When U.S. Rep. Ro Khanna toured the deindustrialized cities of the Midwest last summer to discuss his “economic patriotism” agenda for renewing American manufacturing, the California Democrat spent a lot of time listening to workers who had been displaced when distant owners decided to shutter factories across the region.
He heard poignant reports on the forces that have been tipping the balance against union workers in communities such as Janesville, where a private-equity firm bought one of the community’s oldest manufacturing concerns, shuttered the factory and announced plans to offshore the jobs.
As is frequently the case, the ill-thought offshoring scheme proved to be disastrous, and Hufcor now faces bankruptcy, leaving its former employees without extended health coverage and other benefits they were promised at the time of last year’s plant closing.
Khanna asked the right questions about what had happened and about what could be done to break a pattern of so-called “vulture capitalists” sweeping into towns across this country, buying up historic manufacturers, plucking away naming rights and the most profitable production lines, and then tossing aside the carcasses of once vibrant industries.
The representative came away with a lot of ideas, and now he’s acting on them. He's sponsoring the Stop Wall Street Looting Act, a plan to “fundamentally reform the private equity industry and level the playing field by forcing private equity firms to take responsibility for the outcomes of companies they take over, empowering workers, and protecting investors.”
Last week he announced that he would refuse contributions from OpenGate Capital CEO Andrew Nikou and the private-equity firm's employees. And he is urging fellow Democrats to do the same as part of a bold new initiative to break ties with firms that are responsible for offshoring and deindustrialization.
Khanna, a co-chair of Vermont Sen. Bernie Sanders’s 2020 presidential campaign who is widely recognized as a rising star in Democratic politics, said he would not take money from donors associated with a firm that “bought Hufcor, laid off workers, and looted the company before declaring bankruptcy.”
Khanna learned the story of Hufcor — a manufacturer with roots going back more than 120 years in Janesville — when he visited the southern Wisconsin city of 65,000 in August.
The congressman met during that visit with some of the 166 workers who lost jobs when the company shuttered its local manufacturing operations. The workers recounted how they had, over many decades, helped a locally owned company grow into the world's largest manufacturer of folding doors, partitions and portable walls. And they explained how everything came apart when OpenGate Capital, a California-based private-equity firm, purchased Hufcor in 2017 and, after a few short years, announced plans to move its Janesville operations to Mexico.
Many told stories, like Kathy Pawluk, who worked with the company for 36 years before the plant closed in 2021. "When we were Hufcor and owned by (members of the Janesville-based Hough family), it was a wonderful family-oriented company to work for," she said. "That all changed when we were bought out by investors."
When I spoke with Khanna last week, he recalled that during his stop in Janesville: “I met with Kathy and about six others. They spoke with anger at the corporate greed and the incompetence. It took private equity to loot and bankrupt a company that had been thriving for over 100 years.”
The new owners “were oblivious to the consequences of what they did to the community," Khanna said.
"I was reminded of F. Scott Fitzgerald’s line from 'The Great Gatsby' about Daisy and Tom Buchanan: ‘They were careless people, Tom and Daisy — they smashed up things and creatures and then retreated back into their money or their vast carelessness, or whatever it was the kept them together, and let other people clean up the mess they had made.’ That’s how I felt about those running OpenGate Capital.”
Khanna represents Silicon Valley, one of the wealthiest regions of the country. But he has made it his mission in recent years to go to bat for communities across the country that have been left behind amid all the deindustrialization, consolidation of wealth and growing income and wealth inequality.
The former deputy assistant secretary in the United States Department of Commerce under President Obama, Khanna argues for “a new economic patriotism” that recognizes the importance of investing in U.S. industries, promoting innovation and assuring that the jobs of the future remain in the United States. The congressman is a sharp critic of offshoring U.S. jobs, especially in essential industries. To counter the trend, he advocates for industrial policies that target investment to urban and rural areas that have been harmed by multinational corporations and private-equity firms that put profiteering ahead of sound economic development strategies.
“We should support investors who are betting on America,” said Khanna, who explained, “My new economic patriotism is about supporting people and policies who will help build our country.”
Very few elected officials are willing to call out big investors, or big donors.
But Khanna is doing both.
He has objected to private-equity firms that gut communities such as Janesville. And now he’s calling out his fellow members of Congress, and especially his fellow Democrats.
“Politicians should not accept contributions from private equity firms that literally bankrupt factories and industries and destroy communities,” said Khanna. “This type of predatory activity has contributed to the deindustrialization of America, and we shouldn’t be associated with it.”