January 2012 Archives

The GOP's Assault Upon Economic Reality

           The evidence continues to mount that the GOP's insistent demands for still further reductions in federal, state and local spending  have exacerbated and prolonged the current recession.  In response, advocates  for austerity measures have now begin to argue that demands  for increased government programs to lift the economy and to reign in abusive business practices are nothing less than an assault upon free enterprise itself.

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        Former New Hampshire U.S. Senator John Sununu is a case in point. In an   opinion column in today's Boston Globe ( "Apple, not manufacturing, is America's future," January 30, 2011), Sununu showed that he is oblivious to the daily economic struggle of a majority of Americans who must grapple with high unemployment,  declining wages, mortgage foreclosures, lack of access to affordable medical insurance, loss of retirement savings and diminished  prospects for themselves, their children and their grandchildren.      

         In his column, Sununu argued that we should not lament the loss of manufacturing. In order to support the proposition that corporations like Apple represent the future for America, Sununu had to ignore all of the evidence to the contrary. Previously for example, Charles Duhigg and Keith Bradsher reported in the New York Times ("How the U.S. Lost out on iPhone Work," January 21, 2012) that nearly all of the 70 million iPhones, 30 million iPads and 59 million other assorted products sold by Apple sold last year were manufactured overseas, primarily in China by third-party vendors with  whom Apple contracts for services and products. 

         One facility alone, Foxconn, employed 230,000 workers, who often worked six days a week, in shifts that lasted 12 hours per day. More than a quarter of Foxconn's work force was reported to live in company barracks; many workers earned less than $17 a day; and the intolerable working conditions within its facilities have led to suicides and explosions from aluminum dust that killed and injured scores of workers. By contrast, Apple employs only 43,000 people in the United States and 20,000 overseas.

        As a result of its exploitation of these workers, the New York Times article noted that Apple made a profit of $400,000 per each of it's actual employees, a sum greater than that made  by Goldman Sachs, Exxon Mobil and Google.  In response to that data, one current Apple executive stated, We sell iPhones in over a hundred countries, We don't have an obligation to solve America's problems. Our only obligation is making the best product possible."

       Sununu's enthusiasm for Apple's business model is expansive: "In just ten years, the market value of Apple has grown from $7 billion to over $400 billion. The return for mutual funds and pension funds owning the stock have been outstanding, and thousands of employees have earned financial security." That enthusiasm, however, is not tempered by any recognition that, for millions of middle class Americans who do not directly own Apple stocks, the stock market has been an unmitigated disaster.

         CNN News reported that, on September 29, 2008, the Dow Jones lost nearly 778 points, in the biggest single-day point loss ever, after the GOP House rejected the government's $700 billion bank bailout plan. The day's loss totaled approximately $1.2 trillion in market value, the first post-$1 trillion day ever recorded, according to the Dow Jones Wilshire 5000, the broadest measure of the stock market. As a result, many middle income investors lost their life savings and have never recovered.

         Apple's predatory business practices and the out-sourcing of U.S. manufacturing must be viewed in the context of the American economy as a whole.  Numerous studies report that more than 47 million Americans, including 9 million children, do not have health insurance. A study by Harvard University Medical School in 2009 attributed that the lack of medical insurance to about 45,000 deaths per year in the U.S.
 
        Researchers for the U.S. Department of Agriculture in 2010 reported that 17.2 million households - or 14.5 % of all households in the United States - were "food insecure" and that in one-third of those households "normal eating patterns were disrupted." In 3.9 million of those households, children went hungry.

       As the real unemployment rate climbed to approximately 20 million Americans in 2011, another 2.6 million Americans, according to the Census Bureau, descended into poverty. Almost simultaneously, the World Bank observed that the United States had a higher level of income inequality than Canada, South Korean or any country in Europe with the exception of Turkey.

       In October of last year, the Internal Revenue Service and the Congressional Budget Office released findings which showed that the top 1% of the American population continued to receive a disproportionate share of the country's wealth. In 2009, the 1.4 million who belong to the top 1% made an average of $1 million dollars in 2009. Further, since 1979, the share of U.S. Income enjoyed by the top 1% has increased from 9.18% to 17.9% as of 2009, or more than the entire bottom half of the U.S. population.

       Almost simultaneously, Forbes magazine reported that, as of November, 2011, the four hundred richest Americans enjoyed a combined worth of $1.53 trillion, which figure had increased from $1.37 trillion over the previous year. Their combined wealth was thus approximately equivalent to the GDP of Canada.

        Sununu does correctly note a shortfall of trained U.S. works, including scientists and engineers. He, however, refuses to recognize that the same austerity measures that he and other GOP leaders have advocated have caused the lay-offs of thousands of public school teachers around the United States and forced state governments to cut back significantly their investments in pubic higher education.

