Living the good life in our retirement years seems to be a fading dream for most Americans and even for those living in Europe. The corporate promise with secured pensions has almost but come to an end as an era.

All you need to do is look around to see that times are changing at so many levels. The vision of a retirement spent drinking fine aged scotch and playing golf is an unrealistic dream. For many of us, retirement may span twenty years or longer and will not be viewed as an isolated economic event but rather a part of ongoing life planning.

The Rules Have Changed

The rules have dramatically shifted for middle-class Americans. Statistics clearly tell the tale and here is one of the most alarming: since 1985, corporations have killed 84,000+ pension plans. These were the very corporate promise of secured retirement benefits to dozens or hundreds or even thousands of Americans. Corporate America has been offering plenty of complex explanations and pointed fingers as to why they are cutting down a vital safety net for Americans. Anyone can see that it all boils down to the buck. The money saved by not funding employee pensions now goes for executive salaries, dividends or some pet project of a company’s CEO. Congress went along and even compounded the betrayal by pretending that the change was in employees’ best interest.

As stated by Pulitzer Prize winning authors, Donald L. Barlett and James B. Steele, “Pensions were once an integral part of the American dream, a pledge by corporations to their employees: for your decades of work, you can count on retirement benefits. In return for lower earnings in the present, you were promised compensation in the future when you retired. Not everyone had a pension, but from the 1950s to the 1980s, the number of workers who did rose steadily — until 1985. Since then, more and more companies have walked away from pensions, reneging on their promise to their employees and leaving millions at risk.

“Before today’s workers reach retirement age, decisions by Congress favoring moneyed interests will drive millions of older Americans — most of them women — into poverty, push millions more to the brink and turn the golden years into a time of need for everyone but the affluent.

“For all of this you can thank the rule makers of Wall Street and Washington who have colluded to rewrite the rules on retirement in ways that will harm millions of middle-class Americans for decades.”

The Statistics Of The Pension Fail

• In addition to the 84,350 pension plans killed by corporations since 1985, companies have frozen thousands of other plans, meaning that new employees are barred from participating or benefit levels are frozen, or both. Freezing a pension plan is often the first step toward eliminating it.

• The Congressionally touted replacements for pensions — 401(k) plans — have insufficient holdings to provide a serious retirement benefit. This even though millions will be depending on them.

• As companies have killed or curtailed pensions for employees, executive pensions have soared, largely because they are based on executives’ compensation—which has ballooned in recent decades.

• At some companies the only employees who have pensions are the corporation’s executives.

• The 401(k) plans promoted by corporations and Congress that have replaced pensions as the main retirement plan for many employees are uninsured, and they are less secure and cost more to administer than traditional pensions, but they have provided a windfall of fees for Wall Street.

According to ConvergEx Group, “Only 58% of us are even saving for retirement in the first place. Of that group, 60% have less than $25,000 put away … a full 30% have less than $1,000.” According to Nielsen Claritas, Americans age 55 to 64 have a median net worth of $180,000 — less than they’ll likely need for health care spending alone during retirement.

How The Mighty Fall

In his book How the Mighty Fall, Jim Collins succinctly illustrates five stages of decline:

  1. Hubris Born of Success, leadership becomes arrogant, as it considers success an entitlement.
  2. Undisciplined Pursuit of More, reckless behavior sets the company at great risk.
  3. Denial of Risk and Peril, failure of leadership to recognize and address risks.
  4. Grasping for Salvation, a sharp decline visible to the public.
  5. Capitulation to Irrelevance or Death.

With Edwin Dearborn’s tenure of 18 years as a CEO of a highly successful non-profit organization, he also envisions a huge shift in how many Americans are viewing their future plans, seriously considering starting their own businesses versus putting their trust and future into a dying breed.

This will present even deepening problems for corporate America as they will see talent pools vanishing quickly. .

The responsibility of any leader is to ensure that their organization succeeds, protecting its interests and staff, and conducting itself along an ethos of excellent service, fairness and equity. While many may claim that there is a “fine line” in business, the line in the sands on corporate issues is just as clear as it is with how parents teach children.

