The Twinkie defense

Posted By: John Moore · 11/20/2012 5:42:00 PM

Don't sweat it, you'll still be able to eat Twinkies. Most of the brands produced by the Hostess company are still successful so they'll be bought out and produced by other companies probably paying below minimum wage in Mexico. Jerry Agar has blogged about this business case study and argued that it proves greedy unions are bringing America to its knees. The reality is that a business group bought up Hostess and deliberately sank it for profit. This is what Mitt Romney's Bain Capital used to do and it's one of the reasons Mitt Romney lost. North Americans are waking up to a toxic business environment where people with money game the system, turn a profit and leave a trail of financial ruin for hard working men and women behind them. 

There's a difference between venture capital and private equity. One risks money on good ideas just like the guys on Dragon's Den. Some of the ideas go bust, others take a small investment and return a fortune. Unfortunately the other model is all about deliberately trashing a company. You buy it out, take out enormous loans, and either break the company up into small pieces and sell it off or write down the whole mess and walk away. When it's the later you usually bankrupt or steal the pension plan and leave the workers with nothing. If you really want to give the workers a kick in the head you tell them it’s all their fault. 

It tells you everything you need to know about this breed of businessperson and this type of thinking that after Hostess had declared bankruptcy its top ten executives got raises of two and three times their salaries. The company was going under and 18 thousand jobs were at risk but the executives made sure that whatever cash was left would be theirs. 

This race to the bottom isn't going to end well for the average worker and ultimately we'll all pay the price. When someone has a reliable job and prospects of a decent retirement they buy homes, put their kids through university, lease cars and otherwise feed the economy. At hostess you had ten guys padding their retirements and 18 thousand workers not knowing where their next pay check was coming from. 

The good news is people are waking up to this. There's a reason Obama won the election. It's because voters know the system is being rigged against them and no amount of billions spent by big business and the Koch brothers was able to cover that up. Every forty years or so America goes through a spasm where the spoiled overplay their hand. It never ends well for them. 

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