In my previous two columns, NEWTering Obama, Part 1 and Part 2, I’ve been clear that I think Newt Gingrich is the best of the remaining Republican candidates. I’ve also argued that Romney doesn’t deserve Patriot support in the primaries because of the lack of consevative achievements as Massachusetts governor and his tax-the-rich demagoguery and ignorance (see Tax reform vs. Romney). The South Carolina primary sent a clear message: conservatives are not happy with Romney. And he has certainly not helped his image by taking on the advisers of the RINO turncoat ex-governor of Florida, Charlie Crist.
However, one thing from his past has been unfairly targeted by other Republicans, including Perry and Gingrich unfortunately, although Gingrich backed away from it quickly. But this is actually one of the most encouraging things about Romney, and clearly differentiates him from Obama. This should be an antidote to certain “vote my conscience” types who threaten to stay home on election day, or vote third party, which amounts to the same thing. See my early column, Why conservatives should hold their nose and vote Republican: A search for a perfect candidate will help elect the worst.
It is now becoming well known that Romney made a vast fortune with his venture capital company, Bain Capital, which he ran from 1984 to 1999. Of course, the Left, including the Occupy Whatever swarms, love to stoke envy. But conservatives see wealth as something to admire, if acquired ethically, because it shows great ability to please lots of one’s fellow people. But supposedly venture capitalism is different, typified by Perry’s quip of “vulture capitalism”:
“They’re vultures that are sitting out there on the tree limb, waiting for a company to get sick. And then they swoop in, they eat the carcass, they leave with that and they leave the skeleton.”
However, while Romney certainly invested in “sick” (struggling) companies, a better analogy than Perry’s is a master chef trimming a fat and leaving the tasty steak.
It certainly wasn’t without its costs, including many jobs. But under conservatism, there is no “right to a job”, which entails an obligation to hire. Rather, a job should be considered the ability to please your fellow man in some way. For example, you might be able to persuading a customer to buy something you’ve made, or an employer that your work is more valuable to him than the salary he pays you.
When it comes to struggling companies, clearly they are no longer pleasing enough of their fellow people to cover their costs. Thus, they would be losing money for their shareholders who invested their money. And if a company collapses, then everyone would lose, including the workers.
Bain would try to buy a company before that happened. Then they would try to restructure the company to try to make it profitable—there is no point trying to destroy it. It might mean firing the least competent workers and laying off others, or outsourcing (blame America’s high corporate tax rates and regulations!).
Sometimes the business can’t be saved, such as Romney’s company making look-a-like dolls. But then the capital was transferred elsewhere so it could be more profitable, that is, would actually please customers.
Venture capitalism is certainly risky, because there is no guarantee that the investments in sick companies will pay off. Indeed, according to the Wall Street Journal, of the 77 businesses that Bain invested in during Romney’s leadership:
“22% either filed for bankruptcy reorganization or closed their doors by the end of the eighth year after Bain first invested, sometimes with substantial job losses. An additional 8% ran into so much trouble that all of the money Bain invested was lost.”
But most investors realize that if there is great risk, there needs to be a corresponding great potential reward, otherwise no one would take the risk! As it happens, Bain made some very astute investments that were very profitable. The WSJ summarizes:
“Bain produced about $2.5 billion in gains for its investors in the 77 deals, on about $1.1 billion invested. Overall, Bain recorded roughly 50% to 80% annual gains in this period, which experts said was among the best track records for buyout firms in that era.”
Some well known successes were Staples Inc., Domino’s Pizza Inc. and Sports Authority Inc. Economic historian Burt Folsom adds:
“One of many triumphs at Bain was a $6.4 million investment in Wesley Jessen Vision-Care Inc., which skyrocketed more than $300 million under Bain’s new leadership.”
And the jobs naturally followed these successes: about 100,000 new ones.
What a contrast with the Jobkiller-in-Chief, aka the Foodstamp President. Dr Folsom writes in another column, Is It Right to Fire People?
