Saturday, January 14, 2012

Bain: Crony and Phony Capitalism

In the world according to Romney
In this land of milk and honey
Selective memory is best
When belief is put to the test
Though now Mitt’s berated
For saying it’s jobs he created
When in fact he destroyed them
And pensions were crème de la crème
Still, he denounced us as envious
And not himself as devious

All the recent political theater of the Republican primary season makes Broadway and Hollywood seem real. One must suspend disbelief in order to endure a single debate and watch them each push and shove to enter and exit stage far right. Finally, on last Sunday’s performance, “Bain” and “Romney” were used to form a sentence. Romney has touted his extraordinary ability and experience in creating jobs. Let us look at that startling claim to see where it could possibly have arisen. His competitors questioned Mitt’s boast and yet it has been the lynch pin of his campaign. What happens when a company like Bain enters the door of a struggling corporation? It depends. If you are speaking about Bain Venture Capital, then Bain might provide money to expand business or encourage new sector entry or growth. On the other hand, if it is Bain Capital Private Equity at the door, look for a leveraged buyout by a known raider. Also look for the dark side of capitalism where employees are merely pawns that might be fired to enrich Bain. Bain will acquire and then disassemble the company and sell the pieces. It will also examine those assets for potential changes. Normally, a pension fund is a liability in accounting terms since that money is owed employees at some future date. Private equity firms don’t view pensions that way. Those firms, or vulture capitalists, as Rick Perry called them, see pension funds as assets to be saved from the clutches of employees and used for Bain’s profits. That is what happened when Bain bought GST Steel in Kansas City. Bain took much of the pension money for its profit and then the government agency Pension Benefit Guaranty Corporation had to bail out the pension fund at the expense of American taxpayers. This should not be used as a boast, but a source of shame for Bain and Romney. Is it capitalism to push liabilities to the government or is it greed and corporate socialism?

The current Romney charge that criticisms of his profiteering are “envy” and not righteous indignation pours salt in the wound that he created. It actually condemns criticism and makes it appear that anybody noting the pain he has caused in thousands of families is due to envy of the people so affected and not to Romney’s unique ethics. In effect, he is also claiming that criticism of his ethics is a criticism of capitalism itself. It is not. It is a criticism of Phony Capitalism that pretends to be taking risks to generate profits, but instead is transferring risks to workers and to the government. It is also heartless because those were real people whom he fired and they supported real families living real lives of suffering and pain that Romney has never experienced. His attempt to express identification with people getting pink slips by saying that he feared a pink slip in his life is an creepy joke given that he has never had to fear any economic threat. Let me cite a few examples.

GST Steel eventually lost all 750 jobs in Kansas City and in no small part because Bain and Romney saddled CST with debt and Bain and Romney essentially confiscated $44 Million from the CST pension fund that later had to be made up by taxpayers through the US government Pension Benefit Guaranty Corporation (PBGC). That is a federal bailout going into profits for Bain and the loss of jobs for the steelworkers. Think about it. While corporations normally regard pension funds as liabilities that must be funded, Romney’s Bain saw pension funds as an asset. In accounting, they are on opposite sides of the ledger. In reality, not all the money Romney took was returned by PBGC, so workers each lost about $400/month in their eventual pension benefits. No wonder Romney likes firing people. It means money in his pockets. Romney boasted of creating 100,000 jobs, (80% through Staples), although Bain has never verified that number. He speaks of net/net meaning that all losses have been subtracted from spinoff jobs “created.” Hmm. Romney neglects to mention that the 750 jobs at GST Steel resulted in a cascade of lost jobs at the energy companies and the supply companies that did business with GST. Look closely. Bain and Romney issued bonds after purchasing GST (changing the name from Armco). While making improvements, they also took $36 Million as a dividend to Bain. That is the nature of private equity. Private equity does not create jobs. It creates profit unrelated to jobs. Venture capital is completely different. It may actually create jobs. The jobs lost at GST, were lost by Bain Capital Private Equity, the vulture side of Bain. To show you the balance of business, only about 2.3% of Bain’s business is done by Bain Venture Capital. In other words, vulture capital does over 97% of the business for Bain. Romney has not differentiated between the two nor has he indicated the huge imbalance toward vulture capitalism. Additionally, Bain took its profits directly while socializing losses (as in socialism) by increasing local taxes, increasing borrowing costs for others and using the Pension Benefit Guaranty Corporation to pay greatly reduced pensions to fired workers Was it legal? Yes. Was it ethical? Hmm. Did it create jobs? Probably not here in the USA.

Without going through all the details, Bain essentially did the same maneuver on Ampad by going in and charging Ampad for consulting and having them purchase lots of other office supply companies. In 1992 Bain bought Ampad for $5 Million. In 1993, Ampad had debt of $11 Million. By 1999, Ampad was in debt by $400 Million. Highly leveraged? Worse, Ampad was paying Bain high management fees along the way. Hundreds of employees were laid off and Ampad was put into competition with Staples for the same market while having less purchasing power. Who bankrolled Staples? Why it was Bain, of course. Conflict of interest you say? Not exactly, if your sole interest is making money, there can be no conflict of interest. Are not layoffs and bankruptcy problems? Not for Bain. Bain sold stock and the nearly 400 layoffs were simply a cost of bad management for which Bain was highly rewarded with a profit of over $100 Million. Jobs were outsourced and Bain made money without creating a US job.