Claiming that we live in a “complex world” has been too often the whipping boy for corporate irresponsibility. Even our Forefathers, who wanted and celebrated a free markets system, were well aware of the necessity of ethical conduct in business and in continuing this free way of life. Here are some examples:

“A general dissolution of the principles and manners will more surely overthrow the liberties of America than the whole force of the common enemy…. While the people are virtuous they cannot be subdued; but once they lose their virtue, they will be ready to surrender their liberties to the first external or internal invader…. If virtue and knowledge are diffused among the people, they will never be enslaved. This will be their great security.” – Samuel Adams

“Avarice, ambition, revenge, or gallantry, would break the strongest cords of our Constitution as a whale goes through a net. Our Constitution was made only for a moral and religious people. It is wholly inadequate for the government of any other.” John Adams, Oct. 11, 1798 in an Address to the military

“Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters.”Benjamin Franklin

“Our ancestors established their system of government on morality and religious sentiment. Moral habits, they believed, cannot safely be entrusted on any other foundation than religious principle, not any government secure which is not supported by moral habits.”Daniel Webster

“Good government generally begins in the family, and if the moral character of a people once degenerate, their political character must soon follow.”Elias Boudinot, president of the Continental Congress

In reality, we cannot maintain our freedom without a compliance to a sensibility of right and wrong. We have seen that very avarice with Enron, Wall Street bailouts and a multitude of examples in our daily news. Many would point to that fact that this is the primary fault with capitalism and the free market system. But I beg to differ.

The free market system, while abused by a small percentage of unscrupulous enemies of freedom, was not originally founded on the principle of rip-off. We cannot attack and condemn the application of a business philosophy by the unethical acts of those who claim to conduct business under it’s banner, but in reality, misrepresent it in their actions.

Adam Smith: The Founding Father of Modern Capitalism

Adam Smith is famous for founding economics as an independent field of study by synthesising and systemizing classical economics in his book, The Wealth of Nations. But Smith was also a significant moral philosopher, well deserving to be recognized alongside his close friend David Hume as a key figure in the Scottish Enlightenment. Smith viewed economics as a branch of moral philosophy, and he saw capitalism as an ethical project whose success required political commitment to justice and freedom, not merely an understanding of economic logistics.

Adam Smith was born in a small village in Kirkcaldy, Scotland, where his widowed mother raised him. At age fourteen, as was the usual practice at that time, he entered the University of Glasgow on a scholarship. He later attended Balliol College at Oxford, graduating with an extensive knowledge of European literature and an enduring contempt for English schools.

He returned home, and after delivering a series of well-received lectures was made first chair of logic (1751), then chair of moral philosophy (1752), at Glasgow University. He left academia in 1764 to tutor the young duke of Buccleuch in Scotland.

For more than two years they traveled throughout France and into Switzerland, an experience that brought Smith into contact with his philosophical contemporaries Voltaire, Jean-Jacques Rousseau, François Quesnay, and Anne-Robert-Jacques Turgot. With the life pension he had earned in the service of the duke, Smith retired to his birthplace of Kirkcaldy to write The Wealth of Nations (WN). It was published in 1776, the same year the American Declaration of Independence was signed and in which his close friend David Hume died.

Smith Vs. Marx

Smith was not the cold-hearted capitalist that Marx & Engels would hope to portray. Marx saw capitalism as a progressive historical stage that would eventually stagnate due to internal contradictions, to be followed by socialism. Marxists define capital as “a social, economic relation” between people (rather than between people and things). With this understanding, they seek to abolish capital. Marxists believe that private ownership, as a means to production, enriches capitalists at the expense of workers. In brief, they argue that the owners of the means of production exploit the workforce.

In Karl Marx’s view, the dynamic of capital would eventually impoverish the working class and thereby create the social conditions for a revolution. Private ownership over the means of production and distribution is seen as creating a dependence of non-owning classes on the ruling class, and ultimately as a source of restriction of human freedom.

Smith: An Advocate OF Ethical Commerce

Smith was clearly an advocate of morality in the conduct of business. To save yourself reading the 900 pages of The Wealth of Nations, we have selected some key quotes to illustrate Smith’s view of business ethics. “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged.” (WN I.viii.36) “To hurt in any degree the interest of any one order of citizens, for no other purpose but to promote that of some other, is evidently contrary to that justice and equality of treatment which the sovereign owes to all the different orders of his subjects.” (WN IV.viii.30) “Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men.” (WN IV.ix.51).

