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Don't Abandon Capitalism
· Friday, January 13, 2012
It's bad enough when Democrats start playing class warfare, but when Republican presidential contenders begin using phrases like "vulture capitalism," it's time to be really worried.
It's easy to dismiss as sour grapes Newt Gingrich and Rick Perry's attacks on Mitt Romney and Bain Capital, which Romney co-founded. It's no coincidence that the attacks are getting nastier in South Carolina, site of the next presidential primary and perhaps the last chance one of the challengers has of stalling Romney's path to the nomination. But Romney's critics should be ashamed of themselves for promoting anti-business stereotypes.
The left has always treated wealth as suspect. If one person becomes rich, the assumption is that it is at another's expense, which is why the left believes government has the obligation to redistribute wealth.
But it isn't just the left that has a poor understanding of wealth creation or how free-market capitalism works. A growing number of populist conservatives are deeply suspicious of corporate America, too. You can hear it in their rhetoric about everything from the bank bailouts to immigration.
Corporations seem to be the new villains for everyone to hate. And no candidate in recent memory quite invokes the corporate image as much as Mitt Romney. He is the son of a car company executive. He looks like he just stepped off the pages of Fortune magazine. And it turns out that he made his own fortune heading up a private equity firm that specialized in corporate takeovers.
Bain Capital's model was to identify underperforming companies; tighten or replace management; and make them profitable as quickly as possible -- which often meant cutting jobs, at least initially. And since Romney and Bain are so closely identified, the implication is that Romney got rich by destroying jobs.
Bain also invested in younger and riskier enterprises than some other private equity companies, which meant a fair number -- about one in five -- ended up failing despite Bain's involvement. Nonetheless, Bain also helped create more than an estimated 100,000 additional jobs by providing the equity for companies such as Sports Authority. Yet some people seem to think it's immoral for Bain -- and Romney -- to make money if any jobs were lost.
But is it really fair to blame Bain Capital or Mitt Romney? Not every takeover will be successful, and even the successful ones entail pain in the beginning. Private equity companies that specialize in turnarounds don't usually get involved unless the company is already struggling. And like all companies, the purpose of private equity firms is to earn a profit for investors who have risked their own money.
The alternative would be to treat companies as if their primary purpose is to provide employment rather than turn a profit. That system might work for a while -- a very short while. But it would destroy innovation, reduce productivity and ultimately make everyone, including workers, poorer.
If a company isn't profitable, it won't stay in business, even if the owners are pure altruists. Companies fail for lots of reasons: Their products or services are inferior, they lose market share to competitors or they become bloated and inefficient. Turnaround firms like Bain Capital specialize in solving the last problem.
But in order to get a company back on its feet, someone has to make tough decisions by eliminating positions that are extraneous, cutting jobs that aren't vital to the bottom line and trying to produce more or better products and services with fewer people.
The country could do a lot worse than electing a president who knows how to do exactly that. After all, one of the biggest problems facing the new president will be dealing with the debt we've accumulated running a Leviathan federal government. Who better than someone who has cut costs for years in the private sector to bring those same skills to the job of president?
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Rob Poff
So disappointed in hearing Perry defend this attack line in an interview yesterday on Fox. He lost me. It appears that even conservative career politicians do not understand how businesses work. A good CEO has to have the stomach to cut the bloating, and Newt and Perry don't appear to have it. Romney may be the executive to get the team in place to get it done.
Posted January 13, 2012 at 9:08:46 AM
Brian
How about someone who has complete respect for the Constitution and the limits it places on the federal government?
Posted January 13, 2012 at 9:19:46 AM
Marty
Romney will never moves us back to the Right. Americans need to acknowledge the fact that this is an intentional attack upon us and defeat it. I will never vote for Romney, and since the Republicans are bent on forcing him upon us, and since they keep selling us out and are affraid to fight for us, next election I will be an Independent Tea Party.
Posted January 13, 2012 at 9:57:25 AM
mmccrindle
Good point Linda.
The Feceral Gov't certainly needs to be pared down to size and Mitt just may know the right type of people to surround himself with to accomplish such a gargantuan task.
Certainly far more able advisors than the vermin Obama-Soetoro has put into place.
Posted January 13, 2012 at 10:13:16 AM
wjmccrindle
As the federal government is bloated and ineffecient we need the Blain Capital model to over haul that monstrosity. Many jobs could be lost, I wouldn't miss Pelosi, Boxer, Reed, and all the other losers with a (D) after their credential.
