Posts Tagged ‘Bain Capital’

[…] “Neither Hillary nor McCain can claim the economy as an especial preserve,” argues Dick Morris in a http://www.dickmorris.com blog titled McCain may win, Romney can’t

Can Romney? Inexplicably, the McCain campaign has not spoken of the layoffs that must have accompanied Romney’s efforts to “turn around” failing companies. Hedge funds are notorious for cutting jobs and the Clintons will make Mitt eat every single one. McCain has no such vulnerability and, hopefully, will make Romney’s layoffs an issue before Super Tuesday.So McCain can win and Romney won’t. That’s the long and the short of it […]

More on this issue:

“On the stump in economically struggling Michigan and South Carolina recently, Mitt Romney has been making the case that ‘it always makes sense to fight for every single good job,'” writes Lisa Lerer for the Politico in an article titled Romney changes tune on layoffs

But this position seems to be at odds with the Republican contender’s one-time role as chief executive officer of Bain Capital, a large private equity firm.

In 1992, the firm acquired American Pad & Paper. By 1999, the year Romney left Bain, two American plants were closed, 385 jobs had been cut and the company was $392 million in debt.

The next year, Ampad was forced into bankruptcy.

Bain Capital and Goldman Sachs bought Dade International for about $450 million in 1994.

The firm quickly fired or relocated at least 900 workers. Over the next several years, it sunk increasingly into debt and laid off 1,000 workers.

In 2002 — after Romney had left Bain — it filed for Chapter 11 bankruptcy protection.

A 1997 buyout of LIVE Entertainment for $150 million resulted in 40 layoffs, roughly one in four of the company’s 166 workers.

The job cuts affected all aspects of the company, from production and acquisition to legal and public relations.

In 1997, Bain bought a stake in DDI Corp., a maker of electronic circuit boards.

Three years later, Bain took the company public and collected a $36 million payout.

But by August 2003, the company filed for bankruptcy protection, laying off more than 2,100 workers.

Four months after the bankruptcy, unhappy shareholders sued company executives, the initial public offering underwriters and Bain for mismanaging the IPO and failing to disclose company financial information. (Romney was not named in the suit.)

In March, all the defendants settled for $4.4 million.

Some job losses can be a natural part of the private equity business.

Firms like Bain Capital buy controlling stakes in troubled companies, then revamp them and sell them for a profit — a process that can include management changes and “cost-cutting,” often code for job cuts […]

Yuh-huh. See:

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dr. d.g.

[…] “It’s the perfect opportunity for a Wall Street Republican to make the case that what the country needs now is good business mind, not a former war hero,” writes Rex Nutting, Washington bureau chief of MarketWatch, in a MarketWatch article titled Romney running for tycoon in chief; Commentary: Will business background be a plus?

Unfortunately for Romney, that appeal isn’t working in the Republican primaries.

Polls show that national security concerns continue to rank much higher among Republican voters, even if worries about the economy are growing. According to the Rasmussen Poll, Republican voters in Florida would rather pick a commander in chief than a chief executive for the U.S. economy.

Romney’s support has soared over the past two weeks, especially in Florida. He’s tied with Sen. John McCain in the latest polls ahead of Tuesday’s vote. But the Romney surge isn’t related to the bad news about the economy; rather, he’s picking up conservative voters stranded by Fred Thompson’s withdrawal from the race and Huckabee’s partial pullback from Florida.

Romney leads McCain among conservative voters, and he’s hoping that his message of economic competence could gain him support among voters who see themselves as moderates, where McCain holds a sizable lead.

Romney has been going directly after McCain, his chief rival for the nomination, accusing him of being out of touch on the economy. He has mocked McCain for saying “economics is not something I’ve understood as well as I should.”

McCain has fired back, saying that while Romney was making millions and working for “profit,” he was serving “patriotism.”

So far, the economic themes haven’t been registering for Romney.

According to pollster Scott Rasmussen, “McCain actually holds a slight lead over Romney among voters who name the economy as the top issue.” Seven of 10 Republicans say the best thing the government can do to help the economy is get out of the way, which is more McCain’s view than Romney’s.

Maybe Romney understands the economy, but it looks as if it’s McCain who understands Republicans.

If Romney can get past McCain and win the nomination, he’ll try to persuade independents and hesitant Democrats that his business background qualifies him to be president.

