Capitalism on Trial; Prosecutors Guilty

After a little bit of a hiatus for the primary season (which I now regard as functionally over), ETD is back, because the Op-Ed lunacy is back, and in force. 

Vulture capitalism on trial

By Katrina vanden Heuvel, Tuesday, January 17, 9:12 AM

If you had asked me at the beginning of the Republican nomination fight what candidates like Newt Gingrich and Rick Perry would say to win, I would have said just about anything.

Considering that at the beginning of the race, Rick Perry was regarded as the stalwart conservative’s choice, who had been reluctantly dragged into the contest in the first place, (and even Calista Gingrich wasn’t talking about Newt) experience tells me that this is a bit of revisionist history.

What I couldn’t possibly imagine was that one of the things they might start saying would actually be the unvarnished, unblinking, stand-up-and-clap-for-it truth.

Look no further to why Romney is running away with the nomination: if Katrina vanden Heuvel agrees with you, you done fucked up.

With their eyes set on Bain’s bane and Mitt Romney’s career,

Isn’t it adorable how she thinks she’s a real writer? Have you ever had a small child lecture you on quantum mechanics? It’s kind of like this. I can’t help but think it’s just adorable.

Perry and Gingrich have been astonishingly and appropriately brutal.

As a result, their freefall in the polls has sparked a general coalescence of support around Romney, mostly because Romney knows that agreeing with the Op-Ed pages in the Post during a Republican primary means you done fucked up.

“There’s a real difference between venture capitalism and vulture capitalism,”

There most certainly is. One exists, and the other doesn’t.

Perry told Fox and Friends last week. “I don’t believe that capitalism is making a buck under any circumstances.”

Rick Perry is, apparently, unfamiliar with capitalism. (With the usual caveats for legality—of course capitalism doesn’t tolerate theft or fraud), capitalism is precisely making a buck under any circumstances. If the market wants iron, the capitalist goes out and mines it. If the market wants a television show about idiots, the capitalist goes out and films it. If the market want a fleet of nuclear-powered high-speed zeppelins, the capitalist hires scientists to kick physics in the nuts and make it happen.

This is precisely the reason that capitalism works so efficiently—the individual actors within the system can respond to any market demand because there is no “honorable” or “dishonorable” way to make money. (Again, and I can’t emphasize this point enough, this assumes actions strictly adherent to the laws.) Money is money, and it represents the virtue of the sweat, toil, ingenuity, and risk-taking that were required to make it. This holds true regardless of whether the object of that effort was sewage treatment or fashion design, or equity investment.

Couldn’t have said it better myself.

Be careful admitting that out loud. Your editor might hear it and realize that you omitted a subject in that sentence and realize that you really are less articulate than Rick Perry.

Gingrich sharpened that point further on Bloomberg.

Bloomberg is a great example. He made his money by compiling and selling financial data to technical traders, who are mostly the snake-oil salesmen of the financial industry. These technical traders do precisely what Romney did at Bain—allocate equity, valuate risk, and minimize market inefficiency, yet they (as a field) have a provably worse track record. Yet liberals fail to impugn Bloomberg (or Tim Geitner or the dozens of other financiers in the current administration).

“The question is whether or not these companies were being manipulated by the guys who invest

They weren’t.

to drain them of their money, leaving behind people who were unemployed,”

It’s not that manipulation through aggressive divestiture is illegal—it’s functionally impossible. If you buy shares in a company, those shares are worth more than the value of the assets of the firm (less liabilities). They would have to be, or the current owners would have sold the assets themselves. This means that Romney and Bain could only dismantle a company at a loss. The presumption of rational shareholders underpins our entire system of equity valuation.

he said. “Show me somebody who has consistently made money while losing money for workers and I’ll show you someone who has undermined capitalism.”

Shareholders are not fiduciaries for workers. Precisely the opposite is true: workers are fiduciaries for shareholders. Line workers are entrusted to use and maintain assets that are not theirs; managers are entrusted with the operations and decision-making of the firm using corporate money that is not their own. Both have basic legal obligations to the shareholders.

