Wednesday, January 18, 2012

Romney's Rotten Record

Looks like the memo went out to claim victory for Romney as the ultimate capitalist and pretend that he will be immune to Obama's attacks in the fall. One has to wonder: when the same intellectually bankrupt arguments are repeated ad nauseum, is it because of impenetrable ignorance, or is it due to a lack of integrity?
Dr. Wolf, writing in the Washington Times,  repeats the establishment canard that Gingrich's criticism of Romney's record amounts to an attack on free market capitalism and underscores the weakness of his argument by relying on the fallacy of appealing to authority. If Rush Limbaugh and the Club for Growth say it it must be true! Silly and anemic arguments such as these may succeed as propaganda in the republican primaries but only because republicans are natural supporters of free market capitalism who sometimes reflexively recoil at anything that smacks of dissing Mom, Baseball, and Apple Pie. Such propaganda is less likely to succeed in the general election where the independents who will decide the issue are less ideologically driven and quicker to cry foul at cronyism and unethical privilege than primary voters.

Dr. Wolfe contemptuously discards Gingrich's points as coming from “the left” as if the philosophical background has any impact on an argument. Any criticism of a candidates behavior should be evaluated on its merit's – not disregarded because it comes from the “left” or the “right.” Criticism shouldn't be disregarded even if it is hypocritical as the attacks on Gingrich by Dr. Wolf, Rush Limbaugh, and the rest of the GOP establishment most certainly are.

You won't find Dr. Wolf or Rush Limbaugh defending drug dealers as exemplars of free market capitalism. They would put drug dealers in jail. They would put prostitutes in jail. Many on the right would like to shut down pornographers like Larry Flynt. They don't see any of these things as attacks on free market capitalism. Rather, they see these things as moral judgements on behavior that pure free market capitalism is gnostic on – just as socialism and communism don't speak to these choices.

Newt Gingrich's attack on Romney's record at Bain Capital is fundamentally a moral critique of choices made within a free market capitalist system. Criticizing Romney's record is actually more legitimate than criticizing drug dealers, prostitutes, and pornographers. They provide a product or service that others want and freely pay for. If we are to have a pure free market there is nothing to criticize. In Romney's world, even in a pure free market, there is much to oppose.

The Bain Capital record with American Pad and Paper is the best example. In 1992 Bain Capital bought Ampad for $5 million. Bain begins taking out $2 million per year in management fees. Within three years Bain has Ampad borrow millions for expansion but also to pay Bain about $60 million. Ultimately, Bain Capital increased Ampad's debt from $11 million to $400 million and took out $100 million in fees and stock. Ampad ended up being liquidated. Stockholders who bought into the IPO were wiped out.

There is a world where you can make 20 times your investment even when you fail. It is the world of Bain Capital and crony capitalism – not free market capitalism. While these actions were perhaps legal they were also disgustingly foul and and legitimate targets of criticism.

There isn't a rational being on earth who would loan their money to someone if the deal was structured such that they make millions even if you lose everything. You might loan someone else's money, to your crony, if you , too, were insulated from loss and had the hope of profit. In doing so you would be acting unethically – violating your fiduciary obligations to the people whose money you are loaning. It is that cronyism that is objectionable – not capitalism. And it is that cronyism that is being criticized by Newt Gingrich.

There is a vast pool of wealth available for investment in IRA and 401(k) accounts. By law these trillions are forced into the hands of investment firms who manage the funds ostensibly for the benefit of the savers. These companies take billions in fees (40% of US corporate profits come from finance). The millions of individual account holders have no idea what is really happening with their money. And so deals are made with cronies where firms like Bain, and the managers who loan them money, make millions in fees even when everyone else loses.

Dr. Wolf and the GOP establishment can push this propaganda all they want. They might succeed in the GOP primary but at the cost of losing the general election and reelecting Obama. There is something rotten at Bain and the stench can only be covered up for so long. The smell doesn't come from free market capitalism but from crony capitalism. And crony capitalism stinks regardless of whether it is the government or private companies that are ripping off the American people.

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