Smith On Moral Autonomy

Smith believed that personal autonomy – self-determination – could flourish in commercial society, because its circumstances gave the greatest possible number of people access to the basic requirements for moral self-development. The increased wealth and security that followed a proper administration of justice allowed the mass of ordinary people – not only the aristocratic elite – the leisure to reflect about matters beyond their daily subsistence.

Freedom from artificial constraints and domination allowed them to control important aspects of their own lives, from religion to employment, while taking greater responsibility for how they lived. The markets themselves could be schools for certain virtues. For example, people who worked for themselves would be more prudent and temperate; people who interacted through markets would be more honest than when trapped in sycophantic relationships with masters.

As a result, Smith considered commercial society compatible with the moral autonomy of its ordinary citizens, and believed that such societies would exhibit more moral decency, though less moral greatness, than either classical or contemporary ‘savage’ societies.

Interference From Within

Undisciplined Leadership

Moral accountability has lead us to a situation where Americans are desperate for a way out. Crony Capitalism has left us reeling with outrageous national deficient, inflation, higher taxes and corporate inequities for the majority of workers. Darwinian “Survival of the fittest” mentality and morality in corporate America, aided and abetted by Congress and many Presidents, has most Americans wondering how they are going to survive and flourish.

In his book, Ethics and Leadership Effectiveness, author Joanne B. Ciulla examines how ethical should a leader be? “People often say that leaders should be held to “a higher moral standard,” but does that make sense? If true, would it then be acceptable for everyone else to live by lower moral standards? The curious thing about morality is that if you set the moral standards for leaders too high, requiring something close to moral perfection, then few people will be qualified to be leaders or will want to be leaders. “For example, how many of us could live up to the standard of having never lied, said an unkind word, or reneged on a promise? Ironically, when we set moral standards for leaders too high, we become even more dissatisfied with our leaders because few are able to live up to our expectations. We set moral standards for leaders too low, however, when we reduce them to nothing more than following the law or, worse, simply not being as unethical as their predecessors. A business leader may follow alllaws and yet be highly immoral in the way he or she runs a business. Laws are moral minimums that do not and cannot capture the scope and complexity of morality. “For example, an elected official may be law abiding and, unlike his or her predecessor, live by ‘strong family values.’ The official may also have little concern for the disadvantaged. Not caring about the poor and the sick is not against the law, but is such a leader ethical? “So where does this leave us? On the one hand, it is admirable to aspire to high moral standards, but on the other hand, if the standards are unreachable, then people give up trying to reach them. If the standards are too high, we may become more disillusioned with our leaders for failing to reach them. We might also end up with a shortage of competent people who are willing to take on leadership positions because we expect too much from them ethically. Some highly qualified people stay out of politics because they do not want their private lives aired in public.”

But The question can be easily answered in the virtue of the Golden Rule, “Would you want it done to you?” The Tao Of The Business Warrior must include a path of ethical conduct, which of course recognizes that your choices will not always be perfect. As Ms. Ciulla further illustrates in her book of the same title, “The moral challenges of power and the nature of the leader’s job explain why self- knowledge and self-control are, and have been for centuries, the most important factors in leadership development. “Ancient writers, such as Lao-tzu, Confucius, Buddha, Plato, and Aristotle, all emphasized good habits, self-knowledge, and self-control in their writing. Eastern philosophers, such as Lao-tzu, Confucius, and Buddha, not only talked about virtues but also about the challenges of self- discipline and controlling the ego. Lao-tzu warned against egotism when he stated, “He who stands on tiptoe is not steady”. He also tells us, “The best rulers are those whose existence is merely known by people”. Confucius focused on the importance of duty and self-control. He stated, “If a man (the ruler) can for one day master himself and return to propriety, all under heaven will return to humanity. To practice humanity depends ononeself ” He tied a leader’s self-mastery and effectiveness together when he wrote, “If a ruler sets himself right, he will be followed without his command. If he does not set himself right, even his commands will not be obeyed”. In the First Sermon, the Buddha described how people’s uncontrolled thirst for things contributes to their own suffering and the suffering of others.”

