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Bain Capital and the Race to the Bottom in Manufacturing and Wages
On the campaign trail, Mitt Romney wants to have his cake and eat it too. "Governments do not create jobs," a stern Romney told CNN's Candy Crowley twice during the second debate. Here in Wisconsin, however, he is running ads promising to "crack down on China" and create 12 million new jobs.
When attempting to square the circle, a look at Bain Capital's investment strategies might be helpful. In 1984, Romney co-founded Bain Capital, a spin-off from Bain & Company, a global management consulting firm. A new accounting details Bain Capital's history in shipping some 15,865 manufacturing jobs overseas (see chart below). Using a conservative multiplier, which takes into account other jobs in the supply chain or community dependent on those manufacturing jobs, Bain is responsible for some 31,730 lost jobs.
According to the analysis by Dr. Raymond Lenzi of Southern Illinois University-Carbondale, "Bain has followed a consistent pattern of buying American manufacturing plants and, within one to four years, shipping equipment and jobs to China, Mexico, and India. While Bain may have added some jobs in service companies in which they have invested (Burger King and Staples office supply for example) these jobs have little or no positive impact on the American economy since they pay much less than manufacturing jobs."
What may be most shocking is the diversity of jobs that firms like Bain have decided the nation can do without. Bain has not only offshored Mr. Coffee, it is in the process of offshoring profitable high-tech, high-wage manufacturing jobs, the type of jobs that American workers were told would be the upside of terrible trade deals like the 1994 NAFTA and the 2000 China pact.
Bain's recent decision to close the Sensata Technologies plant in Freeport, Illinois is particularly galling. The plant, which employs some 170 workers, is high-tech, highly profitable, and efficient. It makes sophisticated sensors needed for vehicles including domestic General Motors and Ford cars. In 2011, the company had a net revenue of $1.8 billion and adjusted net income of $355 million. This represents "record levels for the company," Sensata said in a financial report.
But blockbuster profits are not good enough for Bain who apparently can make more money by shipping the entire firm overseas. So they are.
Piece by piece, Sensata's equipment is being dismantled, crated and shipped to Jiangsu Province, where the Chinese government has built a new plant. (Maybe governments can create jobs after all?) Not only are Sensata workers being forced to train their Chinese counterparts, who reportedly flew into this small town near the Wisconsin border and took down the American flag, they have been ordered to dismantle the equipment's safety functions because it slows production and the new Chinese bosses didn't want it.
The kicker? The plant is closing November 5, the day before the election.
Romney says he gave up control of Bain prior to the 2002 winter Olympics, but when it comes to his personal wealth, "Mr. Romney never left Bain," says the New York Times. In 2011, Romney reported Bain holdings between $12.4 million and $70 million on federal disclosure forms. He also has a lot of money invested in China through Bain. He has refused to respond to communications from Sensata workers.
Contempt for the American Worker
If you have ever asked yourself, how can an American company do this to fellow Americans? Edward Conard, Bain Capital's former head of manufacturing, explains:
Let's not kid ourselves about just how cheap offshore labor really is. We not only pay substantially less per hour, we also avoid the costs we would incur if these workers immigrated here. We don't pay for their medical expenses when they show up in the emergency room without insurance. We don't pay for their pension costs if they don't save for retirement. We don't pay for their children's public education. Nor do we pay for their out-of-wedlock children, their unemployment benefits and workers' compensation, their slip and fall torts, their wear and tear on our public infrastructure, and the cost of their drunk driving, drug use and other crimes. We outsource pollution, its adverse effects on our health, and its clean-up costs. Neither the employees nor their employers are here to vote and seek political handouts.
When the plutocracy speaks, it's not pretty. This attitude underscores a business model vastly privileges the 1% while accelerating the race to the bottom in wages and benefits for American workers.
Trade on the Campaign Trail
China and free trade is a hot topic in key elections this cycle in industrial swing states. Rep. Tammy Baldwin of Wisconsin, who has fought against every job-killing trade agreement since she has been in office, framed her whole race on China "they lead the world in cheating" and her consistent opposition to the offshoring of U.S. jobs. Now Karl Rove's Crossroads GPS is blanketing the state in direct mail falsely asserting that she voted to offshore jobs to China when she voted for the Obama jobs package in 2009. Senator Sherrod Brown of Ohio has cut some of the best "Made in America" ads around, an appeal based on a car whose parts are made all over Ohio, along with a tough ad on China currency manipulation -- an issue he has a long track record on.
As for President Obama, he has promised to bring 1 million manufacturing jobs back to America. He deserves credit for saving jobs in Freeport and other towns by applying trade sanctions on China to stop a flood of cheap Chinese tires. But he also pushed through Congress the Korea Free Trade deal and others objected to by the majority of his own party. Worse, the administration is in the process of negotiating another terrible free trade pact called the Trans-Pacific Partnership, a NAFTA deal for Asia.
The good news is that according to the American Alliance for Manufacturing, America really can have a high-wage future in manufacturing. "The brightest minds at Harvard, MIT, and in the consulting community see enormous possibilities for American manufacturing. We're competitive in energy costs, labor productivity, and other factors. Reshoring has already begun," and both Presidential candidates are being forced to discuss the issue wherever they go.
But Americans who want to secure that high-road, high-wage future will continue to have their work cut out for them.