I guess one question would be, Are we already in the private equity economy, and is that why there is so little growth and so few jobs? It seems that investment interests tap into the American economy though private equity, hedge funds and mortgage brokers. They tap into it to get savings from banks, they tap into it to extract profits (often through 'holding companies'). Meanwhile, they pile--offload--huge amounts of debt onto the companies they control and/or create (though mergers, etc.). One reason why PE has been so 'profitable' in the past two decades is most likely simply a bubble in capital gains combined with the ability to extract profits while offloading their debt onto the companies that actually produce goods and services.
See: http://www.amazon.com/Buyout-America-Private-Equity-Credit/dp/1591842859 The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis (Hardcover) >From Publishers Weekly With exhaustive research and a rogues' gallery of interviews, journalist Kosman puts together a convincing and disquieting argument that private equity firms are about to cause the next great credit crisis. Many people don't realize that private equity is just a new name for a leveraged buyout, and that private equity firms make their money by loading their acquired companies with debt, garnering short-term gain at the cost of the businesses' financial longevity. Exposing the pernicious practices of various high-profile firms (including Mitt Romney's company, Bain Capital, notorious for its company-destroying practices), Kosman reveals how they cripple their acquired businesses competitively, limit growth and cut jobs without reinvesting the savings, all without even generating good returns for their investors. But if only half of PE-owned businesses go bankrupt, that would leave almost two million Americans out of jobs. What's to be done? Kosman is a proponent of legislation that encourages buyers of companies to hold on to them for at least five years. This alarming book will keep anxious credit watchers on their toes—and hopefully inspire some pressure to keep PE firms from going the way of mortgage brokers. (Nov.) Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. Review "The Buyout of America takes a different approach. It is less concerned with blow-by-blow deal-making or personal stories than with the real-life economic effects of private-equity deals. Mr. Kosman brings to the subject a relentlessly critical approach that is refreshing, simply because so many stories about the buyout firms are the sort of puff pieces that result from delicate negotiations for access. He documents dozens of companies acquired in buyouts--such as hospitals, mattress manufactuerers and a car-parts maker--whose service or products went downhill, whose employees suffered pay cuts or layoffs, and whose fortunes plummeted, sometimes ending in bankruptcy. Time and again, Mr. Kosman details how the rest of us suffer at the hands of the buyout barons, 17 of whom are members of the Forbes 400. The private-equity firms pay lowball prices, he says, shortchanging public investors, by teaming up with management to pre-empt competing bids. They cream fees from their acquisitions, generating profits no matter how the companies fare. The companies cut more jobs than publicly owned competitors and sidestep proposed reforms by currying favor with politicians. Mr. Kosman finds a University of Chicago study showing that, for the years 1980 to 2001, the private-equity firms' investors got returns that fall short of the broad market average, after fees. Mr. Kosman provides exhaustive specifics." --Wall Street Journal _______________________________________________ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
