corresponds to approximately 7 percent of the gross salary and its yearly capitalization at a rate of 1.5 percent plus 0.75 percent of the actual inflation rate and which is set aside on a yearly basis by the employer, to contribute to such optional pension funds. The practice is innovative in so far as it allows the worker to deny his employer what had historically been, in essence, a loan at a low interest rate, since the TFR was kept in the company, and decide where to invest for his retirement (Ministero del Lavoro e della Previdenza Sociale, 2008).
The prospect of being able to take a portion of one’s hard-earned income and invest it towards one’s retirement along with other workers, as opposed to leaving the money dependent on the fortunes of a single company, or to those of an individual portfolio, is of course alluring. The fact that, as of May 2005, 230,000 metalworkers have joined COMETA, which has current capital holdings equivalent to 3.5 billion Euros, attests to this (FIOM-CGIL, 2007). In its released statements FIOM-CGIL is adamant to point this out, and, furthermore, to offer a reason for this trend, namely that among the different pension funds available, the collective forms, those that encapsulate workers in a particular branch of industry (i.e. metalworkers) and that attach themselves to their respective unions (i.e. FIOM-CGIL), will be more stable, transparent, and advantageous than the individual forms. FIOM-CGIL underlines this by pointing, substantively, to the impressive rates of return obtained thus far by COMETA, and, procedurally, to (1) the right of the representatives of the owners of the funds (i.e. the metalworkers), known as the assembly, to vote on the yearly budget; (2) the instatement of a public competition after every management mandate expires; (3) the lower management costs associated with collective funds (FIOM-CGIL, 2006).
The reactions of the metalworkers of the Bergamo plant interviewed in Annozero however, strongly suggest otherwise. They suggest, above all, that many metalworkers are not aware of how their TFR ends up being invested through the fund. As one worker noted, “All I know is that [the TFR] goes into COMETA, and then that the money is managed by banks” (Annozero, 2007). The interview thus shifts to another location, where the interviewer meets with a financier to bring clarity to the situation and then report back to the workers. The interviewer asks if, in regards to the companies managing COMETA, companies such as Generali, Cattolica, Unipol, Ras, Duemme and Societé Generale Asset Management, one may hypothesize that the banks that own them could pressure their investment strategies. The financier admits that, although this is not the norm, it may occur. The financier goes on to add that it would be important to understand the criteria according to which these particular management companies were chosen by COMETA, since in the list provided by the interviewer there are no independent management companies. This, he adds, is most bewildering since, according to him, there are independent management companies within Italy and abroad that on the market have performed substantially better than those cited. Back at the Bergamo plant, after the interviewer related to the workers that their TFR seemed to be feeding the oligopoly of a few banks, many of the workers angrily claimed that they would rather have left their money within the company they worked for. Furthermore, when the interviewer questions the workers on whether they knew that a portion of their funds was being managed by financial institutions such as Duemme, and that these in turn finance firms such as Finmeccanica, which in association with other French firms are producing missiles, the response of the workers is angrier still, and the disgust reaches its zenith. As one worker shouts, “Had they told me that I was financing missiles I would not have done it!” (Annozero, 2007).
As noted, to this television episode the union responded, emphatically, that most of the funds were managed extremely conservatively, guaranteeing to the full extent possible a constant, if perhaps less impressive rate of return. In the response however, FIOM-CGIL misses the more ominous mark entirely. The reaction of the metalworkers shown in Annozero is not negative merely due to the consequences of investing in less competitive funds, although, to be sure, this is an aspect which weighs on the mind of anyone intent on retiring. The Bergamo metalworkers’, however, is for the most part a reaction of disgust in response to the political nature, the qualitative aspect of how their money is being invested. Relinquishing a portion of their necessary labour-time, what in Marxist accounting constitutes the present ability to reproduce oneself as a worker, not a small sacrifice, the metalworkers accept in order to guarantee themselves a decent standard of living in the future. In passing, it should not be forgotten that such a need is the result of neoliberal measures imposed from above so that Italy could enter the EMU. What the metalworkers cannot believe is that portions of their necessary labour time are handed over to capitalists who, in the first place, along with Berlusconi, had in the past attempted to repeal many of the victories historically achieved by the working class (i.e. Article 18 of the Workers’ Statute), and secondly, who utilize these funds to invest in the manufacturing of weapons necessary for the imperialist subjugation of other workers around the world.
