Bane of Bain Is Mainly in the Plane
by Bill Sardi: Would
You Know Opportunity If You Saw It?
If you think
the primary battle of the classes is between those ultra wealthy
one-percent who pay a smaller percentage of taxes than their secretaries
and can get tax write-offs for private planes versus the 99% who
are envious of the rich and seek to gain greater public entitlements
in welfare transfer payments, then you might want to tune into the
royal public debate going on with Edward Conard, the former managing
director of Bain Capital and million-dollar donor to the Mitt Romney
It is difficult
to imagine why Mr. Conard is falling into the very trap that the
Obama campaign has set for him, the pitting of rich against poor.
As a FoxBusiness TV interviewer said on air regarding the Romney
just not selling it." Mr. Conard is on tour to promote
his new book entitled Unintended
Consequences (Portfolio/Penguin 2012, 310 pages). The book
is apparently a warm up to what the Romney campaign will attempt
to convince America of before the November election.
if America has more income inquality the 99% will be better off
because the wealthy will have more capital to put at risk to find
innovative answers to human problems. Whoa Nelly, how does Conard
get himself out of his own mouth-trap.
admits Bain bought companies, then laid-off workers "to make
these companies stronger," and then sold them at a profit.
But exactly how does that sound to the millions of unemployed, under-employed
and demoralized American workers? Squeezing all the profit out of
a company at the expense of the workers who got them there is not
going to be popular these days. Many American voters will think
Conard echoes opinions Mr. Romney may well share but would not say
out loud. And Mr. Romney says he is largely running on his record
at Bain, not his record as Governor of Massachusetts.
debate really burst into the public eye on The
Daily Show hosted by Jon Stewart. They had to extend the debate
and break it into three parts. If you are into this kind of stuff,
link to The Daily Show and enjoy the daggers of truth mixed with
the laughs. Stewart, in his inimitable style, started the debate,
saying he had read Mr. Conardís book, and his first question to
his guest was: "Huh?"
one of the few who can keep up with the economic complexities that
Mr. Conard presents, and you donít want to miss a minute of it.
Mr. Conard is an unashamed economic Darwinist Ė only the fittest
will survive. The remaining will lose their homes and live in shelters.
(Iím not mischaracterizing his language here. Mr. Conard repeatedly
uses the survival-of-the-fittest Darwinian model in his explanations.)
maintains the investor class wonít put their money at risk to develop
the innovations America needs unless there are spectacular financial
rewards. Stewart replies with a question: "So rewards for the
investor class arenít enough?"
At that moment
Conard has to break the tension with laughter. He has no good answer
there. Inside he knows what he is saying may sound right to him,
but resonates poorly with the public.
This does not
mean that Conard doesnít have some important points to make. He
repeatedly points to the innovation at Apple, Ebay, Google, Amazon,
Instagram, all American companies. He claims lower marginal tax
rates in the US have been the driving force behind this innovation.
None of it comes from Europe where people are over taxed. According
to Conard, "the 10 percent of workers who create close to half
our GDP have to create more value through increased productivity
and risk taking." Translation: the financial elites will create
the future for the rest of the population and they need to be incentivized.
Tell that to small businessmen who create most of the new jobs in
America, small businesses that likely started on a shoestring.
I donít quite
see it this way entirely. I think innovators in Norway or Slovakia
simply have a language barrier to the English language, which is
the language of commerce in the world. And America is THE consumer
economy of the world. Second, the people who started Google, Apple
and Facebook also started these ventures "on a shoestring."
They didnít need massive amounts of capital to be put at risk to
develop their products and services. A lot of it was sweat labor.
makes a real but hard-to-swallow point. That the cost of labor overseas
is so low that even though manufacturing only represents 10% of
the Gross Domestic Product (GDP) in the US today, the US needs to
shift even this small remaining manufacturing capacity offshore
because "making products for $17 an hour that we could be purchased
for 75-cents an hour wastes resources that the nation can use elsewhere."
