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Your Money or Your Life?
Burkard Sievers |
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(Draft version; please do not quote or publish without the author’s permit)
Abstract The present Anglo-American pension fund system is based on totally different images of man, society, and social relatedness than the traditional social security systems and retirement schemes characteristic of welfare states in many European countries. This paper is guided by the working hypothesis that the pension fund system, because of its inherent defenses against persecutory and depressive anxieties, is based on psychotic dynamics. From a psycho-dynamic or socio-analytic point of view, it can be assumed that the pension fund system thus requires a high amount of anxiety management, most of which presumably is accomplished through individual and social defenses. Participating in the pension fund system encourages a psychotic dynamic; one expects the expected pension to protect one against a ‘miserable’ way of life, privation, and annihilation through death and feelings of dependency, gratitude, love or guilt. As people increasingly strive for a retirement in affluence, commoditized money nurtures the illusion that the more money one accumulates the more certain death will be kept away.
It further will be argued that the psychotic dynamic inherent in the pension fund system is not limited to those who invest in the funds, but further finds an expression or ‘resonance’ in the organizations that manage the funds and their respective role holders. Investors, in addition to transferring their money, also transfer part of their anxieties to the pension funds. Money paid into a pension scheme serves – in addition to its ‘pecuniary’ function – as a ‘conductor' of psychotic anxieties.
It can be assumed that pension fund corporations cannot sufficiently contain these psychotic anxieties and dynamics, and that they transfer the psychotic dynamic into the corporations whose shares they own. To the extent that the thinking in pension fund organizations is of a psychotic kind, the only important reality of those corporations, whose shares they own, is a financial one. As a consequence, pension funds have become the main players in a kind of global marshalling yard in which underlying anxieties are transferred and shifted in various ways. Loaded with their customers' expectations and anxieties about adequate pensions after retirement, pension fund organizations tend to maintain and spread a globalized collusion of psychotic thinking.
Content 1.
2. Focus of the presentation
3. Individual
affluence or social welfare: The pension fund and the social security
system
4. Psychosis sets all the world in motion
5. Implications, with no conclusion
6. References
7. Appendix: "Exit Visa". A Poem by Howard F. Stein
1. Introduction 1.1 Foreword
Probably most of us are quite accustomed to the thought that when we retire we will receive a pension that will allow us to make our living into old-age. Many of us take this for granted. For a majority of people in the Western world, receiving an old-age pension seems as normal as electricity, the local water supply, the daily mail service, or the Internet in our homes and workplaces. We have largely consigned the use of the water pump or even the well to times immemorial, i.e. either into fairy tales or into the poorest of third world countries. Similarly, we have lost sight of the social reality experienced by the elderly before the advent of pension systems and the long and often painful history of their development.
I wrote the first draft of this paper in 1998, when the stock market was booming. At that time, anyone who seriously questioned the on-going prosperity of the pension fund industry was, if not completely ignored, generally regarded as being totally out of touch with the Zeitgeist. Today, following the decline of the stock market and its transition to a bear market in the early spring of 2001, it has become obvious that most investors and those soon retiring in particular are in despair about the dramatic loss of the value of their shares (and their pensions). At the moment, one cannot foresee how the previously predominating psychotic dynamic will change as people face the reality that this broadly shared prophecy has failed. Despite these radical changes in the market, I will stay with my earlier hypothesis which will be stated in a subsequent section.
Due to the limited capacity to mourn the loss of the fantasy of unlimited affluence, the most common reactions to the present situation appear to be of a manic kind, i.e. the actual loss is denied and replaced by the equally illusionary conviction that, as history has proved, every bear market will sooner or later be followed by a bull market. The big institutional players in the financial services revolution, the pension funds, seem to have no other option but to promote their conviction that the show must go on.
It is not by accident that I am concerned with issues of pension and retirement money. Like other themes in my writings during the last decades, i.e. motivation (Sievers 1986), mortality/immortality (1994), inheritance and succession (1989, 2001b), the topic of pension is linked to my present life situation, in that I will be facing my own retirement in a few years' time.
As reflected in the title of my presentation, my emphasis here is on a socio-analytic inquiry into the financial services revolution (cf. Bain 1999; Jaques 1965). One might be tempted to extend this analysis to the whole of today's vastly increasing globalization, in which international markets for foreign exchange, commodities, and all kinds of derivatives valued at unimaginable sums of money are moved daily. However, I will be focusing on investment companies and on pension funds, in particular.
In the following part of this exploration, my thoughts are mainly based on the historical developments of the retirement payment system during the last two decades. As it has been important for me to understand these developments and their different historical roots, this second part of the foreword is written to help the reader gain an adequate background for subsequent reflections on the broadly unconscious dimensions on which the retirement payment systems seem to be based. (Those familiar with the more recent development of the pension fund system may want to continue with the subsequent part ‘Focus of this Presentation’ on page 6).
Despite the fact that most people in the Western world regard retirement as a normal phase of life, the notion of retirement itself is relatively new in the history of mankind. Although civil servants and military personnel in some countries had previously received small pensions, “the phenomenon of retirement itself has been around for only about 100 years” (O’Barr & Conley 1992, 15; cf. Graebner 1980). Not only was there no need to save or otherwise provide for old age at a time when life expectancy was relatively low (Davis 1995, 1), but those few who reached old age often had no other choice, until the late 19th and early 20th century, but to continue working. People who dropped out of work were usually impoverished; as their lives were threatened, they became a social problem for their communities and society at large.
In 1889 – as the result of a very long and critical political debate – an old-age pension scheme became law in Germany, as the final part of Otto von Bismarck’s broader social insurance program (Eichenhofer 2000; Köhler & Zacher 1981; Mommsen 1993). This was the very first social security program in the modern sense provided for workers by the state. The first American company to establish a private pension plan was the American Express Company which, at that time, i.e. 1875, was a railroad shipping company. Carnegie Steel (later US Steel, now USK) followed suit in 1901 along with a number of labor unions (O’Barr & Conley 1992, 15 - 17).
In both cases, however, the German public social security program and the American Express private pension scheme greatly limited the terms of entitlement. Beneficiaries of the German state program received money only when they reached the age of 70 (Eichenhofer 2000, 29), and workers were only eligible for benefits from the American Express scheme if they were “permanently incapacitated, at least 60 years old, and in the company’s employ for at least 20 years” (O’Barr & Conley 1992, 16). Not only were these conditions rarely met, but the pension money was hardly sufficient to cover the costs of living, as it was not intended as a substitute for one's previously earned income (Eichenhofer 2000, 28 f.).
In the US, eligibility for a pension provided by one's state was later established by law as a permanent national social security system, funded by employer and employee contribution. Congress' enactment of the Social Security Act in 1935 was above all a response to the economic impact of the Great Depression (Stähler & Roth 1999). Apart from earlier smaller state initiatives in the late 16th century, a state pension system was first established in Great Britain through the Old Pensions Act in 1908 (Devetzi 1999; Fraser 1984; Ogus 1981). France followed with its ‘Code de la Sécurité Social’ in 1956 (Lewerenz 1999; for other countries cf. Ashford 1986; Baldwin 1990; Davis 1995, 53 ff.; Flora & Heidenheimer 1981; Rimlinger 1971; Ritter 1988).
Though both systems – the state social security systems and the private or public pension schemes – provide money for old age, they were built upon totally different principles. Whereas “Social Security is a social insurance program in which retirement benefits are proportional to one’s payment into the system” (Baker & Weisbrot 1999, 115) and “retirees who are receiving Social Security benefits this year are paid from the contributions of workers who are currently employed (and their employers)” (ibid., 33), the pension fund schemes are trust funds, financed by employer and employee contributions. They invest in "shares, bonds, property, and other income-producing assets in order to generate a stable income from which to pay the pensions of its retired members" (Scott 1997, 67; cf. Schuller 1986). Until the early 1990's, these pension fund schemes invested in government bonds and other debt instruments with fixed interest rates and high security. Now pension funds – in their role as company shareholders – increasingly aim for a higher yield. As will be shown later, there is a dramatically differing dynamic between retirement schemes funded by defined benefits and those funded by defined contributions.
(As it is not easy for Non-Americans – and sometimes even for US Americans –– to adequately discriminate the different US pension schemes, I will briefly state how I will be referring to them in the context of this presentation. There is, on the one hand, the pension scheme provided by Social Security, a government program designed to provide basic economic security for the welfare of individuals and their dependents. On the other hand, old-age money is also provided by pension funds. As a matter of fact, many Americans are eligible to collect retirement money from both systems, social security and a pension fund. Similarly to the social security pension, private pensions, until 1981, were exclusively based on defined benefits, meaning that the sponsor (typically a non-financial company) agrees to pay members a pre-determined defined amount related to the amount of earnings and the time one has worked. In the newly established defined-contribution schemes “contributions are fixed and benefits vary with market returns; all the risk is borne by the employee” (Davis 1995, 6). The development of the defined contribution pension scheme is the critical variable on which I base my working hypothesis related to psychotic dynamics.)
In most Western countries, social security systems are under enormous threat. Wallace (1998) states: “Our welfare systems have been created for an age which was characterized by heavy industry, mass society, subordination of women and low life expectancies. They are not tailored for a time in which most of the new jobs emerge in the areas of services, information and communication and in which a steadily increasing part of the population is supposed to change jobs and acquire new skills during their working lives.”
In the U.S, there is, on the one side, a strong political lobby that renounces the current system as outdated and advocates investing social security assets in equities, similar to pension funds (cf. Feldstein 1996; Feldstein & Samwick 1997; Mitchell & Moore 1997). On the other side, however, authors like Baker and Weisbrot (1999, preface, 2 f.) view social security in the US at present to be in its deepest crisis, primarily because the media and the conservative lobby have convinced people that the program is in serious trouble. Arguing that most of the critical objections to social security are not justifiable, they come to the conclusion that “we need more social insurance, not less, because it works” (ibid., 154 f.; cf. Shiller 2000, 220 ff.).
The future of social security is also currently being seriously debated in Germany. Kaufmann (1997, 193; 2000), for example, makes the point that privatization of risk provisions favors those who earn high incomes and thus are ‘good risks’ for the insurers. He is certain that an incomparable battle has begun in the German Federal Republic regarding the best way to raise and distribute retirement money. He is optimistic that the intensity with which market oriented, social and political aspects are interrelated and have developed for several decades in Germany will assure a solution that favors a modified social security system.
Social security systems were the predominant provider of retirement money in most European countries for the first half of the 20th century. After the Second World War, retirement systems in the Anglo-American world and in Europe began to grow in different directions and fostered various models, some of which dominate today. While new financial institutions managing pension funds predominate today in the Anglo-American world, European countries have mainly followed the pattern of the welfare state. Particularly in Germany, which is the biggest country committed to the welfare state in relation to the number of its inhabitants (Kaufmann 1997, 31), the politically enforced improvement in the welfare sector in the two decades following the war became the basis for Germany’s subsequent social and economic development (Eichenhofer 2000, 35).
Regardless of whether a certain country and its government foster a pension fund or a social security system, the ‘choice’ is not exclusively a political issue. Despite apparent threats to the various models of the welfare state still propagated and maintained in most European countries, each of these ‘models’ is not only the outcome of different social situations and historical developments but is also an expression of specific cultural ‘basic assumptions’ about the role of the state and the interrelatedness of freedom, security, justice, solidarity and independence (Kaufmann 1997, 26; cf. 1986).
