Cracks in the Foundation of Capitalism

By Dennis Boone

The real-world consequences of hubris.

Don’t you just love irony? Especially when the Irony Fairy takes her wand and whacks a truly deserving doubter over the head?

Consider me whacked.

This installment originally was meant to explore the current state of public-pension programs in the region and compare/contrast with conditions that have led to huge protests and near-riots of pensioners around the world. The path that these local municipal, county and state public retirement programs are on today shares a lot of fundamentals that have eaten out the foundation of public pension systems in France, Chile, Russia, Brazil, the United Kingdom—even the Dominican Republic. Heck, who knew the Dominican Republic even had a public pension program?

This involved running through the financials and annual reports of alphabet entities like KPERS and MOSERS, plans for Kansas City public-safety workers and others, school districts, counties and other entities. In most cases, the picture is not rosy. This space was intended to rally public sentiment to do more, now, to safeguard promises made to workers decades ago, and to correct a glide path that is making promises to young workers, promises that simply can’t be kept if you do the math.

Then the Fairy popped over and swung her wand. She left welts. Her visit came in the form of news that McClatchy Newspapers had filed for bankruptcy after 163 years of family ownership. The California-based company, which has owned the local newspaper since 2007, proposes to off-load is underfunded pension obligations onto the Pension Guaranty Trust Board.

Full disclosure: I’m one of the 24,500 people who have been—until now, anyway—collecting a monthly distribution from that program. Guess we’ll see how long that holds up.

Against my long-term financial planning interests, I started collecting that benefit years before I had reached full retirement age. The payout was lower than the chart said I’d receive at 65, but I could see the writing on the wall for the parent. I figured getting something for a few years would be better than getting bupkis every month for the rest of my life when the propellers of the Titanic finally went under.

All of that is a very long windup to connect one dot to a couple of others in America today. The easy one is to compare McClatchy’s financial acumen to folks in Washington who are legislating or administering the Social Security Administration. That particular public pension mechanism is slated to deplete its trust funds—the source of payments for retirement, disability and other programs—in 2035. That used to sound a long way off. We’re down to 15 years, and nobody in D.C. seems to have a shred of urgency to tinker with it.

The other dot: Just 48 hours before McClatchy tanked, a lifelong avowed socialist won the Democratic party’s New Hampshire primary. This is a guy who has never even been a member of that party. How, a rational person can only wonder, does a wombat holdover from the losing side of the Cold War end up as a credible threat to seek the presidency in this country?

That’s where I look west to Sacra-mento, and the offices of the good folks at McClatchy, and around the nation to the offices of companies that used to run 2,000 newspapers that no longer exist. A lot of people have been hurt—I know some who are now dead—because the leadership of one newspaper chain was incapable of anticipating seismic changes in the way consumers want their content. And because it refused to impose even-handed editorial standards that half its former customer base would consider, at minimum, “fair.” Lots of people lost trust in the institution. That loss of trust had top-line and bottom-line implications.

I’ll spare you the sermon on editorial bias, but the final dot to connect comes back to the question of what prompts otherwise intelligent, educated Americans to support calls for Free This or Free That, as long as the rich are getting soaked.

Guess that depends on which rich are the soakees. The groundswell from voters comes from episodes like this. A casual reading of SEC filings from McClatchy—the Executive Compensation section is always a hoot—reinforces for many a sense that something is truly wrong in America when corporate fat cats, year after year, can command millions—millions, mind you—even as they are jettisoning the people who made those earnings possible for the better parts of their careers.

I got lucky. I landed a pretty decent gig at this magazine just as they ran out of lifeboats at 17th and Grand 11 years ago. A lot of other people didn’t. And as an advocate of limited government and free markets, I’m having a hard time explaining to my former colleagues why I still believe capitalism is the answer to lifting the masses out of poverty. Because the news-paper industry’s brand of capitalism isn’t getting the job done. Just the opposite.

And I’m having a harder time trying to determine whether I should dissuade any of them if they decide to storm those media offices with torches, pitchforks, tar and feathers.