       Today's Republican Party has become an apologist  for an economic status-quo that is stacked against ordinary Americans The net effect of the extraordinary concentration of wealth and power has been that the decisions and predilections of fewer and fewer individuals now determine the outcomes in the American economy while the overwhelming majority of Americans have little ability to influence macro-economic trends or economic and political policies.

        In the alternate economic universe that so many GOP members inhabit,  the enormous wealth now enjoyed by a mere  1% of the population should be an object of public celebration rather than the focus of civic opprobrium or class envy. As Erasmus once observed, "In the land of the blind, the one-eyed man is king."   

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Is Capitalism Worth Saving?


       An article by Erin Ailworth in today's Boston Sunday Globe ("In China, opportunity is in the air"') as well as two stories that appeared  last week  in the New York Times about the  use of third-party vendors in China by Apple corporation reveal the magnitude of this country's economic problems. All of the platitudes about the need to build a knowledge-based economy can't counter the evidence that a huge chunk our adult and adolescent population can't read, compute, or understand scientific reasoning well enough to cope with the technological and information demands of this century. Hence, they will never be a part of a knowledge-based economy.


tumblr_kxte5fALi31qb50y9o1_400       For that very reason, the need to invest scare funds to improve public education for future generations has never been greater. Sadly, however, the retrenchment of funding at the state and local levels - fueled by a mistaken and short-sighted insistence upon austerity in the public sector - has only exacerbated the problem.

      In the long run, of course, the migration of jobs to China and other third-world countries will prove self-defeating: An increasingly impoverished middle class here in the U.S. will eventually be unable to purchase the high-end goods that out-soured manufacturers such as Apple  and  other U.S. based corporations wish to sell to domestic consumers. Thus, over time, as economic inequality continues to grow and purchasing power erodes, the life-styles of perhaps a majority of Americans will be reduced to that of most Chinese and Indians today.

      The problem is that, by and large, entrepreneurs and the boards of directors of corporations do not care about the long-run consequences of their behaviors, no matter how ill-advised self-defeating. Perhaps they have accepted, accepted as  a corporate credo, to blithely, John Maynard Keynes' observation that, in the long-run we will all be dead.

      Their sole goal is to maximize profits to please their shareholders. Given a mind set that sincerely believes that the pursuit of self-interest is somehow a public good, they remain oblivious to problems such as poverty,  pollution or basic principles of social justice.

      Left to their own devices, entrepreneurs and corporations often engage in practices that have harmful consequences to the public, notwithstanding the fact that their activities are heavily subsidized by taxpayer money - e.g. roads, trains, airports, intangible  infrastructure such as employee training and R&D, favorable tax policies,  legal standing, and legal protection of trade secrets and intellectual property. They also know that if they are unable to escape the ultimate consequences of their poor decisions, if all else fails, they can always enter into bankruptcy and re-emerge as a new corporate persona

      The manufacturing crisis in the U.S. has a long history. The migration of American manufacturing began in earnest with the passage of the Taft-Hartley Act. Shortly thereafter, Southern states out-bid one another in a collective race to the bottom as they rushed to enact "right-to-work" laws that destroyed families and unions and impoverished manufacturing in New England and the Mid-West.

      Today, out-sourcing works even better because corporations such as Boston-Power, Inc., Apple and other corporations can avoid the expense of employing a domestic labor force and can thus be free of all government regulations that concern safety conditions, workers' rights, and wage and hour laws and pensions.

      The kind of short-sighted, predatory capitalism described in the Globe and in the Times, coupled  its exploitation of vulnerable workers in the third world whose governments and the elites who control those governments  are unwilling to protect them, appears to be the favored model of twenty-first century capitalism.

      It  is reminiscent of the kind of manufacturing capitalism that was widely practiced in Lowell, Massachusetts at the beginning of the Industrial Revolution in  the 19th century. The difference, however, is that the descendants of those exploited workers were able to move on and up for two  important reasons:  the ability of workers to unionize and to demand higher wages and better working conditions; and the emergence of a progressive political tradition that, through concerted political efforts, brought an end the worst vestiges of the First Gilded Age, including monopoly capitalism, Social Darwinism and laissez-faire.

      Unfortunately, the social mobility enjoyed by our grandparents and even our great grandparents will be alien to our children and grandchildren unless the apathy of citizens can be overcome and the enormous wealth and power now wielded by the few and wealthy to shape opinions and political consciousness can be countered.