New pension regulations were established by the US National Labor Relations Board in 1948 (Clowes 2000, 1). The first modern private pension plan was established by General Motors in 1950 (Drucker 1976, chap. 1; O’Barr & Conley 1992, 18 f.) and was soon followed by a number of initiatives by other companies. Promoted by GM chairman Charles Wilson, the GM pension plan was based on two significant assumptions, which have been the basis of the pension investment world ever since. Though “most existing funded plans had invested exclusively in government and corporate bonds, mortgages, and other debt instruments that paid a fixed, if modest, rate of interest” (O’Barr & Conley 1992, 18), Wilson decided to invest the pension money in the stock market, restricting its assets to a low percentage of any single company. In addition to the idea that “pension fund portfolios should include a diversified list of stocks”, he further postulated “that a fund should not invest in the stock of its sponsor” (ibid., 19).
Now, at the beginning of the new millennium, pension funds in both the US and Great Britain (Charkham & Simpson 1999; Schuller 1986) reflect the enormous change in the financial services industry and have a dramatic impact on world-wide capitalism. This is largely due to the fact that since Rappaport (1986) first established a new standard for business performance, the creation and optimization of shareholder value of those corporations whose shares they own has become the major, if not the exclusive, goal pursued by pension fund managers.
2. Focus of this presentation I will not join the choir of those who sing hymns of praise to the increasing capacity of pension funds to influence the corporate governance of those corporations whose shares they own. Nor am I primarily concerned with suggesting ways and means to alter the dysfunctional and often catastrophic consequences of the financial services revolution.
It is difficult to develop an adequate understanding of the financial, economic, and social implications of the pension funds, not least because “there is little in the literature which can help us understand the industry” (Clark 2000, XII). I have to admit that my attempts at understanding this growing industry and its impact on the future of contemporary enterprises and the global economy are often accompanied by feelings of inadequacy and despair. At the same time, however, I am convinced that more and more of the real actors in the world monopoly also lack any appropriate understanding of their part in the 'play' for the multiplication of capital and power. In this paper, on the basis of my own limited understanding of the industry and its revolutionary forces, I am attempting to provide a deeper analysis of the social and unconscious dynamics that lie at the core of the social reality of investment managers, analysts, investors, financial advisors, economists and financial scientists, who either take for granted their daily business activities or who question them only to a limited extent (cf. Clark 2000; Galbraith 1993; Shiller 2000).
At last year’s ISPSO symposium in London, I elaborated my conviction that, in many contemporary corporations and their respective markets, war metaphors are used as a euphemistic displacement or denial of the actual violence, destructivity, and brutality of competition (Sievers 2000). Competition appears to be a continuation of war with other means (Sievers 2001a), or, stated more precisely: competition is war. As a consequence, “capitalism is a disguised state of war” (Wolfenstein 1993, 256).
These thoughts are based on the psychoanalytic understanding of war formulated by Fornari (1966/1975), an Italian psychoanalyst. In competing with their peers, corporations tend to deny their guilt and displace it onto their competitors. Fornari has suggested that this can be interpreted as a perverse or alienated elaboration of mourning. Instead of acknowledging guilt for its destructiveness and love for what has been lost, organizations defend themselves by resorting to paranoid mechanisms. As the destruction is said to have been caused by an enemy, it is the enemy, the actual or potential attacker, who becomes, through a process of projection, the object of hate and represents the unacknowledged guilt of those who experience attack or fear being attacked. Inauthentic elaboration of mourning reflects an enterprise’s denial of destructiveness, its unacknowledged guilt from the past, its founding myths, and its historical role.
One can apply these thoughts to the present financial services revolution, as this revolution is primarily based on a war among pension funds and the corporations whose shares they own. The competition as war image further illuminates that side of the coin which, so to say, shows the tail of the industry, i.e., the fact that pension funds seek to exert influence on the corporate governance of the companies whose shares they own for the exclusive sake of shareholder value optimization.
The other side of the coin – its head – seems practically to have vanished both from contemporary business practice and from academic discourse. This may, on a metaphorical level, be partially due to the fact that money itself has broadly lost its symbolic value and "is treated almost as a thing in itself" (Menzies Lyth 1988, 210). The vast amount of money daily shifting around the globe is unimaginable so far as the actual amount is concerned. Money itself has been reduced to an electronic virtuality and has thus lost its function of ‘symbolification’. In a metaphoric sense, the other side – the head of the coin – stands for the fact that behind the financial services (whether perceived as a game, a war or whatsoever), there are not only institutions (investors and corporations) but countless people who, in their role as employers, managers, analysts, consultants, and above all as employees and future beneficiaries, are ‘stakeholders’ of the industry.
Regardless of how pension fund employees might respond to the question of whose money they are investing and what they think about potential or present beneficiaries – whether they perceive them as mere abstractions or as real people whose interests can actually be known (cf. O’Barr & Conley 1992, 102 ff.) – they are the agents for millions of people who, either directly or indirectly through their employers, make continuous investments toward their future retirement. This reality seems to be unequivocally neglected in favor of what is commonly regarded as the ‘reality of the markets’. The immense literature on the financial services industry appears to be preoccupied with inter-institutional, economic, and financial matters without regard to the actual ‘customers’. Instead pension funds focus on the collective maximization of contributions. It thus seems that pension fund customers broadly share the fate of the unemployed, whose death is not even mentioned in the papers (T. S. Eliot 1934/1972, 244).
As already elaborated on previous occasions (Sievers 1999a, 2000), I will stay with the frame provided by the metaphor of the ‘psychotic organization’. Based on the eminent work of Bion (1961) on groups and his differentiation of the Oedipal project and the project of the Sphinx in particular (ibid., 8; cf. Lawrence 1997) and inspired by the notion of the ‘pathological organization’, developed by Steiner (1979, 1982, 1987, 1990, 1993) and O’Shaughnessy (1981, 1992), I will focus once again on the head, as the other side of the coin of the financial services revolution. I will explore the apparent psychotic organizational dynamics inherent in the pension funds industry by which it excludes – to a major extent – the death of the individual beneficiary and pensioner. Propagating the permanent growth of shares and thereby denying the risk of a major decline in the stock market serves to disguise what ultimately is ‘at risk’, i.e. that after all their hard labor and effort, people may ultimately not receive any benefit from their pension, due to an early death. One can thus assume that ignoring the head of the coin, both in industry practice and in the literature, supports the supposition that what is actually being ignored is human mortality – both the unavoidable death of the ‘salesman’ and that of the ‘customer’. Above all, the bull market boom of the late 90s through the beginning of the new millennium not only reinforced the belief that share value would increase exorbitantly and permanently but has also nurtured the illusion that through the enormous increase in pension money, people’s lives after work will be ‘unlimited’. Having the head of a prominent individual on the face of a coin gives this person a certain immortality beyond his or her actual lifetime. In a similar way, the immortality of people involved in the financial services industry – employees and customers alike – is taken for granted. Unlike previous decades, when management – top management in particular – derived its own illusory immortality from the supposed unending life of the corporation (Sievers 1994), the assumption of permanent growth of money is the new incarnation of immortality.
This presentation is guided by the working hypothesis that the pension fund system, with its inherent defenses against both persecutory and depressive anxieties, is based on psychotic dynamics. The traditional social security system is based on a mutual relatedness among current wage and salary earners and future pensioners (in the sense that the retirement money of the latter is guaranteed through the contributions of the former as future pensions will be covered by the younger generation). Today, the value of one's pension is mainly a result of one’s own contributions during the period of one’s work life through 'defined contributions' (and the profit gained by it through the financial activities of the funds).
From a psycho-dynamic or socio-analytic point of view, it can be assumed that the pension fund system requires a high amount of anxiety management, most of which presumably is accomplished through (individual and social) defenses. Regarding my underlying working hypothesis, the pension fund system is characterized by a psychotic dynamic which is based on defenses against both persecutory and depressive anxieties, i.e. the expected pension after retirement is seen to protect one from a ‘miserable’ way of life, from deprivation and annihilation and from feelings of dependency, gratitude, love, and guilt.
Further, the psychotic dynamic inherent in the pension fund system is not limited to those who invest in the funds but finds a further expression or ‘resonance’ in the fund organizations and in their respective role holders. It will be assumed that the ‘customers’, in addition to transferring their money, also transfer their anxieties and psychotic dynamics into the pension fund organizations. This means that the money paid into a pension scheme serves – in addition to its ‘pecuniary’ function – as a ‘conductor' of psychotic anxieties.
Instead of viewing the primary task of corporations whose shares are owned by pension funds as a legitimate reason for existence, there is a focus on the limited reality of optimization of shareholder value. As a consequence, pension funds have become the main players in a kind of global marshalling yard where the underlying anxieties are transferred and shifted in various ways. Loaded with their customers' expectations and anxieties about adequate pensions after retirement, pension fund organizations tend to maintain and spread a collusion of psychotic thinking.
3. Individual affluence or social welfare: The pension fund and the social security system
As previously indicated, broad pension fund regulations were established in 1948 by the National Labor Relations Board. Beginning with the first corporate pension plan at General Motors in 1950, pension planning gradually developed into an industry of its own and caused a revolution in financial services both in the US and abroad. The strategy of investing in shares led other companies to set up their own plans, which caused an enormous increase in the demand for shares. Thus, during the next three decades and beyond, the most important outcome of the establishment of pension funds was the shift in American stock investment from Main Street to Wall Street.
As long as pension funds primarily invest their customers’ contributions into government bonds and other similar debt instruments, fund management is mainly concerned with reasonable interest rates and a sufficient level of administrative support to handle the needs of their present contributors and pensioners. Pension funds were mainly service institutions, able to provide some kind of symbiotic containment for their investors’ aspirations, providing mutual benefit to both the employer and the employees.
The first pension plans were of the defined benefit type, whereby employees were promised a pre-designated and fixed pension by their employers when they retired. The creation of the 401(k) plan in 1981 (followed soon by the 457 plan for public employees) led to a shift from defined benefit to defined contribution plans. The critical difference between these two is that the defined benefit plan was 'owned' by the employing company, which managed the reserves from their employees' contributions, whereas defined contribution plans were owned by the employees and ultimately by outside organizations, who managed the money instead of the employer. Defined contribution plans allowed employees to make contributions to a tax-deferred fund account from monies deducted regularly from their paychecks. Because employers often made matching contributions to their employees’ accounts, the 401(k) plan served as a powerful incentive for employees to participate (Shiller 2000, 32). As Shiller (ibid., 216 f.) notes, the movement towards “employer-sponsored defined contribution plans (in which the company makes contributions to an investment fund that is owned by the employee) ... has marked a shift away from a notion of shared responsibility for the elderly toward a feeling that each person is responsible for his or her own welfare. The 401(k) plan and similar plans are designed to give ordinary people economic security in retirement by encouraging them to mimic the portfolio strategies long pursued by the wealthy.” One important advantage of defined contribution plans, particularly for long-term employees, is that they eliminate the erosion of real value of employee contributions due to inflation. What has gotten lost in the transition to defined contribution plans is “a sense of group responsibility for the standard of living of pensioners” (ibid., 217). Whereas properly designed defined benefit plans provide risk-reducing advantages to pensioners, particularly those with lower incomes, defined contribution plans mean people are now responsible for making their own pension investments and taking their chances.
