Although I agree with you that many pension funds have been mismanaged, it's not 100% your fault if your 401k plan only offers poorly-performing, high fee funds as many do. I'm not sure either model is a good solution going forward.
Well, IRAs and Roth IRAs are the competitor in that realm. I don't trust most people to handle their own funds in an "automatic" 401k plan however. How many "normal" people do you know who has a Roth IRA for example?
Not a lot. A ton of people I know even pull money from their 401k early for luxurious reasons. (It makes sense to do so in an emergency. But not for like... a Euro-trip or Cruise Vacation like some people in my circle...)
Honestly, each time I hear about stupid personal finance stories like that, I wish that those people were on a pension instead. There's a lot of stupid out there.
If your company is small or your benefits person clueless, you may have worse funds available to you than in the taxable brokerage world.
My attitude in practice is that if I'm getting an employer match, then why complain about fees? It's their problem to minimize them - I'm still doing better than I would on my own. The efficiency is their problem, and because they have an incentive to minimize their costs, there shouldn't be a systemic problem.
[1] Average ETF tracking error is said to be as high as 50 basis points: http://www.nytimes.com/2013/04/07/business/mutfund/exchange-...
http://time.com/money/3959942/401k-bad-choices/
http://www.pionline.com/article/20170927/ONLINE/170929858/ge...