Tuesday, July 10. 2012
It's rather interesting, given how much lip service we give to business, how few notable businessmen have been elected president. (You do find more Senators, especially on the chronically underfinanced Democratic side where self-financed candidates are appreciated.) The most successful businessman of any president in the last 150 years was Herbert Hoover, who presided over the nation's greatest depression. About the only others to come remotely close are Jimmy Carter and the two Bushes, which add up to three more recessions plus the current depression. Three of those were one-termers, and the fourth wasn't exactly elected in the first place. The Bushes, of course, came from a political dynasty where their businesses were largely subsidized by their political friends -- all the more reason to discount them.
So the evidence suggests that successful businessmen haven't been at all successful as presidents: that the skill sets are different, as is the measure of success. Krugman barely scratches at the surface as to why this is. The second Bush, more with his Harvard MBA than due to his failed businesses, indicates how deep the downside of electing a businessman can be. After all, by his own lights Bush was a fabulously successful president -- albeit only for his class, but then that's all a CEO is expected to do. He cut taxes on the rich, while propping the economy up through massive fiscal stimulus, which is to say debt; he all but stopped antitrust enforcement, allowing the economy to become ever more cartellized; he planted lobbyists in every federal department, drastically curtailing regulation; he tipped the scales of justice, making it harder for people to sue corporations, making bankruptcy more difficult, and packing the courts with cronies; he outsourced federal jobs, weakening the civil service and creating whole new classes of patronage. He did a lot more bad stuff, like starting two major wars and sticking his successor with them, but that's beyond his business training. During his watch the very rich -- the kind of people who sponsor politicians like himself -- did quite well, while everyone else got screwed.
Romney worked in a different field of business -- private equity capital -- and made a lot more money on the way, but he bears a lot of resemblance to Bush, starting with a political-pedigree name that opened doors in business and offered the promise that some day he would repay those favors in politics. How much he actually contributed to Bain Capital's bottom line isn't clear, but there is no reason to think he broke any new ground in the business. The basic scheme of private equity is straightforward: you look for businesses, preferably undervalued but with a reliable cash flow, with owners who want to cash out; you cash them out by putting up a small amount of your own money and getting the company to borrow the rest; you squeeze the company, selling off assets, cutting costs including wages and jobs, and paying yourself huge management (often paid for with more debt); then you restructure and cash out, or if you were too efficient at squeezing, go bankrupt. Bain was one of dozens of outfits following this formula, and having a telegenic figurehead with a recognizable name must have aided the con. (Indeed, the elder Bush went to work for Carlyle Group after losing the 1992 election, doing the same sort of thing with more emphasis on military contracts and Saudi cash, the sort of graft he was most expert in.)
Krugman is right that private equity is an unsavory business: one that makes nothing but profits stripped from company assets, most notably the company's credit rating. One might expect Romney to ruin the federal government the same way Bain Capital ruined its acquisition companies, a frightful thought. But that's pretty much exactly the way Bush ran the government: I wouldn't want to go on record denying that Romney could add anything worse, but the test of his style of business management has already been made, and we are living with the results.
Aside from Hoover, the examples of businessman-presidents are all recent, suggesting that we've become more benign in our view of businessmen only recently -- since, I would say, the Cold War invested so much effort in lionizing capitalism and in burying the working class. Most recent is the popularity of the term "job creator" as a synonym for businessman, even though every private sector pink slip in history was originated by business management: "job destructor" would be just as accurate, although really the employment rate is determined more by the government's macroeconomic policy than by anything businessmen do. All businesses do is seek to maximize profits under the prevailing circumstances, boom or bust.
What's been forgotten is that throughout American history most people were conscious that businesses profited at their expense. Krugman looks back on Andrew Carnegie as the principal builder of the US steel industry, but more accurately he was the architect of the trust that monopolized that industry, and during his lifetime he was better known for a strikebreaking massacre than for his libraries. Henry Ford, even more so, was a guy who built things, but he was clearly not the sort you would want to place the public trust with -- he was another infamous strikebreaker, and perhaps America's most notorious anti-semite. "Robber baron" wasn't exactly a term of endearment.
We haven't completely lost that sense of the villainy at the heart of so many businesses, and it is making a comeback. One person who's paving the way is Mitt Romney, who's become emblematic of one of the worst strains of capitalism in the world today.
By the way, a big story here in Wichita is that what used to be Beech Aircraft is being sold to the Chinese. Beech was founded in Wichita, and run locally until 1994 when the Beech family sold out to Raytheon, a big defense contracting firm based near Boston. In 2006, Raytheon cashed out, selling Beech and Hawker to a group of private equity investers led by Goldman Sachs and Onex, to form an independent company saddled with a ton of debt. Hawker Beechcraft filed for bankruptcy in May of this year, and now has an offer to buy what's left by a Chinese company, Superior Aviation Beijing. There's no reason to think the company wouldn't be viable without all the debt the private equity companies piled on (and paid themselves with). This doesn't look good for the workers, who have already paid time and again for each change of ownership. Even if the Chinese keep the plants open here in Wichita, they will transfer technology and know-how back home, undercutting our local industry.
Elsewhere Krugman points to this TPM article on Romney fundraisers (in the mansions of Ronald O. Perelman, Clifford Sobel, and David Koch), which in turn points to a Los Angeles Times article, including this quote:
Interesting how Romney manages to tie together so many strands of the ruling class in this country, dragging them out in public so all can see.
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