Saturday, June 23, 2012

Mitt Romney and the crisis of capitalism

The New York Times reports that even when Mitt Romney lost, he won: "The private equity firm, co-founded and run by Mitt Romney, held a majority stake in more than 40 United States-based companies from its inception in 1984 to early 1999, when Mr. Romney left Bain to lead the Salt Lake City Olympics. Of those companies, at least seven eventually filed for bankruptcy while Bain remained involved, or shortly afterward, according to a review by The New York Times. In some instances, hundreds of employees lost their jobs. In most of those cases, however, records and interviews suggest that Bain and its executives still found a way to make money."

The Times adds: "Bain structured deals so that it was difficult for the firm and its executives to ever really lose, even if practically everyone else involved with the company that Bain owned did, including its employees, creditors and even, at times, investors in Bain’s funds."

If there's a crisis of capitalism these days, it's because it's very much a rigged game: The people at the top can't lose, even when their investments go to hell. The people below them can't really win--again, witness the stagnating middle-class wages of the last 30 years--but they can lose. It's not the old days where the shuttering of a factory meant the devastation of the local family that had owned it for 50 years, and so everybody lost together. These days, the Mitt Romneys of the world dust themselves off, count their piles of cash, and move onto the next town. Of course that's going to breed resentment. And if Romney is saying his business acumen is the reason he should be president, then it's absolutely fair game for criticism. 

More to the point: The other day I mentioned Bill Voegeli and his idea that capitalism might be revived if more people--workers--had skin in the game, in terms of compensation tied to the success or failure of their companies. I like that idea, but workers clearly do have skin in the game: When jobs go away, so does their ability to earn a living. Capitalism might also be improved if private equity firms like Bain also had real skin in the game, if they suffered instead of making profits even as the businesses they buy go under in a sea of Bain-generated debt.

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