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Robert Reich begins: "It's one thing to criticize Mitt Romney for being a businessman with the wrong values. It's quite another to accuse him and his former company, Bain Capital, of doing bad things. If what Bain Capital did under Romney was bad for society, the burden shifts to Romney's critics to propose laws that would prevent Bain and other companies from doing such bad things in the future."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)

The Bain of Capitalism

By Robert Reich, Robert Reich's Blog

11 January 12


t's one thing to criticize Mitt Romney for being a businessman with the wrong values. It's quite another to accuse him and his former company, Bain Capital, of doing bad things. If what Bain Capital did under Romney was bad for society, the burden shifts to Romney's critics to propose laws that would prevent Bain and other companies from doing such bad things in the future.

Don't hold your breath.

Newt Gingrich says Bain under Romney carried out "clever legal ways to loot a company." Gingrich calls it the "Wall Street model" where "you can basically take out all the money, leaving behind the workers," and charges that "if someone comes in, takes all the money out of your company and then leaves you bankrupt while they go off with millions, that's not traditional capitalism."

Where has Newt been for the last thirty years? Leveraged buyouts became part of traditional capitalism in the 1980s when enterprising financiers began borrowing piles of money, often at high interest rates, to buy up the stock of ongoing companies they believe undervalued. They'd back the loans with the company assets, then typically sell off divisions and slim payrolls, and resell the company to the public at a higher share price - pocketing the gains.

It's a good deal for the financiers (the $25 billion buyout of RJR-Nabisco in 1988 netted the partners of Kohlberg, Kravis, and Roberts around $70 million each - and most of Mitt Romney's estimated $200 million fortune comes from the same maneuvers), but not always for the company or its workers.

Some workers lose their jobs when the company downsizes. Others, when the company, now laden with debt, can't meet its payments to creditors and has to go into bankruptcy. According to the Wall Street Journal, of 77 companies Bain invested in during Romney's tenure there, 22 percent either filed for bankruptcy or closed their doors by end of eighth year after Bain's investment.

But, hey, this is American capitalism - at least as it's been practiced for the past three decades. Is Newt proposing to ban leveraged buyouts? Or limit the amount of debt a company can take on? Or prevent financiers - or even CEOs and management teams - from taking a public company private and then reselling it to the public at a higher price?

None of the above.

Rick Perry criticizes Romney and Bain pushing the quest for profits too far. "There is nothing wrong with being successful and making money," says Perry. "But getting rich off failure and sticking someone else with the bill is indefensible."

Yet getting rich off failure and sticking someone else with the bill is what Wall Street financiers try to do every day. It's called speculation - and at least since the demise of the Glass-Steagall Act, investment bankers have been allowed to gamble with commercial bank deposits, other people's money.

So is Perry proposing to resurrect Glass-Steagall? Not a chance.

Gingrich, Perry, and others are putting particular focus on the people who lost their jobs as a result of Romney's Bain Capital. Gingrich's Super PAC will be running $3.5 million of ads featuring emotional interviews with some of them.

But what, exactly, are Romney's opponents proposing to do about layoffs that harm so many people? Millions of Americans have lost their jobs over the last four years - and as a result have often lost their health insurance, their homes, and their savings.

Are Gingrich, Perry, and others proposing to expand health insurance coverage for jobless Americans and their families? All I hear from the Republicans is their determination to repeal the law that President Obama championed - which still leaves millions of Americans uninsured. Do Romney's opponents have plans to keep people in their homes even when they've lost their jobs and can't pay their mortgages? No. Do they propose expanding unemployment insurance? If memory serves, most of them were opposed to the last extension.

I'm all in favor of reforming capitalism, but you'll permit me some skepticism when it comes to criticisms of Bain Capital coming from Romney's Republican opponents. None of these Republican candidates has exactly distinguished himself with new ideas for giving Americans more economic security. To the contrary - until the assault on Romney and Bain Capital - every one of them has been a cheerleader for financial capitalism of the most brutal sort.

The party that has repeatedly saved capitalism from its own excesses and thereby preserved capitalism is the Democratic Party. So the only serious question here is what kind of serious reforms Obama will propose when, assuming Romney becomes the Republican nominee, Obama also criticizes Bain Capitalism.