Workers are at-will employees who earn money in return for doing a job. It is virtually impossible to “lose [sic] money for workers” unless you commit fraud or enter fiscal insolvency and fail to pay for services rendered, in which case, tort law adequately defines the debenture procedures for contractors with liens against assets. In other words, the legal system’s got this all worked out already.

Sadly, KVH and—apparently—Newt Gingrich believe that corporations exist to provide jobs for employees. They don’t; all firms exist exclusively to maximize profits for shareholders.

Sing it, Brother Gingrich.

When an avowed socialist agrees with your definition of capitalism, you done fucked up.

What’s especially ironic about all of this is how much the roles have reversed.

Credit where credit is due: what follows is, in fact, irony. I will allow her to bathe in the glory of this brief flirtation with competency.

Romney, shameless flip-flopper that he is, has stood his ground, while the rest of the Republican field is opportunistically flipping and flopping around him. That, it turns out, is incredibly lucky for the American people, allowing us as clear a picture as we’d ever had of the real Romney just at the moment he’s become the near-presumptive nominee.

You’re absolutely correct. This is the first time of the campaign that Romney has appeared genuine, and his poll numbers reflect it. When I start agreeing with Katrina, I’m worrying that I’m about to done fucked up.

His full-throated response to his Republican opponents was deliciously revealing. “In the last few days, we have seen some desperate Republicans join forces with [President Obama],”

They have.

he said during his victory speech in New Hampshire. “This is such a mistake for our party and for our nation.

It is.

This country already has a leader who divides us with the bitter politics of envy.”

We do.

He warned that we must not be “dragged down by a resentment of success.”

We mustn’t.

So that’s what he thinks of the Occupy protests,

Now, I listened to the speech, and I don’t recall any mention of Occupy, but I hope Romney regards them with nothing but seething disdain.

of the 99 percenters,

Keep in mind, calling yourself the “99%” is not an affirmation of who you are, but a small-minded assertion of what you are not. This is purely divisive. Indeed, the entire rhetoric of the Occupy movement is designed to be divisive.

of the millions of Americans who believe income inequality is a real-life problem and that they deserve a fair shot.

I guess the 1% are the people who understand that private equity’s business function is to distributes money to anyone and everyone with a good, marketable (though underdeveloped) business idea, offer management expertise, and make that idea profitable for those who chose to pursue it. It is precisely the mechanism by which inequality is undermined.

According to Romney, they’re just jealous, of him, and of people like him, who concocted rapacious ways to make millions of dollars.

Romney was successful. And his job isn’t easy. I know that because the government is so woefully awful at it. (If it were easy, the government would merely be bad at it.) Selecting companies in which to invest private equity funds is kind of like picking stocks, except that there are millions of options, information is hard to come by, accounting practices are not standardized and often unaudited, investors expect greater returns, negotiations are tense and demanding, and meaningful investments must represent large amounts of capital (so mistakes or missteps cost a fortune).

I am jealous of Mitt Romney. The dude’s clearly got chops. The difference is that I don’t resent him for it. Everything about this article, from the tone to the substance, indicates that you, Katrina, do resent him, precisely because of his success. If memory serves, that’s more or less a verbatim quote.

This is what he believes, we know, not just because of these comments, but because of his career at Bain. He’s a man who built a personal fortune practicing a form of predatory, you-are-on-your own brand of capitalism

Private equity, by definition, ties a firm to outside investors, thereby eliminating the “you-are-on-your own brand of capitalism” that she is hell-bent on discrediting. Does she even know what Bain does?

that casts workers into joblessness — by design.

Bain (like any private equity firm) lays off workers so that the firm (and the rest of the workers) can survive and the investment can grow. It’s not only necessary, logical, reasonable, and responsible (keep in mind that Bain also has fiduciary duty to it’s investors); it’s the only humane thing to do. Doctors amputate arms with an infection likely to kill the patient. That doesn’t mean that they are anti-arm.

