“Creative destruction”: Business experience and the politics of winning the presidency

“Creative destruction”: Business experience and the politics of winning the presidency

Clearlake : CA : USA | Jan 17, 2012 at 8:14 AM PST
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Creative Destruction

“Creative destruction” was the buzz phrase around the media this weekend in discussions surrounding Mitt Romney’s defense of business methodology and in particular his work at Bain Capital. Is Romney a corporate raider or using good business sense, and is business sense going to carry any weight in November?

“Creative destruction” can be viewed from different perspectives.

Taking over a company during a weak moment, followed by the systematic selling off of all the profitable parts domestically and to off-shore interests, then the liquidating of what is left is vulture capitalism. The result is always the loss of virtually all the jobs created by the original company.

Corporate raiding works only by raiding companies that are solvent. These are companies that have a good chance of turning a profit. Corporate raiding involves making a profit for investors by destroying companies and jobs. Corporate raiding is different from liquidating a company after making an honest effort to save it ... in those cases the liquidation usually nets a loss to investors.

Both methodologies sound ruthless. Some have suggested that creative destruction should only take place in a thriving economy, not in a “Depression,” which is what we are experiencing now.

When Mitt Romney was CEO of Bain Capital 22% of investments were liquidated with 8% of investment lost keeping profit margin at 50-80%. Is this corporate raiding, predatory practices or good business? You decide, and should this make him the best candidate for president?

“Creative destruction” is Marxist Theory

Republicans, and others, might be surprised to learn that “creative destruction” originally was a term used in Marxist economic theory. It refers to linked processes of accumulation of wealth and its annihilation under a capitalistic system. This theory is described in The Communist Manifesto (Marx and Engels 1848). In addition it describes vernichtung, which is the German expression suggesting that capitalism destroys and reconfigures previous economic orders, but also it must ceaselessly devalue existing wealth through war, dereliction, or periodic economic crises to continue the cycle for the creation of new wealth.

In this sense it appears to revitalize and regenerate, and in a thriving economy the wisdom is that a person who loses a job will be able to find another in reasonable time. In a struggling economy, however, this increases unemployment without timely re-employment relief contributing to national joblessness and stresses on the economy for public services to serve the unemployed in a time when shrinking public services strain to fill the ever growing needs of the unemployed.

Beginning in the 1950’s Austrian-American economist Joseph Schumpeter adapted and popularized “creative destruction” as a theory of economic innovation. In Capitalism, Socialism and Democracy (1942), he developed the concept out of a careful reading of Marx’s thought arguing that the creative-destructive forces unleashed by capitalism would eventually lead to its demise as a system.

When was the last time a businessman was elected President?

The American people have elected a surveyor, senators, military heroes, Ivy League scholars, 12 lawyers, 1 PhD (Woodrow Wilson), a movie star, a peanut farmer, an oil mogul, the son of an oil mogul, one Rhodes scholar, school teachers and college professors, diplomats, one sheriff (Grover Cleveland), a haberdasher (Harry Truman), a community organizer, a newspaper editor (Warren Harding) and a postmaster (Abraham Lincoln) Ten of the 44 did not graduate from college.

Not a businessman among them.

Some have tried, but none have succeeded. Ross Perot who founded Electronic Data Systems (EDS) in 1962, sold the company to General Motors in 1984, and founded Perot Systems in 1988, is considered among the wealthiest businessmen in America. He ran for a time as a third party Independent for president but ended up withdrawing for reasons still being debated.

Herman Cain the pizza king tried for a bid this year, and he withdrew because of a scandal.

Ross Perot announced his intention to run in 1992 as an Independent for president resting his qualifications heavily on his success in business. He promised to balance the federal budget, end outsourcing of jobs, and espoused a strong belief in protectionism on trade. Perot, like Ron Paul, relied on populist resentment toward the establishment politicians and a general skepticism of the way things are run in Washington.

Perot's support drew heavily from across the political spectrum, with 20% of his votes coming from self-described liberals, 27% from self-described conservatives, and 53% coming from self-described moderates. Economically, however, the majority of Perot voters (57%) were middle class, earning between $15,000 and $49,000 annually, with the bulk of the remainder drawing from the upper middle class (29% earning more than $50,000 annually). His support of the American worker by opposing NAFTA as a protectionist was surely at the heart of this kind of support. It was not necessarily his business sense, but his support of American jobs.


Do the American people vote for candidates who are businessmen? If history is any indication, the answer would have to be “no.” The current political environment, however, could influence people to consider a businessman and give sway to Mitt Romney over President Obama if they meet in the fall. Or does it?

The major debate for the fall, which many believe will be on the economy, will center around job creation and which candidate offers solutions well-planned and substantiated with genuine data analysis to prove their position -- not vague, bloated campaign promises. Does it take a businessman or an economic team to continue to lead America out of this crisis?

A factor to consider is what kind of jobs are the candidates proposing? Service sector jobs in the U.S. are on track to comprise most of the jobs in the coming years—for home health aides, customer service workers, food preparers, retail sales clerks. These don’t necessarily pay all that well, and certainly not as well as the manufacturing jobs they are replacing. Service sector jobs do not represent higher paying jobs with benefits, and it is suggested that the decline in unionization is one cause; therefore, keep watch on which candidates favor unions.

A domestic economic structure that is socially democratic and builds infrastructure in a mixed market economy is when the government and private sector work together to create jobs and an economy blending the best of socialist and laissez faire ideals. Governments in mixed economies often provide environmental protections, maintenance of employee standards, and ensure fair competition. Creative solutions to keep and create jobs in the U.S. will challenge the candidates' ideology.

Is there a vision for the future in building jobs to fill the ever changing technological field that is becoming more a part of how we conduct our lives everyday? Education plays an important role in preparing young people for the jobs of the future. Does your candidate imagine a work force of well-education individuals to fill high tech jobs of the future in analytics, mobility and cloud computing? Tech professionals of the future will not necessarily need to be engineering, math or computer science majors. T K Kurien, CEO of Wipro Ltd told Tech Job Watch that the company likes to hire liberal arts graduates and train them in IT. "They might not do a lot of the heavy coding, but they do a lot of work around business analysis and stuff like that," Kurien said. "The best programmers are now musicians."

Nurses, doctors, financial advisors, dental hygienists, civil engineers, market research analysts, computer analysts, computer engineers, management analysts, and accountants and auditors will be the top ten highest paying jobs in the next ten years. These jobs will grow the most in the next decade and have median incomes well above the national average. Almost without exception, these occupations will be in highest demand because of changes in the nation's population and in the way the country's businesses operate.

Does your candidate support the necessary educational path, beginning in elementary school, and financial assistance and governmental support structure needed to prepare individuals for this kind of work force?

“Creative destruction” loses its artistry in a stressed economy when job creation is the most valuable commodity. Whether your candidate is a businessman or not has little bearing on whether they can meet the challenge in America’s economic crisis. Candidates need strategies to create jobs now and be farsighted enough to look toward the future in planning for the education of young people, sufficient financial assistance, building a mixed market economy, and also have a vision to prepare a work force for the future.








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Economic policy will be the centerpiece of the political campaigns in the fall, and job creation is going to dominate the conversations.
Dava Castillo is based in Clearlake, California, United States of America, and is an Anchor on Allvoices.
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  • Economic policy will be the centerpiece of the political campaigns in the fall, and job creation is going to dominate the conversations. 


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