A case for privatizing the CPP

I’m pretty sure this is not Tom Sandborn’s intent, but he builds a powerful case for privatizing the management of pensions in this article at the Tyee titled Pensions Deep into Weapons, Toxins, Sweatshops. It begins:

The investment experts at the arms-length body that administers Canada Pension Plan funds are facing fierce criticism these days. Critics say the CPP Investment Board managers are pouring public money into war production, tobacco companies and firms like Wal Mart with unsavory reputations for labour and environmental abuses. They also challenge the prudence of shifting CPP money into the volatile and uncertain arena of the stock market, away from the public bond holdings that have traditionally both backed up Canada Pensions and financed public infrastructure across Canada.

No one should be forced to have their money invested in companies that they find ethically objectionable, in my opinion. It’s even worse if they don’t have confidence that the management team is making sound investments, worrying that their retirement depends on “the volatile and uncertain arena of the stock market”.

The obvious answer is to let him direct his contributions to the CPP to the investment management team of his choice. Personally, I’m cool with the volatile and and uncertain stock market, and am content to profiteer on weapons, toxins and sweatshops if it allows me to retire in comfort. In my case I actually have more confidence that money invested privately will be available for my retirement, rather than having it sit in government bonds and depend on the generosity of voters in the future to honour the debts. But far be it for me to tell Tom Sandborn or anyone else how their retirement funds should be invested.

So the solution is clear – we can both have the same CPP contributions deducted at source, but then allow each to select a fund management team that meets our ethical requirements and has a risk profile with which we are comfortable. Tom and similar-minded folks can select ethical funds that avoid companies to which they object – they could even build up a pool of capital that could be lent to developing countries at favourable rates and terms, displacing the IMF and World Bank. And I can sleep soundly knowing those Asian sweatshops will ensure both my comfortable retirement and their economic progress, as outlined in this article by Nicholas Kristof.

(Apologies if posting content is premature, but my view of starting an E-zine is similar to my view on Foreign Policy - conduct it, don't study it. This is an example of what I think one type of content should be - interact with the other E-zines with arguments that potentially persuade on their terms.)