Sunday, June 3. 2012
Note: updated below.
Jonathan Alter is one of those names that blurs in my mind with clusters of others (most obviously Eric Alterman), so when he got one of his op-eds reprinted in the Wichita Eagle, I didn't automatically peg his Romney vs. Obama spiel as particularly partisan. I read a bit:
Mostly stupid, but my mind seized on the last line and spelled out a clear distinction between "venture capitalists and vulture capitalists." Never mind that the etymology of "vulture capitalist" was as a twist to venture capitalist, meant to disparage those who got too greedy. Indeed, that's all too common among venture capital firms, but for the most part venture capitalists have a positive reputation: their greed puts money up to build new companies based on developing new technologies, and their greed is at least tempered by the recognition that they need to offer equity positions to at least some key technical employees and often to the whole team. And I can see an argument for aligning Obama with the venture capital folk, what with his "green jobs" projects and his general stance that growth solves all economic problems.
But the real vulture capitalists are the private-equity firms, where greed is untempered with any desire to build anything. They work out deals where the target company borrows a lot of money to pay off the old owners; the vultures, having put up a small share of their own money, then swoop in, recouping their investment by paying themselves huge management fees (usually by borrowing even more money), stripping off assets, and squeezing out costs, mostly from the workers. The resulting company may be crushed under its debt load, or may fail more slowly by neglecting r&d and other longer-term investment, or it may limp along and be repackaged for another round of profit-taking, fed to other vultures, or dumped onto the market through an IPO.
Mitt Romney's connection to vulture capitalism is direct -- that's exactly how he made his fortune -- whereas Obama has little more than an affinity for venture capital, but the contrast is straightforward: Obama's approach promises growth and technological progress (and maybe a slightly broader distribution of profits), whereas all Romney is interested in is extracting advantage for himself and his ilk. This contrast may flatter Obama excessively, for it could hardly be more accurate in characterizing Romney.
Problem is, Alter didn't write it like that. He conceded the totally unearned moral high ground of venture capitalism to Romney, while muddying the waters with his supposed alternative, Obama's contrasting position: "human capitalists." Now what the fuck is that supposed to mean? I could speculate, but quite frankly I have no problem seeing Romney et al. as human -- just a little warped by their narrow-minded misanthropic greed, but that's a pretty common human trait. But Alter, clearly, has no idea what he means. The closest he comes to a contrast is here, discussing tax policy:
In other words, both intend to lavish tax breaks on businesses, one across-the-board, the other slightly more targeted to keep the vultures from becoming too self-destructive, but Alter doesn't offer any reasoning why the latter should be better. He accepts blindly that both candidates' blind faith in capitalism -- indeed, he seems so pleased to have rescued Obama from the vile charge of socialism that it never occurs to him that there may be a problem with either being "capitalist tools."
I need to interject a disclaimer here: in what follows I'm not saying that we should in any way abandon capitalism (although I could make that argument elsewhere, and certainly think that some reforms and restructuring is in order). Capitalism is a reasonably productive and efficient way to run much of the economy. (Health care is a glaring exception, and there are a few others.) But that doesn't mean that politics should be in thrall to business. Indeed, one thing we should have learned from two-hundred years of American history is that when capitalists have too much power they will soon abuse and wreck the economy -- not just their own, but everyone's, and we've seen that happen time and again.
In the midst of the previous great depression, the New Dealers came up with a useful principle they called "countervailing power." The idea was to create a system of checks and balances that would keep any segment from getting too powerful. One example of this was how the New Deal encouraged workers to join unions. Another was the progressive income tax, and its use to provide popular services (like education and transportation), limiting inequality and opening up broader opportunities. Another was the regulation of banks, which ensured stability for many years until it was dismantled by Reagan and Clinton (resulting directly in the S&L debacle of the late 1980s, and the panic of 2008).
What's happened in the past thirty years is that capitalism has become so hegemonic in American politics that it's become almost impossible even for Democratic Party hacks like Alter to conceive of any form of countervailing power. So, when faced with the threat of a ravaging vulture capitalist like Romney, all Alter can do is propose a hypothetically "human capitalist" alternative, no more distant from Romney than the elder Bush's "kinder, gentler conservatism" was from Reagan's orthodoxy.
Sadly, Obama doesn't seem to have any more understanding, or imagination, than Alter. The closest he came to having a concept of countervailing power was when he threw the 2010 elections to the Republicans so he could act more bipartisan -- the result, of course, was that he has been ineffectual ever since, arguably blameless (although it remains to be seen how well he can sell that).
Alter is, of course, right in his intuition that Obama is every bit as committed to preserving the current order as Romney -- maybe even more so, as Romney is more likely to fall back on the pet MBA rationalization of "creative destruction," and Romney's party is set on destroying every part of the public sphere except those dedicated to war and security -- the part most useful for wrecking the rest of the world. So one could argue that Obama is the only true conservative in the race, but I don't take any comfort in that. For one thing it is a stance that leaves him in the wrong on nearly everything. Maybe not as wrong as Romney, but if we have to make such distinctions, make them by showing how wrong Romney is, because that at least is something one can learn from. On the other hand, touting Obama as the "human capitalist" just makes us dumber.
My fondest hope for Obama's election was that it would lead to Bush and Cheney being tried in the Hague. Now, clearly, Obama belongs in the docket alongside them.
Update: For a reminder that the distinction I made above between venture and vulture capitalists isn't so clear cut, see Andrew Leonard: Private Equity's Evil Twin:
Of course, IPO time is when the avarice underlying venture capital comes to the top, often abetted by the big sharks always cruising for a killing. The moral case for venture vs. vulture capitalists that the former plays a non-zero-sum game where, in principle at least, everyone who gets in on the ground floor can come out ahead. In contrast, the big bank trading desks, the hedge funds, etc., mostly play a zero-sum game where their gains are at the expense of other traders. Sometimes these bets fail spectacularly, as recently happened at JPMorgan Chase, but the fact that the banks and hedge funds usually come out ahead suggests that they are taking their clients for a ride. It's worth noting that the prevalence of zero-sum profiteering tends to create a norm where larceny is the rule, and that's where we're at now.
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