Taxes? The Congress in its wisdom taxes profits from raiding companies like Bain Capital Private Equity at 15% not the 35% that you might assume. You may be wondering why “Mittens” has not divulged his tax returns despite calls to do so. He has compared his situation to that of the late Ted Kennedy who had his money in a blind trust meaning that if he divulged his tax return, he would have to reinvest his money in order to avoid interest conflicts in his Senate decisions. Mittens holds no government position so that, even if he had a blind trust then there would be no conflict of interest. How dare you ask? Besides, what if he paid no taxes? That is none of your business.

Now we hear cries from Senator McCain and others that attacking Mittens Romney is directly attacking our fundamental capitalist economic system. I don’t think so. Even the idea that Romney was picking winners and losers while having taxpayers pick up the tab flies against the advertised strength of capitalism of being rewarded for risk without government. Romney has scalded Obama for bailing out GM and Chrysler and yet jobs were saved and workers shared in the process of reducing demands to ensure survival instead of another bankruptcy. He has yet to take responsibility for his heartless creating of weak companies and then devouring the highly leveraged carcasses he created. Employees had no role except as victims. Crony Corporate Socialism as practiced by Romney and Bain should not be confused with Capitalism. Mussolini would love Romney for his corporatism, but we must call it what it is and it does not create jobs. It is essentially high finance with other people’s money. Remember Wall Street that was too big to fail but was bailed out by GW Bush? Conservatism or Corporatism?

Mittens says that any criticism is Romney Envy? No, he really does not get it. Maybe people felt fear or even hate, but envy? Maybe people envied their outsourced jobs? Governor Romney paid corporations incentives for moving to Massachusetts at the expense of taxpayers and the losing states. Mittens needs to level with us and admit that he created lots of profit for himself and Bain, but please, spare us the phony economics lesson on jobs. Just think of this on a national scale. Ouch.

George Giacoppe
13 January 2012

Wednesday, January 04, 2012

The Non-religious Vote

Americans who are not religious are rarely referred to as voters who have a specific political leaning, or vote as a block. Perhaps this is in part a media slant that perpetuates the myths that non-religious Americans are an insignificant factor or have no specific political viewpoint.

The number of Americans identifying themselves as atheist or agnostic rose from under 2 million in 2001 to 3.8 million in 2008. However, as large as that group is there is a much larger group that are simply not religious. According to a recent American Religious Identification Survey (ARIS) “ “…18% (about 40 million Americans) do not profess a belief in a God.”
Regardless of political party some sort of profession of a religious faith is almost mandatory to get elected in America today. We have finally reached the point in our society where being a woman or black is only a slight disadvantage. Being gay or a Muslim is a bigger hurdle to overcome but being openly not religious today in America makes it really hard to get elected even though the Founding Fathers wrote into the Constitution that there should be no religious test for elected office.
While it is common knowledge that black Christians are heavily Democratic and white Evangelicals are heavily Republican most people don’t know where most non-Christian beliefs fall in the political spectrum.
According to the 2008 PEW Foundation statistical survey their poll was:

Group Republican lean Republican Independent lean Demo Democrat
National 26 10 10 15 32
Evangelical 38 12 9 10 24
Black Church 7 3 6 12 66
Orthodox 27 8 8 18 32
Catholics 23 10 10 15 33
Mormons 52 13 8 7 15
Jews 17 6 8 18 47
Muslims 7 4 10 26 37
Buddhists 10 8 9 30 37
Hindus 6 7 13 22 41
Unaffiated 13 10 15 24 31
Other faiths 7 6 15 29 37

Those who are not affiliated with any religious belief are Democrat or tend toward Democrat by 55% to 23% margin, even though this is a group that Democrats largely ignore. Also, the non-religious, at 15%, have the highest percentage of independent voters of any group. So, there is a large group that could be swayed to vote more Democrat with a little effort.
What surprised me about this survey was how Republican Mormons are. Perhaps this is because of the historical view of the federal government being an intrusive force in their close-knit society. They are much more Republican than Evangelicals. In fact, 34% of Evangelicals tend to be Democrats. I knew black Christians and Jews have traditionally been Democrats, but Muslims, Buddhists and Hindus all lean Democratic by over 60%. It should be no surprise that only 11% of Muslims are Republican considering how often they are demonized by Republicans.

I think that non-religious is a more accurate term than non-believer because the non-religious have their beliefs too. Humanists, Unitarians, Pantheists and for the most part Buddhists certainly have beliefs, but they aren’t religious beliefs. Their beliefs are rooted in philosophy, ethics, human experience and values.

