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Archive for March, 2012


Double Dip?

Are we about to see a double dip in the recession? The source of the double dip might relate to the increase in price of oil. Most of the increase in the price of oil is due to the demand from the recovering world economy. And so the dance between oil prices and economic growth continues.


Vulture Capitalism

What is vulture capitalism?

Vulture capitalists buy failing or failed businesses. They often pick them apart and sell off or run some of the pieces. Some of the pieces are closed down. The point is that the vulture capitalists step up to the challenges of finding the pieces, perhaps divisions, of business that are dragging the whole business down as well as dressing up the divisions that are capable of success. These are very important functions.

Why is it called “vulture” capitalism?

The critics of capitalism will try to find catchy terms to imply that some functions of the market are illegitimate. Well, “vulture” capitalism has caught on as a commonly used term. Have the critics of capitalism succeeded? They intend this term to be uncomplimentary, but I’m not convinced they have succeeded. I happen to like vultures, the birds, and think of them as providing an essential service. Similarly, vulture capitalists deal with the artifacts of business failure. Failure is essential and there must be institutions that reconfigure and reallocate the assets of failed institutions. For example, what is to become of Solyndra’s real estate, intellectual property and workforce? Don’t you want to see somebody trying to figure out what to do with these resources? This is the kind of thing that vulture capitalists do.

Why are we interested?

Various Republican candidates for the presidential nomination have seen fit to criticize Gov. Romney’s tenure at Bain Capital. They have suggested that his activities have been illegitimate. After all, some workers were fired in the process. Of course, more workers were hired, but this little detail is lost on Gov. Romney’s critics. My expectation is that if Gov. Romney becomes the Republican nominee, the Democrats will reinvigorate this kind of criticism. As a result, we may need some way to think about the essential and decent functions undertaken by vulture capitalists.