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including "The Work of Nations," "Locked in the Cabinet," "Supercapitalism" and his latest book, "AFTERSHOCK: The Next Economy and America's Future." His 'Marketplace' commentaries can be found on and iTunes. your social media marketing partner


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+43 # danielvenzon 2012-01-11 12:57
I always thought that capitalism was the bane of Democracy.
By raising free enterprise and "the economy" to godlike stature, people are able to be racist, sexist and elitist in their pursuit of profit and stature. The economy has no soul, it doesn't breathe and we have to weigh the costs of enterprise against the value of the environment (where we live) and the health of people around the world.
At some point we need to define what it is to be humane, not just human.
+5 # PhilO 2012-01-11 15:38
So, is Romney the "Hair Apparent" or the "Bain of the GOP's Existence"?!
+4 # josephhill 2012-01-12 12:50
"I always thought that capitalism was the bane of Democracy."


Capitalism brings out the worst dog-eat-dog traits in people who traditionally live in fear of economic 'ruin'...AND those who take advantage of that fear. It is certainly incompatible with--and antithetical to--any humane code of ethics.
+6 # jon 2012-01-11 13:41
"Gingrich, Perry, and others" certainly lead with their chins on this one.
+9 # Billy Bob 2012-01-11 13:49
Is "hypocri-tunism " a word yet? Remember "snigglets"? I think it would be the most efficient way of describing conservative philosophy in practice.
+37 # Vegan_Girl 2012-01-11 13:51
The fact that this came up in election debates is a direct result of the Occupy Movement. Keep up the good work! Occupy!
+5 # josephhill 2012-01-12 13:09
Quoting Vegan_Girl:
The fact that this came up in election debates is a direct result of the Occupy Movement. Keep up the good work! Occupy!


Thanks for bringing this up, Vegan Girl. The Occupy Movement represents the GENUINE "Change" that is so long overdue--change that has been thwarted for decades by "our" government and the "two" corporate political parties which we are 'allowed' to choose between.

I believe we are on the cusp of a great liberation movement now that we realize there are others who are just as fed up with this faux-democracy as we are.
+10 # RNF123 2012-01-11 14:19
I am in complete agreement with professor Reich. Not being a supporter of Mitt Romney, in his defense, there is a need at times to reduce the workforce to save other jobs. However, under no circumstances is it acceptable to believe that anyone would enjoy doing such a thing. As a former CEO, it is the hardest task ever and unfortunately, Donald Trump, has made a joke of it. It involves people, their family, their careers and most executives will agree that not only do they not like firing an associate but it is a troubling task even for those without compassion.
+15 # wsh 2012-01-11 17:02
RNF, while I agree with what you said about CEOs sometimes needing to "reduce the workforce to save other jobs" and their pain when doing this, that is NOT what the discussion is about. The discussion is about leveraged buy-outs taking profits out of a co. and saddling the co. with debt, and subsequently needing to lay-off employees.

This isn't about a downturn in the market forcing a CEO into tough decisions, it's about PREDATORY FINANCING...wit h the perpetrators pocketing ill-gotten profits.

Hacksaw Jim Duggan was the first CEO whom I saw as a co-conspirator in this type of thing when he ruined Sunbeam 30-odd years ago.
+19 # giraffee2012 2012-01-11 14:25
Never vote for a Republican. Mitt is at the top of the no-no list: he will do one better than "W" to repeal laws to prevent the 1% from taking anything that isn't nailed down - even when it sends people (& kids) to the poor house!

Asking for more laws to prevent the abuse of power is like asking for a Mercedes when all you can afford is bus fare (with transfers) -

Solution: Petitions to combat the laws that aren't followed or aren't in place to become laws. Requesting those we know who can - to run for office and then campaign to get them into Congress (the alleged law making body of our govt)

AND Reich (etc) keep on posting the antics of those like Mitt who have scalped the middle class + of their right to a "fair" standard of work place, medical, education and "you get the idea"

Until financial equality reigns - we do not have equal rights. Biggest example of the inequality is the black population. Not only are they denied equal $ opportunity but they are TARGETED by many (such as NYC and CA) for search/etc and sent to jail (ending with felony charges so they have NO FUTURE).