The contemporary predominance of the defined contribution plan reflects an individualistic and almost solipsistic orientation towards one’s pension after retirement. This is evident, for example, in the following comments of a 37-years-old engineer: “’These decades to come are going to be more about what you do for yourself, as opposed to what you allow people to do for you. It’s not pro-government, not anti-government – just me, myself and I. .... Things are much more competitive these days’ he added, and savings for retirement on your own has become a matter ’of self-preservation’” (O’Neil & Connelly 2001, H 1). While this engineer is self-employed and thus more likely to take an extreme individualistic stance, it well illustrates the extent to which old-age pensions have created a new worrying world of do-it-yourself savings. And it is not too big a surprise that, like the do-it-yourself home improvement industry, fund 'supermarkets' now exist in the US (McDonald 1997).
The most obvious result of the shift toward defined contribution plans has been an escalating trend toward investing in shares and, as a result, the enormous growth of mutual funds. Their number increased ten times between 1982 and 1998 with nearly two shareholder accounts per family (Shiller 2000, 35 ff.). In 1999, in addition to retirement funds, Americans had 60 percent of their investments and savings in the stock market, double the amount of 1982 (Norris 2001). While most employees rely on the combination of social security and private pension plans to fund their retirement years, I am primarily aiming at a comparison of the two systems. I will elaborate some of the underlying differences in modes of thinking that each represents. For this purpose I am going beyond the technical and financial principles and the respective national differences inherent in the two pension systems. I intend to focus on the different images of man (and woman) on which these systems are based and their implicit notions of relatedness, both between people and towards the world in which they live. Metaphorically, the following reflections are guided by the assumption that their respective managements represent two different social dramas. As their plots were written by different ‘authors’, they not only represent distinct concepts of ‘theater’ but further imply other role models both for the ‘actors’ and the ‘director’ (cf. Sievers 1995).
On the basis of the above sketches of social security and the pension fund system, the following differences (or polarities) are evident and will be further elaborated: (1) dependency/responsibility vs. autarchy/irresponsibility; (2) solidarity vs. individualism; (3) supremacy of a welfare function vs. the market; (4) different meanings of work and its relatedness to retirement; (5) different meanings of retirement and old age; (6) different meanings of money; (7) mortality vs. immortality.
3.1.1 Dependency/responsibility vs. autarchy/irresponsibility: While social security and the early pension plans were established by different entities (i.e. the state and private companies respectively), they appear at first sight to have been guided by similar notions of dependency. The social security legislation in Germany (1889) and later in the US (1935) reflected the state’s acknowledgement of the desperate social and economic conditions of the masses of workers, as a result of the industrialization of the 19th century and the financial and economic collapse during the Great Depression. The German social security system was dominated by the notion of state responsibility and above all by the intent to keep its citizens and workers in a state of dependency. A U.S. national pension policy was opposed by a vast majority of politicians and trade union leaders for more than twenty years after Theodore Roosevelt first proposed national social insurance in 1912. “This was largely because the state appeared to be competing with the unions as the agent of economic improvement for the working class. It was not until the twenties that organized labor declared its willingness to work at the state level for public pensions to protect the needy poor” (Kudrle & Marmor 1981, 92).
The early (private) pension plans in the US were social and humanitarian responses to extreme forms of capitalism during the 19th century. These plans led to a similar dependency by insuring long-time employment and a lifetime of subordination to the company. They reflected little responsibility for the fate and welfare of the employed, as the requirements for benefits could only be met by a minority and were – at least under contemporary standards – extremely restricted and in some ways inhuman. Parallel plans established by labor unions were apparently the result of a certain solidarity and sense of responsibility amongst workers. It is most likely that they also fostered dependency by ensuring that workers would stay union members. So far as General Motors' first modern pension plan and subsequent similar programs are concerned, it is still not certain whether GM’s chairman, Charles Wilson, was a social visionary or whether his plan was a thinly disguised stratagem for furthering management control over the workers, as unionists suspected (O’Barr & Conley 1992, 19).
Old-age pensions based on defined benefits reflected the companies' limited sense of responsibility for the fate of their retired workers. Only with the creation of 401(k) plans in 1981 have workers seen the possibilities of receiving large pensions as a result of the growth of mutual funds. As previously suggested, defined contributions had a tremendous impact on the development of pension funds, leading ultimately to the new pension fund industry. The growth of this industry not only led to major changes in the financial markets, ultimately bringing about a revolution in financial services, it also drastically altered investor assumptions and expectations with regard to future retirement payments. Until then, old-age payments, provided either by social security or private pension plans, were paid by the contributions of the following generation, in the same way that current pensioners had paid for those who retired before them. The amount of one's pension equaled the amount actually contributed during one's working life and nothing more. The pension system began to change dramatically with the establishment of defined contribution plans. Not only were employees able to invest whatever they could afford, but the predicted continuous rise in the value of shares increasingly led them to believe that it was they themselves who determined the fate of their pension, even though they had no influence on investment policy. The rapid expansion of stock ownership not only supported the idea that people would be better off if they invested privately (instead of into their social security account) but also nurtured the illusion that “everyone could be a millionaire upon retirement” (Baker & Weisbrot 1999, 7).
3.1.2 Solidarity vs. individualism As people increasingly save for their retirement through direct investment in mutual funds or the stock market, they lose sight of the inter- and intragenerational relatedness which is a constituent element of any social security system. To the extent that their old-age money is no longer raised by contributions by those who are still employed, they are no longer obliged to be concerned for future generations of employees or for those presently retired. In addition, they are no longer concerned for peers who are either less successful at gaining value from increasing shares or unable to invest at all. The previously shared responsibility for both the younger generation and the elderly is replaced by the reality that each person is responsible only for his or her own welfare.
The more one’s interest is solely oneself when generating one's retirement money, the less one relies upon solidarity with others. The traditional notion of welfare involves the provision of a social security and a decent living for people of different ages, sources of wealth, and amounts of income. This increasingly degenerates into an individualistic quest guided merely by personal contentment. Through the predominance of notions such as ‘self-made pensioner’ and ‘do-it-yourself savings’ the predominance of American narcissism (Lasch 1978) finds its monetary equivalent in the exchange relationships of the market.
This possessive individualism (Macpherson 1962; Clark (2000, 276) fosters a model of society where the relatedness of people is limited to the pattern of ‘just me, myself and I’. Such a model favors rational, calculating agents focused on maximizing their welfare. In addition, to enhance their social and financial interests, the role they ascribe to the state is limited to the maintenance of a legal framework which protects their property rights (Clark 2000, 276). As they owe their future pensions only to themselves and no longer to the state, its role is perceived as restricted and irrelevant. As future beneficiaries, they not only deny the state the right to tax the gains of their pension investments, they do not encourage investment funds, whose services they use, to support community interests or projects.
When the inherent model of society is based on the logic of possessive individualism with an exclusive emphasis on economic freedom, it is, as Clark (ibid., 277) states, “unfortunately only half a model of society”. To the extent that this model substitutes relatedness by agreement with financial contracts of financial services organizations, it mightily discounts the social nature of individuals. “Others have hardly any virtue except that found in their instrumental quality – what they can offer to an individual in achieving selfish ends. Lost is any sense of emotional bonds, our commitment of others, and our need for moral regard. If these attributes of social life have any status in theory, they are reduced to the status of enabling exchange. This kind of reductionism runs a real danger of treating people in practice in profoundly inhuman ways. Furthermore, to treat relationships as discrete contracts means there may be no community, no moral sentiments, and no institutions capable of sustaining the framework of economic freedom. Possessive individualism is so ambivalent about the value of community that if individuals’ separate rewards in sum favour autarky there may be no reasonable theoretical claim to hold the community together. In this sense, the whole theoretical edifice becomes self-defeating” (ibid., 279). It is quite obvious that the pension fund industry’s benefit view is limited to future beneficiaries.
Clark’s (2000) critical perspective on pension funds is rare in contemporary mainstream literature. One is left with the impression that the only common bonds an investor shares with the rest of society are the shares one owns. Insofar as it is the atomistic individual who is the building block of this non-relatedness, the pension fund system, from a psychoanalytic point of view, is just the most recent illustration of the underlying basic assumption of ‘me-ness’ (Lawrence, Bain & Gould 1996).
According to the underlying logic of rational madness, which has predominated Western economic thought since the beginning of capitalism, those who either individually or collectively accumulate fortunes are not required to justify them or to give any thought to the possible disadvantages or misfortunes they cause others. The assumption is that what serves individual interests ultimately serves the welfare of all.
Convinced that one owes nothing to anybody, feelings of guilt and, therefore, the need for reparation and solidarity are avoided. This not only favors a self-image of high individual autonomy (or even autocracy) but also reduces one's feelings of responsibility for those who, due to long phases or even permanent unemployment or illness, do not meet the requirements for receiving a reliable enough pension. From this point of view, the American employee and pensioner are alarmingly well adapted to the predominant financial and economic rationality of the institutional investor who, with the legitimized goal of insuring adequate pensions for their customers, are pursuing no other aim but to maximize the value of the corporate shares they hold. Guided by this goal for present and future pensioners, these corporate investors do not feel in any way responsible for the dismissal of employees in order to insure higher shareholder value.
3.1.3 Supremacy of a welfare function vs. the market The inclination toward solidarity in social security (and defined benefit plans) as opposed to the high degree of possessive individualism in defined contribution plans suggests different systemic contexts. Whereas the social security model basically is an expression of the welfare state or at least a welfare function legitimized and guaranteed by the state, the pension funds require nothing but the market (Gabriel 2001).
As opposed to the US, where the state welfare function is quite limited and still politically and ideologically controversial, most European states have a longer tradition and greater integration of the welfare function into their social and political systems. In the past and into the present, many of these states can be regarded as welfare states, in which welfare is politically anchored in society. According to the most concise definition, the welfare state “is the institutional outcome of the assumption by a society of legal and therefore formal and explicit responsibility for the basic wellbeing of all its members” (Girvetz 1968, 512). In a welfare state, “the national product is seen more as a social product, which requires the efforts and cooperation of all who work. Market outcomes are not necessarily fair or just, nor should they determine one’s fate, especially in times of hardship” (Baker & Weisbrot 1999, 14).
To the extent that pension fund systems preponderate in a society or state, legalized responsibility and solidarity become more and more irrelevant. In comparison to the social security system in European countries, the American financial services industry exclusively follows the market. To the extent that the market becomes the only institutional means of exchange, the people themselves and the relatedness between them is limited exclusively to economic issues – and thus ultimately to money.
The emphasis of the welfare state on social security resembles a social drama in which, in principle, ‘real’ people with their daily concerns for life and death are the actors. The market of the pension fund system can be described as a drama of a-sociality. The welfare state is grounded in a view of society and an image of man and woman which is much broader than the agglomeration of atomized individuals, with no other intent than to maximize their own benefits. Though limited individual risk management does not eliminate risk altogether, financial losses are spread over many people, appearing less painful and promoting social welfare. Unlike stock investment, payment into social security is not primarily considered a monetary investment with expected growth. Instead, it is based on the principal of reciprocity and the conviction that current workers will provide the means of living for the elderly in the same way that the elderly had once taken care of the generation before them.
The pension fund system takes the form of an a-social drama, mainly because the atomistic individual uses it exclusively for his own individual purpose. As it will be further elaborated, this view is characterized by an extremely privatized and solipsistic notion of retirement – both on the side of the investors and the fund managers – and by the predominance of monetary investment. As investors explicitly invest for their individual future rather than toward the care of others, their notion of welfare lacks any social motivation other than their own contentment. Guided by the conviction that others are also just looking out for themselves, the individual investor sees himself as the only one he or she can count on.
