Let’s face it: criticizing capitalism is taboo in the United States. It’s a sacred cow, a sort of god that everyone has to worship and appease. What you are allowed to do is distinguish between “good capitalism” and “bad capitalism” and criticize the bad variety. You can call it “vulture capitalism,” for example. Newt Gingrich, not exactly a militant socialist, slammed Mitt Romney during the height of the primaries for his ruthless brand of capitalism.
Now the nation’s attention is again focused on Romney’s history with Bain Capital and the question of whether he was a job creator or job destroyer. President Obama and his campaign have been targeting the presumptive GOP nominee’s Bain record in TV ads and speeches. Romney is crying foul – how dare anyone question his time at Bain? But certain key Democratic Party figures have also found the whole thing unsettling. For them, private equity should be off limits. This means that even the vulture variety favored by Bain is beyond criticism, which is exactly what Romney believes. What’s going on here?
We’re seeing a fundamental truth coming out of all this: that the distinction between good and bad capitalism is very blurry. As those Democrats realize, vulture capitalism is an inherent part of the system – and vulture capitalists have been big contributors to the Democratic Party for a long time. Sure, capitalism got much more vulturish starting in the Reagan years, but the principle of profit maximization at any cost, especially at the cost of working people, has been a constant of the system since day one – it’s the prime directive, to borrow a phrase from Star Trek. Things like leveraged buyouts that Bain specializes in are simply newer, more modern ways of acting on this principle. For capitalists, it’s never been a question of job creation or job destruction – whether jobs are created or destroyed is peripheral. Nick Hanauer, a wealthy Seattle-based venture capitalist, has rightly stated that capitalists like himself are not job creators – they’re in the business of making money for themselves, not of creating jobs.
The mantra that’s constantly repeated these days, with Democrats all too willingly joining the chanting, is that there’s nothing wrong with people amassing wealth (as long as they pay taxes and at higher rates than their secretaries). So, the fact that Romney earns more in a day – without working – than the average American family earns in a year is just fine. The only thing that might be questionable is the way his company, Bain, went about its business.
Sorry, but I have to blow the whistle here. There is definitely something wrong with a system that allows people to amass wealth through ways that are largely disconnected with any form of productive work. Rivers of wealth are flowing into the bank accounts of people who don’t deserve 90 percent of what they’re getting, while those who really create the wealth are struggling to keep their heads above water. Wealth is ending up in the pockets of people who are not investing in manufacturing, not creating decent, well-paying jobs, not helping to revitalize our cities. This is not vulture capitalism, folks. This is just capitalism.
But beyond the question of whether the wealthy so-called job creators are actually investing and creating jobs is the question of why investment and job creation should be in their hands in the first place. Why are wealthy investors and companies like Bain the primary allocators of investment funds? Why are they allowed to decide the fate of a company? Why are they allowed to shut down a plant and lay off hundreds of workers – and make a bundle in the process? Why does “investment” often lead to negative consequences for working people, their communities, and the economy as a whole? We have a system where wealth is heavily concentrated and those who have the wealth control the investment process. Why do they have this wealth to begin with and why do they have the power to control investment? We’re not allowed to question this. Because questioning this is questioning the “free enterprise system” and we’re not supposed to do that, you see. Why not? Because.
Speaking of the concentration of wealth, a very positive development in the United States has been Occupy Wall Street’s spotlight on inequality, especially the growing gap between the top 1 percent and the rest. Because of OWS, inequality has entered mainstream discourse in a way we haven’t seen in a long time. Such inequality is not only unfair, it also damages the economy by reducing middle class purchasing power, as progressive economist Robert Reich keeps pointing out. Wall Street’s “casino capitalism” has seriously exacerbated inequality. Yes, we can and should tax the 1 percent at much higher rates, something Hanauer and various other multimillionaires advocate. But we need to ask why does so much wealth flow to these people in the first place? Yes, we can and should curb casino capitalism and its vulturish practices. But we have to ask why do we have a financial system governed by the anti-social, greed-based priorities of Wall Street? Thanks to Wall Street, money is channeled into Bain Street with its mansions, and not into Main Street with its boarded up shops.
I mention the word “wealth” a lot in this article. But I haven’t asked a crucial question about it: who really creates it? This is the heart of the matter. So let me venture an answer: wealth is created first and foremost not by capitalists and their companies, but by their workers. No one said it better than Abraham Lincoln: “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed.” The problem is that we have a system that simply does not recognize this truth. We have a system that separates the investment process from the people who create wealth and unjustly siphons off a substantial portion of it to enrich an oligarchy. What we need is a system that puts a significant part of the investment process, along with significant ownership and control of companies, into the hands of the primary wealth creators – I call it economic democracy.
Wait a minute, what about entrepreneurs? Don’t they do productive work by putting good ideas, long hours, and of course money into developing companies? Yes, absolutely. Their labor creates jobs and then together with the labor of those employees helps to create wealth. The problem arises when entrepreneurs start amassing wealth disconnected from the labor they contribute. How do we know when they’ve crossed that line? That’s a matter for citizens and working people to decide democratically, as with all distribution of income and wealth. At present, this is left to a “free market” dominated by a corporate and Wall Street plutocracy that makes the rules.
Now, back to Obama. Since Romney is mainly running on his business record, it’s perfectly legitimate for Obama to question this record and make it a major campaign issue. So, the Democrats who have objected to this are wrong. Romney accuses Obama of attacking “free enterprise” by criticizing Bain, as if there’s anything wrong with criticizing capitalism. Romney’s accusation is an illustration of the problem: we’re not allowed to question capitalism. Why not? Because.
But that is certainly not Obama’s intention – he’s no socialist, he’s not even a progressive. Obama is in a place that liberals and most progressives have been in for a long time: they criticize the actions of key players in the system – corporations, Wall Street, firms like Bain – and the inequality that is one of its hallmarks without taking things to their logical conclusion, i.e. the system is the problem.
Nyegosh Dube, an American citizen who lives in Poland, is currently developing a project that looks at existing examples of economic democracy in Europe and elsewhere as potential building blocks for a democratic economy. For over a decade, he worked for the European foundation sector – coordinating a project on legal reform, editing a journal, and writing for a sectoral publication. He has degrees in economics and political science from Yale and Columbia universities.