As
we may have mentioned once or twice in the past, we like to get questions from
our loyal readers . . . “loyal” being defined as anyone with a query that does
not begin, “Are you stupid-insane-crazy, etc.,
etc., etc., for saying something with which I disagree, misunderstand, or
can’t pronounce? (The answer, by the
way, is “yes.”)
That’s
why when we get a question even about something as esoteric as the modern stock
market, we take the time to answer, even though we are not financial
consultants, and nothing we say should be taken as investment advice. (“Is that okay, Madame Corporate Counsel? Are we covered just in case somebody decides
after all that we are offering investment advice instead of just information?” “Yes.”)
So,
what was the comment or question?
So, is owning the stock of a company that you work for when
the company is publically traded of any value or benefit? Is it just as good,
in the current situation, to consider purchasing stock in different companies
that may be doing better. Or is it better to avoid the whole stock market all
together? A financial planner we talked to said saving for retirement wasn’t
going to go very far if we don’t invest in the stock market. But then isn’t
that such a gamble?
Finally, an easy
question to answer.
First,
the ESOP was not invented as a way of saving for retirement, but as a way for
those without property in capital to become owners of capital without putting
up any savings that they probably don’t have anyway, or taking cuts in pay and
benefits. The ESOP was put under
retirement law simply because the trust arrangement and a body of law already
existed, making it possible to plug the ESOP in rather than come up with an
entirely new system, which is much harder to do.
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| ESOPs and 401(k)s cannot "run out of money." |
Viewed
purely as a retirement plan, and everything else being equal, the ESOP has
certain advantages as a retirement plan, e.g.,
it is impossible for an ESOP or 401(k) to be “underfunded”; if it’s in the
plan, you get it, if not, you don’t. The standard defined benefit plan (a “pension”)
often gets committed for more than is in the plan; the ESOP and 401(k) are “defined
contribution” plans, and cannot by definition be underfunded.
At
present, the stock market is a giant gambling casino, and — if you can — it’s
probably better to avoid it. At the same
time, it’s pretty much the only game in town for small scale investors, even
though everything is stacked against them. The same goes for publicly traded shares even
when owned through an ESOP.
Much
of the problem results from two things: Keynesian economics, and the “Business
Judgment Rule.”
Keynesian
economics, by relying on past savings to finance new capital formation, by
definition a monopoly of the already wealthy, means that the rich will own most
of the future wealth just as they own existing wealth. That is, they will own it unless you redefine
private property to take it away, which is what socialism does.
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| Corporate . . . well, you know. . . . |
The
Business Judgment Rule is that the Board of Directors of a corporation (almost
always controlled by the wealthy who own most of the shares) can safely ignore
the rights of minority owners, especially voting and dividends, if — in their
judgment — the corporation is better off. In other words, the Business Judgment Rule
requires a practical (and usually legal) impossibility: that the minority prove
that what the Board of Directors does is not
in the best interests of the corporation (you cannot logically prove a
negative).
So, what can be done about
it, if there’s no other way to invest except the stock market, and the stock
market is set up for the benefit of the already wealthy and those who have the
ability to manipulate and control the already wealthy?
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| "When I have shares and can vote, F.C, you're toast." |
The only thing that can be
done justly (there are always unjust things to do, such as redistribution of
existing wealth that already belongs to other people) is to change the system
so that those who are not wealthy enjoy the same opportunity and means to
acquire and possess private property in capital as those who are wealthy. That way, instead of tearing some people down,
you lift everybody up.
Is there a way to do that,
though?
Yes. Capital Homesteading
is designed to open up equality of opportunity and means to become capital
owners that would eliminate abuses by making it possible to finance new capital
out of future instead of past savings, and to ensure that owners have all the
rights of ownership, not just what the wealthy choose to give them.
#30#