Although in principal every investor knows the eminent risk of the game, i.e. that a critical decline of the stock market can ultimately devastate their (luxurious) life after retirement, this knowledge must be kept unthought (Bollas 1987). Both pension funds and their investors have colluded for almost two decades in the denial that what finally happened in the early spring of 2001 would never come true, i.e. that the bullish stock market would become a bear market. This confronts the investors and, in particular, those who are about to retire with a most painful reality, i.e. just ‘them, themselves, and they’ alone have to bear the consequences, without any support from the pension funds or their management.
3.1.4 Different meanings of work and its relatedness to retirement From the beginning of social security, retirement payments were directly related to one's work, both with regard to the time spent working and the income earned. In contrast, the pension fund system has increasingly lost any relatedness to the amount of time worked or one's earned income. In the ‘old’ system, the length of one’s working lifetime and the relationship between one’s income and one's contributions were more or less given. The actual amount of one’s future pension was both fixed and broadly calculable in advance. In addition to the foreseeable amount of old-age money, one could count on adjustments for inflation and standard of living increases.
When defined contributions were first introduced, traditional pensions continued to exist. Gradually, future pensioners began to invest their own pension money, buoyed by the increasingly growing and ultimately exploding stock market. As a consequence, for millions of people, the amount of one's future pension was more and more dissociated from the actual amount of working time and relatively independent of their actual income. Whereas social security was supposed to provide a decent life and living standard during retirement, employees could now control the way their tax-free contributions were invested and were free to choose based on the performance of the stock market. This broadly nurtured the belief that they could count on a luxurious life after retirement. Once people realized that they could earn pension money in the stock market much faster and easier than through their daily work, a vast majority shifted their savings into shares. Many even took out loans in order to invest as much money as they could into the funds, hoping to realize an even higher return on their investment.
In comparison to old-age money from social security and defined benefits pension plans earned from one’s working life, the newly created opportunity to earn a pension through the stock market was seen as making one independent from work. The more the stock market prospered, the more people began considering early retirement or quitting work altogether. The relationship of money to work has increasingly gotten lost in the pension fund system. Although a pension still relies to a certain extent on contributions which are part of the employees’ income earned through work, the major part of a pension is expected to be derived from the profit gained by investment funds. That the profit gained from the shares is actually the result of work by those who are employed by the pension funds is rarely acknowledged.
Guided by enormous greed, countless people began to disregard their daily work by which they had made their living and generated contributions to their pension. This trend was not limited to those who made enormous fortunes as shareholders and employees of prosperous dot-com companies, but had a broad impact on those with well established and respected professions. My American colleague Howard F. Stein told me this episode: “Many physicians have told me lately that they no longer expect to earn a good living by the practice of medicine. Instead, they plan to take as much of their generated income as they can and invest it in mutual funds and directly in the stock market, where they expect it to grow and thereby compensate them for what they cannot hope to make via working. Financial seminars offer similar strategies for ‘investing’ one's money and one's anxieties” (Stein 2001b; cf. 2001a). Thus, they act out the “envy of others who may have made more in the stock market than one earned at work in the past year” (Shiller 2000, 56). Unlike countless others not fortunate enough to actually give up their profession or leave work to become ‘professional’ investors, in an extreme way, these physicians confirm the view that it is preferable to live for pension accumulation and short term share value than for work itself. This illustrates the extent to which work and the workplace have been degraded and have become a means of transferring and deferring annihilation anxieties and fantasies (Stein 2001b). Their work has become alienated labor, “in which the forces of destruction predominate over those of construction” (Wolfenstein 1993, 255).
People do not invest only their money in pension funds and the stock market but also their hopes and – above all – their anxieties associated with life after retirement. Investors in pension funds have anxieties of a persecutory and depressive kind. Persecutory anxieties, as an expression of the paranoid-schizoid position, are based upon fear for oneself, i.e. the fear that the persecutors will destroy the ego. Investing in pension funds thus can be understood as a defense against the fear of not surviving, and of not having an adequate lifestyle after retirement. Although making provision for the future is reasonable and appropriate to protect against foreseeable losses at a time when there will be no income or financial support from one’s children, unconscious anxieties deeply rooted in one’s childhood and phases of one's later life also influence these decisions. As a matter of fact, these fears and anxieties are revived daily by exposure to the abandonment of others through rationalization measures, downsizing, or other bottom line measures (Stein 1997). To the extent that one allows oneself to recognize that one is disposable and may, sooner or later, no longer be on the employment rolls, individualistic investment in mutual funds, in stocks, and in pension plans may no longer serve the function of an escape from reality but be necessary for one’s survival.
Driven by the fear of damage to the ego due to various illnesses and old age infirmities along with a desperate longing for immortality, the expectation of a splendidly high pension nurtures the illusion that one’s life can be extended almost endlessly. This illusion also serves the purpose of protecting one from the fear of ending up a social welfare case in old age, in total isolation or in permanent need of nursing. These are common fears, nurtured by the experience of one's parents and family members' old age, along with the general knowledge that many elderly people live – despite the widely propagated image of unlimited activity, autonomy and contentment – isolated, inactive, and unhappy lives after retirement.
Depressive anxieties are expressions of the depressive position reflecting a fear for the survival of the love object. In the present context, these anxieties can be related to the fear that one's future pension may not be sufficient to care for one’s spouse, parents, or other relatives to whom one is obliged and wishes to support. But above all they are related to the fear of losing the loved object through death. Not only do traumatic experiences reactivate repeated infantile losses, but they also stimulate the fear that upon the death of one's internal ‘good’ object, one’s internal ‘bad’ objects will predominate and thus dangerously disrupt one’s internal world (Klein 1940/1975, 353; cf. Hinshelwood 1991, 272).
This fantasy may also apply to the employing organization which, particularly when it provides lifelong employment, may be experienced as a good object. The fear of losing one's employing organization upon retirement – which usually means the ultimate end of employment if not the end of active work altogether – may further mobilize the fantasy of impotence. This fantasy includes the fear of not being able to find any meaning in life after retirement and, suffering from meaninglessness, meeting an early death.
Not unlike persecutory anxieties, depressive anxieties normally surface as one approaches the second half of one’s life. With regard to one's pension, the degree to which these anxieties are denied and substituted by respective defenses is critical. To the extent that a person is not able to develop a capacity to adequately mourn these losses, the expected pension may be used as a fetish for an alienated elaboration of mourning of a paranoid or manic kind (Fornari 1975). Fetishism in general “is the substitute of something near the real thing for the real thing, ... the fetishism of money is an equally fantastical substitution. We substitute for object relations with humans a devotion to something which we take to have unlimited potential: money” (Young 1998, 7).
With paranoid elaboration of mourning, a loss results in regression to the paranoid-schizoid position and a reactivation of persecutory anxieties regarding the safety of one’s pension and the reliability of those organizations funding it. In the case of a manic elaboration of mourning, fantasies of omnipotence are projected onto one’s future pension, which is regarded as an endless source of compensation for potential losses and reassurance that one's good objects are not of great importance and therefore not worthy of any concern if lost. Invested with manic longings for omnipotence, a pension may be fantasized as a means of narcissistic reparation. The mature attempt at reparation is grounded in love and respect for the object and is an expression of the depressive position, whereby the individual acknowledges guilt and takes responsibility for the violence and damage done to its internal good objects. In contrast, narcissistic reparation is an omnipotent attempt to compensate for the humiliations, deprivations and losses which one has had to bear. In comparison to mature reparation, which aims for reconciliation with the actual or internal loved other, the narcissistic or ‘auto-reparation’ aims at a reconstitution of the ego to compensate for what others have done to it. With regard to one's pension, this ‘auto-repair’ can be seen as a compensation for the endless deprivations, the contempt and humiliations experienced during one's working-life by one's management or employer.
3.1.5 Different meanings of retirement and old age As mentioned above, the notion of retirement which we now take for granted did not exist before the late 19th century. The modern notion of the pensioner, i.e. the retired ‘worker’ able to make a decent living till his or her death, did not come into existence until after the Second World War. Although there is no commonly agreed upon definition of retirement in the social and economic sciences, permanent departure from the labor force predominates as the critical variable (cf. Hurd 1990, 595 f.). Pensioners form an increasing percentage of contemporary populations in Western countries. This is due to improved pensions, a steadily increased life expectancy, and a considerable lowering of the retirement age.
With the exception of those in the military and diplomatic services, who often begin new careers after their comparably early retirement, most people finish their active work lives when they retire and have sufficient pensions to provide enough means to pursue their interests and fulfil those desires not gratified during their work lives. Unless they have access to other financial resources such as major savings, life after retirement was presumed to be a modest one. Although a pension extended one’s living beyond the end of the working life in a comfortable way, either consciously or unconsciously it was clear that it would, as Lucretius (1986) writes in his De Rerum Natura (The Way Things Are): “not deduct one jot from the duration of death”.
The increasing number of retirees who are financially well off has resulted in more and more industries catering to the elderly. They include travel, fashion, entertainment, as well as health care services, such as geriatrics, long term nursing care and home health services. The total separation of the elderly from socially and economically valued work put them in a predominantly privatized position, isolated and broadly dissociated from the rest of society and its creation – welfare. Like Majorca for European and German pensioners, Florida for Americans has become a social retreat where masses of pensioners retire to live out their final years. Particularly when they grow too feeble to sufficiently care for themselves, elderly people become ‘expatriated’ from active social life, left to live as best they can in retirement homes or in geriatric care.
From a collective point of view, elderly retired people have been increasingly turned into ambiguous ‘objects’. Whereas, on the one side, they are unconscious objects of envy living at the present generation’s expense, on the other side, they also serve as a receptacle for those emotions and experiences which otherwise are not be contained in the broader society: depression, impotence, inability, senility, sickness, and, above all, death. Despite the fact that many live actively into their late 70s or 80s, they became, on a symbolic level, the guardians of death for the rest of society. Their pension money represents the coin which, in ancient Greek mythology, was laid under the tongue of the dead to pay Charon, the miser who ferries them across the river Styx into the Tartaros (Graves 1960, 120).
This ambiguous attitude toward pensioners and their fate has impacted the way those who are currently working think about their future retirement. On the one side, one’s retirement is associated with a variety of so-far unlived opportunities, unfulfilled or repressed desires, an image of unlimited activity, autonomy and content. On the other side, it raises deep anxieties and fears regarding the misery and the dark side of life of a pensioner, i.e. the limited ability or even inability to find a meaning in life and to suffer from meaninglessness, loneliness following the loss of a spouse, and endless boredom leading to an early death.
Although future pensioners may, amongst others, be guided by the belief that at least during their retirement they will enjoy an active social life with their families and friends, most of them will probably end up ‘just me, myself, and I’, since the pursuit of wealth and affluence is usually at the expense of relationships. Previously retirement was seen as the final phase of one’s life, in which one could get off the ‘treadmill’ of work and enjoy the fruits of one's labor and ultimately move into old age with a certain dignity. Today, by contrast, one is inescapably left with the impression that what pension fund investors expect to experience in retirement is the most rewarding and fascinating phase of their lives. Especially for those increasing numbers of people who have no belief in a life after death and thus no hope of entering heaven, retirement no longer serves the role as transitional phase between active life and eternal life, as it had for previous generations. Because there is no further meaning beyond retirement, one has to insure oneself that this last phase of life will be a happy one and will sufficiently compensate for all the losses and deprivations of one's previous life and during one’s worklife in particular. Previous generations of pensioners of moderate financial means used their retirement years to enrich their lives by realizing more of those ‘qualities’ typical of the depressive position (integration of love and hate, responsibility, the acknowledgement of guilt and reparation etc. – cf. Young 1998, 8). In this way they grew wise. In contrast, the riches of contemporary pensioners appear to be more of a manic kind in that they are limited to affluence. The use of paradise as the guiding metaphor for retirement is based on the conviction that it can be bought by money and that one had better make one's reservation long in advance. Although the sense of a new economic era about to dawn has a long history (Shiller 2000, 96 ff.), it has never before been as auspicious as it is at present.
