Saturday, May 26, 2012

Mitt Romney Apologist David Brooks Laments the Role of Private Equity in the Presidential Campaign, - And then Proceeds to Show Why Private Equity is a Largely Failed Strategy for Job Creation

Mitt Romney’s Main Campaign Theme is Attacked – Not Fair to Attack Mitt

Mitt Romney, and no one else is responsible for making Mr. Romney’s experience as the head of a private equity firm a campaign issue.  Mr. Romney has repeatedly claimed that his experience in the private sector in ‘job creation’ qualifies him for the Presidency and also provides him with credibility for solving the employment problems in the American economy.

So it seems only correct that Mr. Romney’s experience in job creation, or lack there of if that is the case should be a campaign issue.  But Republicans are furious, how dare anyone question Mr. Romney’s business background!  Their rules of the game; we get to say whatever we want, attacking what we say and our policy is off limits and unfair.  The latest to join the fray is pseudo intellectual columnist David Brooks, whom the New York Times allows to grace its op/ed pages in a failed attempt to try and present a reasonable Conservative opinion.

Mr. Brooks leaves no doubt where he stands on the issue.

Forty years ago, corporate America was bloated, sluggish and losing ground to competitors in Japan and beyond.

But then something astonishing happened. Financiers, private equity firms and bare-knuckled corporate executives initiated a series of reforms and transformations. The process was brutal and involved streamlining and layoffs. But, at the end of it, American businesses emerged leaner, quicker and more efficient.

But wait, what about the results at Bain Capital, Mr. Romney’s firm and whether or not private equity creates jobs?  It turns out Mr. Brooks thinks they don’t, that the best he can say is that it doesn’t destroy jobs.

This process involves a great deal of churn and creative destruction. It does not, on net, lead to fewer jobs. A giant study by economists from the University of Chicago, Harvard, the University of Maryland and the Census Bureau found that when private equity firms acquire a company, jobs are lost in old operations. Jobs are created in new, promising operations. The overall effect on employment is modest.

Yes, the best that can be said for Mr. Romney’s job creating skills by one of his strongest supporters is that the effect is ‘modest’.  The process by which private equity loads up a firm with debt, rewards the buyers with massive profits taxed at very favorable rates and in many instances results in the destruction of those companies is called “creative destruction”.

Private equity firms are not lovable, but they forced a renaissance that revived American capitalism. The large questions today are: Will the U.S. continue this process of rigorous creative destruction? More immediately, will the nation take the transformation of the private sector and extend it to the public sector?

And  so Mr. Brooks inadvertently lets slip a truth, that Republicans want to take ‘creative destruction’ to the public sector. 

This is something he is in favor of, but then it is easy to be in favor of destroying something which you are not the victim of that destruction.  For the millions of men and women, children, elderly, poor and handicapped who will be the victims of ‘creative destruction’ applied to the public sector, well they probably are not quite as enthusiastic.  But then they should have been an ignorant opinion columnist making a nice six figure income shouldn’t they rather doing real work for a living.

As for Bain Capital and Mr. Romney and his role in all of their deals and how much money he made and how many jobs were created and lost, much of the discussion would go away if he would just provide the information.  But he doesn’t have to, because private equity means private.  And of course there is always the reason that by providing that information Mr. Romney would prove his critics are correct. 

Can’t have that, can we.

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