Mr. Conard maintains the US will never return to a manufacturing-based
economy no more than the US will return to employment largely based
upon farming. OK, point made. But how do unemployed workers take
advantage of the lower cost of goods achieved by cheap labor overseas?
Erin Burnett tries to back Conard into a corner. She asks if
Bain, in its many corporate acquisitions, hasnít attempted to satisfy
investors rather than customers. Mr. Conard lamely responds by saying
the end-use customer is always of primary concern. He keeps pontificating
about free trade and free markets. But America is largely a controlled
Oh, in the
past we let Honda bring its 100,000-mile Honda Civic cars to the
US and Americans learned that American automobile companies were
gaming them with cars what wouldnít last 3 years. And America let
Michelin bring its 100,000-mile tires to the US and this showed
Americans they were being gamed by Goodyear and Firestone. But these
are examples of overseas innovation being brought to America. Mr.
Conard presents the American innovation game the other way around.
free markets characterized America today, why hasnít Bain helped
lead America out of its dependency upon petroleum and used its capital
to substitute natural gas which is far cheaper than gasoline to
Why is America
using uranium-based radioactive material to generate electricity
that comes with all the problems seen in Fukushima, Japan, when
thorium is a far safer radioactive material?
Why is America
misdirected in its efforts to create clean renewable energy by promoting
wind energy that is only cost effective with government subsidies
and will only at best, along with solar, meet 2% of Americaís demand
for energy, when it could install new technology composite power
cables across the national power grid that significantly reduce
line loss that wastes 7-20% of the power that is currently generated?
Do this and hundreds of fossil-fueled power plants can be closed.
power plants, natural gas-powered automobiles and composite power
cables are trillion dollar moves on a large economic chess board
and represent just three of many new technologies that entrenched
forces oppose. So letís not get the false impression that Bain has
a magic wand to usher in true innovation. Mr. Conard makes it sound
like nothing stands between innovation and implementation. There
are many entities that resist change and hold to the status quo.
They buy off government to hold onto their obsolete business models.
The public is getting what industry says is good for them, not the
other way around.
might just ask, why not just print enough money for everybody or
why not ensure everybody has a job. As socialist countries do this
they always have a certain portion of their capital tied up in unproductive
or duplicitous labor. Russia used to brag of its full employment
compared to western capitalismís inherent unemployment. But that
was pure feather bedding. Then again, America, by not automating
important segments of its economy, like the post office, was doing
the same thing.
makes another important point when it comes to unemployment. Higher
productivity in manufacturing has accounted for two-thirds of the
lost manufacturing jobs since 2000, not shifting of jobs overseas.
for the public is in not seeing what happens in countries like Japan
where full employment was a social policy and large employers bore
the full cost of lay offs, that is until recently. This ends up
with capital being tied up in less productive labor rather than
being put at risk to promote innovation. Recently Japan has changed
its full employment policy and now has unemployment.
simply cannot understand this. Why canít everybody be given a job?
Yes, precisely, letís put the welfare folks to work. But doing so
puts them permanently on the backs of the remaining workers in the
capitalist systems will always have a certain level of unemployment
because in a free market private enterprise system, innovation is
forever obsoleting a certain number of enterprises and replacing
them with new ventures. Mr. Conard makes a good defense of capitalism
on this point. Thatís why he deserves a spot at the debate table,
even if he is not the best representative to defend a free market
would like you to be distracted by so many of his up-front arguments
in defense of capitalism versus socialism. Hey, no question, the
income redistribution schemes coming out of Washington DC in the
form of higher taxes simply do not represent what America needs,
which is wealth creation. Any critique offered here of the Romney
campaign is pale next to the disappointment Mr. Obama has been.
Mr. Romney may be off the mark, but the incumbent is a total misdirection.