But if he does make it past the convention, it’ll be an uphill struggle to run as a tycoon after the mess Wall Street has made of the economy, with its overhyped dotcoms, its phony accounting, its bloated bonuses, and its toxic mortgages […]

The emphases are ours, all ours.

We heartily concur. See:

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dr. g.d.

“In early 1995, as the Ampad paper plant in Marion, Ind., neared its shutdown following a bitter strike, Randy Johnson, a worker and union official, scrawled a personal letter to Mitt Romney, pouring out his disappointment that Romney, then chief executive of the investment firm that controlled Ampad, had not done enough to settle the strike and save some 200 jobs,” writes Robert Gavin of the Boston Globe in an article titled As Bain slashed jobs, Romney stayed to side

“We really thought you might help,” Johnson said in the handwritten note, “but instead we heard excuses that were unacceptable from a man of your prominent position.”

Romney, who had recently lost a Senate race in which the strike became a flashpoint, responded that he had “privately” urged a settlement, but was advised by lawyers not to intervene directly. His political interests, he explained, conflicted with his business responsibilities.

Now, Romney’s decision to stay on the sidelines as his firm, Bain Capital, slashed jobs at the office supply manufacturer stands in marked contrast to his recent pledges to beleaguered auto workers in Michigan and textile workers in South Carolina to “fight to save every job.”

Throughout his 15-year career at Bain Capital, which bought, sold, and merged dozens of companies, Romney had other chances to fight to save jobs, but didn’t. His ultimate responsibility was to make money for Bain’s investors, former partners said.

Much as he did when running for Massachusetts governor, Romney is now touting his business credentials as he campaigns for president, asserting that he helped create thousands of jobs as CEO of Bain. But a review of Bain’s investments during Romney’s tenure indicates that job growth was not a particular priority.

Romney’s approach at Bain Capital was more reflective of the economic philosophy articulated by his opponent, John McCain: to acknowledge that some less efficient jobs will be lost and concentrate on creating new jobs with potential for higher growth.

In many cases, such as Staples Inc., the Framingham retailer, and Steel Dynamics Inc., an Indiana steelmaker, the companies expanded and added thousands of jobs. In other cases, such as Ampad and GS Industries, another steelmaker, Bain-controlled companies shuttered plants, slashed hundreds of jobs, and landed in bankruptcy.

But in almost all cases Bain Capital made money. In fact, the firm earned substantially more from Ampad than Staples. Staples returned about $13 million on a $2 million investment; Ampad yielded more than $100 million on $5 million, according to reports to investors.

“It’s not that employment grows, it’s that their investment grows,” said Howard Anderson, a professor at MIT’s Sloan School of Management. “Sometimes its expansion, and sometimes it’s shutting things down” […]

[…] Bain acquired GS Industries in 1993. The steelmaker borrowed heavily to modernize plants in Kansas City and North Carolina, as well as pay dividends to Bain investors. But as foreign competition increased and steel prices fell in the late 1990s, the company struggled to support the debt, according to Mark Essig, the former CEO. GS filed for bankruptcy in 2001, and shut down its money-losing Kansas City plant, throwing some 750 employees out of work.

Ampad, too, became squeezed between onerous debt that had financed acquisitions and falling prices for its office-supply products. Its biggest customers – including Staples – used their buying power and access to Asian suppliers to demand lower prices from Ampad.

Romney sat on Staples’s board of directors at this time.

Creditors forced Ampad into bankruptcy in early 2000, and hundreds of workers lost jobs during Ampad’s decline. Bain Capital and its investors, however, had already taken more than $100 million out of the company, in debt-financed dividends, management fees, and proceeds from selling shares on public stock exchanges.

By the time Ampad failed, Randy Johnson, the former union official in Marion, Ind., had moved on with his life. After the Indiana plant shut down, he worked nearly six months to help the workers find new jobs. He later took a job at the United Paperworkers union.

“What I remember the most,” said Johnson, “were the guys in their 50s, breaking down and crying.”

In his reply to Johnson’s letter, Romney said the Ampad strike had hurt his 1994 bid to unseat Senator Edward M. Kennedy, and no one had a greater interest in seeing the strike settled than he.

“I was advised by counsel that I could not play a role in the dispute,” Romney explained, adding, “I hope you understand I could not direct or order Ampad to settle the strike or keep the plant open or otherwise do what might be in my personal interest” […]

Yuh-huh. See:

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dr. g.d.