       There are no easy solutions to this crisis, but the purported "laws of economics" are not to be confused with the laws of physics. Economic systems do not operate in a vacuum and there is nothing inevitable about the operation of economic trends. Economic systems and political systems are the products of human imagination and ideology as they are shaped by historical forces. Economic theory itself is the step-child of political theory.

      Capitalism as an economic system emerged only slowly as result of the disintegration of the feudal, agrarian economic system and the development of trade and banking in the late Middle Ages and the Renaissance. The development and justification for it as a model was provided by the political ideas of John Locke, David Hume and Adam Smith.  

      Because there is nothing inevitable about economic trends and developments, they can be countered by intelligent and carefully crafted monetary and fiscal policies, and intelligent legislation. In extremis, even the "laws of economics" - as articulated by the proponents of classical, orthodox liberal economic theory - can be suspended by operation of law, as was required during World Wars I and II.

     All of the empirical evidence suggests that out-sourcing, deregulation and a commitment to the myth of "free-trade" have been major contributing factors to the loss of manufacturing, stagnating wages and the growing impoverishment of the former middle class. The model of the market economy, because of these practices, is no longer responsive to the political system that was responsible for creating and nurturing capitalism.

     The critical need is to restore the proper balance between the pursuit of wealth as a purely private activity and the public interest. In a democracy, citizens have the capacity and the right to imagine and to create new political, economic and social structures and arrangements that are rooted in a shared commitment to social justice and a recognition of the mutual obligations that we owe to one another as members of a political community. By law, policies can designed and imposed to protect the rights of workers to join unions,  to create an industrial policy, to re-impose selective tariffs (as the Chinese now do), to enact a tax code that punishes out-sourcing and domestic dis-investment and to provide incentives for job-creation and domestic re-investment.

       All that we lack is the commitment - and a sense of urgency.  

 

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An Edsel or a Fusion?

     The Edsel, named after Henry Ford's son, was an automobile that was manufactured by the Ford Motor Company during the later 1950s. The Edsel, because rumors had circulated  that it would be an entirely new kind of car, quickly disappointed consumers. It was viewed as stodgy and unstylish, and it was designed with the same engineering and bodywork as most other Ford models. Hence, it never became a popular model and it sold poorly. As a result, the Ford Motor Company lost millions of dollars on the Edsel's development, manufacture, and marketing. Today, the name "Edsel" is synonymous with failure.

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           Fifty-two years later, the Ford Fusion has become a top-selling automobile. Stylish, sleek, relatively inexpensive, the 2010 model was awarded the Motor Trend Car of the Year and the hybrid version of the Fusion was recognized as the 2010 North American Car of the Year Award.  The new 20013 Ford Fusion represents the second generation of the car,  a thoroughly re-designed  model that was unveiled at the 2012 North American International Auto Show. Since its introduction in 2006, the Fusion has sold over one million vehicles.

           Both of these automobiles have been manufactured by the same company, but the contrast could not be greater. The Edsel illustrates the kind of a poorly designed,  poorly-performing vehicle  that was the result of arrogant and unimaginative corporate groupthink and planning. By contrast, the Fusion is emblematic of the future of automobile manufacturing, based on a desire to provide consumers with an extremely dependable, fuel efficient and attractive alternative to European and Japanese manufactured cars.      

          In some important ways, the Ford Motor Company, and its experiences with these two very different automobiles, serves as a  metaphor for the current state of American politics. The GOP today - as exemplified by their Presidential candidates -  is dominated by those who profess a nostalgia for the America of the 1950s. They express a preference for limited government, low taxes and a  truculent foreign policy .Their nostalgia, however, is not reality-based..

          In the 1950s, economic inequality was significantly lower than today, median incomes, in terms of real purchasing power, higher, and the share of taxes paid by corporations and wealthy Americans was greater. Robert H. Frank, a Cornell University economist, reported in a New York Times column ["Income Inequality: Too Big to Ignore," October 16, 2010] that, during the decades after World War II, incomes in the United States rose rapidly and at about the same rate - approximately 3 percent a year - for employees at all income levels. As a consequence, America had an economically dynamic middle class; its roads and bridges were well maintained; and Americans as a whole were optimistic as investments in infrastructure and public goods increased. In that era of relative economic equality, Frank noted, that public support for infrastructure - paid for by taxes - enjoyed  wide support.

            By contrast, Frank notes that, during the past three decades, as the economy has grown much more slowly, America's  infrastructure has fallen into grave disrepair. Simultaneously, all significant income growth has been concentrated at the top of the scale with the largest share of total income going to that top 1 percent of earners.
       
            It is also important to remember that President Eisenhower, despite the bellicosity of John Foster Dulles and other members of the GOP's lunatic fringe, was able to disengage this country from the Korean War. He was also able to keep the United States out of any major confrontation  with the Soviet Union by a combination of diplomacy, some-ill considered covert action that later had disastrous consequences, and the use of concerted multi-lateral alliances such as NATO.            

