Mon 25 Jun 2007
Watched another documentary yesterday; this one was called The Corporation. The moment that struck me most was when the commodoties trader was talking about his lack of concern for how these commodoties are acquired. If someone wants to buy copper, he will sell copper. If it means that an entire town in Peru is constantly filled with pollution to acquire it at that price, well, what business of that is his? He doesn’t know about it, he doesn’t care. His job is the exchange of commoditites. “There is opportunity in disaster,” he says. People just want to make money.
This truth, I suspect, goes beyond commodities into the buying and selling of regular company shares. In fact, I am one of those people who just wants money. I invest in stocks and mutual funds because I feel responsible to help secure my financial situation in my old age. In addition, Dr. G. and I are required by state law to participate in retirement investment programs. I just want to park my money somewhere reasonably safe and let it grow. I don’t want to think about it, or worry about it, or spend time on it. I want other people to make it happen for me.
I have no idea where that money is coming from or how it is being made, especially in the mutual funds. In all likelihood there are thirteen year old girls somewhere getting paid six cents an hour in part to improve my return on investment. I guess this means I have to start researching all the companies I invest in, and possibly stop using mutual funds because I don’t know what companies are involved. The problem is, I am not even the tiniest bit interested in becoming so involved. In fact, for my state-mandated retirement program, I don’t think I even have a choice. My resistance to taking responsibility for the sources of my wealth (however small it may be) is so strong that I suspect I will think about it for a week and then do nothing. This is where the Holy Spirit and the community of believers needs to kick in. Have any of you thought about this problem already? What solutions, ideas, and directions have you found?
June 25th, 2007 at 7:05 pm
ouch.
I think about this somewhat often, and I’d rather not, for the reasons stated above.
June 27th, 2007 at 2:06 pm
Ahhhh! Erin! Stop educating me!
June 28th, 2007 at 1:55 pm
I’ve actually done a fair amount of thinking on such issues. Unfortunately, I’m not sure how much good said thought has done. It certainly hasn’t resulted in any simple, packaged solutions. I’m fairly certain that I won’t be able to do justice to even my own simplistic thoughts in a quick blog comment, but I’ll throw out a few things that have come to mind.
I’ve been working ‘real’ jobs and investing for retirement and other such needs for the last 6-10 years, and I do have a big problem with the fact that I’m sure my wife and I own (through mutual funds) small chunks of a number of companies whose ethical, environmental, and social practices we don’t agree with.
A few of the things we’ve done to mitigate such concerns:
–Bought a share of a rental property. We can be pretty certain that we’re not oppressing our renters. Our rents are reasonable, we maintain the place in good shape, and it’s a competitive rental market - there are plenty of other places to live, so there’s some pressure on us and on other landlords to treat our tenants reasonably. Real estate has generally been a solid investment (luckily for us, even better than normal over the last few years), so I don’t think we’re ‘losing’ anything in that market as opposed to stocks, bonds, etc. But of course it’s not a completely easy, hands-off investment strategy either…
–Formed an investment club. We meet monthly with a few friends to pick stocks. We aren’t great investors, but we have been learning a lot, and we feel like we have a better chance as a group to choose companies we’re comfortable with. We pool a small portion of our investment money together and keep a shared portfolio. It’s only been going a year or so, so we’ll have to see how that one does over the long term. At least it forces us to think about the management and practices of the companies we buy.
–Read the prospectus when a mutual fund sends one. I try to keep abreast of the management beliefs of the funds we invest in and pay special attention to the list of top holdings. I can’t keep track of the hundreds of stocks our funds hold, but at least I can usually notice when one of our funds makes a major purchase of a company I know I don’t agree with…
One other idea:
–Look into Real Estate Investment Trusts (REITs). As I’ve already noted, it’s hard to abuse people with real estate (not impossible, probably, but not generally easy). Managing rentals isn’t for everyone, so if you’re not interested in buying on your own, your retirement plan may offer some sort of REIT fund. The fund pools everyone’s money to buy and manage real estate (office rentals, retail space, large apartment complexes, etc.) It’s a way for us small investors to put a portion of our fund into an area that’s generally hard to get into on your own.
Side Note: I should address the specific concern of “thirteen year old girls…paid six cents an hour”. I can’t say I’m entirely comfortable with low wage jobs or child labor, but there are often mitigating reasons for such conditions.
In many cultures, it’s entirely normal for children to work in the family business or farm at an early age, and to contribute to the family’s earnings. Not that 14-hour sweatshop days in a factory are justified, of course…
My wife and I recently returned from a few weeks serving in Kenya, where the prevailing wage for unskilled labor is ~$2.50/day (about 1/15 the US minimum wage) Skilled labor seemed to be paid about 1/10 of comparable positions in the US. Unfortunately, there were obvious reasons for the discrepancy - the actual productivity of labor was incredibly low, due to lousy infrastructure and a culture places little value on efficiency. Not that efficiency is all there is to life, but it helped me to understand that there isn’t always a fat cat somewhere getting rich off the backs of low-wage labor. If (for whatever reason), I’m only producing $.25 an hour worth of goods, it’s hard to justify an American-level paycheck. Fixing the underlying social and governmental issues (and, unfortunately, perhaps changing cultural values as well) seems to be a prerequisite to increasing wages. Putting the wage increase first is likely to be unsustainable for all involved.
We also noticed rampant unemployment and under-employment (less than 50% of college graduates can find a professional job of any sort, much less one in their field). It seems like wages won’t rise across the board until there are fewer unemployed people competing for the few jobs available and willing to work for almost nothing. Our brief African experience confirmed my general feeling that the best answer to low wages is full employment. Unfortunately, I don’t have a nice easy path to that end either…
And that’s about enough for one blog comment.
June 28th, 2007 at 9:40 pm
Aaron– Thanks for sharing your thoughts! For a few days there I was thinking I was off the hook, but here you come along with many helpful ideas and suggestions. I have been thinking about property as a form of investment that is, as you say, hard to mess up ethically.
Regarding the living situations in other countries– yes, I agree with you that wages don’t necessarily need to be to american standards all around the world, but even in the most depressed economies it is hard to live on 50 cents to a dollar a day, especially if you have other people that you help support. I used to know people that only ate vegetables or proteins on very rare occasions, because they were too expensive. Now that’s no good, whatever country you live in. In fact, one reason for the much lower efficiency found in some countries is health– poor nutrition, malaria, and so on all seriously affect people’s productivity. And again, if you only make 3 cents for sewing a $45 shirt, that seems like too wide a gap. When I was making fancy espresso drinks during college my hourly wage was high enough (just slightly above minimum) that I used to earn 25- 50 cents per three-dollar drink that I made. Man, I loved that job.
July 16th, 2007 at 11:54 am
My retirement thing offers several different mutual funds, and I have most of the money going in to a “socially responsible” fund. It has not performed quite as well as some of the others in some years, but it also didn’t lose quite as much as some of the top performers during the dotcom crash, and the 10 year average is quite competitive with the others. The philosophy of the fund directors is that responsible business practices are good for business in the long run (and vice versa). I think one of the main lessons from Proverbs is that easy money (and easy sex) are bad ideas in the long run, so I don’t mind that the “socially responsive” fund might potentially make my investment grow more slowly.
On the sweatshop wages issue– one article I read (Prism) recently pointed out that the sweatshop jobs in third world cities are often more desirable than rural life, and actually do provide their workers a “better” standard of living, even though it’s abysmal by our standards. So even an investment in a company providing those low wage jobs may sometimes be benefiting the actual poor more directly than other things you might do with your money.