Posted January 13, 2012 at 10:52:02 AM
Daylo
Too bad people have not seen the connection between Bain Capital, Dominos, Serta and Staples.
Dominos - a much lauded success of Romney's received a 12 million dollar government bailout.
Serta was bought by an arm of Bain Captial. So was Simmons. Simmons went into bankruptcy and they intended to put them together to be bigger than Sealy. Sounds like a monopoly in the making.
Then there is Staples. Bain Capital bought out Office Depot and started Staples. Tried to Merge the two, but the Federal Trade Commssion said no can do. There could well be too much room for over-pricing and pushing the little guy out, i.e. Office Max and others. Sounds like a semi-failed attempt at another monopoly. Not to mention Staples has many overseas jobs created! I said OVERSEAS jobs.
Do your homework.
Romney is everything they say he is and more on that video.
Then there are arms off of Bain Capital that are busy, busy, busy as well ARES, Kohlberg Kravis Roberts & Company. There are more names if you will really get down and dirty and search instead of whining about the unfairness of it all!
Posted January 13, 2012 at 1:09:25 PM
Daylo
Check out what these people did to Samsonite Luggage Company as well.
Posted January 13, 2012 at 1:46:17 PM
Jonathan Sipe
Mitt Romney is a very successful business man and I applaud him for that. People need to realize that companies are in business to make money and not to create jobs. Bain is a successful business and it is making a lot of people a lot of money and that is great. Yes, we do need a President who will help clean up and streamline our Federal Government. However one man can't do it alone. There are still alot of negatives against Romney and Bain. I don't know about the bailout money but I did hear that Bain has given money to many Domocratic campaingn coffers and to the DNC. Were the conservative democrats. I don't know. We do know where the DNC's interests lie though. Speaker Newt and Perry are wrong for attacking Romney on his business record though. Capitalism is what built and drives This Country I am proud to say which is what Romney practiced to make his money. They should be ashamed not Romeny on this one.
Posted January 13, 2012 at 2:33:03 PM
Richard Ryan
I don`t always agree with Ms Chavez`s editorials. However; I`m with her on this one. Romney might not be my first choice, but if he wins the nomination he will have my unfaltering support. If we do not unify behind the eventual Republican candidate, it will mean four more years of Oboma the destroyer.
Richard Ryan
Lamar,Missouri - Birthplace of Harry S Truman
Posted January 13, 2012 at 4:42:01 PM
KN
"The country could do a lot worse than electing a president who knows how to do exactly that."
The country did do a lot worse - electing a community organizer who never so much as ran a lemon aid stand much less ever met a payroll.
Profit is not an ugly word. It is with profits that companies meet payrolls, expand their facilities and pay taxes. Are there really people in the United States that believe a company can exist by selling their products at a loss? Oops - my mistake it seems a lot of liberals, progressives or whatever the current name they go by do believe that.
Posted January 14, 2012 at 4:11:18 PM
Idaho Mom
"If a company isn't profitable, it won't stay in business, even if the owners are pure altruists. Companies fail for lots of reasons: Their products or services are inferior, they lose market share to competitors or they become bloated and inefficient. Turnaround firms like Bain Capital specialize in solving the last problem."
I think our government has become bloated and inefficient one thousand times over! Mitt will do a great job. He is a leader AND he understands the Constitution! Thanks for putting my thoughts into words! Great article.
Posted January 16, 2012 at 11:36:52 AM
austin farrell
In a period of 5 yrs o so I negotiated and closed some 50 or so acquisitions large and small. None of them were hostile takeovers. WE had a plan and purpose and th each seller had reason to sell.
The seller's reasons were varied; usually these ller had real problems with the business. I remeber closing one deal where we had to go deposit a large portion of the price to cover payroll checks handed out the same day. The acquiror wants to have purchased a viable business and make a profit. Ultimately it must have a acceptable return on its investment. It usually has to make investments on top of the purchase price. Change is almost always necesssary.The purchase price is only the cost of entry for the acquiror. The vultures can be found most frequently in the bankruptcy Courts where the business has allready failed and they are feasting on the bones of the departed.Bain 's business is to save business with big probllems but with prospects.
Posted January 16, 2012 at 5:43:46 PM