Friday, December 16, 2011

Washington Post Columnist George Will Praises Capitalism as “Creative Destruction” – The Creative Part is Creating Massive Wealth for a Few

The Destruction – The Economic Lives of Employees

The latest outrage of the Washington Post’s Conservative columnist George Will (we have to say “latest” because Conservatives are always and continually outraged by something) is an attack by Newt Gingrich on Mitt’s Romney’s gains from buying companies when he worked for Bain Capital.

Gingrich, when asked about Romney’s cheeky judgment, replied: “I would just say that if Governor Romney would like to give back all the money he’s earned from bankrupting companies and laying off employees over his years at Bain Capital, that I would be glad to listen to him.”

Now let’s set the record straight as best we can.  At Bain Capital Mr. Romney was engaged in leveraged buyouts.  This means his company put in a small amount of equity and borrowed huge amounts of money to buy companies they felt were undervalued.  In some cases the companies did well and earned Mr. Romney and his associates tens of millions of dollars. 

In some cases the companies did not do well, but Mr. Romney and his associates still earned tens of millions of dollars (the debt being the obligation of the companies, not Mr. Romney).  No one knows the extent of the income for Mr. Romney, because a lot of the information is not public, but it is well documented that in some cases Mr. Romney made a huge amount of money and the companies did not do well and fired thousands of employees.

To Mr. Will all of this is basic capitalism.

Romney, while at Bain, performed the essential social function of connecting investment resources with opportunities. Firms such as Bain are indispensable for wealth creation, which often involves taking over badly run companies, shedding dead weight and thereby liberating remaining elements that add value. The process, like surgery, can be lifesaving. And like surgery, society would rather benefit from it than watch it.

And he goes to famed economist Joseph Schumpeter

What the economist Joseph Schumpeter called capitalism’s “creative destruction”

The Dismal Political Economist does not disagree with the basic premise, that in order for companies to grow and prosper sometimes new ownership must come in and reinvigorate the company, and in many cases this may well mean downsizing. Management must be free to make the employment decision, and when it is not we have a situation like Europe, where strict regulation to prevent firms from laying off workers results in workers not being hired in the first place.

 But where Mr. Will glories in this process, referring to the employees as "dead weight" the rest of us see them as real people who are losing their jobs through no fault of their own and we have real concerns about the people negatively affected when this happens.  Mr. Will, from his seat at the table of the privaledged simply cannot see and does not care about the destruction of lives from the process he so energetically praises.

In a decent and humane society, government and business programs like having unemployment compensation high enough and long enough to maintain a basic lifestyle, continuation of health care benefits, re-training if necessary, a high level of severance and outright financial support will be provided to the men and women whose lives are severely disrupted  by the “creative destruction” of capitalism.  But to Mr. Will and his kind, there should be no such thing.  That would be “liberalism” and it would destroy the incentives for the employee and his family to get back to work.  To people like Mr. Will these programs just support a bunch of "dead weight".

No where in Mr. Will’s defense of Mr. Romney’s business practices does he even note the victims of “creative destruction”, to him they are irrelevant and invisible.  Mr. Will is important enough to someday have a biographer, and one can only hope that the investigations into his life will reveal how an individual of obvious education and intelligence can live a life without, apparently, a shred of human decency and compassion. Unfortunately that explanation will not help the millions whose lives are financially devasted by the implementation of policy supported by Mr. Will and his fellow Conservatives.

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