In his arguments, as applied to the case of Italy’s metalworkers, John Kenneth Galbraith seems to have been right and wrong at the same time. Galbraith’s analysis was correct in seeing a transfer of power from owners to management. As seen, this is indeed the case with the metalworkers, who have a lack of knowledge, and hence power, in deciding which management company should administer their pension funds. Galbraith proved insightful in seeing that management would not always be most interested in profit-maximization since, after all, it was not their profits they were maximizing (Galbraith, 1985, pp. 128-129). Galbraith was also right in seeing that what he calls the technostructure, which in the case of the metalworkers is represented by the managers of the funds, will attempt to maximize the success of their organization, or, in the case presented here, the success of the mother-organization, namely the bank that owns the fund management companies (Galbraith, 1985, pp. 128-129). As a result of his discourse, he postulated “…the bimodal structure of the modern economy…” (Galbraith, 1985, p. xx), where oligopolies would come to hold a great extent of market power, and simultaneously fiercely reduce competition. All of this can be seen in the list of banks adopted by COMETA, which were chosen in spite of not being the most competitive.
An important issue raised by this whole affair seems to be that, as John Kenneth Galbraith recognized in The New Industrial State, to the extent that ownership becomes dispersed, the right by the owners to intervene in the management of a company becomes illusory (Galbraith, 1985, pp. 81-82). Nay, that the more such a right is insisted upon by the professionals of the trade – according to Galbraith those intellectuals dedicated to the promulgation of vulgar economics, and in this case those responsible for managing the pension funds as well as the union officials promoting them – the more we can rest assured it has substantially waned. The implications of this modus operandi of modern capitalism are of course not limited to the working class, let alone to the more militant segments of that industrial working class, as in the case of Italian metalworkers, which in the core of the international capitalist system is on the decline. The implications affecting metalworkers do, however, render the contradictions of the modern capitalist system more strident, and underline its systemically exploitative nature.
The issue of pension funds began with Italy’s commitment to join the EMU, which meant conforming to Maastricht’s criteria and schedules, and thus adopting austerity measures to balance the country’s accrued public debt (Ferrera and Gualmini, 2004, pp. 23-24). Along with these measures came a restructuring of the country’s pension system, which bifurcated what had previously been a uniquely state-managed system into a system based on private-public partnership. Under a ‘first pillar’ workers would continue to receive a minimum pension guaranteed by the state. In addition, under a ‘second pillar’, workers were given the option to contribute portions of their income throughout their careers into funds that would renumerate them upon retirement depending on market performance. Why then the sudden popularity of the issue? As of 2008, Italy’s pension reform enables workers to utilize their severance pay, an amount known as the trattamento di fine rapporto (TFR) which corresponds to approximately 7 percent of the gross salary and its yearly capitalization at a rate of 1.5 percent plus 0.75 percent of the actual inflation rate and which is set aside on a yearly basis by the employer, to contribute to such optional pension funds. The practice is innovative in so far as it allows the worker to deny his employer what had historically been, in essence, a loan at a low interest rate, since the TFR was kept in the company, and decide where to invest for his retirement (Ministero del Lavoro e della Previdenza Sociale, 2008).
The prospect of being able to take a portion of one’s hard-earned income and invest it towards one’s retirement along with other workers, as opposed to leaving the money dependent on the fortunes of a single company, or to those of an individual portfolio, is of course alluring. The fact that, as of May 2005, 230,000 metalworkers have joined COMETA, which has current capital holdings equivalent to 3.5 billion Euros, attests to this (FIOM-CGIL, 2007). In its released statements FIOM-CGIL is adamant to point this out, and, furthermore, to offer a reason for this trend, namely that among the different pension funds available, the collective forms, those that encapsulate workers in a particular branch of industry (i.e. metalworkers) and that attach themselves to their respective unions (i.e. FIOM-CGIL), will be more stable, transparent, and advantageous than the individual forms. FIOM-CGIL underlines this by pointing, substantively, to the impressive rates of return obtained thus far by COMETA, and, procedurally, to (1) the right of the representatives of the owners of the funds (i.e. the metalworkers), known as the assembly, to vote on the yearly budget; (2) the instatement of a public competition after every management mandate expires; (3) the lower management costs associated with collective funds (FIOM-CGIL, 2006).
