The latest front in the attack on Mitt concerns his time at Bain Capital. As a venture capital firm, Bain was in the business of restructuring companies – making them more efficient and profitable. Inevitably, people were laid off. And therein lies the rub. A new mini-movie, “King of Bain: When Mitt Romney Came to Town” features a series of interviews with people who were affected by this process… showing how cruel, heartless, and out-of-touch Romney really is.
It’s an interesting tactic, given the prevalence of populist rhetoric these days – but is it a fair argument?
Let’s consider the alternative. Highly regulated labor markets in Europe have made it next-to-impossible to fire employees. So what happens if you hire someone and they don’t work out? You’ll be stuck with them. Accordingly, employers are hesitant to hire workers – slowing labor markets further than they would otherwise be.
In a capitalist system, it’s inevitable that successful companies will thrive, while unsuccessful ones will fail. (For more on this, I recommend Joseph Schumpeter’s work on creative destruction in Capitalism, Socialism, and Democracy.) When the light bulb was invented, a number of candle manufacturers were put out of business – but those workers eventually found other jobs. Should we prop up companies that don’t offer desirable products? Should businesses be forced to retain employees who aren’t productive? Absolutely not.
Over at The American, Jim Pethokoukis at the American Enterprise Institute has the best summary I’ve seen:
Of course, Romney and Bain weren’t in the game to create jobs. They were in it to make money for their investors and themselves. Then again, the same would go for Bill Gates, Steve Jobs, Michael Dell, Warren Buffett and just about every other successful entrepreneur and investor you could name. But that is the miracle of free-market capitalism. The pursuit of profits by creating value benefits the rest of society through higher incomes, more jobs, and better products and services. This isn’t “destructive creation” — like, say, crippling U.S. fossil fuel production before “clear energy” sources are viable — but “creative destruction” where innovation and efficiency sweep away the old and replace it with a more productive and wealthier society.
The American economy is great because we allow companies to enter and exit the market – and restructure as they must in order to survive. Trying to undermine Romney because of this process is ludicrous.