You gotta love the headline of George Will’s latest piece: Newt Gingrich commits a capital crime. Mr. Will really lays down some heavy snark as he takes Gingrich apart limb by limb. It’s unusually good writing from Will. But he still misses an important point. Here is Will’s defense of Vulture Capitalism:
Romney, while at Bain, performed the essential social function of connecting investment resources with opportunities. Firms such as Bain are indispensable for wealth creation, which often involves taking over badly run companies, shedding dead weight and thereby liberating remaining elements that add value. The process, like surgery, can be lifesaving. And like surgery, society would rather benefit from it than watch it.
I don’t really disagree with what Mr. Will is saying here, but he isn’t defining what he means by ‘society.’ He’s also failing to acknowledge that it matters how you go about “connecting investment resources with opportunities” to create wealth. Too often, Bain Capital has created wealth only for themselves. The most famous example is American Pad & Paper Co. (Ampad), which they bled dry until it was forced into bankruptcy. And it didn’t help that they were simultaneously funding mega-retailers like Staples that only exacerbated Ampad’s problems.
When a company specializes in outsourcing jobs to other countries with cheaper labor, the ‘society’ that benefits is global. The wealth that is created no longer benefits our local communities. And when a company enriches itself by bleeding their acquisitions into bankruptcy through excessive fees, it isn’t even performing its job as a scavenger. It’s acting as a predator.
We need scavengers to create efficiencies, but we don’t need a race to the bottom on wages, nor do we need predators to come into our communities and destroy our jobs. That’s what Bain Capital did under Romney’s leadership. He didn’t serve the country. Too often, he didn’t even serve the investors in the companies he acquired. He served himself. So, as far as I am concerned, Gingrich’s criticism that Romney earned his money “bankrupting companies and laying off employees” is a completely valid criticism.
The problem is that you posit two things, create efficiencies and race to the bottom/destroy jobs, when in fact this is one process in two aspects. What is the creation of an efficiency is simultaneously a race to the bottom or the destruction of a job. One might argue that one should arrest the process after the efficiency is created and before the job destroyed, but these aren’t steps in a sequence.
The point in this country’s history at which we had the widest employment at the highest median wage was, given how things work, a passing thing. Sooner or later, financialization steps in.
Jobs get destroyed all the time, whether you have vultures around or not. I don’t have a problem with a company buying out a competitor and consolidating their workforces. You don’t need two payroll departments or two shipping centers. You wind up with a bigger market share and more profitability, and that’s fair play.
What I have a problem with is taking over a struggling company and then bleeding it dry by charging exorbitant fees, bankrupting it, and laying off a bunch of workers.
I have a problem with moving a profitable factory to Mexico just to make it more profitable.
We ought to insist that a balance be drawn between maximizing return to the investor and preserving an American manufacturing industry. And we ought to take a look at how Bain bankrupted Ampad and ask whether that kind of behavior should really be legal. And, if not, how do you prevent it?
I agree absolutely with you. The hitch I see is that we would need to institute those changes through a political mechanism, and our political mechanism is an arm of finance.
I know that this paints a very gloomy picture, but I’m not actually that gloomy. I just think that the type of changes we would want will be incremental and at the capillary level, people engaging in other types of economic activity rather than continuing to enrich through their own spending the very types of corporations that we–I include myself in this critique–decry as vulture capitalists. There are sectors of our economy that point the way forward.
Basically what Romney did on a small scale is what the financial interests behind the republican circus, whether Newt or Mitt, want to do (and are doing) on a national and global scale.
The invention of junk bonds, debt financing of corporate takeovers, and other financial disasters of the last 30 years have not done one single good thing, and have led, over and over and over, to disasters for the humans involved in these corporations.
There are case after case of corporations that have been looted, eviscerated, and destroyed, by junk deal after junk deal. American Mattress is one that sticks in my brain – purchased in 4 successive deals, each one with higher and higher levels of debt financing, taking a healthy company with adequate capital reserves to a bankrupt hulk which fired all employees.
If you ask me, any fucking turd like Michael Milkin or Mitt Romney or any other piece of human excrement who participated in this vulture shit should be taken out and shot. Not that I have an opinion.
Part of the problem with this whole discourse regarding jobs and capitalists like Bain is the mistaken idea that entrepreneurs are in the business of creating jobs. They’re not. When they do create jobs, and they certainly do, it is an indirect, and not particularly desirable, consequence of needing to hire people to produce greater numbers of things of value that the businessperson can sell for a profit.
They’re in the business of making themselves, and their shareholders, rich, not job creation. Jobs are a cost to operating a business, not a benefit, so business leaders are always trying to find ways to reduce the costs of labor, not increase it. To do otherwise would be incompetent business management by any measure.
This is the opposite of the objective of government and political leaders during a time of economic recession like the present, whose desire, regardless of political affiliation, is to maximize employment, regardless of implications for profitability. For example, maximizing employment is part of the Federal Reserve’s charter for implementing monetary policy.
In periods of recession like the present, it is entirely possible for businesses to increase profits without adding to labor costs, which is why we see increases in productivity measures right now. And that’s exactly why we can’t rely on business people to get us out of the recession — there are too many opportunities to increase profits today without adding many, if any, jobs. And that’s exactly why someone with Mitt Romney’s skill set would be the worst thing for the country right now. He may help businesses become more profitable, but any increase in jobs will be by accident, not a function of business profitability.
Bain and Romney are not and have never been entrapreneurs, whatever the fuck that is. They are vampires, who take profitable companies, suck the life out of them, and fire everyone.
I think pirates (which I think is a more descriptive term for Bain than vampires) do belong to the general category of entrepreneurs, people who develop and organize private, profit-seeking (which is different from “productive”) enterprises. In fact, piracy on the high seas and related enterprises during the founding centuries of modern capitalism may have been one of the earliest forms of what we understand today as entrepreneurial activities.
Gingrich was on point; and I await the political ads with the people who lost their jobs thanks to Willard.
I’m hoping that by the time Obama is finished with Romney, Americans will believe Slick Willard is personally responsible for half of the unemployment in the US.
And also those who committed suicide, of which I am sure there are more than a few.