Jason Cherkis and Zach Carter have a humdinger out today that lays out Bain & Company's deep involvement with Big Tobacco in the early 1990s as it was dodging U.S. plaintiffs and government watchdogs, and working to crack open the Super Kitty that was the collapsing Soviet Union.
Your first thought on reading that Bain wrote the book -- literally wrote the "official government manual laying out the rules for bringing state resources into the marketplace" -- on how to transfer the Russian people's property into the hand of a few oligarchs might have been: Well, of course they were! What heist of historical proportions would be complete without the power-pointed guidance of America's best and brightest, its private-equity technicians?
But the second thought -- after learning about the flagrant conflicts of interest, the rampant corruption, the "packets of rubles" floating around -- might be: Wow, they did all this stuff?
Bain had plenty of company in the wholesale looting of Russia, which was abetted by major Western banks and intellectuals -- some of whom wound up in jail, most of whom wound up fantastically rich. When it comes down to it, the story of Bain and its Western colleagues in post-Soviet Russia isn't one of anomalous behavior brought about by too much vodka and the bad influence of some nasty Russian mob figures. No, what Western companies did in Russia -- did to Russia -- is more or less what they've done to the United States and Europe over the past few decades. It's just that in Russia they did it basically in a weekend.
"I've been thinking for a while that it's really appropriate to have a private equity guy as a possible president. American decline has reached the asset-stripping phase, as elites stint on investment -- both public and private -- and run off with all the national cashflow. And the electorate hasn't begun to figure this out," wrote Doug Henwood, who blogs regularly over at Left Business Observer, summing up his initial musings on the direction that state-directed capitalism might take if the King of Bain ends up winning the election, and thus, the right to have his hands on the nation’s economic defibrillators. (Doug's no partisan, though. Don't get him started on Obama.)
"Add to this the novelist Gary Shteyngart's observation that the USA today reminds him of the declining USSR he was born into and you've got a pretty dark picture of our future," says Doug, referencing an interview Shteyngart did with him.
As Cherkis and Carter hint at, Bain’s past, and Russia's present, illuminates our possible future. As economic vacuums opened in the wake of the Soviet Union’s collapse, Western banks and consulting firms moved to fill them -- with promised payoffs to decadent elites who would quickly become Russia's new oligarchs. Our own recent history demonstrates that those wheels are similarly greased -- the hole into which further taxpayer wealth may be funneled to Wall Street is at least $4.8 trillion wide, thanks to the post-crash bailout.
The story of Bain and post-Soviet Russia fits neatly into a counter-narrative that has emerged about Mitt Romney and his company, one told by those who have paid the price of his success. Bain's lucrative role in the systematic looting of the country is a compelling story not because it represents an anomalous departure from an otherwise civic-minded free enterprise. Rather, Bain's activity in Russia is simply a blunt and unsophisticated version of the model it and other private equity firms operate here in the United States. Instead of illegally using straw buyers, for instance, it sets up shell corporations in the Cayman Islands. Instead of dodging tax authorities altogether, it claims that hundreds of millions in management fees are not fees at all, but are in fact capital gains to be taxed at a dramatically lower rate. Instead of handing money directly to politicians, it gives contributions to political action committees. Instead of manipulating auctions to find bargain prices, it uses massive leverage to take over companies with little upfront cash.
Of course, having a private equity titan in the Oval Office would only add a dose of steroids to a political system that already features a host of oligarchs as privileged rentiers with what amounts to veto power over legislation -- a phenomenon that, again, the Wall Street bailout and its accountability-free aftermath should elucidate. Yesteryear’s fight to privatize Social Security was sold as freedom for taxpayers to direct their own retirement funds, but it was really a fight to get a gigantic pool of taxpayer money into the hands of bankers. “School choice,” and its promises of greater liberty for parents, is much the same -- it’s about getting a pool of taxpayer money that flows to public schools into the hands of private sector businesses who promise dynamic improvements in educational outcomes which, taken as a whole, have never been delivered.
Even your beloved Affordable Care Act depended on the approval of powerful corporate lobbies to exist. In Ron Suskind’s book, Confidence Men, Billy Tauzin -- whose support for the Affordable Care Act was critical -- is described as being an ally of the “unfettered marketplace,” with “little faith in government acting as an arbiter.” But as Chris Bray pointed out in the June 2012 issue of The Baffler, that’s bunkum:
When Suskind first shows Tauzin in action, he’s one of two people sitting near Larry Summers at a White House–sponsored meeting on health care reform: “A long-serving Louisiana representative who switched from Democrat to Republican in the 1990s, Tauzin had pushed through one of the most expensive pieces of legislation in American history: the Medicare Prescription Drug Improvement and Modernization Act of 2003. Costing $500 billion over ten years, it is considered by many to be a massive handout to the pharma industry, which in return hired Tauzin as their lead Washington representative.”
So the “unfettered marketplace” is where the central government nakedly gives away hundreds of billions of dollars in handouts to private corporations, and people who don’t believe that government should act as an arbiter in health care matters are the sponsors of some of the most expensive health care legislation in history, and free market purists work as corporate lobbyists in the District of Columbia, probing for the spigot. It’s free markets and laissez-faire economics, a half trillion public dollars at a time. Thank god Billy Tauzin doesn’t believe in government intrusion in the health care marketplace, because just imagine what that would look like.
The eloquent point that Bray helps to make here is that there exists no mainstream political party in America that doesn’t openly and proudly practice his sort of oligarchical favoritism in their governance and policy-making. If there’s a dollar’s worth of difference, it comes from political expedience and, perhaps, shame -- for example, the only daylight between the education policies of Romney and Obama is that Obama does not flagrantly demonize teachers’ unions, just subtly so. But, speaking of shame, if Mitt Romney -- who is the member of a faith community that’s hostile to cigarettes -- can nonetheless pad his bankroll by selling them, tithe a portion of those proceeds back to his faith community, and sell the exchange as proof of his generosity, then that dollar’s worth of difference is likely to add up quickly.
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