Archive | May, 2012

12. Bain Capitalism

17 May

Bain Capital is headquartered in Boston and Mitt Romney is one of its 1984 founders.  It engages in financial services and  venture capital.  Romney asserts that his experience with Bain prepares him for running a country.  Democrats are critical of this assertion, but they often seem to miss the important point.  The capitalism that Bain engages in is among the worst kind.

The essence of ethical and admirable capitalism, which I heartily endorse, is to work hard and achieve monetary or other success.  You create a product, refine a service, or develop an idea — and you make a good profit.  Non-rich people generally do not resent this.

However, what “capital” companies often do,  is to take over and manipulate a company for massive personal profit.  A determination is made at some point to either:

1.  Build up a promising business with good potential, or

2. Destroy a troubled business and grab all the money you can, while leaving the workers with nothing.

In many instances, the huge amount of profit taken by the capital company could have been used to restore the business, or at least provide support for the fired workers.

There is nothing wrong in making a simple bond or stock investment in a business.    The unethical method is to step in and “manage” a company, which you did not create, and manipulate it for huge personal profit, while the personnel are fired and left with nothing.  I might also mention that there are other types of abuse, such as Wall Street gambling on “derivatives” — often incurring huge losses that require a bailout.  Our goal should be to enhance productive capitalism, and to discourage and regulate unethical monetary and business manipulation.

Now, let us imagine how Mr. Romney can use his Bain Capital experience in running our country.  A “capital” company is primarily concerned with profits for the company (and any investors), and has little regard for the business it is managing.  So we can expect him to manipulate our government for the benefit of himself and his wealthy supporters.  The rest of us are pretty much irrelevant, like the workers who are fired when one of his managed companies is destroyed. Rich Republicans are desperately trying to hold onto their low tax rates, giant tax loopholes and corporate subsidies.  If this is unclear to you, then remember that all Republican congressmen endorsed the Norquist tax pledge, which includes opposition to closing tax loopholes.

I must add a final word. The general public needs an increased awareness of the distortion of a great system — our form of capitalism.   Our citizens and lawmakers need to support those who advocate necessary regulation to rid us of the wealthy manipulators who will ultimately destroy the middle class.  Throughout history, we have seen revolution  when a few wealthy people run a country, rob its citizens, and produce massive poverty.  The “Tea Party” and “Occupy” movements are the first signs of a potential serious revolution.  (Unfortunately, the Tea Party was blown off course by a misunderstanding of “basic causes” and by the influence of insidious rich manipulators.)

11 The “Private Sector” Solution

10 May

There are two points I want to make in this essay: 1. Experience in the private sector is not appropriate for a president, and 2. Shifting major governmental responsibility to the private sector is dangerous.

1. Experience in private sector

Businessmen like Mitt Romney often say that we should run the country like a business. But the end goal for most businessmen is to make as much money as possible up to the point of risking arrest. The bottom line is the acquisition of personal wealth, and if necessary, paying dividends to stock holders. In business, there is little concern for the health and welfare of the workers. To increase profits, workers are paid just enough to keep them productive, or to satisfy union demands. Note that not all businesses are ruthless, but looking at Romney’s business record, it appears that his personal wealth was more important than company success or worker welfare.

What does a businessman actually learn aside from the specifics of an actual organization. He learns trivial things, like if income exceeds expenses you make a profit. If you pay your executives well, they will be loyal to you. Paying your workers less will increase your profits. If a company is doing poorly, then give youself a huge salary (or bonus) and let the company go bankrupt. A good businessman does well whether the company succeeds or fails. Governing a country is different.

Governments could run like businesses, but if you ask most people, our leaders should be concerned with the strength and welfare of the country, and the health and economic success of all its citizens. We don’t elect our leaders so that they can increase their peronal wealth, or the wealth of their friends. A president must maintain an army and police to protect us, educational institutions, efficient energy production, ethical industries, transportation, budgets, and other governmental factors. Budgets are extremely important and must maintain a balance between lowering national debt and supporting the needs of citizens.

If a leader has spent much of his life in the private sector, he sees and particpates in a society where money is king. People compete and show off their wealth. Romney cannot hide this orientation. He talks about his car elevators, his wife who has a couple of Cadilacs, how he knows the owners of teams, etc. Romney is not oriented to provide for the citizens, he lives in a world where wealth is almost everything. We don’t want his experiences and orientation, we want a president that cares about his country’s citizens.

2. Shifting to the Private Sector.

The theory is that competition among businesses always leads to lower prices and more efficiency. Sadly, this is not the case. Governments are not perfect, but there is more emphasis on constructive and beneficial work than on the accumulation of personal wealth.

Though out history, the private sector has learned to circumvent competition to increase profits, and to develop practices that are highly profitable, but unethical. Industrial laws and regulations were not developed without cause. Laws and regulations are based on serious abuses. Governments need industry, but there is recognition of a need to control it. One of the earliest attempts to control industry greed was the establishment of anti-trust laws. Businesses were working together to fix higher prices.

The Sherman Act of 1890 was the first anti-trust law and covered the fixing of prices by competitors. The Clayton act of 1914 prevented mergers of companies which would tend to stifle competition. U.S. Steel and Standard Oil controlled entire industries and prices rose dramatically. There were additional laws after these fundamental acts. My point is that even a hundred years ago business leaders saw an advantage in joining forces and stifling competition.

A great variety of regulations followed, which were necessary to protect consumers. In their obsession to create personal wealth, private sector persons ignored air polution, contamination of drinking water, tainted foods and drugs, etc. It is very common for people to drift into unethical practices as they compete to be the wealthiest guy around.

I have one more comment on Romney. He tends to turn everything around so that it appears that he and his Republican friends are the good people. He complains that government workers make more than industry workers. It is much more the other way around. Studies of regulators hired by Republicans earn much less (and perform worse) than their industry counterparts. He also makes the absurd claim that Democrats have a war on women, when it is clearly the Republicans.