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The Romney Economy

At Bain Capital, Romney remade one American business after another, overhauling management and directing vast sums of money to the top of the labor pyramid. The results made him a fortune. They also changed the world we live in.

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One day early this August, Mitt Romney gripped a microphone at the Iowa State Fair, faced a crowd of a few hundred people, and began, a little joylessly and therefore a little rapidly, to give a speech. It is the opinion of some of Romney’s friends, some of the men with whom he made his fortune, that the repetitive business of campaigning simply bores him and that this boredom is responsible for the fairly sizable gap between the charismatic man they know in private and the battery-powered figure who often appears in public.

Romney, of course, is not the only person bored by Romney’s campaign appearances, and in the glazed reaction of the crowds you can see some skepticism about whether a candidacy predicated on bringing a businesslike efficiency to the WhiteHouse—a candidacy, basically, of process—could be something to rally around. “Over the coming decades,” Romney said at the fair, barely pausing between each idea, “to balance our budget and not spend more than we take in, we have to make sure that the promises we make in Social Security, Medicaid, and Medicare are promises we can keep. And there are various ways of doing that. One is we could raise taxes on people …”

“Corporations!” a man cried out from the midst of the crowd. Romney was halfway through his next sentence, but he stopped and pivoted, noticing the hecklers, one of whom (it turned out) was a 71-year-old former Catholic priest from Des Moines. Morality incarnate. “Corporations!” a heckler cried again.

Romney grinned. “Corporations are people, my friend,” he said, neatly, flatly, and looked back to the crowd, eager to press on. Suddenly there were loud objections coming from all over, catcalls and cries of disbelief. But the cameras detected a splash of interest on Romney’s face.

“Of course they are,” Romney said, and he began to explain his logic. “Everything corporations earn ultimately goes to ­people. So—” Another heckler started ­ostentatiously laughing, a kind of mock disbelief. The candidate tried another tack. “Where do you think it goes?” Romney said. “In their pockets!” someone cried out.

Romney was already a step ahead. “Whose pockets?” he said, now almost gleeful. “Whose pockets? People’s pockets! Okay. Human beings, my friend!”

In his quick, casual reply—corporations are people—Romney had seemed to give something away, though it wasn’t immediately clear what. The press chose to play the episode as a “gaffe,” as ABC’s Jake Tapper described it, a moment in which the weakness in Romney’s political pitch, the gap between his own privileged experience of the world and that of working-class voters, had been exposed. ­MSNBC, in a spate of giddy incredulity, seemed to keep the clip on loop for a week. But Romney’s own campaign managers did not try to obscure the episode at the state fair, to say he had been misunderstood or to secret it away. Instead they promoted it, as an advertisement of principle, and made the confrontation the centerpiece of a solicitation to supporters. A few days later, Romney’s communication director, Gail Gitcho, told the press that the exchange had raised $25,000 within 24 hours.

The incident, in retrospect, did less to peg Romney as a creature of privilege than it did to reveal something deeper. For Romney, the corporation has long been an object of a certain idealism. It is something he has spent much of his adult life—first as a management-strategy consultant, then as CEO of the private-equity firm Bain Capital—working to perfect, to strip of its inefficiencies until it might function as a perfectly frictionless economic unit.

The political genuflection to businessmen is so gauzy and generic that praise for a candidate’s private-sector acumen can often sound phony. But Mitt Romney is the real thing. He was, by any measure, an astonishingly successful businessman, one who spent his career explaining how business might operate better, and who leveraged his own mind into a personal fortune worth as much as $250 million. But much more significantly, Romney was also a business revolutionary. Our economy went through a remarkable shift during the eighties as Wall Street reclaimed control of American business and sought to remake it in its own image. Romney developed one of the tools that made this possible, pioneering the use of takeovers to change the way a business functioned, remaking it in the name of efficiency. “Whatever you think of his politics, you have to give him credit,” says Steven Kaplan, a professor of finance and entrepreneurship at the University of Chicago. “He came up with a model that was very successful and very innovative and that now everybody uses.”

The protests going on at Zuccotti Park now have raised the question of whether that transition was worth it. What emerged from that long decade of change was a system that is more productive, nimble, and efficient than the one it replaced; it is also less equal, less stable, and more brutal. These evolutions were not inevitable. They were the result, in part, of particular innovations developed by a few businessmen beginning a quarter century ago. Now one of them has a good chance of becoming president.


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