And he’s a man who thinks those workers’ grievances

You’d think this was the Triangle Shirtwaist Factory. Work conditions aren’t dangerous or illegal. The “grievances” of the Occupy “workers” are more like a rambling list of arbitrary wants off the top of a pot-addled head.

are just about his “success” and not the system he intends to propagate from the Oval Office.

Ah. Cool. So we finally get to ideology.

And so the country is being offered a rare opportunity: the chance to have a conversation about two vastly different visions for our nation and its economy.

See, I’m doing it again. Agreeing with KVH brings on a very unsettling paranoia.

On one side, the Romney Economy — a vision of deregulation,

Word.

of tax breaks for the wealthy and corporations,

Tax breaks for all.

of an assault on the middle class and the poor,

Mitt Romney punches poor people for sport, after all.

and of an attack on the social safety net.

By social safety net, she’s referring to “that web of entitlements that are slowly bankrupting the treasury and bilking unearned billions from future generations.”

But what will be the other side of that debate? We have, so far, a patchwork of answers: President Obama’s Osawatomie speech,

Honestly, I already forgot that. I’m sure he said…things…about…stuff.

Elizabeth Warren’s candidacy,

Elizabeth Warren gives progressives lady-wood. Anywhere other than Massachusetts and she’d be an unelectable hack.

New York Attorney General Eric Schneiderman’s public fight for the victims of the big banks,

Read: “shameless pandering”

the Progressive Caucus and its People’s Budget,

Read: “socialist lunacy.”

and a nascent, but potent

This is a reference to the odor. You’ll get no argument from me.

99 percent movement.

Read: “waning swell of relics of the 60’s and bored collegians pursuing a performing arts degree.”

Stitched together, they provide glimmers of a coherent,

There’s not a single thread of coherence to be found in that list of miscreants and castaways.

inspired response to the excesses and depredations of the Romney Economy.

So…modern liberalism defines itself as a reaction to a hypothetical future candidate as opposed to…say… a governing philosophy that has been mostly in power for the last six years? What, you want us to ignore Obama’s disastrous first term? Nancy Pelosi’s reign of terror and the hapless Harry Reid’s 1000 days without the senate passing a budget? The economy, brought on by bad liberal mortgage policies and exacerbated by unmitigated failures like Cash for Clunkers, the bailouts, and the punchline-inducing stimulus? The executive power grab? A muddled foreign policy split equally between deference, confusion, and holdovers from the Bush Administration?

The difference between the two isn’t only that one is about nurturing fairness and the other, very clearly, is not.

Well at least this time, I’m only agreeing with her because her intentional vagueness allows me to read it as I please.

The difference is that Romney capitalism — the kind of “vulture capitalism”

You see, “vulture capitalism” is in quotes because it’s not a real term.

represented by Bain and so many chop-shop private equity operations — undermines the strength of our economy itself, and the economy’s ability to work for working people.

This is the problem with socialists. They usually get sidetracked by reeducation and genocide before they actually understand the economy they’re trying to govern.

There is, as even Warren Buffett has pointed out, a real difference between investing and building a company that makes something or provides a service that adds value to the economy, and a barbarian-at-the-gate-style enterprise that loots and strips, making millions for its executives by ripping holes in the economic fabric.

Warren Buffet is another great example of a liberal hero who does exactly what Bain does (except even better, and usually with public companies). The problem is that he’s tilting at windmills here, because that second category doesn’t actually exist. If you believe markets are at all efficient, it follows that looting companies is functionally impossible. If you don’t believe markets are efficient, all the more reason competing private equity firms like Bain are needed to eliminate inefficiencies by driving up the price of undervalued assets. Either way, it decidedly does not rip a hole in the economic fabric.

The current rules, as set by lobbyists pushing for tax loopholes and deregulations, have been rigged to allow Romney and his friends to make out like bandits.

