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Mitt Romney and Bain Capital Represent Everything You Hate About Capitalism
Illustration by Dan Andreasen
James Sanderson had encountered a rare moment of industrial harmony. It was the early 1990s, and the 750 men and women at Georgetown Steel were pumping out wire rods at peak performance. They had an abiding trust in management's ability to run a smart company. That allegiance was rewarded with fat profit-sharing checks. In the basement-wage economy of Georgetown, South Carolina, Sanderson and his coworkers were blue-collar aristocracy.
Romney has taken center stage in the race for the almighty dollar, consequences be damned.
Jayme Halbritter
Union official David Foster sees Romney as an early pioneer of gaming the system.
"We were doing very good," says Sanderson, president of Steelworkers Local 7898. "The plant was making money, and we had good profit-sharing checks, and everything was going well."
What he didn't know was that it was about to end. Hundreds of miles to the north, in Boston, a future presidential candidate was sizing up Georgetown's books.
Mitt Romney had been running Bain Capital since 1984, minting a reputation as a prince of private investment. A future prospectus by Deutsche Bank would reveal that by the time Romney left in 1999, Bain had averaged a shimmering 88 percent annual return. Romney would use that success to launch his political career.
His specialty was flipping companies — or what he often calls "creative destruction." It's the age-old theory that the new must constantly attack the old to bring efficiency to the economy, even if some are destroyed along the way. In other words, people like Romney are the wolves, culling the herd of the weak and infirm.
His formula was simple: Bain would purchase a firm with little money down, then begin extracting huge management fees and paying Romney and his investors enormous dividends.
The result was that previously profitable companies were now burdened with debt. But much like the Enron boys, Romney's battery of MBAs fancied themselves the smartest guys in the room. It didn't matter if a company manufactured bicycles or contact lenses; they were certain they could run it better than anyone else.
Bain would slash costs, jettison workers, reposition product lines, and merge its new companies with other firms. With luck, they'd be able to dump the firm in a few years for millions more than they'd paid for it.
But the beauty of Romney's thesis was that it really didn't matter if the company succeeded. Since he was yanking out cash early and often, he would profit even if his targets collapsed.
Which was precisely the fate awaiting Georgetown Steel.
When Bain purchased the mill, Sanderson says, change was immediate. Equipment upgrades stopped. Maintenance became an afterthought. Managers were replaced by people who knew nothing of steel. The union's profit-sharing plan was sliced twice in the first year — then whacked altogether.
"When Bain Capital took over, it seemed like everything was being neglected in our plant," says Sanderson. "Nothing was being invested in our plant. We didn't have the necessary time to maintain our equipment. They had people here that didn't know what they were doing. It was like they were taking money from us and putting it somewhere else."
History would prove him correct. While Georgetown was beginning its descent to bankruptcy, Romney was helping himself to the company's treasury.
He should have known better. The year before Romney purchased Georgetown, he mounted his career in politics, setting his sights on the biggest target in Massachusetts: the U.S. Senate seat held by Ted Kennedy.
There were early signs that he might topple the Kennedy dynasty. Much like today, Romney was pitching himself as a commander of the economy, a man with the mastery to create jobs. Yet he suffered an affliction common to those atop the financial food chain: He assumed that what was good for him was good for all. Call it trickle-down blindness.
In the midst of that 1994 campaign, one of Romney's companies, American Pad & Paper, bought a plant in Marion, Indiana. At the time, it was prosperous enough to be running three shifts.
Bain's first move was to fire all 258 workers, then invite them to reapply for their jobs at lower wages and a 50 percent cut in health-care benefits.
"They came in and said, 'You're all fired,' " employee Randy Johnson told the Los Angeles Times. " 'If you want to work for us, here's an application.' We had insurance until the end of the week. That was it. It was brutal."
But instead of reapplying, the workers went on strike. They also decided the good people of Massachusetts should know what kind of man wanted to be their senator. Suddenly, Indiana accents were showing up in Kennedy TV ads, offering tales of Romney's villainy. He was sketched as a corporate Lucifer, one who wouldn't blink at crushing little people if it meant prettying his portfolio.
Needless to say, this wasn't a proper leading man's role for a labor state like Massachusetts. Romney took just 41 percent of the vote. Meanwhile, the Marion plant closed just six months after Bain's purchase. The jobs were shipped to Mexico.
Yet Romney didn't learn his lesson. He seemed incapable of noticing that his brand of "creative destruction" left a lot of human wreckage in its wake.
Just a few months after being hammered by Kennedy, he set fire to another company.
The move was classic Bain. Before buying Georgetown, Romney had purchased the Armco steel mill in Kansas City, which had been in business more than 100 years.
74 comments
I don't have to imagine what will happen if Barak the Fool is re-elected.
More tax cash to his union buddies.More regulations and less freedom.More taxes.More ass kissing of foreign socialists.Higher oil prices.Crappier medical care.A weaker military.Fewer jobs for us and more bureaucrats.