“MIAMI — As the economy takes center stage in the Republican presidential race, Mitt Romney spoke in unusually personal terms about his own business experience during remarks to the Latin Builders Association this morning,” writes the credulous Scott Conroy in a cbsnews blog burst titled Romney: Making Layoffs “An Awful Feeling”

“I’ve had settings where I’ve had to lay people off,” Romney said. “It’s an awful feeling. No one likes laying people off. Someone who thinks you’re a bad person if you lay someone off doesn’t understand. You feel bad. It’s probably the hardest thing I’ve done in business was asking a person to be let go.”

Remarks:

(1) Follow Romney’s “reasoning”

(a) Someone who thinks you’re a bad person if you lay someone off doesn’t understand.

(b) You feel bad.

(c) It’s probably the hardest thing I’ve done in business was asking a person to be let go.

Note the passive voice in (c)—Romney’s awkward attempt to obscure his own agency—not lay a person off, or let a person go, but “ask a person to be let go.” But this bizarre locution implies consent, as if those “to be” laid off were given a choice!

(2) So we should not resent those who like Romney lay people off because they feel bad about it? Is Romney serious? Is Romney really making the case that his feelings are more important that peoples’ jobs?

(3) Does it not follow that Romney can excuse himself of any act by referring to his hurt feelings? Yes, I campaigned negatively against McCain and Huckabee—I lied, and I distorted their records—but anyone who would call me a bad person just doesn’t understand—I felt really bad about it.

(4) How do you reconcile Romney’s appeal to the sufferings of fund managers who engineer layoffs to benefit investors at the expense of workers with Romney’s repeated promise “to fight for every job”:

[…] [Romney:] “You’ve seen it here, in furniture. You’ve seen the textile industry, where Washington watched, saw the jobs go and go,” the Republican presidential contender told a group of senior citizens at the Sun City Hilton Head Retirement Center.

“I’m not willing to declare defeat on any industry where we can be competitive. I’m going to fight for every job,” Romney said […]

Answer: You can’t. The two positions cannot be reconciled.

Back to the credulous Conroy:

Throughout the campaign, Romney has touted his success in the consulting and venture capital fields in contrast to the “lifelong politicians” in the race. But yesterday, Mike Huckabee alluded to a negative impact of Romney’s days at Bain Capital, as the former Arkansas governor continues to brandish his own brand of economic populism.

“And I would also suggest one needs to look very carefully at what exactly the business record is,” Huckabee said. “If it’s taking companies who are in serious trouble, buying them when they are in pain, selling off their assets, and then making a huge profit off of it, that’s not something a lot of Americans can relate to, except those who have lost their jobs because of those kinds of transactions. If that’s the turnaround, there are a lot of Americans who would really not like to see their own lives turned around quite like that” […]

Yes. We have harped on these finely tuned strings for a long, long time:

Back to the credulous Conroy:

[…] “If you haven’t changed and improved the way you provide your product to the marketplace, your competitor will, and ultimately you’ll be gone,” Romney said. “Constant improvement, constant change is called for. And that’s where I spent my life, where you have, in the private sector” […]

Here is the problem: the marketplace operates according to different rules than the state. Citizens have a right to expect continuity from the decisions and operations of a state. Citizens also have a right to expect continuity from their elected officials. For example, Romney’s sudden conversion to the notion of Washington supervising industry, here neatly summarized and commented upon by the estimable Daniel Larison:

[…] There is a developing conventional wisdom that Mitt Romney primarily appeals to and represents “economic conservatives” within the Republican coalition, a view that has not been shaken very much by the candidate’s interventionist promises to quintuple government spending on technology research to benefit Michigan’s battered auto industry. Romney backers seem to be unfazed by this, just as his record of signing universal, government-mandated health care into law did not deter them from labeling him sound on economic and fiscal policy, but among those not already declared for the former governor, Romney’s latest round of telling his audience whatever they wanted to hear has gone over very badly.