Guided by the conviction that the value of one's shares will experience never ending growth, based on the performance of the stock market for the previous two decades, the ‘new’ pensioner easily may have 'bought' the belief in the unmitigated delay of death. As death can be ignored, it may ultimately become obsolete. Though it may seem cynical, it seems that the traditional Christian belief – through the death and resurrection of Christ, death loses its sting (I Corinthians 15:55) and thus humankind is exempted from hereditary sin and eternal damnation – is now replaced by the belief that endless amounts of old-age money from pension funds will be the source of salvation. As death is too intense a persecution to be borne, the magic denial of the investor is based on the phantasy of its total annihilation (Segal 1988, 27). Guided by agnosticism and the lack of a belief in a life after death, the 'new' pensioner tends to be convinced that “the last enemy that shall be destroyed is death” (I Corinthians 15:26).
3.1.6 Different meanings of money It has already become obvious that the meaning of money in relation to one's pension and retirement has dramatically changed due to the development of the pension fund industry. During the time that pensions were provided exclusively by social security and defined benefit plans, money was the means for providing a decent living during retirement. Whereas pensioners under the defined benefit system received only a certain percentage of their previous income as old-age money and thus generally had to reduce their standard of living, the goal of the ‘new’ pensioner is to surpass his present living standard during retirement. The greater the amount of money he is able to put aside for his pension, the more he will be able to realize previously unfulfilled or repressed desires.
Since a pension provided only money, pensioners were generally cut off from all other social bonds with their previous employing organization, which had often provided lifelong employment. As a consequence, they were either reduced to a narrow private life or were required to invent a retirement for themselves as a new phase of life. This also meant that they had to invent new meanings for the last phase of their lives, in order to fill the emptiness of the loss of meaning from work (Ritter & Hohmeier 1999, 97 ff.). The engraved gold watch, which workers traditionally received from their enlightened employer after 50 years of ‘disciplined servitude’ in continuous employment (Thompson 1967, 70), is most likely more a romantic image than a reality for the vast amount of retirees. They were left to ponder to what extent their previous work had actually been honored or whether it had just been a waste of time, with no further result than the pension they were receiving.
In face of “the paucity of literature on psychoanalysis and money” in general (Young 1998, 1) and, in particular, anything that goes beyond the traditional, mainly orthodox notions of the unconscious meaning of money, I found Eugene V. Wolfenstein’s (1993) Groundwork not only provocative but extremely stimulating in the present context. Working from a psychoanalytic and Marxist perspective, he documents the decrease in the symbolic function of money and its reduction to a commodity, both with regard to the inner world of the individual and the external social one.
The fact that money is a universal equivalent to all values and thus has become the standard of values in general is, however, not exclusively due to the financial services revolution. This rather perverse ‘devaluation’ of money in Western society has been going on for many decades if not for more than a century. Nevertheless it can well be regarded as the major foundation on which the pension industry has been built and has prospered. As a matter of fact, the contemporary financial services revolution has brought the abstraction and commoditization of money to a climax. As money increasingly buys and sells nothing else but money, the economy in general and the pension fund industry in particular serve no other purpose than to increase money, which lacks any content or substance (cf. Gorz 1997).
By applying Wolfenstein’s (1993, 302 ff.) point of view to the world of Mr. Moneybags, an investor in the pension industry, the ‘perversity’ by which he participates in the system is made quite clear. As money is the measure of the man, there develops a clear distinction between those who claim their old-age money primarily or even exclusively from social security and those who hope to make their fortune through the stock market. In comparison to the ancient image of the elderly sage, it is the rich man, and the extremely wealthy one in particular, who has accomplished everything a man can possibly achieve. Unlike the sage, whose modest perfection was an expression of the spiritual concern to relate the meaning of life to the meaning of the world (Sievers 1994, 257 ff.), the affluence of today's investors is based on meaninglessness. As the availability of endless amounts of money equals the incarnation of all values, physical and psychic alike, the one who has 'made it’ no longer needs to set any goals for himself or to make any choices at all. “Money has”, as Young (1998, 9) put it, “been and remains the medium by which people believe that they can still have it all ways”. The desire for ‘everything’ is, as Shengold (1991; cf. Werbart 2000, 36) indicates, not only an expression of the utmost narcissism but sustains the notion that there is always ‘something’ unattainable. As all values have become commodities, Mr. Moneybags becomes a commodity himself and has devalued and displaced all other dimensions of his selfhood that are not commoditizable, i.e. that cannot be measured by money.
Although a vast amount of those who devote their lives to achieving a large pension never actually reach their goal – or experience serious doubt or despair about the impact of the present decline of the stock market on their pension's value – it is the commoditization of the self which is the unconscious guiding metaphor for their investment goals. Having replaced a mature wisdom with “the wisdom of investing into stocks via mutual funds whose management teams have proven track records” (Shiller 2000, 200), they have committed their lives to the unrenouncable belief that stocks cannot permanently go down for many years. Through their distorted thinking, they have excluded the reality that “stocks can go down, and stay down for many years. They can become overpriced and underperformed for many years” (ibid.). Not only is there an endless list of factors that could potentially interrupt earnings growth for a very long time (ibid., 209 ff.), but both fund managers and investors deny the fact that “the stock market can reach fantastic levels only if people think that they have good reason not to test it by trying to enjoy their newfound wealth” (ibid., 139).
Confronted with the present bear market, they have no choice but to maintain their self-image and to stay with their commoditized ego-ideal, which they have built up during the last two decades of the prosperous stock market. Through their investment in pension funds, they have ‘invested’ so much in their ego-ideal that they cannot cope with the dissonances in any way other than to stay with the ideal and deny the apparent reality.
Just as idealization of the other on the interpersonal level is concomitant with the repression of hatred directed toward the idealized object, it can be assumed that now – after the recent decline of the stock market – those who must delay their retirement or who must give up their dream of an early retirement will need to deny and repress the hatred they feel towards their financial advisors and, above all, towards themselves. As the decrease in the value of their pension cannot be acknowledged as the loss of an internal loved object, it cannot be mourned in any mature way. Most likely they will attempt to escape into a paranoid alienated elaboration of mourning (Fornari 1975). Contrary to the psycho-social dynamics of war, in which the loss of the loved object is seen as caused by the enemy who is then persecuted and annihilated, it appears to be most difficult if not impossible to make out an actual enemy in the pension fund system. As the aggression, rage, and vengeance caused by the betrayal cannot be projected onto a real enemy and therefore has to be suppressed, they are more likely to be projected unconsciously into the funds. “To cope with self hatred, we project it onto others, experiencing our hatred of ourselves as their hatred of us” (Levine 1999, 239).
Since money is not only the content of the relatedness between funds and investors, but the most highly valued 'content' for all in the industry, financial services have become more and more a virtual scene in which Mr. Moneybags meets his own spitting image. The relatedness between the ‘actors’ in this system is limited to one between commodities. Since the totalitarian form of thinking is devoted to the increase of money and profit, any other dimension that is not commoditizable has to be devalued and excluded.
This appears to particularly be the case with regard to the specific raison d’être of the funds, originally set up to provide pensioners a decent life after retirement. This traditional notion has for some time been substituted by affluence. To the extent that the monetary maximization of pensions has become the exclusive target of the funds, the mere quantity of money has become a symbol of the quality of the pension, one's retirement, and the meaning of the preceding phase of life during which it was accumulated. As a result, commoditized people spend a commoditized work life in order to spend the remaining phase of their lives for the ultimate commodity, i.e. the pension. In so far as work in a ‘traditional’ enterprise or in a pension fund has become alienated labor, this labor is to a major extent performed to achieve affluence as an alienated form of retirement. The inherent alienation becomes unlimited. As money itself is “a commodity that has alienated its use value to all other commodities and now serves as the measure of their abstract value” (Wolfenstein 1993, 296), any other possible meaning of work-life and life after work is replaced by an abstract value whose meaning increases with the amount of commoditized money at one’s disposal.
The prevalent conviction that endless amounts of money will lead to a life of affluence after work-life for the ‘broad masses’ is reminiscent of the gold-rush of the 19th century. Gold-diggers were willing to bear immense strains, due to their certainty that they would ultimately make their fortune from their efforts. The ‘money-fever’ of the new pensioners, however, made from one’s ‘home-office’ with the help of one’s computer or telephone, lacks the pains and strains of physical labor. It merely demonstrates one’s cleverness in making the right decisions to invest in the best performing pension funds or the most prosperous stocks. If one had to rely upon help from others, it would be from financial analysts or advisers. Even though it was common knowledge that many failed in their quest for gold, those who went west nevertheless seemed convinced that they would make their fortunes. In contrast, the contemporary ‘money-‘ or ‘share-rush’ is based on the conviction that everybody will make it and any ‘reality’ regarding the opposite is completely denied. All that is required is to be smart enough to put money into the system and the chances of achieving affluence are almost directly proportional to the amount of money one is able to invest. The more people bought into this belief – recently expressed in the slogan of a leading American Bank in New York City: “People make money, not the other way around. Live rich!” – the more they convinced themselves that money makes a life after retirement free from all worries.
As meaning is reduced to an abstract concept, any notion of meaning related to social inquiry and the ongoing attempt to find answers to the ‘existential’ questions of life and the world appears outdated. But as antiquated or even incomprehensible as such concerns appear to the ‘actors’ in the industry, it reinforces the assumption that, in a ‘money world’ characterized by unlimited alienation, meaninglessness has become the surrogate for meaning and thus the ultimate ‘meaning’. As money can be equated with everything and with every value in particular, “good and evil have no meaning any longer except failure and success” (Orwell 1956, 43). And to the extent that “work has become alienated labor” (Wolfenstein 1993, 255) the whole world is increasingly turned into an alienated financial market. From a psychoanalytic perspective, it is not surprising that “the forces of destruction predominate over those of construction” (ibid.). As the world is reduced to an abstract ‘world of money’, values like solidarity, welfare, and responsibility for others have become obsolete. As the challenge of creativity is limited to “the investment organization’s ability to adapt to the ever-changing market environment with new and innovative ideas” (Allen & Coggin 1999), a ‘meaningful’ differentiation between creativity and destructiveness no longer serves any function other than to distinguish the means that increase money from those that decrease it. As George Orwell (1956, 58) put it, “the sin against money is the ultimate sin”.
3.1.7 Mortality vs. immortality Surprisingly, despite the fact that death, mortality and immortality are critical to the above reflections, they are almost never mentioned in the literature on social security and pension funds. This non-relatedness between death and life after retirement is congruent with the way issues of pension schemes and funds are dealt with in today’s political and scientific discourse. With social security, death is abstracted exclusively into the statistical entity of mortality rates which, as in life insurance, are then used to determine risk, guiding the amount of contributions. On the other hand, mortality in the pension fund system is not a critical variable whatsoever.
