The New Politics of Capital
While dispirited Democrats stew over their party’s uncertain future, they might check out an unusual cluster of progressive “activists” forming within their ranks. Some politicians with real muscle are pursuing far-ranging possibilities for reforming the economic system. Their potential for driving important change is not widely recognized, perhaps because the reformers are drawn from unglamorous backbenches of state government–treasurers, comptrollers, pension-fund trustees. Yet these state officials, unlike the minority Democrats in Congress, have decision-making power and control over enormous pools of investment capital. They are fiduciaries who manage the vast wealth stored by state governments in public-employee pension funds, invested in behalf of working people–civil servants, teachers and other types of public workers–who as future retirees are “beneficial owners” of the capital.
In the wake of Enron-style corporate scandals, in which public pension funds lost more than $300 billion, some of the leading funds have restyled themselves as more aggressive reformers. They are picking fights with Wall Street orthodoxy they long accepted, like the obsessive maximizing of short-term gains. More important, they are broadening their definition of fiduciary obligations to retirees by trying to enforce corporate responsibilities to serve society’s long-term prospects. Instead of adhering passively to market dogma, the activist funds now regularly accuse corporate managements and major financial houses of negligently or willfully injuring the long-term interests of pension-fund investors, therefore injuring the economy and society, too. Pension-fund wealth is thus being mobilized as financial leverage to break up the narrow-minded thinking of finance capital and to confront the antisocial behavior of corporations.
The core players in this struggle are the largest and most progressive pension funds in the nation–anchored by blue-state constituencies in California and New York. The heavyweights are occasionally joined by a handful of smaller states like Connecticut, North Carolina, Iowa and a few others where pension officials are kindred spirits. Together and individually, their efforts are possibly the only reform impulse ascendant among Democrats. Party leaders trying to rethink strategies could learn a lot from these state-level officials (and come to their political defense, if they had the nerve). “We’re thirty-year investors and we have to take the long view,” California Treasurer Phil Angelides explains. “I believe one of the things that led to the corruption of recent years was this notion that infected America that wealth is somehow created in six to nine months and all that matters is whether this quarter’s returns are better than last quarter’s–not whether you are building companies and products and an economy that will have enduring value.”