The story of Sensata Technologies is about the hollowing out of America’s economy by a rapacious 1%.
On the day before an election that’s supposed to hinge on jobs, taxes and the middle class, Bain Capital, the company Mitt Romney founded, will close the doors of a factory in Freeport, Illinois, and ship 170 good, high-tech jobs to China.
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The employees of Sensata Technologies were forced to train their Chinese replacements, and the American flag that long flew over the factory was reportedly removed while the Chinese engineers were visiting the site. A group of workers have set up camp across from the factory — calling it “Bainport” — and some supporters have tried to block the trucks hauling equipment out of the plant. According to Dave Johnson, there have been several arrests.
Sensata workers have asked to meet with Mitt Romney and hoped to enlist his help keeping their jobs in the United States, but he has refused, instead remaining on the campaign trail where he speaks often about “getting tough” with China.
The most important part of the story is that Sensata Technologies is profitable operating in Illinois. Net income last year was $355 million, up 16 percent from 2010. The company reported total revenues of $1.8 billion in 2011, up almost 19 percent from the year before. According to a company financial statement, “both 2011 net revenue and adjusted net income represent record levels for the company.”
So this has nothing to do with “making hard choices” in the process of turning around a failing business, which is how the Romney campaign describes Bain’s corporate raiding. Bain’s partners are looking for a modest boost in profits by locating the plant closer to the booming Asian automotive market (Sensata makes high-tech automotive parts). They’ll get a small tax break for relocating the plant – the one Mitt Romney insisted did not exist during the first debate – and possibly defer taxes on some of the income the company generates.
It takes both capital and labor to make a successful business like Sensata Technologies. In order to make a few more bucks, 170 of the people who helped make the company thrive will be cast aside like so much trash. The layoffs will surely have a ripple-effect in Freeport – a town of 25,000 with a declining population and a poverty rate well above the national average. The move is the epitome of corporate America’s lack of patriotism – it’s capital unmoored from any sense of responsibility for the people that make the profits or the communities where they live. The city passed a resolution Monday asking Romney to intervene.
But the Sensata story has, so far, had little impact on the presidential race, mostly because Mitt Romney has no direct involvement in the operations of the company he established (despite continuing to make millions as a “passive retired partner”). But this is reading the story of Bain Capital too narrowly. Mitt Romney is directly responsible for its business model.
As Tom Gaulrapp — a lifelong resident of Freeport and 33-year employee of Sensata – told the Huffington Post’s Amanda Terkel, “They’re still using his business model. He’s the one who taught them how to do this. These guys were put there by him. So you can say he doesn’t run the day-to-day operations, but he’s still at blame for the way they do business.”
Mitt Romney started the firm, and built it up on a strategy of buying firms with little money down, loading them with debt, raiding their pension funds and breaking their unions and then “harvesting them” – in his words – for a profit. Romney is the only person to ever serve as Bain’s CEO – since his departure, the firm has been run by a managing committee.
The story is bigger than Sensata, and bigger than Bain. The issue is the turn America’s corporate culture has taken, and what the consequences of its model are for our economy and, indeed, our society. And it is Mitt Romney’s embrace of that model – ravage capitalism that is loyal to no nation-state and blind to every human virtue but profit – that should be disqualifying.
In the New York Times, Chrystia Freeland, author of “Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else,” wrote about the historical tendency of elites to self-destruct by extracting wealth from the broader community to such a degree that the society becomes dysfunctional and mired by social problems. She recalls how the Venetians became the most prosperous society in the world during the 14th century by opening their economy to a broad swath of the population. Then, at the height of its golden age, “the upper class acted to lock in its privileges, putting a formal stop to social mobility with the publication of the Libro d’Oro, or Book of Gold, an official register of the nobility. If you weren’t on it, you couldn’t join the ruling oligarchy.”
She then notes parallels to the United States, which featured one of the most egalitarian economies through much of the last century, but is now plagued by rising inequality and decreasing economic mobility. She writes:
The 1 percent cannot evade its share of responsibility for the growing gulf in American society. Economic forces may be behind the rising inequality, but as Peter R. Orszag, President Obama’s former budget chief, told me, public policy has exacerbated rather than mitigated these trends.
Even as the winner-take-all economy has enriched those at the very top, their tax burden has lightened. Tolerance for high executive compensation has increased, even as the legal powers of unions have been weakened and an intellectual case against them has been relentlessly advanced by plutocrat-financed think tanks. In the 1950s, the marginal income tax rate for those at the top of the distribution soared above 90 percent, a figure that today makes even Democrats flinch. Meanwhile, of the 400 richest taxpayers in 2009, 6 paid no federal income tax at all, and 27 paid 10 percent or less. None paid more than 35 percent…
Educational attainment, which created the American middle class, is no longer rising. The super-elite lavishes unlimited resources on its children, while public schools are starved of funding. This is the new [Venice]. An elite education is increasingly available only to those already at the top. Bill Clinton and Barack Obama enrolled their daughters in an exclusive private school; I’ve done the same with mine.
Much of this is the result of the 30-year assault on organized labor. It’s worth noting that Sensata Technologies is a non-union shop, which is a big reason the firm can move profitable operations abroad without much resistance.
Employment, in raw jobs numbers, should not be the defining issue of this election viewed in isolation. We also need to consider what kinds of jobs are being created. A recent study conducted by the National Employment Law Project (NELP) found that while only 21 percent of the jobs lost during the recession were low-paying (with median hourly wages from $7.69 to $13.83), a majority of those created during the recovery – 58 percent – have come with such low wages.
These trends are not Mitt Romney’s doing, but he is the walking, talking personification of what’s been happening in the American economy. Mitt Romney was an innovator in offshoring. He and his family will make a few more dollars as a result of shipping those jobs to China, at the expense of the workers who “built that” in the first place. That’s why the story of Sensata Technologies should have an impact in this race.