Romney must be one of the first Republican candidates ever to be likened to a Soviet premier on account of his economic proposals […]

[…] There are two things particularly striking about Romney’s appeal to Washington for the solution to Michigan’s economic woes. The first is that Romney has partly built his “transformation” campaign around the argument that the federal government has been overspending, but has vowed to increase spending within the “first 100 days” in a transparent (and successful) effort to buy votes in Michigan—his own fortune is no longer sufficient to buy supporters, so now he must draw on our money as well. The second, more telling problem is that Romney embodies not only the image of corporate America, but also possesses the mentality and ideology of the free-trading globalists who policies have worked to reduce manufacturing in Michigan and across the Midwest and the country to its present state. Even if Romney’s proposals were sincere (doubtful) and even if they were efficacious (unlikely) in ameliorating some of the damage of broader trade policy, he has stated that he has every intention of pushing for additional free-trade agreements and exacerbating the causes of de-industrialization and job losses. It is therefore all the more disturbing that someone who embraces the policies that have contributed to the economic ravaging of his home state can win over a plurality of voters based on little more than sentiment and promises to make them more dependent on the government that has failed them […]

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dr. g.d.

[…] “The former Massachusetts governor, who made a fortune as a venture capitalist before entering politics, said he saw a worrying trend in growing numbers of U.S. banks seeking capital offshore following a blowout in subprime mortgages,” writes Jason Szep with editing by Lori Santos, in a reuters.com release titled Romney warns of distressed markets

He stopped short of predicting some banks would face the risk of insolvency. But in a speech earlier to Florida’s Jewish Republican community he said he had been warned of such a crisis.

“We were talking about the credit crisis and how bad the credit crisis was and how to make sure the credit crunch is not spread, and someone sent a message back that said the credit crisis is so 2007 — 2008 is a solvency crisis,” he said.

“And that’s obviously a very fearful perspective and hopefully one that does not rear its ugly head in reality. But people are talking about institutions having difficulty maintaining their level of capital,” he added.

Stocks tumbled at the open on Tuesday, joining a global equity rout on fears of a U.S. recession. Investors dumped stocks despite the Federal Reserve’s slashing benchmark interest rates by 75 basis points in a surprise decision.

Romney is in a close four-way race in Florida where the primary on January 29 is the next test in the state-by-state battles to determine the Republican and Democratic candidates who will square off in November’s presidential election.

The multimillionaire former venture capitalist has retooled his campaign to emphasize his nearly 25 years of business experience that includes founding Bain Capital LLC, a successful Boston-based private-equity firm, in 1984 […]

Yes. More on Romney’s Bain Capital:

Romney’s “Bain Capital is partnering with China’s Huawei Technologies in a buyout of 3Com, the U.S. company that provides the technology that protects Pentagon computers from Chinese hackers”—is this the economic policy we can expect from Romney?—answer: yes.

And more on Romney’s relationship to the global crash:

Samuelson: “it is becoming clear that capitalism’s most dangerous enemies are capitalists”—our conclusion: capitalists like Romney

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dr. g.d.

“WASHINGTON — Amid the mayhem on world financial markets, it is becoming clear that capitalism’s most dangerous enemies are capitalists,” writes Robert Samuelson in a realclearpolitcs.com article titled Wall Street Elite Put Capitalism at Risk

No one can have watched the “subprime mortgage” debacle without noticing the absurd contrast between the magnitude of the failure and the lavish rewards heaped on those who presided over it. At Merrill Lynch and Citigroup, large losses on subprime securities cost CEOs their jobs — and they left with multimillion-dollar pay packages. Stanley O’Neal, the ex-head of Merrill, received an estimated $161 million.

Everyday Americans will conclude (rightly) that this brand of capitalism is rigged in favor of the privileged few. It will be said in their defense that these packages reflected years of service, often highly successful. So? It’s not as if these CEOs weren’t compensated in all those years. If you leave your company in shambles — with losses to be absorbed by lower-level employees, some of whom will be fired, and shareholders — do you deserve a gold-plated sendoff? Still, the more serious problem transcends the high pay itself and goes to the wider consequences for the economy […]

[…] By “Wall Street,” I mean all the commercial banks, investment banks, mutual funds, hedge funds and the like that comprise the financial sector — but particularly investment banks. Pay is eye-popping. In 2007, Lloyd Blankfein, chief executive of Goldman Sachs, received compensation estimated at $68 million. But pay is also heavily skewed toward annual “bonuses” based on the profits that traders and bankers generate. I asked Johnson Associates, a compensation consulting firm, for typical Wall Street pay packages. The results describe “managing directors” based in New York with 10 or 15 years experience. Most would be in their 40s.