Any Democrap who says this will not be so is either a fool or a liar. ANYBODY but Barak the fool.
Mitt Romney is a Job Annihilator.
It's dangerous how blatantly Mitt Romney will fabricate his record. It's appalling and reckless and the American ppl deserve a person of high caliber for our President. Wake-up independents, undecideds & Obama republicans! Yes, Obama republican…I know u are out there because I’ve met some of you.
To Mitt we will all be mere overhead. We will continue to be marginalized; we will be slashed and cut. We will be expected to do even more with even less. In the end we will have less and the Mitt's of the world will have even more. It is time to take a stand! Pick the team that is fighting for you and not against you. It’s a non-decision decision that should not be fuel by a single issue let alone hate, race or religion. Obama2012 is the only choice for our future prosperity.
What has changed the most in the last several years is companies shipping jobs overseas and manufacturing overseas. That is the biggest challenge we face as a country in the coming years - getting Americans to get it - we all have to be willing to pay a little more and buy American - we should buy stocks only in Companies who keep jobs here in America and only demand that they give us a dividend in return for our investment - not expect that each quarter has to be better then the quarter before - the only way to keep doing that is to have less workers doing more for less money.
Capitalism built and made this country great. Good bad or indifferent. You can all thank the fact you have or had a job on capitalism.
Capitalism relies on resources to process and sell and thus create wealth. What made America great was its untapped resources that were exploited for a century or two. But, as these resources are diminished, capitalism resorts to concentrating existing wealth in fewer hands. This is the difference between a true entrepreneur like Bill Gates, and a vulture capitalist like Mitt.
Insanity: Doing the same thing over and over and expecting different results. People keep voting for him. I am seriously wondering what is it going to take for people to see what is going on right in front of them?
Just think, Mitt Romney wants to help the U.S. workers just like he did all those he "helped" right out of their jobs via takeovers by Bain. This is just the type of help that nobody needs or wants. He made his millions on the backs of those workers who he cheated out of their pensions and their jobs. Worst of all, the fed gov't bailed out the pension funds for him. He's been telling us all alone who he is when he speaks of letting the housing market drop even further, let everything go into foreclosure so investors can buy up those homes and rent them out. He did the same when he spoke about the auto industry. What really ticked him off the most was the fact that the pension funds were taken care of before the big investors on Wall St. which proves he doesn't give a damn about the people, just the $$$ he can make off their misfortune and misery. God help us if he ends up in the White House! He doesn't care about anyone but his wealthy friends and he'd ignore them if they ever lost their money.
I think the best term for Mitt is Business Pirate, he and Bain just looted these companies and the workers pensions for everything they had.
Aargh!
Very well done story, BTW. You can still see When Mitt Came to Town here: http://youtu.be/2wGZRJG4ZJE Neuton's PAC owns the rights so who know how long it will stay up before it is deep sixed.
Great depiction of Rmoney as parasite. Maybe the Reich Wing can market him using (cough) science.
see: http://www.astrobio.net/pressr...
Summary: Scientists have discovered that parasites are surprisingly important in food webs. According to a new study in the Proceedings of the National Academy of Sciences, parasites may be the thread that holds the structure of ecological communities together.
Going to Bain Capital's website reveals that not even Bain has any jobs available. So much for creating jobs!
We barely survived one MBA President. We can't afford another.
Especially not from the same B-school.
Except, George W. Bush failed his original investors as well. He not only single-handedly destroyed the company but left his pals high and dry. But, his pals didn't care, they treated him like a wayward child. They probably said, "You'll get 'em next time, tiger."
Typical union operatives. The union leaders try to take all the money. And right know we need Romney to save our country from the tyranny that this president is bringing to us. Next issue why dont you air Obamas dirty laundry to be fair. I bet you wont because you are a left wing liberal. Go ahead i dare you.
maybe you should try airing obama's dirty laundry and explain why it is dirty. everyone have a opinion, just don't jump on someone else's band wagon and started blaming obama for the state the economy is in, if so blame him for U.K. sliding back into a recession that was fueled by the former president. remove the veil from your eyes, obama has already done a whole lot more good for this country, than what george did in both terms. As for Rommey, any level headed person can reason as to why he is not forth coming with his tax statement. you think the unemployment rate was bad, make Rommey president and you may realize how good you had it.
Not quite! Ask some of the suppliers for GSI how they felt about Romney raiding that company. It effects more than just the rank and file workers. A large company not only employs people directly but creates jobs at its suppliers too. It sounds like you are parroting back what the politicians are saying rather than thinking for yourself.
Guys like Romney are obsessed with trimming surplus expenditures and capturing surplus value. The problem in the real world is that what is surplus on a balance sheet might be someone's livelihood. We didn't do business like this a generation ago.
Very well said! Surplus on a balance sheet might also be someone's health benefits being used to care for a sick family member.