Contrary to life insurance, where people represent either a good or a bad risk according to their life expectancy, pension funds do not have to be concerned about such a risk, since mortality rates have no impact on the (endless) growth of share value upon which future pensions will be based. Nor does the pension system take the traditional view of risk-management, in the sense that the risks of others are shared. The pension fund industry is so sure there will always be an endless increase in the value of stocks that their ultimate risk, i.e. the risk that stocks may decline, has lost any probability and is completely ignored. As a consequence, investors have all too willingly bought into the belief that a future affluent pension will protract death to such an extent that they easily can consider the matter closed. In achieving affluence, immortality too is perceived as an achievement. This illusion is further nurtured by recent gerontological thinking that, according to Kirkwood (2001, 1; italics added), “our unprecedented survival has produced a revolution in longevity which is shaking the foundations of societies around the world and profoundly altering our attitudes to life and death”. Whereas money in the traditional pension system
supports the pensioner during the transitional phase of retirement from
one's work-life till one’s death – and thus, despite the fear of death
and all the other worries of the pensioner (and his spouse), potentially
may provide a space for the emotional state concomitant with the depressive
position – pension money in the pension industry primarily has a psychotic
connotation of a manic kind. Equated with all kinds of objects and affects,
money is not only the bearer of love and hatred, as Wolfenstein (1993,
302) indicates, but also the bearer or representation of immortality
(Brown 1959; Becker 1975). Although one may share the conviction that
the belief in immortality is a prerequisite for the ability to love,
as, for example, Dostoevskij (1973) writes in The Brothers Karamazow,
there is, on the other hand, more reason to assume that the commoditized
immortality to be gained by affluence is limited to a narcissistic love
of self. Unlike mortals, who, as Lucretius (1986) stated, “live dependent
one upon another”, the new immortal pensioner depends only on his money. With unlimited amounts of money at their
disposal, these ‘new immortals’ need not regret their inability to love
and be dependent upon others, as they are exempted from setting any
priorities and making any choices. They share the conviction that everything
is at their disposal. On a more general level, however, this inability
to regret is just one expression of a much broader inability to mourn
typical of contemporary capitalist competition. As the capacity and
need to discriminate between creativity and destructivity – the forces
of life and death – become obsolete in an economy exclusively driven
by abstract and commoditized money, the actual injuries, annihilations
and deaths resulting from this economy are not perceived and thus cannot
be acknowledged – neither as fact nor sin.
The above thoughts and interpretations have been guided by the working hypothesis that the pension fund system, due to its inherent defenses against both persecutory and depressive anxieties, is based upon psychotic dynamics. Whereas I have been mainly focusing on the immediate interface between future pensioners and the pension-providing institutions, I will now elaborate the second part of the hypothesis, i.e. the potential impact of this dynamic on the globalized economy. As suggested above, the pension fund system as a whole is characterized by a psychotic dynamic, which is based on defenses against both persecutory and depressive anxieties. It will be assumed that the ‘customers’, in addition to transferring their money, also transfer their anxieties and psychotic dynamics into the pension fund organizations. This means that the money paid onto a pension scheme serves – in addition to its ‘pecuniary’ function – as a ‘conductor’ of psychotic anxieties.
The reality of the pension industry, if not the
whole world, has been reduced to one of commoditized money (where the
increase in money through buying and selling anything but money lacks
any content or substance). It is no longer money itself but the merry-go-round
of psychosis which sets the world in motion. To the extent that the
industry sustains a vicious circle of psychotic projections and introjections,
pension funds and their customers are caught in a mutual collusion of
defenses against psychotic anxieties, which makes the ‘actors’ far more
paranoid and schizoid than they otherwise would be in another role or
context. The more the psychotic mutual collusion around commoditized
pensions predominates individual lives and the world as a whole, the
more other roles and contexts become tainted by meaninglessness and
lose more and more significance till they ultimately vanish. Mr. Moneybags
thus no longer is the most perverse incarnation of homo oeconomicus
but has taken over the former role of homo sapiens, representing the
new ‘ideal type’ of human being. It would be far too easy to suggest that the psychotic tendencies and dynamics concomitant with the newly developed pension industry reflect people’s shift toward psychosis in the society at large. Such a limited explanation would reduce the economic dynamic from a social to an individual phenomenon and ultimately to a (mass) pathology, which is then traced back to the domain of Oedipus, i.e. early childhood traumas and/or defects of families of origin. Based on the perspective gained from the project of the Sphinx, I suggest that these psychotic reactions are "socially induced rather than a product of the individual" (Lawrence 1995, 17; cf. Lawrence & Armstrong 1998; Sievers 1999a). To regard psychosis as socially induced means that role holders in the pension fund industry, i.e. management, employees, and investors alike, regress into primitive psychic conditions and mobilize defenses typical of the psychotic position in order to defend themselves against prevalent anxieties and fantasies. These defences are, for example, denial, splitting, excessive forms of projection and introjection, identification, omnipotence, aggression, and even sadism. They are above all an expression of psychotic thinking whereby people “defend themselves from understanding the meaning and significance of reality, because they regard such knowing as painful” (Lawrence 2000b, 4). Psychotic thinking serves to create and maintain the destruction of meaning and the neglect of the related reality.
Money made the world go round long before the famous line in Cabaret appeared. Publilius Syrus, the first century BC Roman writer, first stated the conviction that “money alone sets all the world in motion”, which was probably already part of common wisdom. Although there is striking evidence that the predominance of financial markets, characteristic of contemporary globalization, has brought this ‘truth’ to its climax, it seems to me that its psychotic undercurrent is the prevalent ‘currency’ of the world’s economy. To the extent that the pension industry has caused a financial revolution that serves no other aim than for commoditized money to beget commoditized money, today's ‘undercurrent’ has become the key currency: psychosis sets all the world in motion. It is this “raving motion of money”, as Elias Canetti, the writer (1980, 64; cf. Platthaus 2001), put it, by which the psychotic dynamic spreads. The shift from money to psychosis as the basic currency has created a universal marshalling yard or a merry-go-round for psychotic dynamics.
Led by predominant business policy, strategies, and practice, the role holders in the pension funds are encouraged to position their funds amongst the top performers in order to attract the greatest number of investors and provide them an optimal profit. By creating and enforcing the illusion of a pension of affluence for their customers, pension funds reconfirm the monetary expectations of their investors, who wish to accumulate as much capital for their retirement as possible. This is the official primary task of the funds’ existence and operations. These funds become the recipients of their investors' anxieties, greed, and fantasies about unlimited prosperity. Despite the fact that the funds themselves, through their business practices, induce psychotic reactions and demands from investors, they simultaneously become the object of their investors' psychotic tendencies, which are at the core of their longing for a pension of affluence. The psychotic desire of investors to live a life after retirement equipped with a reservation for ‘paradise’ accompanies every dollar transferred into the funds. As the funds see money, and commoditized money in particular, as serving no other purpose but to beget more money, they experience the psychotic dynamics put into them as a challenge and aspiration for further successes on the financial markets.
While Roman Emperor Vespasian may have legitimized the taxation of public conveniences by assuming that money had no smell, the more general notion of money as a neutral entity is not tenable from a psychoanalytic perspective (cf. Harsch 1995; Wolfenstein 1993; Young 1998). Money is not limited to the possession or investment into (abstract) values, but it is the bearer of various emotions including the incarnation of immortality. The transfer of money, thus, is also connected to all kinds of mostly unconscious transferences. Whereas, for example, foundations in America, are inclined to transferences of a more depressive kind on the side of their donors – providing financial support for the health of others and for art and scientific institutions – the predominant transferences of money into pension funds are psychotic.
Pension funds cannot only be seen in terms of their economic and financial function of receiving, increasing and ultimately paying back the savings of a large number of individual contributors. Through the very nature of their business, they also become the recipients of their customers' expectations, desires and anxieties, which are both consciously and unconsciously linked to their future pensions. Pension fund managements, in addition to the monetary or financial product they provide, either explicitly or implicitly sell reliability, security and prosperity. They are not only financial agents but also the industrialists of the private longings and anxieties of their customers – regardless of whether they are prepared to take over this role or not. In order to be successful and to remain continuously in business, pension funds cannot carelessly deny their customers' concerns.
Insurance companies, both life insurance and social security institutions in particular, either overtly or in a more unconscious way, provide some kind of containment for the anxieties and fears of their customers. In contrast, the new pension funds are not capable of providing such a containment. As they tend to perceive these projections mainly as turbulence or chaos which they cannot bear, this chaos – as subsequently will be further elaborated – is projected into the external environment of increasingly globalized financial and economic markets. Thus we often hear of the unpredictability and chaos of these markets, as if our activities are not somehow related to that reality.
Since the (new) pension funds are exclusively concerned with their investors' money and lack any capacity to contain their psychotic anxieties, a more detailed consideration of the psychoanalytic notion of containment may help us to understand their inability to cope with their investors’ projections. The function and meaning of containment was first formulated by Bion (1961, 1963, 1970) in the context of a psychoanalytic interpretation of the normal, healthy relationship between the mother and her infant. In her breast-feeding and comforting, the mother does not only care for the physical well-being of the infant but also accepts the persecutory annihilation and death anxieties projected onto her. If she is not overcome by these extreme anxieties, she is able to contain them and finally, converted into repleteness and a sense of well-being, pass them back to the infant. As it progresses in its development into the depressive position, the infant learns to accept these persecutory anxieties as a part of itself and becomes capable of coping with them in different, more mature ways (cf. Segal 1981, 134 f.; Hinshelwood 1991, 246 ff.). Containment thus implies a relationship between ‘container’ and ‘contained’ (Bion 1970).
In addition to this symbiotic relationship between container and contained, which both stimulates the mother’s and the infant’s growth and maturation, Bion (1970) suggests two other possible relationships between container and contained, the parasitic and the commensal. In the parasitic relationship one ‘part’, either “container or contained, feeds off the other to the eventual destruction of both". In the commensal relationship "container and contained co-exist harmoniously without effecting each other" (Bain 1999, 2).
From this point of view, the containment relationship between the ‘old’ retirement scheme institutions and their future beneficiaries can be perceived as a symbiotic one. Whereas the institution contained the concern and fear of present employees for a decent living after retirement, the contributions of the employees provided the financial means required to pay the pensions of current retirees. In the case of social security, part of these contributions provided retirement money for the underprivileged, serving the additional function of social welfare. As long as the pension scheme system was intact and currently employed people knew that they would receive a pension comparable to the ones being received by those presently retired, the pension-providing institutions were – like the ‘normal’ mother in relation to her infant – quite able to provide the necessary containment for future beneficiaries. The relatively high security of their assets, invested in government and corporate bonds, mortgages, and other debt instruments paying a fixed, if modest, rate of interest, kept the pension institution, their management and employees from colluding with the anxieties of investors. Employees of pension-providing institutions had no reason to be concerned about their own pensions after retirement. The symbiotic containment of the institutions and their future beneficiaries was based on the permanent proof of trustworthiness, through the reliability of a future pension and the contributions from those in employment. The increasing bureaucratization of the pension providing institutions may not have been too different from that of banks or insurance companies. One may, however, assume that the underlying containment function of the institution was not deemed irrelevant to their management and most employees.