Here are estimates for 2007:

Investment banker: $2.1 million, consisting of $275,000 in base pay plus $1.2 million in cash bonus and $625,000 in long-term bonus. (An investment banker helps firms raise capital by selling new stocks and bonds and also advises on mergers and acquisitions.)

Bond trader: $1.525 million, with $240,000 in base pay, $975,000 in cash bonus and $310,000 in long-term bonus.

Hedge-fund manager: $1.85 million, split between a salary of $265,000 and $1.585 million bonus […]

[…] But Wall Street also frequently misallocates capital and credit. The “tech bubble” of the late 1990s was one episode. Now we have subprime mortgages. Why? Well, the herd mentality of financial crazes has a long history. But compensation practices skewed so heavily toward bonuses based on annual profits make matters worse.

“People self-select for careers. On Wall Street, they self-select for the money,” says pay consultant Alan Johnson. “Wall Street is a sales business — they sell bonds, securities, transactions, ideas. … They’re not paid to be long-term, philosophical, reflective.” The pressure is to do the next merger, sell more stocks and bonds, do more trading — whatever boosts current profits and bonuses, the long-term consequences be damned […]

[…] But if the subprime failure turns out to be a preamble to a larger financial breakdown, flowing from the creation of new securities that offered short-term trading possibilities but whose long-run risks were underestimated, then the mood could turn uglier. Indeed, many Americans may conclude that capitalism has run amok […]

Precisely.

What does this have to do with Romney? Everything. Quite simply, everything. As we wrote before, Romney’s cohort of mangers and specialists that began their careers in the financial services industry in the 70s have come of age; they are taking their places in our highest echelons.

Permit us to quote from an earlier contribution:

“That’s the good news for America [i.e. the Democrats backing away from a defacto isolationism]. The bad news for the GOP is that once Iraq goes from being the top headline, the economy is the next issue. And, indeed, with casualties falling, Americans are focusing on the economy,” writes eye in an eyeon08.com post titled economy most important issue?

Yes. About the economy:

“The two appointments [to the federal reserve] come after six tortured months in the credit markets that have included sub-prime debacles, a Congressional crackdown on taxes in the private equity industry, and increasing involvement of the Fed in bailouts,” writes Heidi Moore in a Financial News Online-US article titled Wall Street experts invade Washington

The two appointments Moore refers to are:

Stephen Friedman, former co-chairman of Goldman Sachs, currently co-chairman of Stone Point Capital

-and-

John A. Canning Jr., co-founder of Madison Dearborn Partners

Friedman and Canning will “take the respective helms of the two most powerful branches of the 12 banks of the Federal Reserve.” You may not know these two gentlemen. But Romney knows them. And they know Romney. Back to Moore:

… The Federal Reserve under chairman Ben Bernanke has become more involved in Wall Street bailouts and cash infusions amid the credit crunch. The Fed last week injected $41bn (€29.9bn) in the markets to guarantee liquidity, and Bernanke also supports the creation of the $80bn master liquidity enhancement conduit that will sop up assets from troubled structured investment vehicles …

Translation: using taxpayer money—public funds—to recoup private losses in the private equity sector. Back to Moore:

… In addition, some prominent former Wall Streeters hold unprecedented influence in Washington. Hank Paulson, the Treasury Secretary and former Goldman Sachs chief, has spearheaded initiatives to revamp US laws that allegedly hinder competitiveness …

Translation: initiatives to emancipate capital flows from their bondage to local procedures for adjudicating among rival claims—i.e. states, nations, communities—more privatizing gains; more socializing the costs and the losses. Back to Moore:

… The crop of current presidential candidates includes Connecticut Senator Chris Dodd, who heads the Senate banking committee, as well as Bain Capital founder Mitt Romney. New York Mayor Michael Bloomberg has also been rumored as a candidate …

We have harped on this string before—see: Romney and private equity: the new ruling class. As much as we wish it were so, Romney is not an aberration. He and his peers represent the most advanced sector of a new class of professionals—the product of the revolution in financial services that began in the late 70s, early 80s—that have come of age and are now taking their places in senior executive positions. Most of them are comfortable working behind the scenes—not Romney.

The equity sector is capital at the limit of its development—it is capital negating itself as capital, as it is capital without owners in any conventional sense—it is capital in the form of vast pools of spare money or other instruments managed by technical adepti and professional elites. (Drucker famously refers to capital at this level of development as “pension fund socialism.”)

The equity sector gives us the notion of the “business audit”—imagine a pension fund that has bought into a retail chain. Say also that the chain is too big an investment for the pension fund to allow to fail. So: on the basis of a business audity, the fund—the effective “owner” of the retail chain—supplies the technical and managerial expertise to “turn-around” the retail operation. Does this sound familiar? If you’re a Romney observer, it should. It should sound like Romney’s Bain Capital. It should also sound, sadly, like what Romney wants to do with our government (see his interview with Carney that we discussed here).

The equity sector elites are already plundering our treasury to pay for their losses—but how can politicians refuse their demand for relief?—so much of the equity sector is composed of pensions, mortgages, savings instruments, public and private debt, in other words, the moneys, properties, and pensions of the middle classes and the elderly—equity sector money is, in a sense, public money already, only it is public money that disproportionately benefits the class that disposes of it—hence: Romney’s millions.

Imagine a professional class with direct access to our treasury. Imagine a professional class that has the power to tax you—this is the so-called private equity sector. (Not since the central-storage economies of absolute antiquity has economic and political power been this unified or concentrated.) Imagine what this new defacto ruling class will do once of their own sits upon the US presidential dais? This would be corruption on a scale that eye hath not seen, nor hath ear heard.

We have harped on these sad strings for weeks. Our point: Romney, the equity sector, the global crash, the collapse of the GOP and its institutions—these are all related. No, we don’t mean to suggest that they are related in some sort of grand conspiracy; not in the least. Rather: we would argue that they are all the surface irritations of larger, and necessary, historical developments.

yours &c.
dr. g.d.

[…] “America, to pay her bills, has begun to sell herself to the world,” argues Pat Buchanan in an article titled Subprime Nation

Its balance sheet gutted by the subprime mortgage crisis, Citicorp got a $7.5 billion injection from Abu Dhabi and is now fishing for $1 billion from Kuwait and $9 billion from China. Beijing has put $5 billion into Morgan Stanley and bought heavily into Barclays Bank.

Merrill-Lynch, ravaged by subprime mortgage losses, sold part of itself to Singapore for $7.5 billion and is seeking another $3 billion to $4 billion from the Arabs. Swiss-based UBS, taking a near $15 billion write-down in subprime mortgages, has gotten an infusion of $10 billion from Singapore.

[Willard Miton Romney’s] Bain Capital is partnering with China’s Huawei Technologies in a buyout of 3Com, the U.S. company that provides the technology that protects Pentagon computers from Chinese hackers.

This self-indulgent generation has borrowed itself into unpayable debt. Now the folks from whom we borrowed to buy all that oil and all those cars, electronics and clothes are coming to buy the country we inherited. We are prodigal sons, and the day of reckoning approaches […]

The word financial system is in crisis. Romney, the equity sector candidate, has nothing to say about it.

Romney utterly silent on world financial crisis—we, for one, are grateful for this oversight

Only one candidate—possibly two—speaks clearly and compellingly on the problems that issue from the new capitalism

The populism of Gov. Huckabee—and to a lesser degree, Sen. McCain—reduces to a class critique consistent with the conservative principles as we understand them. The premises are these:

(1) Conservatism tolerates—even celebrates—natural hierarchies, e.g. some runners run more swiftly, some businesses profit more than others, some people amass more wealth than others, others are wiser than others etc.

(2) Conservatism tolerates—even celebrates—blind elites, i.e. gate keepers who rule on grounds of merit, examples may include universities, military formations, professional societies, corporate hierarchies, trade unions, craft guilds.

(3) Hence: conservatism in the era of the nation state tends to favor civil society and human commerce as relatively autonomous zones where natural hierarchies and blind elites may develop according to their own inner logic, their own rules.

(4) Here is the problem: the new capitalism,represented by the equity sector—vast pools of spare money, pension funds etc., managed not by owners but by a technically adept professional class with interests of their own—organizes itself according to different rules. When e.g. pension funds fail, the problem is instantly national and political and can cascade through an entire economy. Pension funds and other equity funds command capital reserves far in excess of other market actors.

Say a capital fund like Romney’s Bain Capital owns a stake in a national retailer. Say the retailer fails to perform. Whether the retailer is allowed to fail, whether the retailer is allowed to persist until market conditions change, or whether the retailer is “turned-around” by e.g. “re-engineering,” purging the management, downsizing, out-sourcing etc.—these are all reduced to technical questions. In other words, in the era of owner-less capital, competition and innovation take on a different characters—what we are confronted with, suddenly, is the antithesis of capitalism—what we are confronted with is a de facto planned economy in which profits are privatized, and costs—in the form of crashes and failures—are socialized. In other words, we don’t get a say in the planning. But when things fail it is we—pensioners, taxpayers—who get to pay for it.

“Pension fund socialism,” is what Peter Drucker called it in the 1970s when he predicted its rise. Well, it’s here.

(5) Further, economic development in general, productive capacities in particular, are more generalized globally. The US economy’s productivity relative to the rest of the world is in steep decline. The cost of energy has also increased precipitously; the entire post-war boom was largely an artifact of cheap energy, an enormous subsidy that we increasingly no longer enjoy. When energy-transfer systems or social systems experience supply shocks or the marginal returns on their investments begin to diminish, they begin to differentiate; their hierarchies begin to steepen. The rich become richer and the poor become poorer, to use a tired cliche. The rise of the equity sector is a part of this socio-material-historical process.

(6) Hence: neo-populism, and neo-populist proposals as articulated by Gov. Huckabee and Sen. McCain. Their critique is class as opposed to market or system based. Note that Sen. McCain in MI argued that the jobs lost to US industry were lost forever. What was required was investment in worker retraining and newer, lighter and more agile industries consonant with the historical moment. Also: Sen. McCain opposed Pres. Bush the younger’s tax cuts as he believed they benefited the rich etc.

Populism and class criticism in general is anathema to the Reagan coalition assumption about how productivity generalizes itself throughout a system. Allow the most disposed to do so to prosper as freely as possible—those who work hard, those who lead or innovate, those who can attract, organize, and develop income-producing capital—and everyone prospers as the newly developed wealth distributes itself throughout an economy, is the argument.

But what if the era itself no longer supports capital formation as construed classically? What if the new capitalists—or new non-capitalists, as they no longer own but only dispose of capital owned more generally—are capitalists like the steward capitalists of Bain Capital? For the capitalists of the industrial era the primary unit of production of circulation was the commodity, and everything got commodified—time and space itself got commodified. For the new non-capitalist the primary unit of production and circulation is the security, and everything is getting securitized.

Take, for example, mortgages, especially subprime mortgages. What drove so much cash into the mortgage markets were the banks, capital funds, pension funds etc., trading in the new mortgage-backed securities.

Politics and political life is a lagging sector. The sad truth is that no one yet knows what to make of these developments. Gov. Huckabee and Sen. McCain represent an intuitive and under-theorized response that hardly rises to the dignity of a knee-jerk reaction to the perception of great danger. But it is a response. And it is a start.

Here is what we believe is most perverse. Romney, after months of savaging Gov. Huckabee’s views and opinions on the economy, suddenly becomes Gov. Huckabee in MI. Romney becomes a populist. Suddenly this super-rich non-capitalist sides with the oppressed against entrenched powers in Washington, a city that Romney says “is broken.” But just as Romney’s alleged, ingenue, and now abandoned conservatism was always clumsy and caricatured, so too is his atavistic fantasy-populism. See:

candidate endorsed by the National Review, Romney, suddenly veers hard left, argues that Washington must subsidize, become “partner” with, US automobile industry

yours &c.
dr. g.d.

[…] Wolf [of the Late Edition] played a clip of a Huckabee commercial – “[Gov. Huckabee] remind[s people] of the guy they worked with, not the guy who laid them off [i.e. Romney],” reports Mark Kilmer of Redstate.com in a post titled The Sunday Morning Talk Shows

[In response:] Romney chastised Huckabee for criticizing the guy who gives people their paychecks […]

Romney to the workers of MI: STFU and trust those who who profit the most from your labor.

