Romney helped people at Bain (plus video)
One of the most dishonest attacks on Mitt Romney comes in the form of attacks on his work at Bain Capital. The purpose of companies like Bain, in the most general sense, is to buy failing companies and make them more efficient. This involves the ending of some jobs, but that is part of the process of making the companies more efficient. Here’s John Hayward with some smart questions:
Stasis is being presented as morally superior to dynamic growth. Are we supposed to pass a law that says private-sector investments can only be made if the investors agree to retain 90, 95, or 100 percent of the workforce, as well as vowing not to declare bankruptcy? How long would that moratorium have to last?
Who would be willing to make an investment under rules like that? Bain borrowed a good $250 million to buy out several companies, create GST Steel through a merger, and upgrade their equipment. It’s a matter of some debate whether they actually made a profit at all, since some of the figures have not been publicly disclosed. They did realize a $36 million dividend after the merger, but they immediately reinvested $17 million of it. When Bain first got involved, the operation was carrying $376 million in debt.
That sounds like a costly effort to make a difficult investment work out, or perhaps a foolish gamble that didn’t pay off, not corporate piracy. What’s the Obama alternative? Taxpayer-subsidized guarantees that nobody in a preferred corporation or industry will lose their jobs, or suffer reductions in their benefits? The President of the United States at the time Bain became involved in GST Steel happens to have been a Democrat, Bill Clinton. Why didn’t he swoop in and save all those jobs? How much in interest would the rest of us have paid on the ensuing 17 years of accumulated debt if he had?
Part of this is the difficulty laid out by economist Frédéric Bastiat in the concept of what is seen and what is not seen. All people see is what happened, not what didn’t happen. What probably would have happened with a lot of the companies, had Bain not invested in them, is that EVERYONE would have lost their jobs because the companies would have gone under. That’s not quite the scenario Bastiat was talking about, but it’s the same problem. People never saw the companies go under. They just saw the companies get bought out and some of the people losing their jobs in the process of rescuing the company.
Sympathizing with those workers is admirably compassionate, but economically short-sighted. Sometimes, that is what has to happen in order to save the company and thus save some jobs. I am not going to use the analogy of pruning plants, because people’s jobs are not branches, but I easily could, because it’s the same sort of thing. Lose some jobs and come back stronger, or lose all the jobs when the whole thing goes under.
The Romney camp has just released a video on this very subject: