THE MORNING RANT: Wealth Extraction – It’s What Socialists and the “Financialize Everything” Capitalists Have in Common

Free enterprise creates wealth. By contrast, socialism extracts wealth, destroying the institutions that created the wealth. It is extremely unhelpful in our battle against socialism, however, that an ascendant business class of financial raiders, who argue that they are free market capitalists, are doing the same thing as socialists – extracting wealth and leaving in their wake the ruins of the institutions that created the wealth.

There was an excellent essay a few days ago from Annang Mittal at the Daily Wire addressing this problem. He discussed how the plunderers who capture private sector wealth, without doing any wealth creation of their own, have “done more to discredit free enterprise than Bernie Sanders ever has.” That piece is linked below, along with a few pull quotes.

This is another of those horseshoe issues, where the extremes of both left and right nearly meet. The Private Equity Bros and the Bernie Bros both look at the wealth of a business and dream of extracting it for their own enrichment.

I’d also add that it is not just private equity that is raiding the capital of businesses. Much of corporate America’s executive class has embraced an ethos in which headcount is slashed, product quality is diminished, and customers are subject to deceptive revenue-mining practices. This may produce a short-term spike in profit and stock price, but it also results in long-term degradation to the revenue flow and equity of the business, as disaffected customers never return. When the dust settles, the net result is that capital has simply been extracted from the corporation, with much of it flowing into the pockets of those executives who enacted those short-sighted actions.

There are many “capitalists” who feel that any criticism of private sector wealth extractors is a criticism of the free market itself. It’s not. We defenders of free markets have an obligation to condemn those who give it a bad name so as to lessen the appeal of socialism. If a private equity firm looks at a company like Toys R Us or Joann Fabrics and decides to extract its wealth in a manner that leads to the company’s bankruptcy, why shouldn’t Bernie’s acolytes decide that they too should get in on the action?

Don’t forget, just as private wealth extraction can occur under the umbrella of capitalism, socialism can be voted in under the umbrella of democracy. If we’re supposed to accept the legitimacy of equity raiders because we’re pro-capitalism, then shouldn’t we also accept socialism as being legitimate too because we’re pro-democracy? The answer is “No.” We should reject all destructive wealth extractors, be they on the left or the right. Both deserve disapprobation.

Here is the link to the Daily Wire article I referenced. I encourage you to read the whole thing: “What Happened When Capitalism’s Worst Salesmen Tried Selling the American Dream; Private equity and rent-seeking discredited the free market” [Anang Mittal – Daily Wire – 10/13/2026]

That is why so many in the heartland voted for populism, and why a growing number of young Americans have turned to socialism. Americans have stopped believing either party’s promises of economic renewal. Rent-seeking, getting rich by capturing wealth but not creating it, has done more to discredit free enterprise than Bernie Sanders ever has. Generations watched plants move overseas, communities disappear, and watched financiers strip what remained. When people hear “the free market,” they hear “the fix is in.” Private equity did not stay in manufacturing either. It soon entered healthcare, retail, and food service, jobs that seemed safe because they couldn’t be shipped overseas.

Mr. Nittal also discusses the pattern of unloading debt via bankruptcy and offloading to taxpayers the pension burdens of now-failed companies after all sources of cash have been extracted. Nothing says “free market” quite like pawning off a plundered company’s pension obligations to the federal government:

The federal pension insurer took over the workers’ pension plan and released Cerberus from future claims in exchange for about $900,000. When Anchor was auctioned off in 2007, Cerberus walked away clean, but the workers’ pensions became the government’s problem.

That is the play. Buy the company. Borrow against it. Pay yourself first, and offload the liabilities on the public.

When an owner borrows against a business it bought and pays itself from the loan, that’s extraction. The debt is slapped onto the original business, as happened at Anchor. The business services its debt by delaying repairs, laying off workers, or cheapening the product. Eventually the customers leave and the business stops paying, so the owner shuts the business down and sells off the remaining assets. Toys R Us was bought with borrowed money in 2005 and liquidated in 2018, costing about 33,000 American jobs. Red Lobster’s 2014 buyout was financed by selling 500 of its own buildings, and when it went bankrupt in 2024 under a different owner, it was still paying rent on property it used to own. Few Americans could have named the companies that gutted these household brands.

I would rather entrepreneurs build high-speed rail, nuclear reactors, battery plants, and semiconductor fabs than find another ingenious scheme for converting a Red Lobster or a dentist’s office into a higher-yielding financial asset.

We free marketeers understand that creative destruction will render some businesses unviable and some industries obsolete. But those engaging in wealth extraction are not creative destructors. They’re destructive parasites.

[buck.throckmorton at protonmail dot com]

posted by Buck Throckmorton at 11:00 AM

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