No Bain, No Pain

According to the Republican Party's front runner, Mitt Romney, private equity firms, like Bain Capital, engage in a process inherent to capitalism called, "creative destruction."

While this has the look and feel of being the Zen of capital formation and distribution, it is a technique for organizing markets so that they consolidate.

The objective is to creatively destroy demand (what causes deflationary risk, or the risk of default). By enterprising to form more capital (consolidate more private property) than distributed, our economy is organized for failure, from which private equity firms "derive" benefit by default.

Using the example of Bain Capital, the sound-bite description of the way capitalism operates is, "whether the firms acquired survive or not, win or lose, Bain profits." So, you see, capital can be organized and enterprised so that it destroys demand without causing a declining rate of profit, which suggests that the risk of loss is avoided. No! The risk of loss is fully assumed.

The risk of loss is gamma (consolidated)--it cannot be avoided.

Creative-destruction suggests that the capital gained has to derive from inflicting pain. Causing harm (by avoiding the risk--the probable detriment--rather than taking it yourself) is a demonstration of power, and as power consolidates, the risk of loss becomes more fully assumed, not less. The Romney camp and the rest of his party are discovering the inevitable, practical effects of the gamma-risk proportion.

Like I have said before, the revolution is just as likely to proceed from the right as from the left (because the risk of loss is fully assumed). As we plod along after the Great Recession, being offered the problem in the form of a solution, we come to discover, more and more, where there is no Bain, there is no pain.