Mitt Romney's Years at Bain Represent Everything You Hate About Capitalism

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 co-workers were blue-collar aristocracy.

"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.

At the time, 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 he left in 1999, Bain had averaged a shimmering 88 percent annual return on investment. 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.

The Working Man's Villain

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 was pounded in the election, taking 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. Or that voters might see him as more scumbag than saint.

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14 comments
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dairyking887
dairyking887

Why does anyone vote for this monster? How has he managed to stay alive for so long in political life? Ah, that's right, he's very, very, very rich. And he's "white" in an era when many European-Americans are deeply, deeply, deeply afraid of "the other," whomever that "other" may be. Why is the de-facto voting position in American political life always to the right, especially on economic issues, when such voting only works to further emaciate the middle class? Why is this conglomerate hedge fund model or business being allowed to destroy our economy? I want to make a decent wage. I want to own a home and have health insurance and enjoy my life. How can I do that when the entire economy is dominated by corporate oligarchs and slave service sector jobs? Where is the hope? Where is the future? Where are any of our political leaders? Do they realize the very existence of our country is at stake?

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A man can know nothing of mankind without knowing something of himself. Self-knowledge is the property of that man whose passions have their full play, but who ponders over their results.

Bob
Bob

It seems that the cards are stacked against the average person just trying to scratch out a living. Why is Bain, or any other company allowed to rape and pillage going companies??? Why when companies go bankrupt in such a manor, Directors aren't held responsible including paying back the proceeds that they obtained???. The laws need to be changed to prevent this type of pillaging, then filing a bankruptcy to let the taxpayers pick up the pieces. If deception is detected, officers should have criminal charges brought against them. When companies borrow money, limits should be placed how much money can be pulled out by company directors. Execs should only be allowed to earn a percentage of the PROFITS not the combined assets. I'm not against company execs making money, but I am against them raping the company, while they make fortunes. Where is the accountability??? It's time that Senate hearings are held to change the laws to help prevent these practices in the future. Oh that's right, The Senate and lawmakers are the ones pulling all the scams and screwing the taxpayers.

Mo_H
Mo_H

Capitalism sucks, it is much better for everyone to be poor and not have any ability to do anything about it. That would be great.

Need we be reminded we do not live in a democracy, we live in a representative democracy. There is a reason the American public is not allowed to run the country, it is because most of us are complete morons and have no idea the economy, politics, or the world works, as evidenced by this article. Keep in mind management SOLD these companies to Bain Capital at their own discretion. If you wanna "blame" someone, blame them for being sufficient greedy to sell their company to a vulture investor. While I have compassion for the tireless unionized workers earning triple overtime who lost their jobs, it comes with the territory and they all know that. You can't work in a paper mill in the modern economy and assume you will be employed for 40 years without hiccup.

And an 88% return is not 88% success, it is in fact averaging an 88% "interest rate" per year on an investor's equity investment.

Guest
Guest

So he had an 88% success rate.

Okay.

pcl
pcl

The idea of taking over a firm, cutting unnecessary costs, laying off unnecessary workers in order to allow a strengthened, more profitable and permanent firm to emerge is in keeping with the principles of capitalism. But pocketing borrowed money while spinning off a company that is so fragile it is almost certain to go bankrupt in the next downturn is not; it's just a legal form of fraud; made legal by corporate limited liability and bankruptcy law, both creations of government. The Republican party has gone from being the party of free enterprise to the party of legalized fraud (though Obama's reaction to this sort of thing is underwhelming, to put it politely). The workers, plants, and alleged "rescue plans" Bain was juggling were just props in a shell game. Conservatives are correct that the people of a nation can't generate wealth by doing nothing but paying each other's bills and changing each other's diapers. But they don't seem to understand that nations are no more likely to get rich from their people ripping each other off.

Brian
Brian

Really everything we hate about capitalism. So the fact that they bought companies that were about to go under and saved many jobs from being lost is something I am suppose to hate? I don't hate capitlism. I love the Free Market. And since the government won't let the free market work we don't see how great it would be with a free market. Prices would come down and we all would be more prosperous. The media must have decided to stop even pretending they are not biased and so they feed us this crap.

nanook5
nanook5

free market myth aside, i hate capitalism a lot more for all the corpses it produces.

Crzystap
Crzystap

this is predictable liberal nonsense. throwing out the facts about the source of success and prosperity, and replacing them with mindless emotional fabrications. even if people believed the garbage about Romney being a villain and a crook, his 5 point lead over Obama speaks volumes about what America regards the president to be.

Bebep
Bebep

Well... you have almost half the country full of mindless morons who still believe the president is not a citizen, that he's a Muslim, and a communist.

About four years ago, the same people crying these ridiculous things would call this "Un-American" to say something negative about THEIR president.

Your 5 point lead (which in April means absolutely nothing at all by the way) doesn't give me fear about Obama not being reelected.

It gives me fear in realizing how fucked up and stupid half the people in this country really are.

Anthonyvop
Anthonyvop

Apparently the author, Pete Kotz has a problem with Capitalism, Profits and Freedom!

Maybe we should forgive him? Perhaps, nobody explained to him that companies like Georgetown Steel, American Pad & Paper, Bain Capital and almost every company in existence. exist for one thing and one thing only.

It isn't to make steel or paper. It isn't to provide benefits or Jobs.

They exist for one thing and one thing only.

TO MAKE MONEY FOR ITS OWNERS. To think otherwise is just jealous, ignorance.

nanook5
nanook5

your argument seems to be that the highest form of capitalism is armed robbery, and we should be okay with that.you seem incapable of peering outside the box. companies under CAPITALISM exist to create profit. traditionally jobs are meant for people's survival.

pcl
pcl

That these companies exist only to make money is correct (and expected). But would that justify a company sending its people out on the street to rob old ladies? If not, why is it OK for the management of a firm to pocket money while raiding their employees pension fund or borrowing money it won't be around to repay, or lobbying for public subsidies based on promises it won't keep. So much for the party of "personal responsibility". If Mitt had to repay all the debts from which he has walked away, he and his family would qualify for food stamps.

 
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