“Americans have understood this capitalist process for years, and it’s odd that in a time when we need to encourage risk and innovation that some would be critical of Romney for doing what needed to be done to run a profitable enterprise. Put another way, Romney at Bain Capital was so successful that he made three times as much money as President Obama lost with taxpayer dollars invested in Solyndra. Solyndra made solar panels and sold them at a loss. Romney would have shut such a company down, but President Obama kept it alive for years. Let’s put aside Solyndra’s giving contributions to Obama and the Democrats. The larger point is that the business was a bad risk. When Romney was investing with his own money, he fired people who ran companies like Solyndra. When President Obama was using other people’s money, he kept Solyndra alive and hoped for the best. Which of these two men is most likely to make the moves necessary to pull the U.S. out of its economic slump?”
Jobs in perspective
While conservatives regard jobs as pleasing their fellow people, the Left has long loved fake “make-work” jobs, which produce nothing. We could easily “create jobs” by hiring some people to dig holes, and other people to fill them. But this would hardly make our country better off.
Rather, the object should be more goods and services for all, and capitalism is far and the away the best provider. However, sometimes this means “creative destruction”, to use the phrase of Joseph Schumpeter (1883–1950). That is, destroying some jobs and even some industries that were no longer pleasing their fellow people—this frees them for other jobs that will do so, and actually make everyone richer.
Astute libertarian John Stossel points out in Myths, Lies and Downright Stupidity that firing seems cruel. But many of these workers are miserable in these old jobs, and hang on because change is scary, and searching for new jobs is discouraging. Yet often, they have found better jobs, and even say, “Being fired was the best thing that happened to me!”
The outstanding economist Dr Walter Williams even wrote a column Job Destruction Makes Us Richer. He points out that back in 1790, 90 percent of American workers were farmers, but by 2008, only 3 percent of Americans were working in agriculture. Was this a horrific unemployment disaster? No, improving technology meant that not only are our farms more productive now, but also, all these workers are now available to invent and produce so many of the other things we enjoy.
Similarly, industries like horse-and-buggy, iceboxes, and typewriters were huge employers that are now extinct. But users of motorcars, refrigerators and word-processors should all be happy that there were no politicians trying to “create or save” jobs in those industries.
Why Romney is much better than Obama
During the great SC debate where Newt shone throughout, Romney also had his shining moment, where he castigated Obama’s attacks on the free market and firmly defended real capitalism as benefiting everyone:
“You’ve got to stop the spread of crony capitalism. (Obama) gives General Motors to the UAW. He takes $500 million and sticks it into Solyndra. He stacks the labor stooges on the NLRB so they can say no to Boeing and take care of their friends in the labor movement. … He has to bow to the most extreme members of the environmental movement. He turns down the Keystone pipeline, which would bring energy and jobs to America.
“My view is capitalism works. Free enterprise works. … There’s nothing wrong with profit, by the way. That profit went to pension funds, to charities. It went to a wide array of institutions. … And by the way, as enterprises become more profitable, they can hire more people. I’m someone who believes in free enterprise. I think Adam Smith was right. And I’m gonna stand and defend capitalism across this country, throughout this campaign. I know we’re going to get hit hard from President Obama, but we’re gonna stuff it down his throat and point out that it is capitalism and freedom that makes America strong.”
Naturally during the Republican primaries, supporters of the different candidates will rightly be defending their candidates, and pointing out flaws in the opponents. But these attacks should be accurate. Dr Folsom, who like me is highly critical of Romney’s liberal record, advises:
“But let’s debate his vulnerable positions on those issues and admire the fine work he did creating wealth at Bain Capital—at a time when the U.S. needs a leader with economic sense.”
Patriots should not lose sight of the main goal: a conservative takeover that turns this great country back into the Land of the Free. And a vital step is anyone but Obama—including Romney!