The Truth about Bain and Jobs

dogtowner

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from WSJ

in case you have any interest in the truth


Mitt Romney and his GOP rivals are engaged in a fruitless argument in South Carolina over whether private equity creates more jobs than it destroys. The debate is fruitless because voters and politicians don't believe jobs should ever be destroyed.
The American voter is not about to become sophisticated about the place of private equity in American life. But the American voter can become inured to it. So let backers of Newt Gingrich's flaming candidacy run a "King of Bain" video savaging Mr. Romney's leveraged buyout career on South Carolina TV.

All such productions are but poor reprises of a story that appeared in this paper on May 16, 1990, written by a reporter named Susan Faludi, later to become famous as an angry feminist author.
In 7,770 words, Ms. Faludi described the buyout of the Safeway supermarket chain, and if anybody suffered a layoff or pay cut or got depressed and committed suicide, she did not hesitate to blame private equity. You would think that firing had been unknown in the economy until private equity invented it.

Most damning, she claimed Safeway was a profitable company when private equity went to work trying to make it more profitable. What neither she nor Safeway's investors could have known was that the fat in the supermarket industry would soon be the target of Wal-Mart, Costco and other revolutionary discounters, so competitive change was coming in any case. The lesson? When private-equity investors sniff a profit opportunity, they are probably just one step ahead of someone else.

As a rule, private equity takes on the most troubled companies because turning them around offers the biggest profit opportunities. That's why private equity tends to generate more than its share of traumatic headlines. Look no further than Ripplewood Holdings' decision to put the maker of Twinkies into bankruptcy this week. It's the kind of decision that, were Ripplewood's principals ever to run for office, would get them savaged in an ad.

there is more and its worth reading but the money line is, of course, at the end


Second, the work: He put his talent for calm, careful analysis to work helping American businesses adapt to the onrushing challenges of globalization and technological change. Looking back, it may even be true that his ratio of jobs created to jobs destroyed was better than the economy's as a whole.

What does this have to do with the presidency? Perhaps not much, but one thing he didn't learn at Bain Capital was to twiddle his thumbs because taking action might make somebody mad at him. That's not the worst qualification to bring to the Oval Office right now.
 
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