Monday, January 23, 2012

Bain in the Ass

Newt Gingrich's recent primary win in South Carolina is (hopefully) a temporary blip in the continual progress of the universe. It's not exactly revolutionary to declare that if the Republicans want to defeat Barack Obama, Romney is the only viable choice. Any other choice--namely Santorum and Gingrich--is effectively re-electing Obama, since I don't think America will actively vote for someone who has specifically called for the prohibition of birth control (as Santorum has), or someone who has had such an ugly psychological personal life as Gingrich (the dead-horse character issue aside, it's a particularly messy situation). Ron Paul could conceivably cobble together a victory if he is smart about it, but there are a lot of unpopular skeletons in his closet that I don't think will be overcome by his more moderate-loving positions on military conflict and social issues.

I don't have any problems with Romney, although I think he will be a bland President who takes no risks and, therefore, gets nothing of note accomplished (which, I would like to add, is not necessarily a bad thing for a President). That said, the attacks on Bain Capital--where he is accused of laying off masses of workers for the benefit of his extraordinarily wealthy company--is disingenuous at best and downright wrong at worst.  The entire nature of his company is (more or less) to find companies that are undervalued, make them valuable, and then sell it for a profit. Normally, a company is a target because they are being mismanaged. It isn't too far-fetched to imagine that many of these companies would be laying off workers anyway--so to lay the blame of mass layoffs to Bain is wrong. And, long term, these transactions tend to make the company viable again--which, of course, means more employment in the future.

Does this happen 100% of the time? Of course not; there are already anecdotal examples of businesses that failed after Bain stuck their nose in. And they'd be right--in as many transactions as Bain has gotten into, there are bound to be some that failed. Again, it's important to remember that these are business that most likely would have failed anyway. Studies have shown that the net effect of these types of transactions is zero jobs lost or gained--but in most cases the end result has a healthier company, so future growth is likely. So from an economic standpoint the companies aren't any worse off, and if anything are in better shape.

Politically, of course, it's a different matter. It's just unseemly for a candidate to stand up and say, "Hey, I know I just laid off a bunch of hard workers and young mothers, but six years from now it will create 1.22 jobs for every job we just slashed." Economically, it's a good call, but it's political cyanide. This is the challenge that Mitt Romney faces.

It's one of the most difficult things about defending the free market--the long-term things that tend to benefit the economy as a whole have very visible drawbacks (failing companies, starving unemployed) and very hidden (but much greater) benefits (years-long multiplier effects, broad, percentage-based growth in wealth). At one point, people trusted the system since the outcome could be seen by everyone--withness the explosive growth we've pretty much had every decade since WWII--but capitalists and politicians in the last decade or so have done everything possible to destroy that trust. Whether Romney wins or not depends on how much faith he can help restore in the capitalist system.

1 comment:

  1. Good call that the crisis of confidence that matters is the confidence in capitalism.
    Capitalism respects freedom, and freedom only works with a moral populace. In that sense, it is true that capitalism is no longer a workable system in America. However, what needs to change is American morality, not capitalism.

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