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Monday, April 22, 2024

Column: The Bain of Capitalism

President Obama’s reelection campaign has made a strategic decision to focus on Mitt Romney’s business record at Bain Capital. The goal is to paint a picture of Romney’s past that is characterized by a willingness to shaft ordinary workers in pursuit of the biggest profit possible.

In case you don’t know the details, Bain Capital is a private equity and venture capital company that Romney co-founded and helped run for over a decade. The modus operandi at Bain is to acquire a struggling company, initiate structural reforms, and then, assuming all goes well, sell at a profit. This strategy has served the company well — Bain controls billions of dollars and is currently one of the preeminent investment firms in the world.
In his campaign, President Obama has been focusing on the structural reforms that are integral to Bain’s management strategy. In effect, “structural reforms” is a code-phrase that involves cutting a company down in size to reduce costs, the end goal being to restore and increase profitability. The problem with this approach is that these cuts often lead to mass layoffs for workers. To add insult to injury, those at Bain Capital often walk away millions richer while their proletariat brethren are left to fend for themselves, newly jobless and destitute.
Obama’s campaign has seized this issue as a main argument against Romney. After all, he argues, do you really want a president in the White House who made his fortune off the backs of savaged workers? It has become a central narrative for the Obama team, and it is one that he will no doubt continue to use with increased frequency in the coming months.
Predictably, this has sparked a negative reaction from Romney’s campaign. Less expected, however, was the flack the President is taking from members of his own party. For example, Cory Booker, the Mayor of Newark and a prominent figure in the Democratic party, called the attacks on Romney’s business background “nauseating” and “crap.” They were harsh words, and they predictably had Romney’s fanclub crowing while Obama was forced to spend time defending his campaign strategy.
I can understand why Romney’s business legacy would be a ripe target for criticism — there is nothing intrinsically appealing about the notion of ordinary Joes and Janes receiving pink slips while the Mitts of the world swoop off into the sunset, a few million richer.
Yet to critique this reality seems to level criticism at the very nature of capitalism. It certainly would paint a negative picture of our modern, cutthroat, globalized economy. The fact is that capitalism today involves a desperate struggle to be the best, a type of social darwinism that is intrinsic in our economy. The rewards at the top are immense, and you are set if you can reach the pinnacle. But, by very definition of the word, not everyone can be the best. In order for there to be winners, there must also be losers.

With such a duality, any critiques on capitalism Mitt Romney style – also known as “creative destruction,” where it is no sin to break businesses and fire people – become something much deeper than merely a questioning of Bain’s business practices. Such criticisms raise deep questions about the systemic economic world we live in, and whether it is possible for such an environment to be either just or fair.

So whenever I hear President Obama attacking Romney’s background in private capital and Romney’s ease at initiating layoffs, I recognize that such charges carry greater weight than perhaps initially intended. To criticise Romney’s success is to criticize the environment that led to his fortunes.
Maybe that is not such a bad implication. Maybe there is, in fact, something really messed up about more than just the current state of the economy. Of course, any conversation about the merits of the way our economy is structured and how it is incentivized would be a serious discussion indeed. And debates about serious, substantive issues that cannot be reduced to 10-second sound bites are apparently rather out of vogue these days.

Despite it all, JONATHAN NELSON still has a soft spot for serious conversations. E-mail him at jdnelson@ucdavis.edu if you’re interested. 

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