The Weiner Component #22-Vulture Capitalism

Mitt Romney surrounded by supporters during th...

While Mitt Romney was running for the presidency in 2012 his former company, Bain Capital, bought a steel company by gaining control of its stock.  Romney, from what I understand, had several million dollars invested in the acquisition.  In its last operating year in the United States the company made a profit of three hundred and something million dollars.  This meant that after paying all the compensation expenses from the executives to the janitors, that included 6.2 percent for social security, 1.4 percent for Medicare, medical insurance, retirement, plus any other costs associated with each employee, the company still made that profit.  There were about 169 employees involved in operating the company.

The executives at Bain Capital decided that it was more profitable to move the entire operation to China.  They would move the factory machinery there, reset up the plant, and use local labor to operate it, replacing all the American employees.  They brought Chinese workers to the United States to be trained by their American counterparts who they would be replacing when the factory was moved overseas.

Apparently the cost of a Chinese worker would be a fraction of what it cost to employ an American.  Even with the greater shipping distance the cost of the finished product would be one tenth or less of the cost of producing the item in America.  The yearly profit would be over three billion dollars a year, allowing for a massive return to the stockholders.  Mitt Romney’s few million dollars investment would be worth about ten times the amount he spent.

The people at the plant had appealed to Romney for help.  He had ignored them.  Obviously business is profit; the more profit the better the business.  The people employed are just a disposable tool when it comes to profit.

Bain Capital acted in a modern capitalistic manner, searching to maximize its profit.  They could earn much more using Chinese workers in China, where there is no social security, Medicare, or retirement, than by using American employees in the United States.

I’m not sure what happened to the steel company’s retirement fund.  Bain Capital could have looted it to pay for the transfer of the company to China and left the Federal Government with the responsibility to make good on it for their former employees.  They had done that type of thing before, more than once.

Bain Capital calls itself a Venture Capitalist Company, but they are actually Vulture Capitalists; like the bird they pick and devour the flesh and sinews off a living or dying creature, leaving only the lifeless bones behind.  They will take a successfully functioning company, sell off the parts, making millions in the process and leave unemployed workers and an empty structure behind or move a successfully functioning factory outside of the United States where there are far cheaper labor markets.

Is this all legal?  I would suspect it, more or less, is.  There may be some gray or very grey areas where the legality is highly questionable.  For example, some of these companies have looted long existing retirement funds leaving the Federal Government to pick up and fund the mess.  Bain Capital has, over the years, bought a number of companies and then added what it spent for the purchase to the company’s debt, turning a successfully operating business into a bankrupt concern.  There are probably a number of other ways to turn a quick profit employed by Bain and similar companies.

I would suspect there needs to be a thorough examination of the existing business laws leading to a thorough revision of the these statutes   Their purpose should not be to allow for many of the practices that now exist.

In the 1930s then Senator Harry S. Truman called these people “the wrecking crew.”  They existed then and pulled these practices during the Great Depression and they certainly exist today.

Mitt Romney during his presidential campaign called those people, part of whose employment he had done away with, part of “the 47% who expect a free economic ride.”  I see Romney and his like as the true economic leaches in this country.  They are the ones who have taken a free economic ride by exploiting a large percentage of the public and, in many cases, left the taxpayer, by way of the Federal Government, to pay to pay the bill.

 
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The Weiner Component #11 – Outsourcing & the Enigma of China

TAMPA, FL - AUGUST 27:  Protesters demonstrate...

Bain Capital, Apple, and other companies that manufacture their products in China do so for a very obvious reason, profit, and usually enormous profits.  In the U.S. a decent wage has to be paid, generally arranged by a union contract.  There are additional monies for social security, Medicare, unemployment insurance, pensions, medical insurance, etc.  The employee pays some of this, but the employer pays most of this sum.  A seventeen-dollar an hour job could end up costing the company from thirty to forty dollars an hour.  Even paying all this a successful concern can be making a good profit.

Modern Communist China is in an interesting condition.  An individual visiting that country today would find its large cities no different than those in other industrial nations.  The people in these cities are paid according to their occupation as in the West.  There are public transportation, parks, libraries, and schools.  These are modern urban centers, which in many instances look better than those in Europe or the United. States in that they are newer and generally better planned.

However if one visits the countryside, there an individual finds a totally different situation.  Factory communities have been set up in many places that employ, house, and feed large numbers of workers who labor in these buildings on twelve hour shifts under primitive conditions, poorly fed, and poorly housed in crowded accommodations.

These are the sweatshops of China into which many American and Western employers such as Mitt Romney have invested.  Historically the conditions in these plants mirror those in England, Europe, and later the United States during the early period of the Industrial Revolution.  Whole generations of people were sacrificed to the growing needs of early capitalism.  In England over a period of thirty or more years Parliament gradually passed legislation limiting the employment of women and children and bringing about reforms for everyone employed.  While the employers had no social conscience in this pure capitalistic system, the government did have one.  Eventually the labor or socialistic part became one of the major political parties in England.  Much of the same can be said for all the other industrial states.

Today the American and European entrepreneurs can have an immediate phenomenal cash advantage by shipping both their manufacturing and even their factories to the Chinese countryside.  Here all their labor costs are under one dollar an hour and there are no benefits or retirement for the workers.  For every million dollars in profit they made in the United States they would now be getting thirty to forty million dollars.  People like Mitt Romney, the former CEO of Bain Capital would be foolish to do otherwise.  After all their success is measured by the bottom line, the amount of profit they make for their company and for themselves.