          At the end of his second term, President Eisenhower warned against an ever-growing military-industrial complex and observed that, "Every gun that is made, every warship launched, every rocket fired signifies in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. This is not a way of life at all in any true sense. Under the clouds of war, it is humanity hanging on a cross of iron."

          Because of their inability to apply the facts of the past to the needs of the present, today's GOP have become the Edsel of American politics. If President Obama and the Democratic Party want to become the future model of  American politics  - the Fusion, as it were - they must not be intimidated by the rhetoric that endorses austerity, trickle-down economics and a passive role for government in the face of increasing misery.  
    
        The Oxford University philosopher, Thomas Hill Green, challenged the conventional wisdom of his day - classical liberalism with its laissez-faire prescriptions - with the argument that, in a democracy, government must be used as a positive instrument for the public good. Green's advocacy of an activist government, his disavowal of extreme individualism and his communitarian politics were subsequently endorsed by A.D. Lindsay who insisted that the purpose of the state is "to serve the community and in that service make it more of a community."

       "Modern liberalism" as articulated by Green and Lindsay, if embraced by Democrats, can provide a firm foundation for a creation of a new and resilient progressive tradition.  It would also offer tangible evidence that, even in politics,  it is still possible to learn from past mistakes,  triumph over political inertia, and  offer a coherent vision that can persuade a majority of citizens that their greatest needs will not remain unmet.     

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The Trivialization of U.S. Politics

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            Newt Gingrich has won the South Carolina GOP primary. Why should anyone care?

            The coverage of the GOP presidential debates, the caucus in Iowa, and the Republican primaries in New Hampshire and South Carolina offer conclusive proof that our political system is broken and perhaps near death. While attention was focused upon Newt Gingrich's truculence, Mitt Romney's reluctance to release his income tax returns, Rick Santorum's willingness to permit the state to invade a woman's uterus, and Ron Paul's bizarre fixation on the gold standard, our political culture continues to unravel. 

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          A study by the Central Intelligence Agency reports that the U.S. ranks 50 out of 221 countries surveyed for life expectancy. The average life expectancy of 78.37 years places the U.S. below all Western European countries and is only slightly higher than Cyprus, Panama and Costa Rica.

       Numerous studies report that more than 47 million Americans, including 9 million children, do not have health insurance. A study by Harvard University Medical School in 2009 attributed that the lack of medical insurance to about 45,000 deaths per year in the U.S.

        Researchers for the U.S. Department of Agriculture in 2010 reported that 17.2 million households - or 14.5 % of all households in the United States - were "food insecure" and that in one-third of those households "normal eating patterns were disrupted." In 3.9 million of those households, children went hungry.

       As the real unemployment rate climbed to approximately 20 million Americans in 2011, another 2.6 million Americans, according to the Census Bureau, descended into poverty. Almost simultaneously, the World Bank observed that the United States had a higher level of income inequality than Canada, South Korean or any country in Europe with exception Turkey. 

       In October of last year, the Internal Revenue Service and the Congressional Budget Office released findings which showed that the top 1% of the American population continued to receive a disproportionate share of the country's wealth. In 2009, the 1.4 million who belong to the top 1% made an average of $1 million dollars in 2009. Further, since 1979, the share of U.S. Income enjoyed by the top 1% has increased from 9.18% to 17.9% as of 2009, or more than the entire bottom half of the U.S. population.

       Perhaps as unsettling, Forbes magazine reported that, as of November, 2011, the four hundred richest Americans enjoyed a combined worth of $1.53 trillion, which figure had increased from $1.37 trillion over the previous year. Their combined wealth was thus approximately equivalent to the GDP of Canada.

      The news about the current plight of American education is equally disturbing. Children in twelve European counties rank higher in mathematics literacy; and in eight European countries, children were ranked as possessing better scientific literacy than their peers in the U.S. The 2003 results from the OECD's Programme for International Student Assessment (PISA) documented the comparatively poor performance in mathematical proficiency, on average, of fifteen year olds in the United States. "Out of 30 OECD countries which participated in PISA 2003, the average performance for the United States was statistically higher only than that of five countries (Portugal, Italy, Greece, Mexico and Turkey) and statistically lower than that of twenty countries."

      As of 2006, the average adolescent in European Union countries completed 17.5 years of education, versus his counterpart in the United States who, on average, completed only 16.5 years of education. In nine European countries, more young people entered university education than in the U.S. and, as of 2006, the United States slipped from first to seventh in the number adults aged 24-35 who have received a bachelor's degree, as opposed to Canada (53 percent), Japan (52 percent), Sweden (42 percent), Belgium (41 percent) and Ireland (40 percent).