Romney argues further on Face the Nation that not only should CEOs be immune from criticism, they should also be subsidized at public expense for their insane decisions:

[…] [Romney] said that though it would be difficult to bring back the automotive industry, government could invest in “basic science and research”: fuel technology, automotive technology. With the money of the taxpayers. “We, frankly, are lagging behind,” proclaimed Mitt, and government is the solution […]

Further:

[…] Schieffer brought up a Huckabee remark, that Mitt’s business would buy businesses and people would lose their jobs. Mitt claimed that he rebuilt businesses, protecting “as many jobs as humanly possible” […]

Romney protected jobs? Really? This is not consonant with Romney’s earlier testimony. Elsewhere Romney argues for cutting jobs because US workers are lazy and overcompensated:

Romney: American workers are lazy and over-compensated

—and—

Romney really knows how to cut jobs, as he boasted in a live debate:

“Romney was doing great on the job creation answer until he said he knows how to get rid of people who need to be gotten rid of,” writes Andrew Cline of the NRO in a The Corner blog burst titled Romney on Jobs

That is not going to help him in New Hampshire, where another paper mill closed this year and the loss of manufacturing jobs remains a huge issue […]

We used to ask rhetorically who Romney’s natural constituency could possibly be. Now we know. It is the executive classes of the equity sector. See:

how Romney plans to enrich himself by liquidating the US manufacturing base

yours &c.
dr. g.d.

Kevin Tracy cites and quotes from the LA Times article that specifies Romney and Bain Capital’s use of off-shore tax havens.

yours &c.
dr. g.d.

“After today, Rush Limbaugh is in reruns until January 3, the day of the Iowa caucuses,” writes sniveling, belly-crawling Romney sycophant Jim Geraghty for the formerly conservative NRO and proud Blog for Mitt in a Campaign Spot post titled The Rush Fallout for Huckabee: Fatal, or Missing the Target?

… Can a guy who’s been slammed as hard as Mike Huckabee has by Rush Limbaugh, the most popular conservative radio talk show host in the country, go on to win the Iowa caucuses? Anybody think Rush will have dropped this issue by the third of January?

My instinct is to say, “no way, a thumbs down from Rush is fatal,” but a guy on another campaign cautions me. “An Iowa pastor who has been talking up Huckabee isn’t going to change his mind because Rush Limbaugh doesn’t like him.” He points out that a pastors and religous leaders deal with people who fall short of their ideals all the time; hearing that Mike Huckabee was too merciful in dealing with Wayne Dumond is not going to be a dealbreaker for them. They’ll probably go, no pun intended, “there but for the grace of God go I” …

I hate to burst Boy Geraghty’s troubled bubble but Rush Limbaugh—a voice carried by Clear Channel, recently acquired by Romney’s own Bain Capital—is not the only voice on their airwaves of Iowa.

… “We’ve been holding this post for a couple days while we got our thoughts in order on it,” writes CC in a Caucus Cooler post titled WHO vs. Mitt Romney—What it means

One of the biggest buzz items around Iowa the past few days has been Jan Mickelson absolutely eviscerating Mitt Romney on the radio for the past 2 days. We’ve received more emails about this than every other issue combined. On top of that, Steve Deace has made obliterating Romney (and Rudy and McCain) his personal mission for the past umpteen weeks. In this post we’ll discuss what does this mean as it relates to the Iowa caucuses? In the next one, we’ll look at whether or not it is fair.

The fact is this hurts Mitt in a major way. Jan Mickelson has the biggest microphone in the state. His show can be heard in most of Iowa’s 99 counties and the listeners in large part are the same people who attend the caucuses. So 2 weeks from caucus night for him to use that platform to take on Romney has major implications. Unlike Deace (who is a Huckabeeite), Mickelson hasn’t endorsed a Romney opponent. At times he’s been critical of all the major contenders for the nomination. That is about the only positive spin Camp Romney can put on this situation. Looking back at 2006, you can see the damage Steve Deace did in splintering the GOP base, with his attacks on Jim Nussle. Mickelsons audience is exponentially larger than Deace’s, so you cannot understate the impact it will have on the Romney campaign … etc.

Our prediction—base on no other data than our reading of trends in the various reportage—Romney loses both Iowa and New Hampshire.

The market correction that we predicted is hot upon us. Besides: Romney, as we predicted, has been forced to go heatedly negative in 2 states on 2 fronts. Romney’s icy-cold personality and ultra-high negatives will not support a single negative message campaign, let alone 2. Note how both Sen. McCain and Gov. Huckabee delight in Romney’s baleful attentions and laugh off his every angry shriek and misleading screed.

yours &c.
dr. g.d.





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