Why Romney can’t defend capitalism
When Fox News worries out loud that Mitt Romney’s failure to account for his time at Bain and his personal tax affairs may represent his Swiftboat moment, it is plain the Republican presidential bid has careened offtrack. The Bain attacks are “part of a strategy by Team Obama to turn Romney’s biggest perceived strength – his business experience – into his biggest weakness,” writes Fox’s Juan Williams. “Romney needs to come clean or his hopes of being president will end long before Election Day.”
How has Romney come so close to bungling his big chance, even before he has been nominated by his party? He appeared to be in an ideal position to turn his experience as a businessman into a winning political narrative. During these jobless economic doldrums, Romney might have become a champion of capitalism, explaining how private enterprise works and how it creates jobs.
His problem is that his time at Bain is not a classic story of heroic capitalism at work. Instead of an old-school entrepreneur with a good idea who raises funds to employ Americans to make a product that sells successfully around the world, Romney took distraught companies, charged them hefty fees, fired workers, and set the stumbling enterprise off in a new direction, laden with debt. Some companies prospered, some failed. Some gave Americans new jobs, some sent jobs overseas.
Romney’s tax embarrassment follows a similar arc. No one likes paying taxes, but conservatives have made tax dodging a religion, so Romney was in prime position to explain how taxing people too much can drag an economy down and how the rich, if lightly taxed, spend freely and create jobs. But the intricacies of Romney’s vast wealth are far from simple and his personal tax avoidance measures beyond ingenious.
There may be good reasons to hold a bank account in a tax haven like the Caymans, but most Americans don’t have reason to resort to such ruses. They suspect that those who help avoid the payment of taxes due in America are unpatriotic, even un-American. So how does Romney set minds at rest on his tax record? He doesn’t; he insists he will only issue two tax returns.
Many have a visceral dislike of Romney and his kind of well-heeled Republican. He is too rich, too smooth, too handsome. His family is too large and their vacations too extravagant. His privilege since birth has set him apart from ordinary Americans. His business at Bain was largely slaughterman’s work, taking unsentimental decisions about shedding jobs, incurring debt and closing plants. His private fortune is so substantial he employs armies of accountants to pick holes in the tax laws. He is prepared to say and do anything to get elected. Except for one thing: He won’t – or can’t – explain why capitalism is good.
Preaching the virtues of capitalism red in tooth and claw (to paraphrase Tennyson) is a hard sell at any time. Right now, in the midst of the most prolonged recession since the Great Depression, capitalism is in the self-immolating period Joseph Schumpeter cheerily dubbed “creative destruction.” If you believe what’s on the label, stronger, leaner companies will emerge from the wreckage, better fitted to the new competitive marketplace.
A leap of imagination is needed to grasp an argument that is so faith-based and counterintuitive. Not even Ronald Reagan, with all his persuasive eloquence, was able to convince Americans it was true: Closing companies and firing people leads to new jobs; outsourcing jobs overseas helps Americans get a job; free trade makes the whole world better off; and so on.
Romney hasn’t been helped in his task by those he beat to the nomination. Rick Perry describes what Bain does as “vulture capitalism,” picking the flesh off the bones of corporate corpses, while New Gingrich’s dark charge was that Bain was no more than “rich people figuring out clever legal ways to loot a company.” It is only a small step from such ferocious friendly fire to hostile questions about exactly when Romney left Bain’s employ, which disastrous Bain deals he was involved in, and which of the Bain companies he presided over fired people and sent jobs overseas.
For now, while Romney gaffes his way around the world, questions about exactly what he did in his Bain years and what taxes he paid before last year will remain unanswered. But damage has been done: The impression is that Romney’s vampire capitalism and his reluctance to pay his dues are hard to explain, even indefensible. Unless he returns to America in a more transparent mood and is prepared to open a decade of tax returns to scrutiny, he will be dogged by questions all the way to Nov. 6.
Nicholas Wapshott’s Keynes Hayek: The Clash That Defined Modern Economics will be published in paperback in September by W.W. Norton. Read extracts here.
PHOTO: Republican presidential candidate Mitt Romney delivers foreign policy remarks at the University of Warsaw Library, July 31, 2012. REUTERS/Kacper Pempel