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<DIV class=timestamp>December 8, 2011</DIV>
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<H1><NYT_HEADLINE version="1.0" type=" ">All the G.O.P.’s
Gekkos</NYT_HEADLINE></H1><NYT_BYLINE>
<H6 class=byline>By <A class=meta-per title="More Articles by Paul Krugman"
href="http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columnists/paulkrugman/index.html?inline=nyt-per"
rel=author>PAUL KRUGMAN</A></H6></NYT_BYLINE><NYT_TEXT>
<DIV id=articleBody><NYT_CORRECTION_TOP></NYT_CORRECTION_TOP>
<P>Almost a quarter of a century has passed since the release of the movie “Wall
Street,” and the film seems more relevant than ever. The self-righteous screeds
of financial tycoons denouncing President Obama all read like variations on
Gordon Gekko’s famous “greed is good” speech, while the complaints of Occupy
Wall Street sound just like what Gekko says in private: “I create nothing. I
own,” he declares at one point; at another, he asks his protégé, “Now you’re not
naïve enough to think we’re living in a democracy, are you, buddy?” </P>
<P>Yet, with the benefit of hindsight, we can see that the movie went a little
off at the end. It closes with Gekko getting his comeuppance, and justice served
thanks to the diligence of the Securities and Exchange Commission. In reality,
the financial industry just kept getting more and more powerful, and the
regulators were neutered. </P>
<P>And, according to the prediction market Intrade, there’s a 45 percent chance
that a real-life Gordon Gekko will be the next Republican presidential nominee.
</P>
<P>I am not, of course, the first person to notice the similarity between Mitt
Romney’s business career and the fictional exploits of Oliver Stone’s antihero.
In fact, the labor-backed group Americans United for Change is using
“Romney-Gekko” as the basis for an ad campaign. But there’s an issue here that
runs deeper than potshots against Mr. Romney. </P>
<P>For the current orthodoxy among Republicans is that we mustn’t even criticize
the wealthy, let alone demand that they pay higher taxes, because they’re “job
creators.” Yet the fact is that quite a few of today’s wealthy got that way by
destroying jobs rather than creating them. And Mr. Romney’s business history
offers a very good illustration of that fact. </P>
<P>The Los Angeles Times recently surveyed the record of Bain Capital, the
private equity firm that Mr. Romney ran from 1984 to 1999. As the report notes,
Mr. Romney made a lot of money over those years, both for himself and for his
investors. But he did so in ways that often hurt ordinary workers. </P>
<P>Bain specialized in leveraged buyouts, buying control of companies with
borrowed money, pledged against those companies’ earnings or assets. The idea
was to increase the acquired companies’ profits, then resell them. </P>
<P>But how were profits to be increased? The popular image — shaped in part by
Oliver Stone — is that buyouts were followed by ruthless cost-cutting, largely
at the expense of workers who either lost their jobs or found their wages and
benefits cut. And while reality is more complex than this image — some companies
have expanded and added workers after a leveraged buyout — it contains more than
a grain of truth. One recent analysis of “private equity transactions” — the
kind of buyouts and takeovers Bain specialized in — noted that business in
general is always both creating and destroying jobs, and that this is also true
of companies that were buyout or takeover targets. However, job creation at the
target firms is no greater than in similar firms that aren’t targets, while “<A
title="A pdf"
href="http://www.chicagobooth.edu/pdf/PrivateEquityandEmployment.pdf">gross job
destruction is substantially higher</A>.” </P>
<P>So Mr. Romney made his fortune in a business that is, on balance, about job
destruction rather than job creation. And because job destruction hurts workers
even as it increases profits and the incomes of top executives, leveraged buyout
firms have contributed to the combination of stagnant wages and soaring incomes
at the top that has characterized America since 1980. </P>
<P>Now I’ve just said that the leveraged buyout industry as a whole has been a
job destroyer, but what about Bain in particular? Well, by at least one
criterion, Bain during the Romney years seems to have been especially hard on
workers, since four of its top 10 targets by dollar value ended up going
bankrupt. (Bain, nonetheless, made money on three of those deals.) That’s a much
higher rate of failure than is typical even of companies going through leveraged
buyouts — and when the companies went under, many workers ended up losing their
jobs, their pensions, or both. </P>
<P>So what do we learn from this story? Not that Mitt Romney the businessman was
a villain. Contrary to conservative claims, liberals aren’t out to demonize or
punish the rich. But they do object to the attempts of the right to do the
opposite, to canonize the wealthy and exempt them from the sacrifices everyone
else is expected to make because of the wonderful things they supposedly do for
the rest of us. </P>
<P>The truth is that what’s good for the 1 percent, or even better the 0.1
percent, isn’t necessarily good for the rest of America — and Mr. Romney’s
career illustrates that point perfectly. There’s no need, and no reason, to hate
Mr. Romney and others like him. We do, however, need to get such people paying
more in taxes — and we shouldn’t let myths about “job creators” get in the way.
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<DIV><FONT size=2
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<DIV><FONT size=2 face=Verdana>Wayne A. Fox<BR><A
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