Tale Of A Town With Three Mines

Mitt Romney who is running for the presidency of the United States of America has authored a plan he calls: “Believe in America” which he claims will achieve the sought after jobs and economic growth. The plan is made of seven policies, five of which are troubling enough to create doubt that the plan will succeed. For example, Romney wants to reduce the personal tax on savings and investment, abolish the inheritance tax and lower the corporate income tax to 25 percent. Except for his stance on the inheritance tax, the rest might have worked if it were not for the regulatory and fiscal policies he espouses. Indeed, he wants to abolish practically all the regulations, and he wants to put the fiscal policy of the nation on a course that was once called “automatic pilot” and was proven disastrous.

The problem of capping the spending at an arbitrary level is that you do not allow for contingencies. Just think about it: What will happen if and when you have an emergency and you need to spend 2 percent more than the cap. Will you let the old Congress that made the capping law veto the judgment of the new Congress that sees the need to impose a surtax? And what happens if one year you spend 2 percent less than the cap and you are left with a surplus? Will you be forbidden from using this money next year lest you go over the cap? No, this is not a good idea. If you want a Congress of dumb robots that cannot think for themselves but follow old directives, you have one now, and these guys are not something to warm anyone's heart as you can tell. And yes, there is a dogma about government being a problem, therefore the smaller the government the better. But there may come a time when you will need to hire more people to achieve something out of the ordinary. Democracy is to make judgments that suit the moment not to be bound by decisions made beforehand.

And when it comes to his energy policy, you can see that Romney has no idea how the various energy companies operate. The people who run these companies make their own policies; they make them with an eye on the whole world taking into account the available technologies and the existing reserves. The only time they respond to the call of any government is when regulations are put in place or incentives are given out. They will take anything you give them if that's what you want to do, even ask for more. And if you start deregulating, they will take advantage of every missing regulation to do what is good for them without regard as to who will get hurt or who will be helped. In short, there is nothing that Romney can do to create an energy policy that will be tailor-made specifically for America. Several presidents have tried for decades and they all failed.

As to his human capital policy, it is truly a sorry sight. There are now 3 or 4 million jobs in America that employers are unable to fill because they cannot find Americans with the right skills to fill them. Instead of offering incentive to these employers so as to encourage them to hire the unemployed and train them to fill the available positions, Romney wants to direct the incentives toward the foreign workers by raising the visa cap and by giving permanent residency to recipients of advanced degrees.

You can see that this approach fits exactly the current debate in which everyone automatically articulates the ideas that made America great in the past without mentioning the possibility that such ideas may not be adequate for the present. What is ignored in this debate is that for many historical reasons, America used to enjoy a special place in the world, and was able to attract a special kind of people to its shores. But the world has changed and America finds itself competing with rivals that have the ability to produce their own exceptional people and keep them at home. It follows that America can no longer be exceptional by standing on the shoulder of someone else. It will have to train its own people to be exceptional and thus hope to maintain their country's exceptional designation. Dreams of past glories won't do anymore.

And so, with a plan like that, and knowing what his professional background as a “vulture” capitalist has been, what can be expected Mitt Romney will do if he is elected President of the United States of America? A good way to answer this question is to devise a fictitious scenario that will illustrate the various possibilities. What follows is that scenario.

Once upon a time there was a mining town fortunate enough to have three profitable copper mines, a number of healthy manufacturing plants and the usual service enterprises that make a local economy hum such as the restaurants, department stores, bank branches, bakeries, insurance agent, motels, barber shops, the local printer and so on. The good times lasted till the day when the worldwide economic cycle began to take a downturn, an occurrence that caused the demand for copper to weaken and the price to drop. It was an unusual downturn in the sense that it was sharper than anything experienced since the great depression.

The three mines (called Mine A, Mine B, Mine C) got into trouble and so did the whole town because the other industries did business with the mines, some directly and some indirectly. For example, the plants that fed the mines with parts and accessories faced immediate closure while those that used their copper to manufacture products faced the prospect of having to import the raw material from further away at a cost. And without the high paying jobs, there was little else that would sustain the service industries. And so, the town mayor and the other prominent figures in it called on the central government to help save the jobs and prevent the town from turning into a ghost town.

The government answered that under the current circumstances, it can do nothing past the existing programs to assist the unemployed. Consequently, the dreaded scenario started to play itself out, and the bad times began to creep in. One after the other, the mines shut down followed by the other companies, some which reduced the workforce while others shut down the operation entirely, laying off everyone. The town atrophied gradually over the following months as the transient workers that had come from somewhere else left town the moment that they lost the job. Worse, these people were followed by the young from among the long established families who saw no future for themselves in this town or in the mining industry for that matter.

