Mitt's Gray Areas

http://www.futureofcapitalism.com/2012/07/mitt-gray-areas

Paul Krugman has a New York Times column contrasting Mitt Romney with Mitt's father George Romney:

Unlike his father, however, Mr. Romney didn't get rich by producing things people wanted to buy; he made his fortune through financial engineering that seems in many cases to have left workers worse off, and in some cases driven companies into bankruptcy.

That's just ridiculous. The Romney or Bain Capital investment that most people are probably familiar with is Staples. No one forced anyone to shop there. Customers go there because they want to. And the "things people wanted to buy" in the case of Bain Capital included not only the products that customers bought but the shares in the funds that investors wanted to buy so that Mr. Romney and his partners could invest their capital.

The Krugman column did bear out my own prediction from January: "expect to hear more, between now and Election Day, about George Romney, the CEO of American Motors-turned governor of Michigan who is the father of Mitt Romney, the CEO of Bain Capital turned governor of Massachusetts turned Republican presidential candidate."

I'm also not sure that Professor Krugman got George Romney's AMC career exactly right. The New York Times columnist writes:

What did George Romney do for a living? The answer was straightforward: he ran an auto company, American Motors. And he ran it very well indeed: at a time when the Big Three were still fixated on big cars and ignoring the rising tide of imports, Romney shifted to a highly successful focus on compacts that restored the company's fortunes, not to mention that it saved the jobs of many American workers.

Actually, it's not so straightforward. Rather than moving from industry to politics, George Romney started in politics. As I wrote in January, "George Romney had started in politics, working as an aide to a Democratic senator from Massachusetts, David Walsh. Romney then went to work as a Washington lobbyist, first for the aluminum industry, then for the Automobile Manufacturers Association, and only in 1948, after 18 years as a lobbyist, joined American Motors." Even then AMC's focus on compacts worked for only a brief period. George Romney took over leadership of the company in 1954. According to The Romney Riddle, the company lost money in 1955, 1956, and 1957. It made money in 1959 through 1965, but by 1966 it was back to a loss, with the managers quoted in Forbes blaming "bad judgment" on the part of "previous management." George Romney had left in 1962 to enter politics and became governor of Michigan in 1963. Eventually AMC went out of business. The Jeep division went to Chrysler, which then itself went bankrupt. If it were George Romney rather than Mitt running for president today, the Krugmans of the world would no doubt be criticizing George Romney for getting rich from a company that went on to fail; when AMC eventually went under, plenty of auto workers lost their jobs.

by Editor  |  Jul 9, 2012 at 8:57 am Related Topics:  Auto Industry, Paul Krugman, Politics receive the latest by email: subscribe to the free futureofcapitalism.com mailing list