A white American doesn't have to worry about a bag of marijuana in their possession bc they won't be randomly searched - no matter what!

Remember - even you in the GOP - Hitler started with one segment of the population and spread to all who didn't belong to the Nazi party (& etc)

+20 # davidhp 2012-01-11 14:28
Maybe the democratic party should re-evaluate whether American Free Market capitalism is worth saving - how about an economic system that protects the people instead of the greed mongers on Wall St. Democratic Socialism is my answer. The Dems and Reps both protect free market captialism which feeds the rich and starves the workers. Time for real change.
+12 # ericlipps 2012-01-11 18:10
Quoting davidhp:
Maybe the democratic party should re-evaluate whether American Free Market capitalism is worth saving - how about an economic system that protects the people instead of the greed mongers on Wall St.

What "free market"? The greatest con job conservatives pull is to conflate free enterprise with private enterprise, as though the only threat to economic freedom came from the government. People, even some Republicans, used to know better, but now too many swallow oligarchy capitalism as though it represented the pinnacle of economic freedom. *That* idea can fertilize a lot of fields.
+28 # reiverpacific 2012-01-11 14:31
As a sometime admirer of Dr. Reich's clarifications and articles on things economical, in my case sub-101 level, I wonder how he got his PhD and what his basic economic education was at the hands of "the system".
All I can say is that, having read my daughter's high school and pre-college educational material and helped her with some kind of (layman-level but common sense based) interpretations and responses thereto, I have to put much of it down to pro-capitalism propaganda at least at a basic level.
What I saw was, reduced down to it's very basic components: "Capitalism = Good"; all others, especially Socialism = "Bad"! and even worse, "Capitalism = "Freedom" (my response = "For a few") all others = repression of free enterprise.
I describe myself as a "Small-business Socialist (if pressed for categorization, which I dislike intensely), which completely baffles most "average" Americans I encounter, especially in the Blue-Collar bars I occasionally pop into for a breath of stagnant air on the state of the union as dictated by FOX and the Repug's in these times -not the case when I first came here in the 1970's where consciousness overall was much more broad and realty-based across the US demographic than it is now.
Sadly, the owner-media are doing their numbing-dumbing job very well, as exemplified by these battling brats of the right (no left left to speak of), who seek to manipulate the impressionable downwards even farther.
+18 # bugbuster 2012-01-11 15:32
If you want to see real capitalism at work in its purest form, come to one of the Saturday markets around the country and watch the hardest working people in this country set up their booths and sell their crafts.

Sneered at as "hippies" by aristocratic drones and their wannabe admirers, these self-made entrepreneurs design, manufacture, and market their own creations at their own risk. They work from dawn into the night and ask no one for anything but a moment to consider the products of their honest labors.

These are the people most likely to be pointed at as freeloading hippy scum by those who are in fact society's greatest liabilities.
+22 # bugbuster 2012-01-11 15:25
Capitalism worked ok when the big winners had to kick back part of their winnings to the house and generally behave like good citizens.

Since the big Bush tax cuts for the aristocrats, the rest of us have been bleeding what is left of our meager holdings into the coffers of the aristocracy in the form of taxes and national debt. The little guy with a good business plan can't get startup money from a bank like in the old days. Real capitalism has been choked off by the gamers, grifters, and gansters of Wall Street and Washington DC.

Add to that the orgy of deregulation that freed up the banksters to steal our money, and what we are left with bears no resemblance to the economic engine that built America.