The reactions of the metalworkers of the Bergamo plant interviewed in Annozero however, strongly suggest otherwise. They suggest, above all, that many metalworkers are not aware of how their TFR ends up being invested through the fund. As one worker noted, “All I know is that [the TFR] goes into COMETA, and then that the money is managed by banks” (Annozero, 2007). The interview thus shifts to another location, where the interviewer meets with a financier to bring clarity to the situation and then report back to the workers. The interviewer asks if, in regards to the companies managing COMETA, companies such as Generali, Cattolica, Unipol, Ras, Duemme and Societé Generale Asset Management, one may hypothesize that the banks that own them could pressure their investment strategies. The financier admits that, although this is not the norm, it may occur. The financier goes on to add that it would be important to understand the criteria according to which these particular management companies were chosen by COMETA, since in the list provided by the interviewer there are no independent management companies. This, he adds, is most bewildering since, according to him, there are independent management companies within Italy and abroad that on the market have performed substantially better than those cited. Back at the Bergamo plant, after the interviewer related to the workers that their TFR seemed to be feeding the oligopoly of a few banks, many of the workers angrily claimed that they would rather have left their money within the company they worked for. Furthermore, when the interviewer questions the workers on whether they knew that a portion of their funds was being managed by financial institutions such as Duemme, and that these in turn finance firms such as Finmeccanica, which in association with other French firms are producing missiles, the response of the workers is angrier still, and the disgust reaches its zenith. As one worker shouts, “Had they told me that I was financing missiles I would not have done it!” (Annozero, 2007).
As noted, to this television episode the union responded, emphatically, that most of the funds were managed extremely conservatively, guaranteeing to the full extent possible a constant, if perhaps less impressive rate of return. In the response however, FIOM-CGIL misses the more ominous mark entirely. The reaction of the metalworkers shown in Annozero is not negative merely due to the consequences of investing in less competitive funds, although, to be sure, this is an aspect which weighs on the mind of anyone intent on retiring. The Bergamo metalworkers’, however, is for the most part a reaction of disgust in response to the political nature, the qualitative aspect of how their money is being invested. Relinquishing a portion of their necessary labour-time, what in Marxist accounting constitutes the present ability to reproduce oneself as a worker, not a small sacrifice, the metalworkers accept in order to guarantee themselves a decent standard of living in the future. In passing, it should not be forgotten that such a need is the result of neoliberal measures imposed from above so that Italy could enter the EMU. What the metalworkers cannot believe is that portions of their necessary labour time are handed over to capitalists who, in the first place, along with Berlusconi, had in the past attempted to repeal many of the victories historically achieved by the working class (i.e. Article 18 of the Workers’ Statute), and secondly, who utilize these funds to invest in the manufacturing of weapons necessary for the imperialist subjugation of other workers around the world.
In his arguments, as applied to the case of Italy’s metalworkers, John Kenneth Galbraith seems to have been right and wrong at the same time. Galbraith’s analysis was correct in seeing a transfer of power from owners to management. As seen, this is indeed the case with the metalworkers, who have a lack of knowledge, and hence power, in deciding which management company should administer their pension funds. Galbraith proved insightful in seeing that management would not always be most interested in profit-maximization since, after all, it was not their profits they were maximizing (Galbraith, 1985, pp. 128-129). Galbraith was also right in seeing that what he calls the technostructure, which in the case of the metalworkers is represented by the managers of the funds, will attempt to maximize the success of their organization, or, in the case presented here, the success of the mother-organization, namely the bank that owns the fund management companies (Galbraith, 1985, pp. 128-129). As a result of his discourse, he postulated “…the bimodal structure of the modern economy…” (Galbraith, 1985, p. xx), where oligopolies would come to hold a great extent of market power, and simultaneously fiercely reduce competition. All of this can be seen in the list of banks adopted by COMETA, which were chosen in spite of not being the most competitive.