      The totality of the evidence suggests that American education, at almost every level, is experiencing a profound crisis and has failed to create a literate, educated citizenry. For example, the National Adult Literacy Survey found that over forty million Americans age 16 and older have significant literacy deficiencies. In addition, more than 20 percent of Americans read at or below a fifth grade level which is far below the level needed to earn a living wage. The data with respect to scientific literacy is also disquieting. Americans in general do not understand what molecules are, less than one third can identify DNA as a key to heredity, and one adult in five thinks that the Sun revolves around the Earth.

       These critical concerns signify the existence of severe, intractable structural problems that, if not addressed, will ultimately cause our political system to collapse. How many questions about these issues were asked by the media and their pundits during the GOP presidential debates? Why were the GOP candidates themselves given carte blanche to mouth sonorous platitudes about the virtues of unregulated free enterprise and the need to roll back an already meager safety net, with suggestions that, if food stamps were abolished and child labor laws suspended, perhaps the poor would learn the value of hard work? 

       Leo Strauss, a political philosopher in the European conservative tradition, observed that the proper object of political theory and inquiry is to discover the Truth of the human condition. Measured by that standard, what passes for a discussion of serious issues and ideas in American politics is woefully deficient. Our politics has been reduced to the equivalent of a food fight in which the superficial - who's up? who's down? - has become the standard by which our leaders are chosen.

      Who is responsible for the trivialization of American politics? Undoubtedly media and the enormous infusion of money from corporations - with their legions of lobbyists and super PACs sanctioned by the Citizens United case - have played a large role in the decline of meaningful political discourse, but they are not alone.

       Who else bears responsibility? We all do. By our apathy, our lack of active participation in the political system, our unwillingness to challenge the lunatic fringe, and our tolerance of political lies, we have allowed the democracy to which we claim allegiance to be gamed and stolen.

       Howard Zinn once warned that, "If those in charge of our society - politicians, corporate executives, and owners of press and television - can dominate our ideas, they will be secure in their power.They will not need soldiers patrolling the streets. We will control ourselves." His prophecy is now becoming our nightmare.          

 

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Romney's Bain And Creative Destruction

       In the past few weeks since the end of the GOP Iowa Presidential caucus, Mitt Romney's stewardship of Bain Capital has again come under question. GOP Presidential candidates Rick Perry and Newt Gingrich, among others, have characterized Bain Capital, in a phrase once popularized by former Clinton Secretary of Labor Robert Reich, as vulture capitalism that destroyed thousands of American jobs while reaping fortunes for predatory investors. In response, Romney and his vast army of corporate defenders, apologists and spin-doctors have denied the allegations and piously claimed that an attack upon either Bain Capital or venture capitalism is nothing less than an attack upon the free enterprise system itself.


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       Bain Capital was  founded in 1984 by three partners from the consulting firm Bain &Company, one of whom was Mitt Romney. Today, Bain Capital's website describes the company as "one of the world's leading private, alternative asset management firms whose affiliates manage approximately $66 billion. Our principals are the largest single investor in each of Bain Capital's funds, which aligns the interests of the firm with our investors and the long-term objectives of the management teams"    

       Especially in its early years as a start-up when Romney was actively involved, Bain Capital functioned a  private venture capital firm that profited by acquiring businesses through highly leveraged purchases with equity investor money and thereafter reorganizing the companies, often chopping them up into smaller components and selling-off or outsourcing the components. Bain Capital personified the model of "strip and flip" capitalism that emerged  Reagan era.

      According to a New York Post article by John Kosman ("Romney's past is more a working class zero,"February 20, 2011), "Bain Capital bought companies and often increased short-term earnings so those businesses could then borrow enormous amounts of money. That borrowed money was used to pay Bain dividends. Then those businesses needed to maintain that high level of earnings to pay their debts." Kosman contends that, during his 15 years as head of Bain, Romney "made fortunes by bankrupting five profitable businesses that ended up firing thousands of workers."
 
          Among the troubling examples that Kosman notes:

          (1)   Bain orchestrated a 1994 leveraged buyout of Baxter International's medical testing division and renamed it Dade Behring). The company sold machines and reagents to laboratories. Bain then reduced Dade's research and development spending to 6 to 7% of sales, at a time when its competitors invested between 10 and 15 % to R&D. In June 1999, Dade then used the pledged the savings as collateral to borrow an additional $421 million. Next, Dade used $365 million from the loan to purchase shares from its owners, who were then able to enjoy a 4.3 times return on their investment. In August 2002, Dade filed for bankruptcy.

