Tom Power Commentary: ” ‘Job Creators’ Old and New”

George Orwell tried to warn us about political “doublespeak:” the continued abuse of language for manipulative purposes by unscrupulous politicians.
In this political season, in which the airwaves are a continuous flood of partisan political advertising, there is no escaping from such doublespeak.
One of the most ingenious examples of that in this political season has been the renaming of the very rich among us as our “job creators.” This verbal contortionism turns what in a democracy might otherwise be a somewhat troubling curiosity that could evoke envy or hostility, namely the rich, into a central economic player without whom all of the rest of us would be unemployed and poor. That verbal jujitsu also simultaneously explains why some folks are very rich: Their wealth was the appropriate reward for providing all of the rest of us (or at least 92 percent of us) with jobs.
This ingenious doublespeak came just in time for the presidential candidacy of multi-millionaire Mitt Romney. His wealth is offered as a sign that he knows the ins and outs of the economy and is one of the nation’s leading “job creators.” In the midst of the lingering Great Recession, with unemployment hovering around 8 percent, who else but one of these “job creators” would we want at the nation’s helm?
One of the reasons that this particular example of doublespeak has passed the laugh test is that in our nation’s past some of the largest and most enduring fortunes were associated with industrial ventures that did create tens of thousands of jobs: Ford produced cars; Carnegie, steel; the Rockefellers, oil; the Edison companies electrified the nation, and so on.
But beginning in the 1970s, our economy began a dramatic shift away from building the basic manufacturing infrastructure that produced goods and the business organizations that delivered services to satisfy our needs and desires. Instead, more and more of our skill and talent and productive energy turned to the buying and selling of ownership interests in existing productive capacity rather than building new capacity. We turned increasingly to buying and selling financial instruments: stock shares, industrial bonds, mortgages, currency, commodities futures, and the like. The financial sector of our economy exploded as more and more complex and risky financial maneuvers were marketed at great profit.
One popular financial maneuver was the leveraged buyout where a group pooled a small amount of their own money and then borrowed a much larger amount of money to purchase controlling interest in an existing company. Once under the control of the new investors, the company then took on that new debt and the investors took out their new equity in lump sum dividends or by tapping the company’s cash flow over the next several years. The company was then left to fend for itself, burdened by substantial interest payments on the newly acquired debt. Those who engineered the leveraged buyout made enormous returns on the small amount of their own money they had invested. The target company, however, might or might not survive the raid on its wealth.
Note the difference here between a small group of investors putting their own equity into a new company that aims to produce a new product or produce an existing product at a lower cost or of higher quality. Such equity investors are adding to the nation’s productive capacity. In contrast, leveraged buyouts often are corporate raids aimed at looting the wealth and cash flow of existing productive companies, often leaving them worse off.
One could dramatize the differences in American capitalism in the middle of the 20th century and that of today by focusing on the business experience of Mitt Romney and that of his father, George Romney. Both made a lot of money, both went on to serve as Republican governors of important states, Massachusetts and Michigan, and both launched presidential campaign bids.
But they made their money in different ways. Mitt’s father, George, became president and chairman of American Motors Company in the early 1950s. At the time, American Motors Company was the smaller stepchild of the U.S. “big three” automakers and ultimately was absorbed by Chrysler. American Motors was the first Detroit automaker to market fuel efficient compact cars. George Romney famously mocked the Big Three automakers as “gas-guzzling dinosaurs.” George Romney manufactured automobiles while paying workers a middle-class wage that allowed auto workers to actually buy the cars they produced. Those jobs and that pay both helped build our prosperity and kept the level of inequality in United States relatively low.
Mitt Romney, on the other hand, made his money helping run Bain Capital which focused on buying and selling existing companies. Bain often made use of the leveraged buyout tools that allowed Bain to both earn very large fees and use company debt to finance the payment of dividends to Bain Capital. Mitt’s experience was entirely in the financial sector of the economy that wheels and deals in the ownership of existing assets.
Of course, the implicit criticism or unease in these two descriptions of an earlier and our current capitalist economy may simply represent nostalgia and difficulty in understanding the modern financial economy. On the other hand, no one understood the modern financial economy enough to keep us from almost driving over the financial cliff in 2008 at a huge cost to the American economy, workers, and tax payers. It is also true that no one has shown that they understand that modern financial economy sufficiently to help us climb out of the huge hole the financial meltdown put us in.
Although there are still many drunks out there who think that “a nip from the dog that bit you” is the way to recover from a hangover, I would not recommend that approach when choosing a leader for this county come November.


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