It is sad to see a President polarize the population and lead them
to think that too much capital in the hands of individuals is no
good while too much capital in control of government better redistributes
the spoils of American society. In fact, government removes 15%
of capital for overhead. That is an incremental lack of competitiveness
It takes great
private wealth to fund many large projects, like Collis P Huntington
had when he built much of the nationís railroads nearly a century
ago. Put the capital in the hands of government and you end up with
"friends of the President" receiving government guaranteed
loans for ventures like Solyndra that never had a chance of being
successful. Itís crony capitalism at its worst.
There is so
much missing in Mr. Conardís arguments over what went wrong in the
American economy. Mr. Conard wonít quite say no one should go to
jail, but he does say "itís unfair to blame bankers, regulators
and credit rating agencies." But then Mr. Conard, without jail
time there is simply no accountability. Government fines simply
represent hand slaps.
I thought Mr.
Conard said Bain Capital relentlessly focuses on the end consumer.
I must have heard that wrong. Didnít homeowners get lured, misled,
foreclosed, robo-signed, shafted? Arenít savers today seeing their
life savings squandered by inflation while being offered less than
1% interest on their banked money? I donít think Mr. Conard would
recognize a bankster if he saw one.
would have the whole central-banking/ print endless paper money/
fractional banking/ cheap money/ scheme continue in perpetuity.
We wouldnít anticipate Mr. Conard would mention a renewed gold standard
to permanently put a halt to the rubber money system, and he didnít.
The savings class is losing hundreds of billions of dollars in the
value of its saved banked money due to hidden inflation (7% to 10%
says ShadowStats.com) and that doesnít seem to bother Mr. Conard.
Itís the investment class that needs greater returns on their money,
sees nothing wrong with government bailouts of financial institutions.
Mr. Conard says, since banks cannot possibly hold enough equity
to stem withdrawals (bank runs), government must increase its insurance
in the event of a panic so that risk taking and innovation will
not cease, which he says is the case today. But Mr. Conard, we ended
up with privatized profits and socialized losses, again. The greater
the guarantees the more reckless were the lenders. Let them sink
or swim on their own. Now that is survival of the fittest. It goes
says, because of recent losses, savers and large lenders now demand
short-term risk-averse investments. That stifles long-term capital
requirements. Mr. Conard wants Americaís savings put back to work.
But the bankers were using their floating average of funds received
in checking accounts to fulfill there reserve requirements, and
investment banks were leveraged 30-to-1, even 50-to-1, which was
OK by the Securities Exchange Commission. How much more money could
be put into play than this Mr. Conard?
goes on to say that what happened in the real estate crisis
is that large lenders, mostly hedge funds, were willing to take
the risk and underwrite sub-prime real estate home loans where low-or-no
down payment was required. But despite $15 trillion of explicit
government guarantees, short-term savers got antsy and withdrew
$1.5 trillion, a hidden bank run of sorts that is only now being
revealed, which was five times more than the loan losses (~$300
to Mr. Conard, the financial sector took it on the chin for most
of the losses in the real estate bubble, not homeowners. This tack
completely frustrated Jon Stewart, who quickly said: "But only
one of them can be out of a house!" Human suffering is not
part of Mr. Conardís Darwinian equation.
goes on and on with his drivel. He says America provided jobs for
more workers than any other country itís just that they were
mostly overseas. If you follow Mr. Conardís reasoning, a bank robber
who stole money for his sick mother in Lithuania should get off
Scott free. Iíve had enough of this. Stop this insanity. Vote for
Ron Paul. Write him in regardless of what choices lay ahead at the
polls. It will send a message. Donít give the next President an
him mail] is a frequent writer on health and political
topics. His health writings can be found at www.naturalhealthlibrarian.com.
latest book is Downsizing
© 2012 Bill Sardi Word of Knowledge Agency, San Dimas, California.
This article has been written exclusively for www.LewRockwell.com
and other parties who wish to refer to it should link rather than
post at other URLs.†
Best of Bill Sardi