         (2)   In 1988 Bain placed a  $5 million down payment to purchase Stage Stores, a privately held company, and in the mid 1990s, after an successful IPO, collected  $100 million from stock purchases. The company entered  bankruptcy in 2000.

        (3)   In 1992, Bain Capital acquired American Pad & Paper (AMPAD), invested $5 million, and collected $100 million from dividends. The business filed for bankruptcy in 2000.                                                                                                                                                                                                                                                      (4)   In 1993, Bain invested $60 million to purchase GS Industries, and earned $65 million from dividends. GS entered bankruptcy in 2001

       (5)   In 1997, Bain invested $46 million to acquire Details, and earned $93 million from stock sales. The company was bankrupt by 2003.

Kosman concluded that "Romney's Bain invested 22 percent of the money it raised from 1987-95 in these five businesses, making a $578 million profit."

        In a recent article, David Wren of the Myrtle Beach Sun News ("Romney's Bain made millions as S.C. steelmaker went bankrupt," January 14, 2012)  reports that Bain's involvement with GS Industries was even worse than Kosman reported. Under Mitt Romney's stewardship in the 1990s, Bain Capital "more than doubled its money on GS Industries Inc. - the former parent company of Georgetown Steel... even as the steel manufacturer went on to cut more than 1,750 jobs, shuttered a division that had been around for 100 years and eventually sank into bankruptcy." Wren further notes that, although Bain Capita spent $24.5 million to acquire GS Industries in 1993, by the end of that decade its partners had earned $58.4 million in profits from its investment, and had "earned multimillion-dollar dividends from GS Industries and annual management fees of about $900,000. But by the time GS Industries filed for bankruptcy protection in 2001, it owed $553.9 million in debts against assets valued at $395.2 million."

      To counter these examples of corporate plundering that resulted in the destruction of thousands of jobs, Romney and his defenders invoke the concept of creative destruction, which they argue is a dynamic process central to capitalism. Creative destruction, according to the mythology, involves relentless competition as a result of which new business are created, existing businesses are changed, reorganized or closed based upon their ability to compete, innovate, adapt, and to bring new products to the marketplace. Hence, in the long run, according to its advocates, the free enterprise system rewards the winners, punishes the losers, and creates a more efficient, productive and prosperous economy for everyone.

        As one example of the innovative and creative side of this process, Romney cites Staples as a successful business that was created by Bain's start-up capital. Staples is a nationwide chain that supplies office products that, since its inception, has continuously increased its market share. Romney claims credit for the 100,000 or so jobs he contends Bain's investment created.  
     
        The argument in favor creative destruction, however, is not persuasive since the evidence contradicts the theory. The past decades show ever increasingly consolidation among businesses and decreasing domestic competition. The continued atrophy of businesses in the face of low-cost, often state-subsidized foreign competition, especially among those that actually manufacture  goods, has led to the attendant loss of millions of well-paying jobs. The demands of the financial sector and quest for immediate short-term profits irrespective of the long-term consequences have now become the proverbial tails that wag the dog. As a consequence, economic inequality has increased, social mobility declined, and the middle class has begun its descent into penury. Bain Capital and venture capital in general have been instrumental as facilitators of this invidious process.

       Staples is precisely a case in point. Its "success" has led to the demise of perhaps thousands of small, often family- operated paper goods and stationary stores across the United States that, for generations, provided a comfortable living for families and enabled owners and their children to realize the American Dream. Staples has replaced these jobs and the income provided to these family-run business with thousands of minimum wage jobs that provide few, if any, benefits and no job security.

        The activities of Bain Capital during the decades since its inception demonstrate the metamorphosis of American capitalism during the last decades of the twentieth century and the first decade of this new century. The classical market economy model which theorized a vibrant, decentralized system of freely competing small business that created new opportunities, new products and new jobs has been replaced by a new paradigm in which largely unregulated monopolies and oligopolies have been permitted to plunder and denude companies of their value to enrich corporate raiders and shareholders, while research and development, concern about the well-being of employees,and commitment to long-term viability become, at best, secondary concerns. The maximization of profit, no matter how short-sighted, no matter how disproportionate to the effort invested, has become the raison d'etre.   

        If capitalism represents a system of economics in which decisions about the resources of the public are made in private, isn't it time, given the increasing economic inequality and the appalling lack of social mobility in the United States, to begin a discussion about the need to create a more humane alternative? Perhaps the "European entitlement system" in the Western social democracies that Mitt Romney consistently condemns offers at least one alternative model that actually does attempt to tend to the welfare of all citizens and that does try to consider the public interest.

 

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Rick Santorum's Hypocrisy

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speaking at CPAC in Washington D.C. on Februar...

