Saturday, January 14, 2012

Mitt's Problem is Our Problem

 Click on the title page of this post and you'll be directed to a great article by RJ Eskow about Mr. Romney's current problems with his image and why even the most full-throated "free-enterprise" conservatives such as Rick Perry and Newt Gingrich are spouting invective against Mr. Romney like an Occupy Wall Street protester.  I can't do the article justice by repeating here so I highly recommend you read it, then come back and read my thoughts on the matter.

Mr. Romney's troubles are as Mr. Eskow suggests the end result of well intended government policy to foster investment and "job creation".  As the article describes, Bain Capital came to life after regulations were eased to facilitate what was hoped to be a spark of investment in companies, products and services and ultimately jobs.  Of course,  wealth or the accumulation of wealth is like water in that it finds the path of least resistance.  Why build wealth through production or through work that results in production when one can hire some very intelligent analysts and take advantage of the laws and regulation to make your money without all that pesky labor and effort beforehand? 

So, here we go.  People have used a system intended for one thing and manipulated it for another.  Surprise, surprise!  Mr. Romney and his colleagues at Bain didn't do anything illegal. No, quite the contrary, they scrupulously followed policy, law and regulations and made hundreds of millions of dollars for their investors and themselves as a result.    It seems that this is a story that repeats itself over and over again.  A well intended action generates unintended consequences, and after it is done enough, no one really pays attention to it except to jump on the bandwagon and attempt to achieve similar results. 

This is human nature.  Having wealth provides a level of security that our base instincts want.  In the early 1940's, a psychologist named Abraham Maslow published a paper titled "A Theory of Human Motivation" which describes a basic level of requirements (Hierarchy of Needs)  for a human to eventually become as Maslow perceives, "self-actualized".  At the base levels of the hierarchy are core requirements such as physiological needs like breathing, water, food, etc..  Just above this level is "Safety", which involves security.  One of the ways to be "secure" as we have learned over history is to accumulate wealth or its cousin, power.  Obtaining wealth lets one live in a safer place, eat better food, get good medical care when you are sick, influence people to do what you want them to do, and many other things.

OK, as a result, we are all kind of wired to find a way to be secure for ourselves and our families.  In our society, that generally means having enough money to see those desires realized.  If getting some wealth makes one secure, then having a lot of wealth makes one very secure right?  Well, sometimes.  Nonetheless, we'd all like a little more money.  We have many ways of doing this. We work at our jobs, we go to school to get smarter so we get better jobs. We save, and back to the relevant part of this article, we invest.  Some of us do this professionally and become very good at it. Some of us do it on the guidance of others who trade and invest for us or we buy into instruments like mutual funds, bonds, real estate, etc. hoping that our money invested will return more than we put in.   So, an emergence of people like Mitt Romney and all those who came before or after him have established an industry that focuses on making wealth through the manipulation of money.

Much of this activity is good.  Investment does allow people to create and establish businesses that hire people and produce many useful things such as the computer I am using to write this article.  This is good and proper, and as a result many people are made a little richer and a little more secure.

The problem with Mr. Romney's private sector industry of choice however is the other side of the coin.  It is the side of the coin that makes money not by producing things, rather by re-organizing them.  Sometimes this is needed as companies become inefficient, poorly managed and are headed for dissolution.  Companies such as Bain Capital can provide help to save these businesses. Staples is an example of where this worked.  Other companies, despite well intended efforts to save them, didn't make it.  That's the way the world works. Some succeed, some fail.  Even that is not the problem.  The problem is when companies such as Bain Capital intentionally strip a company of assets or reduce its cost basis to the point of where the business cannot function solely for the purpose of making profits for Bain's investors.  This is known as 'destructive capitalism', or as Mr. Perry has so loudly described 'Vulture Capitalism".   Companies are stripped bare, people are laid off, buildings, assets and other items of value are sold off and the investment company (e.g. Bain Capital) walks away with a tidy profit and return for itself and its investors.

Mr. Romney is an intelligent man. He and his partners knew full well that they could make themselves and their investors very wealthy by taking advantage of policies and regulations that would allow them to leverage destructive capitalism fully.  They receive through the tax code a break on their investment returns because capital gains are only taxed at 15% where as the people's incomes who work at the companies Bain

I have no problem with a businessperson being President if he or she have a track record of actually producing something that involves the entire business cycle of investment, creation, production, consumption, etc.  That way you'll know they at least are exposed to the lives of the majority of the people in the country and might have some way to relate.  We don't need aristocrats and patricians who have no conception of what it is like not being able to make the rent, or to make a decision on buying food instead of medicine.   Mr. Romney is out of touch with the majority of the people in this country, and it stands to reason that someone who understands the issues of the majority of the people in this country might have a better chance of helping those who need it most.  Those people are not the ones Mr. Romney worked with at Bain Capital. 

At the end of the day, this circumstance Mr. Romney finds himself in can be traced back to who we elect to represent us either in Congress or the White House.  The environment that Mr. Romney enriched himself in was put in place by legislators.  If you like that kind of public policy fine, then Romney is your guy because he'll repeat it over and over again if he can.  If you think it makes sense to promote wealth through the production of things versus the manipulation of tax codes, then someone else is probably your candidate.  Remember, we made this

Now, Mr. Perry, Mr. Gingrich and anyone else attacking Romney (you too Mr. President) need to look in the mirror because I'm sure if there were any other way to take a shot at Romney they would be using it. But, there's not (except for the Mormon thing and I think that's a non-issue personally) so this is what they have.  Don't think they are purists as much as opportunists.  Mr. Romney is the front-runner, so his experience and record will be called into question as it should. But, the people that are lobbing hand grenades at him over his business experience have their own problems.  I'm talking to you Newt. 

I say once again that this situation is why elections are important and we need to pay attention to who we send to Washington to do our work for us.   Romney's wealth is there because we put it there.  Let's do a better job of selecting people we send to write our laws and lead our nation, and perhaps, we can obtain that level of security that Maslow describes by doing something that actually results in a building, a road, a computer, a car, or other item we will actually use.

Tell me what you think,


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