One reason the non-religious are as high as 23% Republican is that many Libertarians are atheists. Ayn Rand was an atheist and many have bought into her whole philosophy. This group is in sharp disagreement with the Humanists and Unitarians who tend to be very liberal and tolerant of other viewpoints and beliefs. A large percentage of Americans for Separation of Church and State are non-religious liberals who believe strongly in maintaining the wall of separation of church and state and that their should be freedom of religion and freedom from religion.

In the PEW survey Hindus and Jews had the highest percentage of college graduates and advanced degrees. I don’t know the statistics but I do know from personal experience in both Humanist and Unitarian groups that most of the people I have known are college graduates. Other beliefs that the PEW survey shows to divide along religious and political lines are a belief in evolution and global warming. In fact, 81% of Buddhists believe in evolution while only 77% of unaffiliated accept evolution although if you only surveyed atheists and agnostics I’m sure the figure would be higher.

What can Democrats learn from this? The most obvious thing, right at the top of the chart, is nationally we have a lot more people who prefer the values the Democrats stand for but its harder to motivate these people to get out and vote in their self interest. Another thing these figures bare out is that just by being inclusive and standing up for the 99% we are attracting a solid majority of non-Christians as well as liberal Christians without even making a concerted effort to win them over. By simply recognizing that non-religious Americans should be treated just like other Americans Democrats will be taking the moral high ground and I believe will benefit politically in the long run.

Dave Silva

Monsanto's Saintly CEO

Here’s a little addendum to the last post on Monsanto. The CEO of Monsanto is a Brit or a Scot named Hugh Grant; he’s also Chairman and President of what, to hear him tell it, is a corporation modeled on the work of Mother Theresa. That’s if you can ignore the “compensation” he gets for all his good works, including, in 2009, a salary of $10.8 million, and, in 2011, his sale of 150,620 shares of his corporation’s stock at $75 a share, amounting to another $11,296,500 (yes, Monsanto’s stock has done well in recent years, with annual average earnings growth of 19.2% over the last 10 years.) Of course, the business pundits don’t feel any need to ignore the compensation: indeed, they seem to take it as indicative of Grant’s prowess, with Barron’s putting him on its annual “most respected CEO” list in 2009, and Chief Executive Magazine naming him its "CEO of the Year" in 2010.
Grant himself seems to agree. In a speech featured on the website, he spoke, believe it or not, to the 2010 Business Social Responsibility Conference in New York. He started by raising the specter of population growth—“Between the time you got up this morning and the time you’ll go to bed, there will be 210,000 new people on the plant. By 2050, that’s three new Chinas.” Here, according to Grant, is where Monsanto, the alleged champion of “how to do more with less,” comes in as saviour. For Grant, that’s developing new, more efficient agricultural products, specifically a more “water-efficient Maize” that can transform the low-efficiency African farmer (corn farms yielding only 20 bushels/acre there) into an operator more akin to his high-tech American counterpart (160 bushels per acre). Grant cited a recent trip he made to Malawi, where one Monsanto project giving villagers American hybrid seed produced so much corn the ecstatic villagers had to use the local schoolhouse to store the bumper crop. For Grant, this pointed to two things: first, new partnerships to produce, store and sell the new bumper crops, and second “the promise in a seed, giving people tools we’ve had for 70 years.” Perfect language for the conference Grant was addressing, the BSR being, according to the article, the “largest and most highly-regarded conference in corporate responsibility.”

Just gives you a warm and fuzzy feeling, doesn’t it? Seeing Monsanto and its CEO being so socially responsible, so concerned about the poor wogs in Africa, about sustainable agriculture for the newly-starving masses? But wait. What about the great GMO products, the ‘frankenfoods’ Monsanto has pioneered? What about the gathering evidence that the application of increasing quantities of glyphosate to Roundup Ready seeds are undermining the most productive agricultural acreage in the world (the American Midwest) with their deleterious effects on microorganisms upon which all life depends? What about the evidence that crops grown in such conditions and fed to livestock are turning the stomachs of the ruminants into breeding grounds for god-knows-what monstrous organisms? What about Monsanto’s lawsuits against small organic farmers whose fields have been contaminated with GMO seeds—which Monsanto terms an unlicensed use of its patented products? What about Monsanto’s corruption of the USDA, the FDA, the EPA to not only accept this genetic tinkering but to try to force it on farmers worldwide? What about the fact that higher food yields inevitably lead to benighted optimism and increasing populations that soon outstrip the new capacity? Grant mentions none of this. Nor, apparently, does the Business for Social Responsibility Conference, nor Barron’s nor Chief Executive. All simply keep on keeping on with “newspeak”—criminality dressed up in the language of empathy and social responsibility that we’ve come to expect. Forget shame. Forget the truth. All is hype and advertising and the most voracious wolves still, after all these years, safe in their sheep’s clothing, still able to persuade the majority of the sheep that steely fur is wool, that rapacious eyes are loving, that razor teeth are not for slashing and tearing but only for nuzzling.

And the lambs, ah, the lambs are silent.

Lawrence DiStasi