Union Socialism

On the other side of unethical capitalism, grew the expansion of unions.

Unions began forming in the mid-19th century in response to the social and economic impact of the industrial revolution. National labor unions began to form in the post-Civil War Era. The Knights of Labor emerged as a major force in the late 1880s, but it collapsed because of poor organization, lack of effective leadership, disagreement over goals, and strong opposition from employers and government forces.

The American Federation of Labor (AFL), founded in 1886 proved much more durable. It arose as a loose coalition of various local unions. The AFL helped coordinate and support strikes and eventually became a major player in national politics, traditionally on the side of the Democrats.

American labor unions benefited greatly from the New Deal policies of Franklin Delano Roosevelt in the 1930s. The Wagner Act, in particular, legally protected the right of unions to organize. Unions from this point developed increasingly closer ties to the Democratic Party, and are considered a backbone element of the New Deal Coalition. A common refrain from those who support the labor movement is that the power and success of labor unions continued to grow after World War II, but faced stiff resistance from conservative, free market business interests, represented politically by the Republican Party. Such an outlook ignores the role that union-imposed costs, inefficient work rules primary among them, played in pricing union labor out of many markets. Each side appeared satisfied to blame the other instead of developing economically sensible programs to help secure fairness and sustainability.

E. J. Dionne, Jr. , American journalist, political commentator, and a long-time columnist for The Washington Post, noted the union movement has traditionally espoused a set of values—solidarity being the most important, the sense that each should look out for the interests of all. From this followed commitments to mutual assistance, to a rough-and-ready sense of equality, to a disdain for elitism, and to a belief that democracy and individual rights did not stop at the plant gate or the office reception room. Dionne notes that these values are, “increasingly foreign to American culture.”

But today the world is changing and tens of thousands of manufacturing jobs and going overseas. Contentious unions are trying to hold tight to unreasonable and unrealistic goals, seeing management as an enemy in a rival ship rather than as a partner on the same ship.

It is this very contention that is driving corporate America away as a competitive alternative, thus seeing jobs flee from America like never before.

Interference From Above

Federal Bureaucrats

Unsound government policies, which keep inefficient companies afloat with subsidies or burden healthy companies with complex and costly regulations. Regulations are particularly onerous to the nation’s small business person, due to the complexity of complying with these their countless requirements, laws and statutes.

“Job-creating small businesses represent 99.7 percent of all employer firms, employ over half of all private sector employees, and have created 64 percent of new jobs over the past 15 years. Yet they are forced to bear a disproportionate share of the more than $1.75 trillion federal regulatory burden. The U.S. Small Business Administration estimates costs of more than $10,000 per employee for firms with fewer than 20 employees in compliance costs alone.” – The Hill (3/10/2011)

Members of the National Federation of Independent Business have consistently ranked government regulations and red tape as the most important problems facing businesses today. Per them, one in five business owners explain that red tape is their single biggest concern – even over taxes, inflation, and the cost of labor.

The Hope For Bureaucrats

Brad Power is a consultant and researcher in process innovation. His current research is on sustaining attention to process management. He is currently conducting research with the Lean Enterprise Institute. Mr. Power, writing for The Harvard Review (03/08/2013), stated:

“Leaders of big bureaucracies need to get — and keep — everyone enthused, create and communicate a future vision, assure support during the transition, insist on excellence, create demands on managers, and convince everyone of top management’s conviction and commitment to change. These leadership challenges may seem familiar, but in a bureaucracy they are, if anything, magnified. To sustain momentum in this special context, leaders may need to adopt the behaviors of a fanatic — as Winston Churchill said, ‘A fanatic is one who can’t change his mind and won’t change the subject.’

“Of course, the federal government provides an extreme example of entrenched bureaucracy with an established way of doing things. But it offers lessons to any organization that is mature, successful, and set in its ways, yet recognizes the need to transform itself.”

The Federal Reserve: Unsound Money Managers

This a feature from Murray N. Rothbard (1926–1995). Mr. Rothbard was dean of the Austrian School, founder of modern libertarianism, and chief academic officer of the Mises Institute.

