In October 1994, a machine operator named Harold Kellogg gathered five of his colleagues; borrowed a brown van from a used-car dealership in Marion, Indiana; and began to drive east on I-90, headed for Boston, where Romney, in his first political race, had suddenly begun to threaten Ted Kennedy. Kellogg had worked, for eleven years, for an office-supplies manufacturer called SCM, but a few months earlier his plant had been acquired by a Texas-based company called American Pad and Paper, in which Bain Capital had a majority stake. AmPad fired all of the union workers at Kellogg’s plant, more than 250 people in total, then hired most of them back at much lower wages; for years, they had gotten health-care coverage as part of their pay package, but now AmPad asked them to pay half of the costs. The whole plant walked out.
The narrative that the Kennedy campaign had been trying to build through the summer was that Romney was a Gordon Gekko type, but it didn’t really catch until Kellogg and his five friends started touring Massachusetts, visiting manufacturing plants, and then confronted Romney during an appearance at an East Boston Columbus Day parade. Kennedys campaign commercials were suddenly filled with flat midwestern accents. Romney promised, tepidly, to meet with the Indianans, “to see if there’s anything I can do.” Kennedy held on, and the line among political consultants was that the Kellogg stunt had helped turn the election.
It didn’t do much to help Kellogg. The plant in Marion closed down six months later, and the machine operator went to work at a nearby glass company. Management sent in Pinkerton guards and, according to a union source, took away machinery and moved it to nonunion plants in Utah and Massachusetts. “You had an industry where the only thing they did was converting paper to make Siegel pads, notebooks, and copy paper,” says Marc Wolpow, who was at the time the Bain Capital partner who worked on the AmPad deal. Labor in the plants, he says, was nearly a commodity product—the only thing Kellogg and his co-workers did was to move paper from one machine to another. This could be done more cheaply at plants in China or Indonesia. “Those jobs were going to get destroyed internationally. That plant was going to go out of business, and there was nothing Mitt should have done, or could have done, to prevent it.” But it is harder to be so charitable when you look at the broader moral contours of the arrangement. By 2001, five years after the company had been taken public, it had filed for bankruptcy and liquidated its assets. But Bain Capital made more than $100 million from AmPad for itself and its investors.
After the plant closed, the head of its union, Randy Johnson, tried to keep track of where everyone went. He assembled a roster of the destinations of his former colleagues—some moved to Tennessee, some to Texas—but the effort was incomplete, and what Johnson compiled was only a partial catalogue of loss. It’s difficult to track the fallout of any one private-equity firm’s work, but scholars have been able to look at the conesquences of the industry as a whole. These studies have consistently found that private-equity takeovers improve productivity and shed jobs. But one interesting nineties study, by two academics, Don Siegel at SUNY Stony Brook and Frank Lichtenberg at Columbia, found something surprising: White-collar workers, for the first time, were more vulnerable than blue-collar workers. “Part of what the private-equity firms were doing was replacing office workers with information technology—that’s where they were getting some of their gains,” says Siegel, now the dean of the University of Albany’s business school.
Here, too, private equity seemed to provide an early warning of broader changes. In three years during the early nineties, the Princeton economist Henry Farber has found, roughly 10 percent of American white-collar male managers lost their jobs. For the first time, according to data collected through the General Social Survey, white-collar workers were nearly as worried about losing their jobs as blue-collar workers. Those white-collar workers who kept their jobs worked harder, and the compensation that had once been spread through the broader middle ranks of corporations now collected at the top. In 1980, a CEO had earned about 35 times the wages of an average worker; by 1990, it was about 80; and by 2000, it was about 300. The portion of America’s gross national product that ended up in the hands of workers declined by more than 10 percent between 1979 and 1996; the portion that went to investors rose by a similar amount. “What you end up with is a choice between a bigger cake less equally split and a smaller cake equally split,” says Bloom, the Stanford economist. “But that’s a social question.”