The Economist reports on the controversy surrounding Argentina’s ANSES (the public social security agency). The whole story is well worth reading, but, in particular, take a look at the following:
Facing a financing crunch, in 2008 Ms Fernández nationalised the country’s private pensions.
She has since turned ANSES into something of a public slush fund. In the past four years the treasury has sold the agency over $10 billion of bonds at paltry interest rates. The president has used the proceeds to fund popular projects, such as low-income housing, infrastructure and transfers to poor families with children. Meanwhile, in recent years the returns on ANSES’s investment portfolio have lagged behind Argentina’s estimated inflation rate of 25% (the official rate is lower, but is widely known to be doctored).
Walter Russell Mead reports:
Despite the numerous problems facing state pensions across the country, state politicians are now calling on local pension funds to make “socially responsible investments” in local businesses and other community endavours. The practice is gaining traction on both sides of the aisle, earning the support a diverse group including these two unlikely bedfellows:
“Using pension money would simultaneously achieve another of Mr. [Jesse] Jackson’s goals: encouraging pensions to focus on socially responsible investments,” Alden noted.
Jackson’s proposal found support in an unexpected place last week. In Wisconsin, an econonomic development agency spearheaded by an appointee of Republican governor Scott Walker, unsuccessfully asked the state pension fund trustees to use $200 million from state pension funds to help start up businesses.
Ahh, bipartisan consensus.
At first glance, this sounds like a nice idea. Using local pension money to support local business sounds like a classic win-win to most states and municipalities. Experience has shown that when political interest have the ability to influence pension funds, money is routinely diverted towards pet projects and pork barrel spending rather than wise investments, leaving pensioners holding the bag when they go bad.
I’d add that the way that public pension funds occasionally disinvest/refuse to invest in certain companies due to pressure (unrelated to investment return) from the political or bureaucratic class is equally reprehensible.