« The Case for Geothermal | Main | Dependency Ratios »

Comments

Rick Wilson

You probably already know this, but you got some backup recently from the president of the UAW:
http://www.detnews.com/apps/pbcs.dll/article?AID=/20060901/OPINION03/609010308&SearchID=73255529985835

Viva Reuther and keep it up!

David Lawton

1. SS is the big risk pool, but it is only a safety net.

2. Conservatively managed pension funds might have worked, but future costs are too unpredictable and funding is always at the mercy of companies.

3. The teamsters had a pension and look where it got a lot of its members! I question whether Walter Reuther was looking at union members or the benefit of the union. To control the pension would be a powerful force.

4. What is missed is what is happening now - a large shift away from company controlled funds to 401k funds that are funded and vested concurrently with the employment, independently invested, transparent, and not dependent on the company's future success. That is the real story and should be the direction the country continues to follow for retirement benefits.

thanks for a thought provoking article.

eyeresist

An enjoyable piece, but of course it won't convince the partisans. I've come to the conclusion that the success of the West is due to three things: capitalism creating wealth and encouraging innovation; parliamentary democracy bringing some accountability to governance, with check & balances limiting negligence and abuse of power; a good social welfare system providing a safety net for victims of economic downturn and those unable to support themselves. These three elements prop each other up like a teepee of freedom and prosperity.

Of course, it all depends how you define success. The social benefits of a well-run welfare system are if anything a gut-level deterrent to modern conservatives. I hope your article will persuade some that social benefits can, in turn, produce economic benefits.

Monica Ricci

You asked the question, "as a retiree, would you rather rely on the federal government or General Motors?"

My answer would be it's not the federal government's job or GM's job to provide for me or anyone else in retirement. That's MY job as an individual. I'd prefer to have ALL my money in my pocket where I can invest it as I choose for my OWN future, as opposed to pumping a large percentage of it into a "security" system where I get no control of it and it gets redistributed to the masses. ~Monica Ricci

Bob Strickland

Mr. Gladwell, I thought this piece was well written and provocatively argued. However, I found it's central thesis to be a result of flawed analysis.

I think your central mistake is in trying to inappropriately mix macroeconomics and microeconomics. The dependency ratio is a useful tool for looking at demographics on a national level and understanding their impact on that nation's economy. However, it simply doesn't apply to a private pension managed by a corporation like GM.

You quoted a senior manager from Bethlehem Steel as saying, "we are making as much steel as we ever have"...but with far less people. Your implied conclusion is that because there are less people working in relation to the number drawing pensions, that the dependency ratio was unfavorable and causing difficulty with their huge pension obligation. You are a wonderful writer, and fascinating generalist theorist, but I don't think you have a solid understanding of corporate finance and accounting.

In a company, there is revenue produced, and then expenses have to be drawn from that. Major categories are labor expense, supplies, debt service, etc...and yes...pension funding. IF a company is producing as much product as ever, and selling it at a fair price, the fact that they are doing it with far less people than they used to is going to HELP their ability to fund their pension...not hurt it. If they could do it with NO people at all (absurd extension to make a point), their ability would be further enhanced. Why? Because a major category of expense has been reduced, leaving a larger share of the revenue for funding the pension. Think of total net revenue as a large pie. If the piece called "labor expense" is reduced in size significantly, without affecting production volume, then that simply leaves more of the pie to devote to the other pieces....like pension funding. The reason these companies got in trouble is because of what Drucker implied in the quote you used...basically, that it is highly risky, and somewhat arrogant, as a manager to look 40 years or more into the future and feel that you are going to be experiencing the same market success that you now are experiencing. In other words, they made poor use of actuarial tables set against inappropriately optimistic business models. Make sense?

Now, that being said, I want you to know that I fully agree that a national health system and national pension would be an improvement if it was done well. My reasons are based on both ethics and economics. Our health system is immoral and a disgrace, and the cost is strangling small business, entrepreneurship, and careers in the arts. Pensions are also important, for similar reasons. However, the reasons they are in trouble has everything to do with bad business and managerial incompetence, and not much to do with the economic principle of dependency ratios.

Would love to hear your thoughts on these thoughts. My email is rs4ropebottom@hotmail.com.

heating


If you have looked into solar energy as a method for heating your home, panels are usually the first things that come up. There are, however, other unique methods.

The Solar Heating Aspect You Have Never Heard of Before

The power of the sun is immense. The energy in one day of sunlight is more than the world needs. The problem, of course, is how does one harness this power. Solar panels represent the obvious solution, but they have their downside. First, they can be expensive depending upon your energy needs. Second, they do not exactly blend in with the rest of your home.

Passive solar heating represents a panel free method of harnessing the inherent energy found in the sun for heating purposes. If you come out from a store and open the door of your car in the summer, you understand the concept of passive solar heating. A wide variety of material absorbs sunlight and radiates the energy back into the air in the form of heat. Passive solar heating for a home works the same way as the process which overheats your car in the parking lot.

The comments to this entry are closed.

My Photo

Bio

  • I'm a writer for the New Yorker magazine, and the author of four books, "The Tipping Point: How Little Things Make a Big Difference", "Blink: The Power of Thinking Without Thinking" and "Outliers: The Story of Success." My latest book, "What the Dog Saw" is a compilation of stories published in The New Yorker. I was born in England, and raised in southwestern Ontario in Canada. Now I live in New York City.

    My great claim to fame is that I'm from the town where they invented the BlackBerry. My family also believes (with some justification) that we are distantly related to Colin Powell. I invite you to look closely at the photograph above and draw your own conclusions.

My Website

Books

  • What the Dog Saw

    buy from amazon

    Outliers

    buy from amazon

    buy from amazon UK

    Blink

    buy from amazon

    buy from amazon UK

    Tipping Point

    buy from amazon

Recent Articles

Blog powered by Typepad