“In modern central banking, the Central Bank is granted the monopoly of the issue of bank notes (originally written or printed warehouse receipts as opposed to the intangible receipts of bank deposits), which are now identical to the government’s paper money and therefore the monetary “standard” in the country. People want to use physical cash as well as bank deposits. If, therefore, I wish to redeem $1,000 in cash from my checking bank, the bank has to go to the Federal Reserve, and draw down its own checking account with the Fed, “buying” $1,000 of Federal Reserve Notes (the cash in the United States today) from the Fed. The Fed, in other words, acts as a bankers’ bank. Banks keep checking deposits at the Fed and these deposits constitute their reserves, on which they can and do pyramid ten times the amount in checkbook money.

“Here’s how the counterfeiting process works in today’s world. Let’s say that the Federal Reserve, as usual, decides that it wants to expand (i.e., inflate) the money supply. The Federal Reserve decides to go into the market (called the “open market”) and purchase an asset. It doesn’t really matter what asset it buys; the important point is that it writes out a check. The Fed could, if it wanted to, buy any asset it wished, including corporate stocks, buildings, or foreign currency. In practice, it almost always buys U.S. government securities.

“Let’s assume that the Fed buys $10,000,000 of U.S. Treasury bills from some “approved” government bond dealer (a small group), say Shearson, Lehman on Wall Street. The Fed writes out a check for $10,000,000, which it gives to Shearson, Lehman in exchange for $10,000,000 in U.S. securities. Where does the Fed get the $10,000,000 to pay Shearson, Lehman? It creates the money out of thin air. Shearson, Lehman can do only one thing with the check: deposit it in its checking account at a commercial bank, say Chase Manhattan. The “money supply” of the country has already increased by $10,000,000; no one else’s checking account has decreased at all. There has been a net increase of $10,000,000. But this is only the beginning of the inflationary, counterfeiting process. For Chase Manhattan is delighted to get a check on the Fed, and rushes down to deposit it in its own checking account at the Fed, which now increases by $10,000,000. But this checking account constitutes the “reserves” of the banks, which have now increased across the nation by $10,000,000. But this means that Chase Manhattan can create deposits based on these reserves, and that, as checks and reserves seep out to other banks (much as the Rothbard Bank deposits did), each one can add its inflationary mite, until the banking system as a whole has increased its demand deposits by $100,000,000, ten times the original purchase of assets by the Fed. The banking system is allowed to keep reserves amounting to 10 percent of its deposits, which means that the “money multiplier” – the amount of deposits the banks can expand on top of reserves – is 10. A purchase of assets of $10 million by the Fed has generated very quickly a tenfold, $100,000,000 increase in the money supply of the banking system as a whole.

“Interestingly, all economists agree on the mechanics of this process even though they of course disagree sharply on the moral or economic evaluation of that process. But unfortunately, the general public, not inducted into the mysteries of banking, still persists in thinking that their money remains “in the bank.”

“Thus, the Federal Reserve and other central banking systems act as giant government creators and enforcers of a banking cartel; the Fed bails out banks in trouble, and it centralizes and coordinates the banking system so that all the banks, whether the Chase Manhattan, or the Rothbard or Rockwell banks, can inflate together. Under free banking, one bank expanding beyond its fellows was in danger of imminent bankruptcy. Now, under the Fed, all banks can expand together and proportionately.”

The New “Retirementality”

Author Mitch Anthony is his book, The New Retirementality: Planning Your Life and Living Your Dreams….at Any Age You Want states, “Retirement as we know it today, is a relic from a time and a world that have long since passed.”

Becoming Your Own Retirement Planner

To succeed in life and to ensure the complete security of your financial future, you are going to have to become your own financial planner. This may sound counter-intuitive, but let me me pose these two questions to you:

Who’s money is it?

Who do you think pays your broker?

It is your money, and while you may think you are paying your broker, in actual fact he is paid agent of the company that hires him. He is swayed by their decisions and packaged deals on what to sell to you. It may or may not be the absolute best investment for you, but I assure you these financial institutions earn a ton of money off of the growth of your funds. And their growth may not represent what is your best growth.

Investment companies strongly favor and quota their brokers to sell very specific programs and investments. And let me tell you, it is a dog-eat-dog industry that has to win the hearts of sales managers, share holders and CEOs. Your broker answers to them and not to you.

There is a very old saying: Caveat emptor. Latin for “Let the buyer beware”.

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