C Gopinath

Justifying capitalism in America

C.GOPINATH | Updated on March 08, 2018

The lead-up to elections is always a great source of entertainment, especially if you are not a candidate. Parties and candidates squirm as they try to explain controversial decisions and actions in their past.

And this season, we have two leading contenders for the Republican Party nomination in the US having to explain their track record when it comes to the party's core platform, capitalism and family values.

I never thought I would see the day when candidates for the Presidential race in the US would have to defend capitalism! After all, the country exudes capitalism and is built on the idea of free and private enterprise. It is even a well-established political axiom that the dirtiest trick in the book is to accuse a political opponent of having socialist views.

So, it gets particularly dirty when a film released by supporters of Mr Newt Gingrich, one of the two leading contenders, portrays rival Mr Mitt Romney as a ‘King of Bain'. The film's focus is the role of Mr Romney when he headed the private equity firm, Bain Capital.

Job loss, a sore point

As any private equity firm, Bain Capital invests in firms, restructures some of them, causing loss of jobs, and sells them for a hefty profit. However, with job growth a hot political issue, Bain is becoming a stick with which Mr Gingrich can beat Mr Romney. The film asks if Mr Romney is a corporate raider or a job creator?

The film subtly plays on the sensitivities of various protests around the country that occupied public spaces and drew attention to, among other things, the widening income inequality. What is ironical is that this pot shot against capitalism is taking place within the Republican Party, the champion of the pioneering spirit, and which loves to promote itself as being in favour of getting the government out of people's lives and to leave the markets alone.

But when the unemployment level is still high, someone whose resume includes firing people is fair game.

So, while poor Mr Romney was trying to promote his reputation as a shrewd business person who knows how to build the economy and create new jobs, the other Republican contenders piled onto his record as a wealthy investor who laid off people in order to make money!

Another issue is that of taxes. The tax shock of the election season began when Mr Romney revealed that his tax rate is about 15 per cent.

For a person who is already being cast by his rivals as the wealthiest candidate out there, to have to admit that he is paying probably as low a rate as one can and yet wants to become President can be even more uncomfortable.

In capitalism, of course, you make enough money till the money starts working for you and you can devote your time to other pursuits. That is what Mr Romney does. As he said, his income comes overwhelmingly ‘from investments made in the past, rather than ordinary income.'

‘Ordinary income,' of course, means income earned from doing work. In the US tax code, when you earn money from working, your tax rates can range from 10 to 35 per cent, but income from investments is taxed at only about 15 per cent. Not to mention that another way by which Mr Romney, legally, saves on taxes is by keeping his money in funds that are invested offshore for their tax haven status, in places such as the Cayman Islands.

America has always claimed that it is a society where the rich and powerful were not envied but admired as role models for others to follow and try to make their own pile. And now we have a candidate who wants to be President of a capitalist country and who is trying to explain to the public that he had to fire workers as a businessman, he cleverly pays lower taxes, and parks his money offshore. Welcome to Mr Romney's course on ‘Introduction to capitalism' as part of his campaigning!

Equally intriguing

Another election issue that is afflicting Mr Gingrich is equally intriguing. Mr Gingrich, who is twice-divorced, has been put in the spotlight by his second ex-wife who alleges that he asked her for an ‘open marriage' meaning whether he could have an affair with someone else while still married to her. He vehemently denies it, but past rumours of infidelity swirl around him. All this in a party that has always advertised its adherence to ‘family values'!

The primary season is casting serious doubts on the Republican Party's core beliefs. Perhaps we are witnessing a shift is society's attitudes but the party certainly needs to rethink what it stands for.

(The author is professor of International Business and Strategic Management at Suffolk University, Boston, US. >blfeedback@thehindu.co.in)

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Published on February 12, 2012
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