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          Anyone who cares about future of United States should be extremely concerned about what now passes for a serious discussion political issues and about the quality of the candidates who now stand for public office. A case in point is Rick Santorum. As a result of his extremely second place finish in the Iowa GOP caucus, the  former Pennsylvania U.S. Senator has now become the darling of  radical right and a serious contender for the GOP presidential nomination.   

    Santorum's website touts his commitment to limited government, fiscal conservatism and family values:

    "Every American should have access to high-quality, affordable health care, with health care decisions made by patients and their physicians, NOT government bureaucrats America needs targeted, market-driven, patient-centered solutions to address the costs and underlying causes of being uninsured rather than a one-size fits-all, government-run health care system."

    "Rick Santorum is committed to reviving our economy, restoring economic growth, and creating jobs in America again by unleashing innovation and entrepreneurship through lower and simpler taxes for American businesses, workers, and families.  He also will roll back job killing regulations, restrain our spending by living within our means, and unleash our domestic manufacturing and energy potential.  His vision for America is to restore America's greatness through promotion of freedom and opportunity for all.  This is just the start.  A plan made in America to promote America's families and prosper its businesses."

    "Coming from Pennsylvania, a state with a rich heritage of hunting and fishing, Senator Santorum understands firsthand the importance of preserving our constitutionally protected rights found in the 2nd Amendment. Senator Santorum fights to preserve this tradition, and will work to ensure these rights are not infringed upon."As a Senator, Rick Santorum opposed frivolous lawsuits against the gun industry by supporting legislation (The Protection of Lawful Commerce Act) that would protect law abiding firearms manufacturers and dealers from frivolous lawsuits attempting to hold them liable for criminal acts of third parties."

     Santorum's website further proclaims that, "As a believer in American Exceptionalism.... Rick Santorum understands that those who wish to destroy America do so because they hate everything we are - a land of freedom, a land of prosperity, a land of equality....As an elected representative, Rick knew that his greatest responsibility was to protect the freedoms we enjoy - and we should not apologize for holding true to these principles."

     The question that now needs to be answered, however, is whether any sentient human being could possibly believe in either Rick Santorum or the "conservative values" he professes to endorse.     
    
    There is little in Santorum's background that suggests that a reliance upon "conservative values" enabled Rick Santorum to realize the American dream. To the contrary, his life is proof positive that if the kind of limited government he now advocates had been in place during his childhood, much like millions of other middle-aged Americans, he would have been a victim of "road kill." In fact, it was the social safety, now so decried Sentorum and other the right-wing zealots, that enabled Santorum's family to be prosper and to become members of the middle class. 

     During his childhood, Santorum's parents were employed by  the local (socialist) Veterans Administration Hospital in Butler. His father worked as a clinical psychologist, and his mother was employed as a VA nurse. His  family also lived at the VA hospital in government-provided housing.  As a child,  Santorum attended public, tax-payer-supported schools in the Butler Area School District and only later attended a Catholic School, Carmel School in Mundelein, Illinois, after his father was able to transfer within the VA hospital system. Subsequently, Santorum earned a Bachelor's Degree  in political science from the Pennsylvania State University in 1980 - a public land grant university.

       As reported in today's New York Times, in an article by  Mike McIntire and Michael Luo, as a U.S. Senator, Santorum worked diligently to provide hundreds of millions of dollars in additional Medicare money for hospitals in Puerto Rico. In addition to his having sponsored  two Senate bills, Santorum inserted an amendment into a Medicare bill that provided for additional  spending that was intended to benefit Universal Health Services, a Pennsylvania-based hospital management company with facilities in Puerto Rico. 

       As a U.S. Senator, Santorum cultivated Washington lobbyists and pandered to a number of influential trade associations. For several years, he held regular breakfast meetings with a handpicked group of influential lobbyists, and he was closely linked to disgraced lobbyist Jack Abramoff and majority whip Tom DeLay who helped to create  the "K Street Project." As a reward, Santorum led all federal candidates in 2006 having received  approximately $500,000 in contributions from lobbyists and their family members, according to data compiled by the Center for Responsive Politics.

        Santorum also became embroiled  in controversy because of  his home in Virginia, where he and his family lived while the Senate was in session. He admitted that he spent only "maybe a month a year, something like that" at his Pennsylvania residence yet  he enrolled five of his children in an online "cyber school" in Pennsylvania for which the Penn Hills school district was billed $73,000, despite the fact that all of his the children lived in Virginia..

