The Trusty Servant

This is based on the attack ad that sank Romney when he ran against Ted Kennedy in the 1994 Senate election. The new version, apparently starring the same cast of heart-broken ordinary citizens whose lives were allegedly destroyed by Romney as Gordon Gekko incarnate, has now been remade and re-released by a SuperPAC loyal to Newt Gingrich, courtesy of a $5M donation from Sheldon Adelson. The last Forbes rich list ranked Adelson as the 8th wealthiest American at $23 billion, mainly because of his holding in Las Vegas Sands Corp, which operates the Venetian Resort Hotel Casino:

This line of attack, coming from a leading Republican candidate, surprised a fair number of people, since it is essentially an attack on capitalism. The detail does not seem to stand up to close analysis. The Washington Post ran a lengthy article on it last Friday.

In the film, three former employees of UniMac, which makes commercial washing machines, appear to suggest that quality went down under Bain Capital’s management and that a plant in Marianna, Fla., was closed because of Romney’s actions. But the chronology is all jumbled. Bain Capital bought the business from Raytheon in 1998, and Romney left Bain a year later to run the Winter Olympics in Salt Lake City. In 2005, Bain sold UniMac (also called Alliance Laundry) to a Canadian entity known as Teachers’ Private Capital. The factory was moved from Marianna to Ripon, Wisc., in 2006, after Bain’s involvement ended …
In fact, Mike Baxley, who was interviewed for the film, said that he and his partner had “absolutely no idea” that the interviews were for a film about Romney and Bain. He said they thought they were being interviewed for a documentary about the factory closing. “They said they wanted to know what it was like when the factory closed down,” he said …
The [Bankruptcy of DDi] segment tries to tie Romney to Wall Street games-playing by focusing on allegations that Lehman Brothers pumped up the stock of DDi, allowing Bain Capital to sell its shares for big gains, even while an Lehman analyst had misgivings about the Orange County electronics maker.

According to an Aug. 26, 2003, account in the Orange County Register, which the film cites as a source, Bain Capital under Romney’s leadership invested $46 million in DDi in 1997. It sold many of its shares for at least $93 million and received a $10 million management fee, but the newspaper said Bain retained a 14 percent stake in the firm that was wiped out when DDi filed for bankruptcy during the dot-com bust. (The film suggests Bain had sold all of its shares, saying it had “dumped the rest.”) Lehman Brothers in 2003 paid $80 million to settle charges by the Securities and Exchange Commission that its bankers had tainted stock recommendations in five instances, including recommendations for DDi. But the SEC did not say that Bain had done anything wrong …

Hmmm. If this is the best Romney’s allies can do, then he could be sunk again. The fact that those interviewed did not know their words would be used to attack Romney is surely irrelevant. The fact that the SEC did not say Bain had done anything wrong means nothing. The whole point of the SEC settlement process is to allow quick wins for the SEC. The price of speed and certainty is that the guilty party does not admit fault. [But it is also true that the SEC was not directly examining Bain's role, and Bain did not pay a fine, so there any presumption of guilt scarcely applies to Bain.] But much of the Washington Post article sounds like nitpicking, it does not really deal with the main thrust of the attack on Romney.

In any case, many of the clips of Romney speaking are eerily reminiscent of Gordon Gekko (played by Michael Douglas in the famous 1987 film Wall Street).

Of course, it is easy, and partly correct, to dismiss the clips from heart-broken ordinary citizens. Just as much of what Gordon Gekko said was true. The reason corporate raiding worked so well was because many senior managements were seriously incompetent and many workforces were overpaid and obstructed the introduction of new and more efficient practices, some even obstructed the introduction of practices which would simply have required them to do a fair day’s work for a fair day’s pay.

Many businesses were simply no longer viable. International competition had undermined their business model. To survive the existing workforces had to be drastically reduced or radically redeployed. The businesses were doomed anyway, but the raiders got the blame for all the unpleasantness, which might better have been laid at the door of senior management over the previous decades.

The snag is that these points rarely sound convincing coming from the mouths of those who have profited hugely by them. Nor is it remotely true that all actions by all corporate raiders have been benign. It is hard not to feel that Gingrich is onto something when he characterises Romney as one of a bunch of rich guys who specialise in “figuring out clever legal ways to loot a company”.

This particular comment infuriated Donald Luskin, a “public intellectual” and controversialist, and apparently also “chief investment officer at Trend Macrolytics LLC”. Writing today in the Wall Street Journal, he claimed that the looting characterisation was “an egregious lie”. The article chose not to present any reasons for that claim but rather to argue that a few blemishes were beside the point:

The enduring case for capitalism—the moral case that Romney must make now—is that it is the only economic system consistent with liberty. Private equity — the realm of capitalism in which Bain Capital operates — is an expression of that liberty. There’s nothing mysterious here. Private-equity firms are much like mutual funds that invest in stocks. But when a private-equity firm invests, it typically buys the entire company.

It is an enjoyable diatribe, full of generalities, but largely based on insult and assertion, with no attempt at reasoned argument. He ends up:

Mr Romney must stand up for the rule of law that underpins free-market capitalism. It can’t guarantee a chicken in every pot—and neither can any other system. But capitalism does guarantee a fair deal. Investors in businesses, and the employees who choose to work for those businesses, know exactly where they stand, and they have the liberty to invest or not invest, and to work or not work, accordingly.

I find that just bizarre. It seems to ignore completely what we have learnt, painfully, in a couple of hundred years of economic history. I am happy to grant that capitalism is the least bad system. But one cannot just proceed by simplification and slogan. The whole argument is surely about just how much, and in what ways, one needs to regulate and temper capitalism to prevent injustice, minimise unfairness and curb excessive greed. Rabbitting on in a general way about liberty achieves nothing. Even the rawest undergraduate knows that liberty is a question of balance. Society and the rule of law is all about how best to balance competing rights.

But all that is beside the point. Many ordinary voters may start to see Romney in a new light after a deluge of attack videos. Certainly, Gingrich was badly hit by all the ads attacking him. Many voters are not as well informed as the political classes. In any case, Obama must be amazed at the way his enemies are slaughtering each other.