Of course all of this is short term, immediate.  By the time this situation is straightened out in China at least a decade or two will have passed.  Mitt Romney will be seventy-five or eighty-five years of age and might even have gone to his reward.  It won’t be his problem anymore.  Bain Capital will still be around; but it will be run by a group of younger men.  They may be able to find another area of the world to exploit.  China will have benefited by having become the first among all the manufacturing countries in the world.  After all what are a few million lives to a country with a population of well over a billion people?

What I find innocuous is that China, a Communist Country, formally called The People’s Republic of China, is willing to exploit sections of their own population in the same fashion as the early industrial capitalists did in Nineteenth Century England.  At least in the British Isles the government worked to end the abuse.  In China it seems that the government is perpetuating it.  With or without the direct aid of the Chinese Communist Government these early capitalist practices will gradually change.

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The Weiner Component #4 – Mitt Romney and Vulture Capitalism

 

EVANSTON, IL - AUGUST 21: Protesters outside t...

If we consider that Mitt Romney has between 190 to 250 million dollars, that he has set up a trust for his sons of an estimated 100 million dollars, and that he has an additional ten million as an IRA then, we have an image of how well he’s done as the CEO of Bain Capital, where he headed the company from it inception in 1984 to August 2001, seventeen years, when he announced that he would not return to Bain Capital. He still receives millions from his retirement package.

Bain Capital was organized in 1984 as a Venture Capital Corporation, which raised money and invested in other companies. One of its earliest investments was in Stables in which it invested over one hundred million dollars and eventually more than doubled its investment. From 1989 on it changed its model to leveraged buyouts of more mature companies. It did this by using money essentially borrowed from the assets of the company it took over. It partnered with existing management and sold off their assets in a few years.

At this point it changed from a venture capital company to a vulture capital one, turning all the company’s assets into cash for its (Bain’s) stockholders and employees. In essence Bain devoured all the meat and left the bones of these concerns to rot. The bones included all the employees, and in many cases, their pension plans. By the end of 1990 Bain had raised 175 million dollars of capital and financed 35 companies with combined assets of 3.6 billion dollars. Mufti-millions were made by the people at Bain; the employees of these companies lost their livelihoods and, in many cases, the benefits they had accrued.

Similar examples of Vulture Capitalism or models can be found in the history of our nation. In the early 1930s, while the country was attempting to fight its way out of the Great Depression, a Senatorial Committee, headed by Senator Harry S. Truman, found that a holding company, the Allegheny Corporation that had been formed by some Cleveland manipulators using money supplied by J.P. Morgan acquired control of all eighty lines of the Missouri Pacific railroad. The holding company then proceeded to loot the railroad. They declared dividends out of capital instead of earnings, fired thousands of workers to cut payroll, reduced maintenance, and abandoned badly needed improvements in the road and equipment. In a few short years the Missouri Pacific was bankrupt. Senator Truman dubbed this group as “the wrecking crew.” These Wall Street financiers were a special interest group constantly ready to sacrifice the welfare of millions for the profit of the few.

Mitt Romney is a perfect example of this kind of individual. In fact he may have discovered and used their economic model as his own.

Mitt Romney was, to use his own term, a “harvester” But instead of harvesting crops for use of the general public, he harvested companies. In doing this he increased his and his investors wealth by hundreds of millions of dollars. Ink a period of seventeen years he received over three hundred million dollars. We do not know how much his investors got; but it was far more than Romney’s amount.

Romney “harvested” these companies, stripped them of their assets, fired their employees, outsourced much of what they produced, and moved on millions richer each time. While this process may be legal, it is certainly immoral. It is Vulture Capitalism, striping the flesh off of the companies and leaving the bones to rot.

Romney as a leader presents a strange image. As a youngster we have evidence of him serving as a bully with other students in high school. There are also other incidents.

Since his father was a prominent figure he was never called on any of these occurrences. It would seem that he was never chastised for misbehavior at anytime in his life. The result of this is that he will say almost anything. No matter how inaccurate or stupid the statement Romney states he will not back down. During the Olympics in 2012, on his trip to Europe, he visited three nations and created an incident of inappropriateness in each of them. If he had visited all our allies as an ambassador for the U.S. he might well have alienated all the countries with which we are friendly.

In dealing with the Libyan issue in Benghazi where our Ambassador and three other Americans were killed by terrorists Romney not only inaccurately politicized the incident but also stated later that if he were president there would have been no terrorist raid on the embassy. Apparently from what he said he would strengthen the military to the point where everyone else in the world would be afraid to in any way take on the United States. He would run his foreign policy on the basis of everyone in every other nation being afraid of the might of the U.S. This is the behavior of a young bullying adolescent rather than a mature adult. His vice-presidential candidate sounds no better.

The thought of Romney serving a term as President is frightening. Since he objects to everything President Obama has proposed Romney has placed himself in a corner. From what he has said his idea of creating jobs is to lower taxes for the very rich. They will then invest their money in new productivity and thus create millions of new jobs. We can do this while cutting down the size of government on all levels and by firing a goodly percentage of all government employees.

This is the road to economic madness. The upper echelon has had their taxes reduced to its lowest point since the 1929 depression. They currently have billions of excess dollars. Witness what has been and is being spent by the Republicans on the 2012 election! This process has been going on since the Bush Tax Cuts in the early part of this century. Where are all the jobs these rich people have created? There aren’t any. Their excess funds have been stored and sat on, not invested in anything. In the 2012 Election these people are spending trillions to try to influence the election in their favor so they can continue to get these funds and possible more. Romney has promised to lower taxes for the upper few percentiles if he is elected.

Mitt Romney strikes me as a man who desperately wants to be President of the United States. He has been campaigning for this position since 2005, the third year of his four year term as governor of Massachusetts. In my estimation if he were able to make a deal with the Devil to exchange his soul in order to become President that he would do so. Even if this were possible, I don’t believe the Devil has any need to make such an offer

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