      Shortly after the voters of Pennsylvania declined to return Santorum to the Senate, he  was invited to join the board of Universal Health Services, where he was paid $395,000 in director's fees and he was given stock options before he resigned last year. Santorum was also hired as a consultant by Consol Energy for which, as a major Pennsylvania gas and coal producer, Sentorum had spent years supporting drilling and extraction policies that favored  the company. In addition, he consulted for the American Continental Group, a lobbying firm whose clients won earmarks he sponsored.

       A financial disclosure report that Santorum filed in August, 2011 as part of his presidential campaign shows the full extent of his newfound wealth. He earned a total of more than $1 million in the prior 18 months from a number of sources that  included a fellowship with a conservative research organization, his being employed as a commentator for Fox News, and a handful of consulting contracts, as well as income from rental properties in Pennsylvania, three years earlier, in 2007, he spent $2 million to buy a 5,000-square foot home in Great Falls, Va., according to property records.

     The contrast between what Rick Santorum says be now believes and his life history is startling and irreconcilable. The fact that Santorum's purported  working "class values" could be the subject of a favorable commentary by David Brooks, or that he could be described as a "fun candidate" by George Will, suggest that the current "conservative" movement and  the GOP establishment, as illustrated by the new found enthusiasm for Rick Sentorum, are intellectually bankrupt and, like Sentorum himself, are able to offer little more than recycle discredited slogans and nostrums from the nineteenth century.   
   
        H.L. Mencken once observed that "Nobody ever went broke underestimating the intelligence of the American public." Rick Santorum's emergence as a serious GOP presidential contender is evidence that Mencken was right. 
 

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Are GOP Voters Reality-Based?

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New York Times columnist David Brooks, in an opinion piece yesterday, correctly reported that "The Republican Party is the party of the white working class.This group -- whites with high school degrees and maybe some college -- is still the largest block in the electorate. They overwhelmingly favor Republicans." Brooks further  observed that white-working class "members generally share certain beliefs and experiences. The economy has been moving away from them. The ethnic makeup of the country is shifting away from them. They sense that the nation has gone astray: marriage is in crisis; the work ethic is eroding; living standards are in danger; the elites have failed; the news media sends out messages that make it harder to raise decent kids. They face greater challenges, and they're on their own."
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       Brooks' solution to this disconnect between the GOP's elite and its base was to recommend the kind of politics espoused by Rick Santorum who, because of his alleged working class-background and strong family and communitarian values, Brooks claimed, would strike a resonant chord among members of  this neglected but essential GOP constituency.             
 
       As a self-described "conservative," Brooks' endorsement of Santorum's working class values needs to be viewed within the broader context of GOP political rhetoric. While campaigning in Iowa, Newt Gingrich accused Mitt Romney of being a "Massachusetts moderate" while Romney himself depicted President Barack Obama as someone who wanted to destroy this country's "free enterprise" system with its values of hard work and individual advancement and replace it with a "European entitlement system." Simultaneously, Santorum, Bachmann, Perry and Paul all expressed concerns that the U.S. was in danger of metamorphosing into some kind of socialism state that, because of oppressive government regulation, was strangling economic productivity.
                 
       All of this rhetoric, of course, diverts attention from the real problems of this country: A dysfunctional political system dominated by a wealthy elite, their lobbyists and enablers; and an economy that, because of the out-sourcing of American jobs and manufacturing,  restrictions on the ability of employees to unionize and bargain for higher wages, "free trade," increasing automation, extraordinary economic inequality, and declining levels of education and literacy, among a multitude of other problems,  have caused the incomes of  most Americans to stagnate or decline since the 1970s.    
 
       As the magnitude of social, political and economic problems has increased over the past decades in the United States, the dysjunction between reality and political rhetoric has grown wider and the rhetoric more hysterical. Exit polls from the Iowa Republican caucus, for example, revealed that almost six of every ten voters considered themselves to be evangelicals or born-again Christians and were concerned about social values, while only three out of every ten voters thought that the economy was the most important issue bedeviling the country. 

       The preoccupation of GOP voters with social and moral values, as opposed to economic concerns, once again illustrates the phenomenon of "false consciousness" identified by Karl Marx and most recently chronicled by Historian Thomas Franks in his book, "What's The Matter With Kansas?"  The determination of  predominantly working-class white males and their female counterparts to consistently support politicians and issues diametrically opposed to their own economic interests forecloses the possibility of any serious civic dialog. It also provides a sobering commentary that calls into question the ability of this country's  political system to address, in a meaningful way, any of our real problems.

        If Mitt Romney can be  viewed as a moderate and Barack Obama is a socialist, then the evangelicals may very well be right: The apocalypse is at hand. Rather than provide a spiritual transformation, however, it may instead signify, in the lyrics of P. F. Sloan, that we are "on the eve of destruction."  
            
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