After the largest correction in 40 years, house prices are rising again in Sydney and Melbourne, two of the world’s most unaffordable cities. Along with private pension savings, real estate investments (including the family home) are central to a dignified life in retirement for workers in Australia; indeed, they are increasingly crucial to the mere possibility of retirement.
These phenomena, commonly associated with neoliberalisation and financialisation, are the basis of the asset accumulation economy. As real wages decline, and the provision of public services is reconfigured, asset inflation is the primary source of wealth accumulation for working and middle class people, as well as the rich. As Lisa Adkins, Melinda Cooper and Martijn Konings have written recently, these dynamics raise important questions about how we understand class.
An analysis of the contradictions between the myths of financialised neoliberalism and the underlying reality of how these phenomena operate are crucial to developing a class politics for the asset accumulation economy. The following is based on a recent article I have published in the Journal of Sociology, which uses the example of private pension savings and the practice of “responsible investment” to explore those contradictions.
Private pensions: Tightly regulated agency
Mandatory private retirement savings have been a feature of working life in Australia for thirty years. Part of a suite of neoliberal measures introduced by the Australian Labor Party, superannuation (as it is known locally) was pitched as a means of generating economic independence and prosperity for working class people. Like some of the arguments for liberalising the regulation of joint stock companies in the mid-1800s, the promise was that working and middle class people would have access to wealth accumulation through stock markets.
Superannuation reflects both the beguiling rhetoric and the bleak reality of neoliberalism in practice. Two interrelated contradictions are at play, regarding the regulatory role of the state and the degree of freedom afforded to individuals.
Although superannuation prioritises private savings over public retirement security provision, it is a tightly regulated system that offers little private choice or autonomy, except to the wealthiest superannuants (who are entitled to “self-manage” their funds). Workers’ wages are compulsorily diverted, at a rate of almost 10 per cent annually, into superannuation funds, creating monolithic financial institutions that currently control AUD2.9 trillion (for a population of 25 million), and depriving poorer workers of wages that might help them make ends meet today.
The state determines when and how personal superannuation funds can be accessed. Recent debates about raising the retirement age demonstrate the lack of control individuals have over their portion of the pool of wealth in superannuation funds. In addition, the superannuation system provides few possibilities for the majority of working people to exercise meaningful control over how the money is invested. Throughout a person’s working life, the state regulates how superannuation can be managed and the purposes to which the funds can be put.
Further contradicting the core tenets of (neo)liberal theory that advocate human freedom and voluntary engagement in markets, privatisation of retirement savings compels individuals to participate in financial markets in order to meet their basic needs. In addition to dependence on wages, working people’s interests are further subordinated to the circuits of capital accumulation in the stock market. Rather than expanding individual choice and freedom, for the majority of workers in Australia, the lived experience of superannuation is one of coercion.
The myth of the responsible investor
Despite having questionable agency, workers bear the economic risks associated with performance of their pension savings, subject to an increasingly prevalent discourse of personal and moral responsibility for debt (see, for example, Beggs, Bryan and Rafferty; Lazzarato). This myth of the financially responsible subject underlies the emergence of the politics of responsible investment.
The growth of private pension funds around the world has fueled debates about, and political movements for, responsible investment of “workers’ capital” (see, for example, Ghillarducci; Barber and Rifkin; Skerrett et al). Recognising the shift in class relations that a dependence on asset inflation generates, this politics points to a new basis for social change.
Pension funds are called upon to invest in affordable housing, to divest from human rights-abusing companies and fossil fuels, to promote labour rights, and many other good causes. Demands for responsible workers’ capital investment sit alongside broader assertions of investor responsibility for social and ecological consequences of their investments.
But what does it mean to suggest that pension fund members should be responsible for the sustainability credentials of the investments their fund makes?
First, in material terms, what consideration is given to the conflicting interests of pension fund members as investors who need to achieve a high return, against their interests as concerned members of the public? If the asset inflation economy rests on private accumulation to fulfill basic needs, why would we expect working people to sacrifice returns?
The responsible investment industry’s answer to this conundrum is that there is no conflict between “doing well (earning a profit) and doing good (making morally correct investment choices)”. This is a claim that is highly dependent on which morals are being used as a yardstick.
Second, returning to liberalism’s myth of individual freedom, what are the processes by which responsible investment decisions are made and priorities assessed? My investigation of these processes show that it is a small number of investment analysts and managers who decide the criteria for responsible investment, aligning ethical questions with matters of financial risk management, in closed quarters with no space for meaningful member engagement or democratic deliberation.
The privatisation of retirement security has not facilitated freely contracting individuals using their investment preferences to take control of their economic futures. The reality for most working people is that private pension funds mean compulsory enrolment in financial markets and a new form of subordination to capital accumulation. Any attempt to drive social and political change using investment as a lever must acknowledge and grapple with this class politics.