If your companies were doing so well, why were they able to be purchased? If an owner sees tons of money coming in on their already established business, why would he sell the business? This was coming from a workers perspective. They knew nothing of what was on the books. If your manufacturing facility is constantly upgrading machinery and giving profit sharing checks then that means they were living off credit and were close to bankrupting anyways.
That is where the big payday is for the owners ... punch out when the going is good. Then Romney comes in, fills it with debt, runs with the cash, and leaves the workers on government aid and the company torn apart in BK court for the vultures to pick apart. Not the American model I believe in.
I believe in Americans .. but NOT the campaign slogan of Mitt Romney .. 'Believe in (creative destruction of) America' ..Every American should read this well written, very informative article ! Don't miss it ..
Yes, one sided, well written by a left wing, anti capitalist, pro union, member of the lame stream media.
Please pick an assertion in the article to refute. I am willing to listen to your rebuttal.
so is that how you characterize any article you don't like? Instead of petty, tired attacks, care to dispute anything that was written in the article? We're waiting...
If you're in certain industries, this is all too familiar a story. I've been through this a few times. People learn to recognize that when one company buys another, it's a kiss of death and it's time to start job hunting. Of course, the new company will promise the sun moon and stars to get everyone to stay. The smart ones go and get promotions at other firms. This is why there's no loyalty between worker and employer anymore. Once you've been through this you understand, you are only a dollar in someone's pocket. And if you don't watch out for yourself, you will get trashed as soon as they get their money out of you. I'm lucky in that there is enough business here I've always been able to move sideways with a pay upgrade. Small towns with only one shop, not so lucky. But a smart worker can't afford to be loyal to a company anymore.
I am going with the only honest, decent, and intelligent man that has predicted everything going wrong with the US for the past fifteen years. I probably don't even have to say his name and you already know who I am talking about. Ron Paul is the only brilliant man running. I would walk through hot coals to elect this great man. You people need to wake up and actually research his ideas if you don't agree with them because it will make a lot of sense when you know the history and facts.
Please cite just ONE inaccuracy in this article. As someone who lives near Gaffney, SC, and as a child would drive by Georgetown Steel on the way to the beach, this article hits close to home for me. It's a shame that folks see Romney as some sort of hero because he's able to strip money from companies and siphon it to select investors. I'd be more impressed if he was a true job creating venture capitalist, like Ross Perot or Ted Turner, Bill Gates or the late Sam Walton (fuck his children, bloodsucking leeches.) Even Ayn Rand hated so called "capitalists" like Romney.
Rasmussen Poll: "Adults under 30 are essentially evenly divided: 37% prefer capitalism, 33% socialism, and 30% are undecided."
spending to get out of debt..... how can that work?
why is Greece, Portugal, Spain, and Italy, being forced to cut govenment spending? (by the EU), rather than increase spending to get out of its debt?
Why should it work here and not in Europe?
can someone explain that?
Austerity isn't working. Anywhere. It is physically impossible to cut gov't deficits during a recession.
Also, you are off topic.
If you value your labor, this model of capitalism, as practiced by BAIN should offend you. Perfectly healthy companies, providing liveable wage jobs to middle class skilled workers, bought up with borrowed money and all the value possible extracted from those companies, and then the pieces are sold off for pennies on the dollar.
BAIN's profits were, literally, taken out of these skilled employees wallets.
<----- socialism is that way.
where has socialism succeeded?
-don't forget, as bad as this country seems, its still the best in the world, and where everyone else want to be.
Even though they're not remotely close to the invisible bogeyman you're looking for... the fact is that the social democracies of Scandinavia have long since passed us in nearly every measurable facet of "best". Your blind faith isn't helping.
You obviously haven't ever been in places like, say, Scandinavia. More probably never left good ol' US of A...
LMAO - interesting that you talk to people that know him so well personally, and not just know him, but are privy to what he has and hasn't done. If they know so well, and if this truly isn't so, then why doesn't he himself prove it and release all the information that would be necessary to support that statement? Makes no sense whatsoever that random people know what goes on behind his closed doors...
Capitalism is making money for owners of businesses.
what is the alternative to Capitalism? Socialism? Communism?
or something else? What is it that you favor and works better than Capitalism?
everyone has the same opportunity to make money in this country (still). - look at the owner of 5 hour energy drinks. he is now a multi millionaire. - you can be too.
just create a business, and succeed.
I don't get attacking someone that makes money for himself and shareholders.
(respond quick before this post is deleted!)
why are you making this about capitalism vs everything else? this article is about how romney is using his experience as a private equity executive as good experience for economic management, whereas his track record says that whilst he was good at extracting short term profits but these actions would be incredibly destructive in the long term.
seeing as he is a candidate for the most powerful office in your country, and where long term prosperity should be a primary concern, his track record should be of interest.
also, equality of opportunity is a complete and utter myth... do you really think everyone has equal access to education or capital for instance? infact, i think its lower in the USA than in other comparable countries!
At least five large studies in recent years have found that vertical inter-generational mobility is lower in America than in comparable nations, belief in America as a land of opportunity not withstanding:
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