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Paul Thomas is a Weekend Herald columnist

Paul Thomas: Romney the vulture test for US voters


A win for Mitt would show America is OK about hard-edge capitalism

Who used the term "vulture capitalism" to describe the activities of one of America's most successful venture capital firms and elaborated as follows: "They sit there until they see a distressed company, then they swoop in, pick the carcass clean, and then fly away."

Was it:

A. Sue Bradford
B. Hone Harawira
C. Fidel Castro
D. Barack Obama
E. Rick Perry

The correct answer is Perry, the Texas governor who was briefly the frontrunner in the race to become the Republican candidate in this year's presidential election. He was talking about Bain Capital, the company co-founded by Mitt Romney, the firm favourite for the Republican nomination following his victory in the Florida primary this week.

Romney was chief executive of Bain for 15 years, during which time he amassed a fortune estimated at more than a quarter of a billion dollars. When he left in 1999, he became a passive partner in some Bain entities, an arrangement that gives him about $16 million a year.

(Notwithstanding his wealth and the fact that he has, to all intents and purposes, been running for president for the better part of a decade, Romney has been known to joke that he's unemployed.)

A venture capital firm provides funding to companies that need investment for expansion or product development in return for a share of the risks and rewards. A vulture capital firm does pretty much what Perry said. Bain under Romney seems to have been both.

Romney claims to have created 100,000 jobs by revitalising companies and putting them on the path to prosperity. At other times Bain executed leveraged buyouts, forced the company concerned to take over its debt and, having extracted huge dividends and consultancy fees, let it go bankrupt.

Some defenders of slash-and-burn capitalism call this "creative destruction", arguing that over time it has a positive, Darwinian effect. You might expect Perry, as a rock-ribbed Republican and champion of the free enterprise system, to take that tack; instead he came at it from the perspective that "I don't believe capitalism is making a buck under any circumstances".

Perry's now out of the race, but this torch will be carried by the increasingly feral Newt Gingrich, who describes Bain's modus operandi as "rich people figuring out clever legal ways to loot companies and lay off people".

His supporters have put together a 30-minute film of Bain's greatest hits.

Assuming Romney wins the nomination, it will then be the turn of Obama and the Democratic Party.

The Republicans have been calling Obama a socialist for the past four years, so they shouldn't be surprised when he bashes their candidate with the cudgel so enthusiastically wielded by leading figures in their own party.

You may shrug and say "Well, that's American politics for you" - but it might go a bit further than that.

First, it suggests that even the Republican Party, the spiritual home of Gordon Gekko-style capitalism, is immune to the resentment against Wall Street and its counterparts that has been gathering steam since the 2008 global financial crisis.

Manifestations of this backlash range from the Occupy Wall Street movement and its many off-shoots and imitators to the British Government's decision this week to strip a knighthood from the man who presided over the greatest banking failure in UK history.

Second, Romney's candidacy will in effect be a referendum on "new" capitalism, which rationalises and restructures and plays computer games with other people's money, as opposed to benign and paternalistic "old" capitalism which employed people to make things.

Romney may look and sound like another in the long line of privileged Americans who believe God wants them to buy their way into the White House, but he's more than that - he's a standard-bearer for new capitalism.

As a profile in New York magazine put it: "Romney was a business revolutionary ... pioneering the use of takeovers to change the way a business functioned, remaking it in the name of efficiency.

"What emerged from the process when Wall Street reclaimed American business and remade it in its own image was a system that was more productive, nimble and efficient than the one it replaced. It is also less equal, less stable and more brutal."

How apt that he has was endorsed yesterday by Donald Trump, America's celebrity arch-capitalist famed for his catchphrase "You're fired!"

If Romney becomes president having had his corporate history dissected and debated throughout the nominating process and election, it will demonstrate that the mindset and methods he represents aren't a spent force or an anathema to the American people.

And where America goes, the world still tends to follow.

Or perhaps New Zealand's the trailblazer. After all, it would mean that the US had followed our example by electing a financier who will be the country's richest-ever leader.

- NZ Herald

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