.
Galbraith, however, was profoundly wrong in one aspect of his analysis, at least as it relates to the case of Italy’s metalworkers. Galbraith stated that
In the outermost circle in the mature corporation are the ordinary stockholders. This, for all practical purposes, is a purely pecuniary association. The typical stockholder does not identify himself with the goals of the enterprise; he does not expect to influence these goals. He has a share in the ownership; normally his only concern is that it return him as much money as possible. If he can get more income or capital gain with equal security elsewhere, he sells and invests there. No sense of loyalty – no identification with the goals of the enterprise – normally prevents his doing so” (Galbraith, 1985, p. 157).This assumption does not hold true in the case of the metalworkers in their role as absentee owners since, in the first place, they are more than interested in taking an active role in the management of their funds. Secondly, and perhaps most importantly, their ultimate goal is not profit maximization, but a balance between a rate of return that can guarantee them a decent future standard of living, and class solidarity with the workers that are going to be affected by the wherewithal provided by their investments.
Bibliography
Annozero. (2007). I Perdenti. Retrieved January 23, 2008 from Annozero Web site:http://www.annozero.rai.it/category/0,1067207,1067115-1075174,00.html
Ferrante, G. (2007). Il cilindro di Santoro. Retrieved January 23, 2008 from FIOM-CGIL Web site: http://www.fiom.cgil.it/fondi/sui_fondi/fp%20_061107.htm
Ferrera, M. and Gualmini, E. (2004). Rescued by Europe? Social and Labour Market Reforms in Italy from Maastricht to Berlusconi. Amsterdam: Amsterdam University Press.
FIOM-CGIL. (2006). Le pensioni e una replica a Report. Retrieved January 23, 2008 from FIOM-CGIL Web site: http://www.fiom.cgil.it/fondi/sui_fondi/fp%20_230606.htm
FIOM-CGIL. (2007). Previdenza Complementare. Fiom: ristabilire un’informazione corretta su Cometa dopo la trasmissione di “Anno Zero”. Retrieved January 23, 2008 from FIOM-CGIL Web site: http://www.fiom.cgil.it/stampa/2007/c_191007.htm
Galbraith, K. (1985). The New Industrial State. Boston: Houghton Mifflin Company.
Kar-Gupta, S. (2008, January 25). French bank hit by worst scandal ever. The Financial Post.
Ferrante, G. (2007). Il cilindro di Santoro. Retrieved January 23, 2008 from FIOM-CGIL Web site: http://www.fiom.cgil.it/fondi/sui_fondi/fp%20_061107.htm
Ferrera, M. and Gualmini, E. (2004). Rescued by Europe? Social and Labour Market Reforms in Italy from Maastricht to Berlusconi. Amsterdam: Amsterdam University Press.
FIOM-CGIL. (2006). Le pensioni e una replica a Report. Retrieved January 23, 2008 from FIOM-CGIL Web site: http://www.fiom.cgil.it/fondi/sui_fondi/fp%20_230606.htm
FIOM-CGIL. (2007). Previdenza Complementare. Fiom: ristabilire un’informazione corretta su Cometa dopo la trasmissione di “Anno Zero”. Retrieved January 23, 2008 from FIOM-CGIL Web site: http://www.fiom.cgil.it/stampa/2007/c_191007.htm
Galbraith, K. (1985). The New Industrial State. Boston: Houghton Mifflin Company.
Kar-Gupta, S. (2008, January 25). French bank hit by worst scandal ever. The Financial Post.
Retrieved February 23, 2008 from Financial Post Web site:
http://www.financialpost.com/money/rrsp/Story.html?id=261291&p=1
Ministero del Lavoro e della Previdenza Sociale. (2008). Commissione di vigilanza sui fondi pensione. Retrieved January 23, 2008 from Ministero del Lavoro e della Previdenza Sociale Web site: http://www.tfr.gov.it/TFR/LaRiforma/
Ministero del Lavoro e della Previdenza Sociale. (2008). Commissione di vigilanza sui fondi pensione. Retrieved January 23, 2008 from Ministero del Lavoro e della Previdenza Sociale Web site: http://www.tfr.gov.it/TFR/LaRiforma/
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