Tim Rutten of the Los Angeles Times provides this fascinating and insightful overview of the history of privatized retirement accounts, and the devastating impact that their implosion is having, and will continue to have, on the fundamental foundations of the American economy.

As a consequence, there’s been little discussion of the way in which this economic implosion has exposed the utter failure of the now-ubiquitous 401(k) retirement accounts. In fact, the entire 401(k) system looks increasingly like the sort of bait-and-switch con relished by the Bernie Madoff’s of the world.

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…More and more employers began to look for ways to get out of funding the pension and health plans that, up to then, had been regarded as part of the responsible capitalist social contract. Two innovations in political ideology — one on the left and one on the right — provided superb cover for the companies’ greed.

For the Democrats, “choice” became a mantra, and the 401(k) suddenly became a mechanism through which working people could “choose” how to fund and manage their own retirement. On the Republican side, the notion of “an ownership society” came into vogue. There, the theory was that giving working people an ownership interest in the equities market would promote greater personal responsibility and make people better citizens.

Nobody bothered to ask employees whether they wanted to swap their pensions for choice or ownership, nor did anybody stop to notice that very few people are suited by background, ability or temperament to actively manage investments.

If there is such a thing as lethal social poison, it is avarice cloaked in political piety.

Companies seized the opportunity to abandon their defined-benefit pension plans. Today, more than 60% of all U.S. workers rely on 401(k)s as their primary retirement fund. They’re not eager to “choose” their own retirement program, nor are they enthusiastic “owners” of American business. They’re draftees. Essentially, millions of us have been conscripted into the equities markets, where we have helped fuel stock prices and provided a bonanza for the financial services companies that manage and sell investment funds.

The problem is that, since the markets’ peak in October 2007, our 401(k)s have lost a collective $1 trillion in value. That’s fully a third of the value of all 401(k)s. The picture is actually worse than that because another $1 trillion has been stripped from people who lost or changed jobs and rolled their 401(k)s into individual retirement accounts.

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