Friday, September 27, 2013

Connecting the Dots on Inequality

Last night I attended the Boston area premiere of Robert Reich's new documentary, "Inequality for All", at the Kendall Square Cinema in Cambridge.

The movie tells many powerful stories about the growing wealth inequality in this country.

Here is one story it does not tell. Can you imagine it as an animation in your mind's eye?

  1. It starts with you, and each of us, as individuals working hard to build something we each treasure, and collectively we all treasure: savings held for investment and reinvestment, so that we may live well in our retirement, and have something to pass on to the next generation,
  2. We give those savings to pensions as stewards of our future, to invest and reinvest, prudently, on our behalf - imagine this as a physical transfer
  3. Pensions give our savings to experts in the default form of investment as securities trading, who take us on the bumpy ride, buying low and selling high.
  4. Fiduciary duty should shout: STOP!. Speculating is not allowed, because it is too dangerous.
  5. Economics pushes fiduciary duty out of the way, giving us all its assurances that speculation can be made safe through diversification and disclosure.
  6. We get: 2008. The markets collapse, the global economy comes to a virtual standstill.
  7. The Advisor (dressed as a wizard, in flowing robes and a pointy hat: a Wizard of Wall Street) comes in, saying in a very pleased tone "delighted to report that your volatility was well controlled and your fund outperformed the benchmark and median". 
  8. The pension fiduciary turns round to the Wizard in shock and dismay, and says "what the xxxx does that mean?". 
  9. The Wizard says "you lost money but not as much as other folks and its meaningless 'cause they are talking about 3 years".
  10. Evergreen steps forward and pushes the Wizard away, saying diversification and disclosure only work for the little guy, that needs liquidity. For large, purposeful, powerful stewards of an evergreen trust, that needs longevity more than liquidity, they are not enough.
  11. Evergreen says, "Evergreen stewards have the power to 'go long' themselves, directly, and take back control of the decision to reinvest."
  12. Fiduciary duty steps back in and says: "Pensions must go Evergreen, because they can. If they can, then they should. Anything else is not prudent, and is not loyal."
  13. Speculation fades away. It has nothing to say.
  14. Business Strategy says, "You're right"
  15. Casino Capitalism becomes once again Creative Capitalism, but this version is new and improved. Creative Capitalism 2.0: robust, resilient, regenerative and adaptively co-creative. A kinder, gentler Creative Capitalism. For society. The economy. The environment. People and Planet, alongside Profit!

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