So far as ‘new’ pension fund institutions, their management and employees are concerned, it is doubtful that the idea of serving a containment function would have any meaning at all. Predominated by possessive individualism (Macpherson 1962; cf. Clark 2000, 276) and narcissism, which leaves no space for any emotions or feelings towards others, and driven by the desperate desire and commitment to beget commoditized money from commoditized money, these organizations have no valency at all for relatedness, which is at the core of containment. If a fund and its management take containment into account at all, it most likely is economically legitimated as a commensal relationship in which the fund and its investors co-exist in their longing for prosperity without 'impacting' each other (cf. Bain 1999, 2). The funds and their investors are dependent on one another to increase the funds’ profits and the investors’ pensions. This relationship is further based on the unrenouncable assumption of permanent stock market growth. As such, the relationship between container and contained may seem to be a harmonious one. To the extent that the pension fund industry is based on totalitarian destructiveness by which meaning is reduced to the meaninglessness of commoditized money and people are nothing more than a ‘rabble of Moneybags’, the relationship between the funds and their investors is ultimately based on a parasitic containment, a ‘perverse symbiosis’, in which both container and contained feed off each other to the eventual destruction of both. Even though these funds are called 'mutual' funds, suggesting a form of relatedness to others, the name is misleading. Because of the idiosyncrasies upon which the ‘new’ pension fund system is based, i.e. the assumption of permanently increasing share prices, the growth of national products, sufficient demands for further investment etc., the future security and reliability of the pension funds are not a mutual risk but are instead purely the risk of current investors who rely on this money when they become retired beneficiaries.
Of course, every insurance company and even classic European pension schemes have to cope with the implied risk of future reliability vis-a-vis their customers and contributors. This has an especially significant impact on pension funds partly due to their unspoken guarantee of an affluent livelihood in retirement and partly because of unforeseeable political and financial events in the global economy. Insofar as customers’ confidence in pension funds must be sustained for a long time span (till their contributions are paid off by their pensions), their anxieties remain mainly uncontained by the funds and their management. As a pension fund’s management, almost by its very nature, actively denies any possibility that the fund’s core business might be based upon an illusion, the anxiety that this may be the case is exclusively left to the investor. As already indicated, one way pension fund investors – especially those contributing to the larger and more well-known funds – cope with this insecurity and the accompanying anxiety is to view the vast amount of money invested into these funds as proof of the fund’s high value and eternal success. As Galbraith (1993) has observed, these anxieties are thus replaced by projections of intelligence and omnipotence onto the management and the financial institutions to which they are linked.
The fragility of this psychotic thinking toward pensions funds has become more and more obvious with the recent decline of the stock market. In a most dramatic way, it illustrates the paradox that while organizations – and psychotic organizations in particular – “are quite specifically and exquisitely designed to avoid consciously experiencing psychotic anxiety, ... psychotic processes are in danger of breaking through from moment to moment” (Young 1994, 156).
The social collusion of the funds with their investors and employees finds its expression in the psychotic part of their organizations, which dominates the systems’ reality. The mutual collusion regarding commoditized pensions is not limited to the funds and their investors but further includes the funds’ management and employees. It therefore can be perceived as a threefold collusion. Like collusion in a general sense, in which people play the game of not playing a game (Laing 1971, 1969, 108 f.) and “falseness [is] knowingly used as a basis for action” (Goffman 1969, 359; cf. Sievers 1994, 59 ff., 1999b), the role holders of pension fund organizations are active players. Since the funds’ employees have a most critical impact on the success of the funds and are responsible for making dreams of affluence come true, they are also maid to mobilize the psychotic parts of their personalities in order to reconfirm the falseness that all that counts in the world of business is money – and especially the financial value of the shares owned by the funds. The social collusion is at the same time maintained by the personal collusion of the investors and employees. Though their relatedness and contributions are primarily an expression of the psychotic parts of their personalities (induced by the funds), the psychotic reactions must stay hidden behind the appearance of normality. This 'faking of normality' is quite similar to the liaison of psychotic and non-psychotic parts of the pathological position typical for borderline and narcissistic individuals. “The liaison creates a complex affair in which healthy parts of the personality are induced into colluding with purposes that are felt to be destructive, and thus are perversely used to masquerade as health” (Hinshelwood 1991, 385).
Such an organizational culture diminishes the capacity for thinking and feeling, as role holders are expected only to focus on the quality of methods used to execute the task of optimizing the shares of the fund. "What cannot be reduced to numbers cannot be managed and therefore is not worthy of attention" (Bowles, 1997, 793). As their professional values and beliefs are limited to fulfilling the illusion of their investors' pensions of affluence, these employees all too eagerly put their faith in the management structures and financial instruments that have proven successful. Similar to the dynamics in health systems described by Lawrence (1995, 11; cf. Sievers 1999a, 595 ff.), “the complexities of delivering” a pension “have been reduced to the financial concerns of an enterprise culture. This results in people having a frame of mind which can only encompass the immediate and the short term. Reality becomes reduced to profit and loss.” Though they may not be as preoccupied by fears of unemployment as are those in the health system, role holders in the pension funds are most likely preoccupied with their own financial survival when they retire. By identifying with the needs of their customers, they are trapped in the inner, political life of the pension fund organizations and their predominant ways of coping with the environment. To the extent that everything and everyone is commoditized “the larger issues of the place of spirituality in the institution are [not only] deemed irrelevant” (Lawrence 1995, 11) but have become obsolete.
As individual investors project and displace their anxieties, their fantasies of unlimited prosperity and feelings of greed onto the pension funds, the management and employees of the pension funds are not only mobilized as fiduciaries – acting on behalf of their investors – but also introject these unconscious fantasies and anxieties. Insofar as these fantasies and anxieties introjected by the funds are based on their projections which were then introjected by the investors, the dynamic of transferences becomes a reflexive one, i.e. the funds re-introject the greed and longing for affluence which they have induced in their investors.
The fantasies and anxieties of current investors interfere with the emotions of pension fund employees, who – regardless of whether they are personally contributing to one of their own funds or not – are striving to accumulate a pension of affluence, just as their customers are. Thus they have lost sight of any need to discriminate their interests from those of their customers. Legitimized in their organizational roles as representatives and advocates of masses of investors, not only are their own psychotic anxieties stimulated, but they are additionally mobilized to transfer the (re-)introjected fantasies and anxieties of the investors in general together with the money/capital which they, as institutional shareholders, are investing in other corporations. Due to the psychotic anxieties of both private and institutional investors, corporate strategies designed to keep these anxieties at bay unconsciously evolve in the organizations whose shares are owned by the pension funds.
The relationship between pension funds and their investors, elaborated above, suggests that the vicious cycle of psychotic transferences is not limited to or absorbed by the immediate ‘inner’ world of the industry. Not only are the funds and their customers caught in a collusion of defences against psychotic anxieties, the mutual collusion about commoditized pensions increasingly influences the world as a whole. As good objects of the inner and outer world are irrelevant to the collective greed for pensions of affluence, the inherent destructiveness and aggression of the industry is enacted in the outer world. Sustained by psychotic anxieties and defences, the external reality in which the pension funds operate is characterized by a totalitarian mode of thinking and thus reduced to a universal money game.
While pension funds previously shifted their investments from less to more successful corporations, such a passive mentality is now obsolete since selling off considerable amounts of a company’s shares inescapably leads to dramatic decreases in its share price. As indicated above, the most significant change in the pension fund industry and its development into a financial services revolution is using shareholder value as the predominant means of evaluating overall company results. This method of evaluation has meanwhile become the predominant one for major global players and is also supported by their high priests, the neo-liberal economists. The increasing tendency towards shareholder value optimization and the predominance of financial markets is concomitant with a globalization of psychotic anxieties, which are unconsciously managed and maintained by the various referent systems and their respective role holders.
Based on the conviction that a company's profit is no longer the appropriate measure of a shareholder's yield, the shareholder value orientation suggests that a company's cash flow, the free cash flow in particular, is the best measure of profitability (cf. Rappaport 1986; Black et al. 1998). Contrary to the conviction that the value of an enterprise, in addition to its monetary profit, is its contribution to the national economy, its employees' quality of life, the value of its products and the responsible use of resources, the increasing dominance of the shareholder orientation – instead of valuing what a corporation gives to the world – is exclusively oriented to what it 'makes' of the world.
By promoting shareholder value optimization of the corporations they control, pension fund organizations increasingly intensify fantasies of persecution and annihilation and nurture the fear that corporate executives and their employees are at the mercy of shareholders. The rigidity and brutality of the strategies for increasing cash flow are hidden behind a rationality typical of psychotic thinking: The markets think there is no alternative to paying tribute to the shareholders (cf. Black et al. 1998, 8).
By the effective use of marketing and corporate governance, pension funds have become institutional investment actors in the global markets. Unlike smaller shareholders, the big corporate and institutional shareholders have "the kind of administration and supervisory apparatus that allows them to collect, analyse, and act upon business information, and so they can ensure that management is more responsive to them" (Scott 1997, 54). The asset managers of the large institutional pension accounts actually are or otherwise pretend to be better informed about business matters and the global scene than those representing smaller entities. Therefore, they do not hesitate to make their views known to corporate management. The increasing degree to which they advise and pressure those making company policy has resulted in the establishment of special departments dedicated to shareholder relations (ibid.). Increasingly, top management representatives of big corporations fly to the respective financial investors’ headquarters, where they pay homage and allow themselves to be controlled and monitored. As Black and his Price Waterhouse colleagues have quite openly put it, it is “one of the basic facts of capitalism that shareholders have to be rewarded for investing in you” (Black et al. 1998, 25).
Thus a corporation given the Midas touch by its shareholders and institutional investors, turns into gold – or at least into money. The exclusively monetary orientation of the current 'cult of the share' is based on a staggering loss of reality via reification and commoditization. As has been elaborated above, money has not only become a value in itself, but the ultimate value, which has relegated all other values to mere opinions or ideologies. "The belief in market forces and capitalism has caused managers to think of their institutions as only having the purpose of making or saving money. This primary task has supplanted the idea that any enterprise exists to perform work oriented tasks" (Lawrence 1998, 68).
In the context of the shareholder value frenzy, reducing an enterprise's value to an objective monetary one might appear to be a major accomplishment, an ultima ratio, but viewed in a broader frame, it represents a reduction of a much more complex reality. For shareholders in general, and for shareholder conglomerates such as the investment and pension funds in particular, any other notion or quality of an enterprise is obsolete. According to this underlying conviction, money is no longer increased by buying or selling products or services but merely by multiplying itself. As Fromm notes (1973; cf. Harsch 1995, 95), the inherent desire represented by the Midas myth of turning everything into money is, from a psychoanalytic perspective, destructive.
This industry is concerned only about money, and even more about numbers – a position articulated by Vargisch (1991, 86) in an almost cynical way: “Postmodern investment couldn’t care less what was actually being produced or traded. What turned out to be important was not building an industry but something much more simple: numbers. What counts in postmodern money is how much (or more accurately how many) you have. We don’t care if it’s airlines or biscuits. We can reduce it to a common point system (the points in this high scoring game are called dollars) and tell who’s won. It’s not the ‘real world’ (as in airplanes and passengers, farmers and grain supplies, books and readers) but the game that counts. One doesn’t invest in an industry; one invests in an opportunity. One is not interested in producing things: that’s not what players do because that’s not how you win.”
If one can believe press reports – the only reliable sources so far (Wilke 1997, 15) – since the break up of ITT and AT&T, institutional investors have not only influenced the history of big corporations and the careers of their chief executives, but have become the ultimate governors on the world’s capital markets. "They are the ones who decide upon the rules of the game of new capitalism. In such a system there is no place anymore for managers who do not care for the interests of their shareholders. Politicians who attempt to resist the laws of the market by other than suitable economic regulations will soon be pushed out into the cold" (Balzer & Nölting 1997, 88). These corporations and their top executives, like Jack Welsh of General Electric and the late Roberto C. Goizuetta of Coca Cola, using unscrupulous restructuring, quite early and successfully committed themselves to the demands of their shareholders. They are not only national US heroes, but famous models for a new generation of managers in Germany (N. N. 1998, 93).
