"Mister One Per Cent" Loses South Carolina Primary

Henry Srebrnik, [Charlottetown, PEI] Guardian

Newt Gingrich came from behind to beat Mitt Romney handily in the Republican South Carolina primary last week.

Romney is a casualty of the ‘Occupy' movement, which has highlighted the growing gap between rich and poor in America - the so-called "99 per cent" of the population versus the ultra-rich "one per cent."

Romney has played into the hands of populists with flat-footed statements that demonstrate how out of touch he is in a country where millions are unemployed or having their homes foreclosed.

When asked during the primary contest about his income, this was his answer:

"For the past 10 years, my income comes overwhelmingly from investments made in the past, rather than ordinary income or earned annual income," he responded. "Then, I get speaker's fees from time to time, but not very much."

Not very much? From February 2010 to February 2011, Romney earned $374,327.62 in speaking fees - 10 times what an average worker in South Carolina makes in a year.

But even that is small potatoes. His fortune of about $250 million comes from his time as a "venture capitalist" with Bain Capital.

Romney has now released tax returns indicating that he and his wife, Ann, paid a tax rate of 13.9 per cent in 2010. He is among the top one per cent of taxpayers.

Romney's tax rate is below that of most wage-earning Americans, who may pay as high as 35 per cent, because most of his income flows from capital gains on investments. His holdings include an undisclosed amount in funds based in the Grand Cayman Islands, although his aides say he never used the location as a tax haven.

Romney wasn't a "capitalist" in the classical sense of the term - someone like Henry Ford or Thomas Edison, a businessman who founds a successful manufacturing company.

Following graduation from Harvard with law and business degrees, Romney joined Bain & Co., a global management consulting firm in Boston.

He then co-founded, with rich friends, the spin-off company Bain Capital, a private equity investment firm that became highly profitable by taking over companies and downsizing them in order to make greater profits. This often involved laying off workers, of course.

In other words, Romney simply got friends to pool money in order to buy (and in many cases destroy) companies. He's a child of privilege - how many readers of this article could get rich by first having access to millions of dollars?

Romney has defended Bain's practices by referring to the theory, first popularized by the economist Joseph Schumpeter in his book Capitalism, Socialism and Democracy, of "creative destruction." But Romney deliberately misinterprets the term.

Destroying firms to enrich investors isn't what Schumpeter meant by creative destruction. It refers to the fact that innovative or improved technologies, which create new products, can lead to the demise of firms producing things no longer in demand. They change the capitalist playing field.

When Xerox invented the photocopier, it was the end of the road for producers of carbon paper. The word processor finished off typewriters. And thanks to the digital camera, which doesn't require film, Eastman Kodak has just filed for bankruptcy.

Texas governor Rick Perry (of all people) called what Romney did "vulture capitalism." Even if Romney wins the nomination, given today's economic climate, there's little chance he can become president of the United States.