We owe our thanks to the Occupy movement for bringing this all up. Spring is coming soon, and with it the resurgence of public truth-telling in the streets.
+18 # wleming 2012-01-11 15:32
capitalism in the u.s. is a religion which can bankrupt millions, produce 40 million living below the poverty line- most of them women and children, ship the wealth and jobs off shore, enrich a few and impoverish the mass.... gut communities, and imprison more black men than are in college. not bad- for a system you cannot critizise in the media.. as mr. reich rather obliquely points out.
+8 # David Starr 2012-01-11 17:28
I am oftentimes impressed w/ Robert Reich's writing on various issues, but I'm compelled to disgree w/ him about capitalism being reformed. Because of its very nature, capitalism cannot be sincerely reformed. It is inherently antagonistic to democratic processes if we're talking about prioritizing the rights & interests of as many peoples as possible. The bottom line is not only profit, but perpetual, privatized, profitized monopoly where even the sky is not the limit. It doesn't have w/in its nature the prioritzation, e.g., of workers rights & interests. Rather, the protection & continuing of the unequal relationship of capital & labor. Besides, reforming it has already been tried. We've had, e.g., FDR's New Deal, which while having certain or some positive benefits for the masses still ironically helped to save capitalism in the process of recovering from the Great Depression. The reforms occured w/in the confines of capitalist rule. Thus, in later years we've had attempts of reasserting a more pure kind of capitalism, e.g., of the Milton Friedman
"school." And today, w/ "new" gimmicks & tinkering, it goes on & the consequences are evident, at least for the masses. W/ this, I am now compelled to say that I support socialist rule, seeing, as Albert Einstein put it, "social-ethical " objectives w/in its nature. But it has to be implemented w/ consideration of certain realities in a given time period combined w/ sober idealism. But it's an advanced form of democracy.
+1 # tclose 2012-01-13 12:39
Well, David, others have tried pure Socialism with rather bad results. 18th century England (and us) tried pure Capitalism with pretty bad results too. What seemed to be a pretty good compromise at least for the US, that reined in the excess of pure capitalism yet still allowed for creative energy, was implemented in the 30s up to the 60s. Since the 80s we have gone back towards pure capitalism - with the results that we plainly see.

You have not stated why correcting this backsliding could not work, compared to a call for a wholesale shift to socialism - which in the US is not in any way feasible.
-1 # David Starr 2012-01-16 16:10
This is way late but here goes: "Pure" Socialism hasn't really been that pure, e.g., in the USSR where unfortunately Stalin, a few of his blindly-obedien t close aides & Stalinism itself actually contradicted, many times, the ideas of Marx, Engels & Lenin. I'll add that despite that, there's was a degree of socialism practiced but thanks mainly to other Soviet citizens, officials & commoners alike. My initial post does show, at the least, brief reasons why I think capitalism isn't really reformable as a ruling ideology, e.g., its very nature. My support for socialist rule, referring again, e.g., to its social-ethical objectives, doesn't mean that the gov. will have 100% control of everything. It can't because like other human-made creations it's imperfect. Also, capitalism will continue to exist if only because it can't be abolished overnight. But socialism, e.g., a socialist gov, would regulate, monitor & hold dominion over it precisely because of its cutthroat nature. But there would still be capitalist practices. It's usually a case of an old, established ideology, system, epoch more or less overlapping w/ a new, alternative one(s). There is on the one hand a clean break to some degree, but w/ some features continuing from the previous order. The U.S. was born bourgois, but what we have now isn't really working w/ periodic, but persistent potential & literal threats against common interests in the U.S. & worldwide. Thus, the U.S. is not THAT unique; it is not THE exception.
+8 # RLF 2012-01-12 07:35
Since Raygun the take-over 'artists' have existed only to enrich themselves. The have destroyed numerous American companies by loading them with debt untilthey go bankrupt. The most responsible companies...the ones that funded their retirement well in case of a rainy day, were the best targets. This whole way of, not predator capitalism, but parasitic capitalism has gone unabated for 30 years...and we wonder why the standard of living has gone down!
+10 # ozken 2012-01-12 08:27
Remember the movie Pretty Women (1990) in which Richard Gere plays a rich prick businessman? As the advertising blurb said at the time 'engaged in a legal but hurtful business'? That's right the same kind of business as Bain Capital.

After meeting Julia Roberts prostitute character, Gere finds redemption in love and becomes a good guy helping out the businesses he buys into instead of asset stripping them and downsizing the workforce. All this because he finally got a fuck.

Wouldn't it be great for America if the whole Republican Party got fucked?
+2 # Jude 2012-01-13 01:06
A point for making me laugh! Good on you, OzKen.
+1 # mignatoff 2012-01-12 14:10
You seriously believe that Obama is going to propose serious reforms? I don't.

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