When a corporation’s management is unable to satisfy the expected viability, i.e. the shareholder value, pension funds do not hesitate to exert influence on a company’s business strategy. They may even play an active role in hostile take-overs (Sievers 1999a, 599 ff.). Though there may be a variety of reasons for such take-overs, the underlying acquisition policy exclusively aims at maximization of the acquired company’s shareholder value which – quite simply – is accomplished by an increase of the inflows and a decrease of costs. Victims of hostile take-overs are viewed similarly to those who have been defeated in war. In losing, their guilt is proved and they therefore deserve sadistically sanctioned reparation payments (Fornari 1975). Particularly if an acquired company does not produce an increase of market power for the company already in the pension portfolio, it is not uncommon for an acquired company already in trouble to be cut to pieces. Those running a deficit will be shut down. Whereas successful ones are sold immediately, the remaining ones are put on the market once they have been refloated (Misik 1997, 956). The dismissal of much of the workforce is broadly regarded as an important cost reducer. Just the mere announcement of such a dismissal may often cause a major increase in a company’s shareholder value.
The increasing dominance of the shareholder value orientation also leads to major changes in the meaning of management and work. The new generation of top managers has no choice but to adapt to the triumphant progress of the ‘cult of the share’. As such, they lose their autonomy as entrepreneurs, which managers in Germany have traditionally enjoyed. In confirming the belief that the most important task of a corporation's top management is to meet shareholder expectations and direct business strategy towards the achievement of the highest possible value for the enterprise, they increasingly turn into mere henchmen of the major institutional investors and their managements.
This shareholder value orientation has led to a devaluation of work, an increase in job redundancy, and the increasing transfer of work to locations abroad, where labor costs are cheaper. Because of the fast growing world population and the disappearance of trade barriers, more and more human work is becoming extremely cheap. "And those who are paid like dirt, will, sooner or later, find themselves in the mire" (Afheldt, as cited in Martens 1996, 21). Whereas some three decades ago the ultimate product of work was considered to be people (Herbst 1974; Sievers 1990), work in the not too far future will primarily serve as a means for transferring money to shareholders after all other costs, including labor, have been deducted. The realization that one’s pension may provide a prosperous life after retirement at the expense of other people’s suffering and ‘death’ (due to downsizing, unemployment, and the concomitant despair) is so unbearable to be denied. Since the individual investor “has to deny, not only that he is selfish, but also that without some selfishness he could not live comfortably and perhaps could not live at all” (Fornari 1975, 118), he has to deny the unconscious feelings of guilt inherent in the pension fund system.
Contrary to Drucker's (1976) thesis in ‘The Unseen Revolution’, the contemporary predominance of institutional investors and pension funds, inseparably linked to shareholder value orientation, has been concomitant with a visible and simultaneously hidden revolution. This present development is based on the paradox that everyone who participates in the system (more often than not without choice) does so in two conflicting roles. At the same time one is both victim/winner and culprit/loser. Due to the idiosyncrasy of the pension-fund-dominated-economy, every member of an enterprise (with the probable exception of those at the top who, as future pensioners, hardly need to worry about relying on old-age money) are caught in the contradiction that his interests as an employee interfere with his or her needs as a future pensioner.
Misik (1997, 957) presents the following paradoxical and bizarre scenario: "If a steel worker pays into a pension fund which subsequently buys shares of his steelwork with the explicit intent to increase its profitability through the reduction of its workforce it then is in the material interest of the steelworker in his role as future pensioner to dismiss himself. To structure the system in such an ingenious way that the workers and the employees themselves become agents of the process of exploitation demonstrates what can be called the beauty of capitalism. ... Ultimately this process is dominated by one single banal principle: the radicalized economy of shareholder value which strikes any other possible principle dead.”
The rational madness inherent in the present propagation and predominance of pension funds appears almost unlimited. The pension fund system will soon create a situation in which the savings and available liquidity of the industrialized world will far surmount the required investments (Neue Züricher Zeitung, April 5, 1994; cf. Misik 1997, 958). The boom in pension funds is based on the assumption of a permanent growth of share prices and the implicit consequence that the expected pensions can only be satisfying as long as there is no turnaround in the market. In face of foreseeable demographics and the enormous increase in aging populations in Western countries, future pensions will involve a significant increase in time between deposits and disbursements. The probability that such a continuous increase in national markets could be jeopardized is all too easily denied and covered up by the unquestioned conviction that it is guaranteed by the capital inflow from developing markets of the third world (Misik 1997, 958).
Misik is obviously right in his view that the pension fund system mirrors and reconfirms ‘the madness of bourgeois economy’, which Marx (1867, 39) regarded as the major source of ‘the secret of profit making’ (ibid., 140). Marx was mainly concerned with the madness resulting from the contradiction between subjectively rational economic strategies and the actual irrationality of the larger economy. In contrast, as Misik (1997, 959) points out, these established paradoxes of mutually contradictory partial rationalities no longer characterize the present reality. The newest contemporary capitalism no longer relies upon "the detour from production via distribution towards consumption" in which the subjects become entangled.
Contrary to the Druckerian fallacy that workers become the real owners of capital through their ownership of pension funds, capitalism under the present structure proves itself more ingenious. The pension scheme designed to guarantee the livelihood of employees after retirement "is bound to the functioning of global investment funds which can only fulfill their promise if the dynamic of delimitation and globalization, the economistic undermining of all regulations, i.e. the liberal frontal attack on the state and on politics, continues" (ibid.). Through increasing globalization, the national state as the traditional domain of representative democracy loses its economic basis. Globalization replaces the institutions of democracy by creating a marketplace of atomized individuals whose actions have no consequence whatsoever (Dahrendorf 1997, 15).
Through intense control and direct influence, corporate investors take on the corporate governance of those corporations whose shares they own. Thus they reinforce and act out the very lack of solidarity and mutual responsibility on which the pension itself and the longing for affluence are based. As a matter of fact, the extent to which the position of shareholder value optimization is viewed as the only perspective to guide the actors in the field is strikingly proved – again – by Black and his Price Waterhouse colleagues. Based on the reification that it is the market that thinks (Black et al. 1998, 8), they begin their book In Search of Shareholder Value with the straightforward description of “the shareholder value view of the world” (ibid., 22): “The individual investor expects funds to maximize their performance; in their turn the funds increasingly demand value from the companies they invest in” (ibid., 10). “The management of a business must have one prime focus: maximizing the value equity” (ibid., 14). And what the shareholder wants, “is nothing but better return” (ibid.).
Such a position was endorsed by the late Roberto C. Goizuetta, former CEO of the Coca Cola Company, who has said: “The real and lasting benefits we create don’t come because we do good deeds, but because we do good work – work focused on our mission of creating value over time for the people who own the company” (ibid., 15). “We raise capital to make concentrate, and sell it at an operating profit. Then we pay the cost of that capital. Shareholders pocket the difference” (ibid., 22).
Black et al.'s (1998) book title In Search of Shareholder Value evokes Peters’ and Waterman’s (1982) best-selling management book In Search of Excellence. One becomes strikingly aware that the double aim of making money and meaning, which a corporation should strive for according to earlier cultural engineers, has now been reduced to the former. The only meaning which is left is money: “SHV [shareholder value] is the new game. ... This is now a game in which success requires both sustainable superior returns on capital and peer-leading growth rates” (Black et al. 1998, 23). O’Barr and Conley (1992, 149 ff.) have observed that pension fund managers mainly describe their business using sport metaphors. Whereas they found this metaphoric frame inadequate (ibid., 157), the Price Waterhouse consultants (Black et al. 1998), not unlike other contemporary authors, seem convinced that the reality they deal with every day is nothing but a game, in which there are just winners and losers.
Though pension funds have to date been mainly an Anglo-American phenomenon, they are, in the face of current changes in the social politics of many European governments, increasingly regarded as a tool or even a panacea for overcoming the limitations of traditional social security systems. Future demographics indicate that the percentage of pensioners in the population will increase drastically. It has become more and more obvious that future pensions can no longer be fully funded through contributions by the next generation. Therefore, national governments in many European countries – and above all social democratic ones – are propagating social legislation that increasingly encourages (or even forces) the working members of the population to contribute to their old age by making additional payments into private or public funds. 5. Implications, with no conclusion
While the pension fund system established by General Motors in 1950 was a creative way to gain its workers’ longtime commitment and support (cf. O’Barr & Conley 1992, 19), the contemporary financial services revolution tends to convert the creative destruction, regarded by Schumpeter (1943, 83) as being at the core of capitalism, increasingly into creative destructivity. Whereas Schumpeter perceived the inherent destructivity of capitalism as a potentially creative dynamic, in that it allowed for something new and possibly more valid to grow out of what had died (or was killed), it seems that contemporary capitalism and particularly the financial services revolution is devoted to a perverse relatedness between creativity and destructivity. By this I mean that, guided by the underlying psychotic dynamic, no effort will be spared to clear all obstacles to the further growth of the industry without any further awareness and concern for the ‘sad remains’ left behind.
Although many details of what I have attempted to elaborate above may be unknown and/or incomprehensible to a majority of contemporary citizens, I am convinced that many, if not most, in the West share similar experiences of despair in face of the ongoing devastation of money and meaning. It is, however, striking how seldom we allow ourselves to really ‘experience’ these experiences in order to derive further thoughts and learning. It apparently is much easier to indulge in a contemporary global psychosis without being actually aware of it, because such awareness would be too painful. Quite similar to Bollas’ (1987) notion of the ‘unthought known’, the predominating dynamic of contemporary advanced capitalism seems mainly to be an ‘unthought experience’ or an ‘un-experienced experience’. Both individually and collectively, we tend to turn a blind eye (Steiner 1985; Long 2001) to the destructive implications inherent in today's economy and its devastating impact on our external social worlds and our internal ones.
When Günter Grass was awarded the Nobel Prize in 1999, he articulated a major concern on behalf of most of us: "We look on in horror as capitalism – now that his brother, socialism, has been declared dead – rages unimpeded, megalomaniacally replaying the errors of the supposedly extinct brother. It has turned the free market into dogma, the only truth, and intoxicated by its all but limitless power, plays the wildest of games, ... with no [other] goal than to maximize profits. No wonder capitalism is proving as impervious to reform as the communism that managed to strangle itself. Globalization is its motto, a motto it proclaims with the arrogance of infallibility: there is no alternative“ (Grass 1999).
Günter Grass, as a German citizen and particularly as a writer, represents the “hope that if not politics, which has abdicated its decision-making power to economics, then at least literature may come up with something to cause the 'new dogmatism' to falter” (ibid.). I hope that I am not overestimating the abilities of we scholars and practitioners oriented toward a psychoanalytic study of organizations in urging us to join ‘literature’ in this attempt. That will, however, require that we acknowledge our own ‘not knowing’ and be willing to go beyond the narrow frame of organizations, regarding the world as an eco-system in which everything is related to everything else (Trist 1976, 1983). In light of what we have accomplished on this matter as an international society so far, perhaps the title of Grass' 1999 Nobel Lecture – "To Be Continued ..." – may not be sufficient. We actually have to face and explore the psychosis which surrounds us. To the extent that we more realistically address it, allow ourselves to suffer from the pain of despair, and better understand it for ourselves, there may be hope that we can contribute to the downfall of the global psychosis – both for ourselves and our contemporaries.
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7. Appendix An earlier draft of this paper inspired my
colleague, Howard F. Stein, to write the following poem:
* I am very grateful to Wanda Brzozowska, Yiannis Gabriel, Rose Redding Mersky, Damian O’Doherty, and Howard F. Stein for their help and encouragement in writing this paper.
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