Tax loopholes are nothing but tax deductions for actions that the government deems beneficial. You’re right; they’re not purely capitalistic. But that’s not Bain’s fault. It’s not even the lobbyist’s fault. It’s the damn senator or congressman who voted in un-capitalistic tax laws. Blaming Romney’s private sector career for a purely public sector problem is ridiculous on its face.

For the record, I’m taking this as a tacit acknowledgement from KVH that lower tax rates spur economic growth on a microeconomic level.

And so this election doesn’t just turn on whether we will change the rules; it is a question of whether we want one of the actual bandits to be put in charge of our future.

Ugh. Those are all gross misunderstandings of Romney’s actual record, yet he is still preferable to a rabble-rousing agitator from Chicago’s south side with no private sector experience, a decidedly unspectacular legislative history, and an atrocious record as President.

Though it might be odd that such attacks on Romney have originated with Republicans themselves, that they have sparked a national conversation matters a great deal.

That is the worst constructed sentence of this whole sprawling mess, which is quite the honor.

It allows those who’ve been making the case for years to drive home the critical point that the work of people like Romney is not the stuff of natural free markets;

Somewhere in the afterlife, Adam Smith just hit Karl Marx upside the head with a tire iron because of this broad.

Wait, hold on. There’s more than one person making this asinine argument? I need bottles of wine.

it is the product of a well-funded construct of laws and rules and institutions and values

I.e. government regulation—you know, that thing that conservatives loathe and have devoted their entire movement to dismantling?

that undermine shared prosperity in a country that once took pride in supporting upward mobility.

I’ll say it again: private equity (as all sources of capital) is the engine for upward mobility.  Without it, great inventions and ideas languish until patents expire or underfunded inventors simply give up. This is, unquestionably, a natural and necessary product of the free market.

There are many smart, concrete, not pie-in-the-sky

She has a way with words, doesn’t she?

ideas about how we can recalibrate our economy,

Recalibrate? Re-fucking-calibrate? It’s not a goddamn guided missile. It has two directions: growing or dying.

return it to fairness, how we can reimagine it

Reimaging the economy is worse than recalibrating it. It’s already an abstract constract, you buffoon. It doesn’t need any re-imaging, especially not from the executive branch of the federal government (you know, the one that signs all those tax loopholes and rules and institutions into law).

as one built not on vulture capitalism but on democratic capitalism.

Stop making shit up! “Democratic capitalism” is no more a concept than “vulture capitalism” is, but it’s even more asinine. Capitalism, necessarily, is democratic. The market is the most absolute form of democratic participation ever known. That is because it is the manifestation of the freedom of choice.

The Nation recently gathered many of those ideas in a special issue,

All of them, I’m sure, (I can’t be bothered to read that pinko rag. I have standards, after all) were dumb, abstract, and pie-in-the-sky. You see what happened there? Mirroring her prose actually made mine worse. God dammit, Katrina.

Reimagining Capitalism, laying out alternative ideas for a more humane capitalism that works for communities.

In the height of irony, the new argument for socialism is simply calling it “New Capitalism.” It didn’t work for New Coke either.

This campaign promises to be an MRI of our economic system.

No, this campaign is an examination of the failures of modern liberalism and the miserable policies of Barack Obama.

If that sounds unlikely, consider that six months ago, few, if any, political leaders were talking seriously about economic inequality — and today, the king of crony politics, the governor of Texas,

When did we demote the Barack Obama?

is complaining about the immorality of vulture capitalists. A lot can change; a lot already has.

And a lot hasn’t. Six months ago, Perry was seen as a stalwart conservative. Now, he’ll be lucky if he’s able to hold onto the governor’s mansion the next election cycle. Both Perry and Gingrich have embarrassed themselves and shown their campaigns unworthy of flying the flag of conservatism. The failure of Romney to win the support of Republican voters lies in their fundamental distrust of his ideological inclinations, not in his career. The more Romney talks about Bain, the more he looks like a good conservative.