Then one day, a faint glimmer of hope began to flash in the distance when people came from out of town to look at Mine A. The news spread among the remaining town folks to the effect that the parent company of this mine whose head office was in the big city had just been bought by a larger mining company. The new bosses had come to see what they can do to reopen the mine and make it profitable again even during this economic slump. Two days later, rumors began to circulate to the effect that a private company of the vulture kind had bought the adjacent mine known as Mine B.

A few months later, Mine A was back in business with the old equipment being refurbished or replaced. As for Mine B, the equipment in it was taken out for the wrong reason. It came to light that it will be sent somewhere else and that the mine will not reopen. In fact, the equipment was sold to a mining operation in a Third World country where the price of new and modern equipment is beyond their reach but labor is cheap. As to the land claims that were owned by Mine B, they were sold to the company that now owns Mine A.

This takeover alarmed the town folks who feared that the same thing will happen to Mine C, a move that will leave them with an out-of-town company owning a single huge mine and all the land claims. To prevent this from happening, the mayor assembled the prominent figures and the employees that remained in town but were not rehired by Mine A. They discussed the subject and decided to buy Mine C, and run it themselves. But they still needed outside help in the form of financing. Luckily, someone had discovered the existence of a program in the books of the central government to assist industries that open in a remote region of the country and hire local people. They applied for a grant and got a positive response followed by a check.

The white collar and blue collar workers partnered with a number of local business people to form a company that took possession of Mine C. They bought modern equipment and restarted the operation. With Mine B now history, the town was left with two healthy Mines: A and C. Nearly two years pass but the new owners of Mine A have not yet made use of Mine B or its claims even though the world economy has improved enough to absorb the production of a few more copper mines. This was the puzzle that perplexed the town folks who were eager to see the roaring days of the past come back to their town. That was a time when all three mines were producing at maximum capacity, when everybody was employed and everyone making money like a proud member of the middle class.

The puzzle was solved when the news spread to the effect that the owners of Mine A had sold the remnant of Mine B and all its claims to someone else at three times the price they paid for it less than two years ago. Well, what can you say! This is how capitalism works, and the good thing is that there is going to be three mines again operating at maximum capacity, and the good times are just around the corner. Also, the fact that Mine C stands as a cooperative that some people call an emblem of “socialism” does not threaten the functioning of the capitalist system. In fact, the surprise came a few months later when the controlling interest of Mine C – the portion that did not belong to the employees -- was sold at a hefty gain to a foreign mining company that wanted to establish a foothold in this part of the world. No one objected because everyone was too busy making money like crazy.

There are two questions to ask here. One: was there a villain in this story? Two: was there a difference between the action taken by the vulture company with regard to Mine B, and the action taken by the town people with regard to Mine C? The first bought Mine B, sold its equipment to a Third World operation, and sold its claims to Mine A. As to the second, these were local people who partnered with other local people to restart Mine C. When a foreigner offered them a good deal and they ascertained that he will not take away the equipment or try to sell the claims to someone else, they sold their share to him.

It is clear that the owners of the vulture company come out looking like villains for making a bundle of money buying a distressed mine and selling it to a foreign interest at a huge profit. But what about the town folks who also made a bundle of money buying a distressed mine and selling it to a foreign interest at a huge profit? Yes, this is what happened in both examples but there is a difference between the two. It is that the vulture company did not create one local job whereas the town folks did. Also, the vulture company did not intend to produce wealth in the form of copper or anything else whereas the town folks did.

If now, we define capitalism as being the pursuit of profit by producing and selling goods or services, it will be seen that the town folks fit the definition because their primary motivation was to reopen the mine. By contrast, the primary motivation of the vulture company was to make a profit without pretending to produce goods while at the same time – get this now -- produce a service that serves no one but its owners. What must be concluded from this is that vulture capitalism is no capitalism at all but legalized banditry. To say that a vulture capitalist is a successful person may be true but so is a bank robber that gets away with it. This is the kind of success to be ashamed of not proud of.

Think about it now, if Romney gets elected and he does what he promises he will do on the first day, you will instantly have a deregulated America with minimum taxes being collected for the public treasury. This will result in maximum freedom of action being transferred to the vultures as well as the nation's wealth to play with. The net result will be that while Romney will get busy hollowing out the nation of its civil service, they will hollow it of its wealth.

In that regard, they will spirit out its equipment, intellectual properties, cash reserves and where possible the savings of its people. In the end, it will be seen that he, alone stood like a giant that made the Bush, Cheney, Rove triumvirate look like toddlers playing the “wreck America game” they used to play -- causing so much damage already to a nation that used to be exceptional but is no more. What else do these people want?

It looks like Mitt Romney has a great deal of explaining to do before he can convince anyone he will run the affairs of America not like a vulture capitalist that is beholden to a gambler whose wealth is coming from operations in Eastern Asia and whose heart is unashamedly anchored in Western Asia.

There is nothing in this plan about doing what is good for America or the American people. Where things stand now, only China and Israel will benefit from a Romney presidency.