The last week has brought a fair amount of attention to the Obama campaign attacks on Romney and Bain Capital, most of which might have been lifted straight out of the “vulture capital” meme started by the Rick Perry campaign. It all started with Corey Booker’s rejection of the Obama strategy on Meet the Press ( a decision that is reportedly paying off quite nicely). It then spread quickly, ultimately finding an expression in Romney ads.
Steve Ratner, former Obama car czar and financier, has an interesting piece in the NYT that is worth a quick read. A few quick quotes:
In fact, Bain Capital — like other private equity firms — was founded and managed for profit: ideally, huge amounts of gain earned legally and legitimately. Any job creation was a welcome but secondary byproduct.
The language in one prospectus seeking Bain Capital investors was clear: “The objective of the Fund is to achieve an annual rate of return on invested capital in excess of the returns generated” by other investments. Any job creation was accidental. …
That’s not wrong; it’s part of capitalism. Whatever its flaws, private equity has made a material contribution to sharpening management. But don’t confuse a leveraged buyout with job creation.
Ratner chastises Romney for claiming responsibility for all jobs created, even after he left Bain, while deflecting any responsibility for jobs lost. It seems that Ratner has a point.
Yet, if this was Romney’s mistake, he is not alone. All we have heard in the past 3 years and 5 months is that every job lost since inauguration day was the product of Bush’s policies whereas every job created (and/or saved) since inauguration a product of the Obama policies. There is no honest accounting, no recognition that some jobs have been lost or created in spite of public policy decisions.
The President seems to have altered his tone—only slightly—and now claims that there is nothing wrong with private equity firms. But even successful management of a private equity firm does not qualify you to be president where you must make jobs.
At least Ratner et al are directing attention back to the fact that capitalism’s primary function is not to generate an endless stream of jobs, even if this is one of the beneficial byproducts.
One only wishes we could apply the same lesson to government. Government’s primary job is to defend life, liberty, and property rights. If it restricts itself to these functions, there may be a stream of new jobs. But as with private equity, it is one of the beneficial side effects, not its primary function.