IT SEEMS the level of vitriol rises with every election cycle, and this year’s Republican nominating contest is no exception. Maybe that’s simply because there is so much fodder. It’s hard to resist mocking a morality-preaching candidate accused of sexual harassment, or another who denounces Washington while making millions as a lobbyist.
Still, little compares to the venomous attacks that are now targeting Mitt Romney’s tenure at Bain Capital. Supporters of Newt Gingrich released “King of Bain,’’ a 28-minute video trashing Romney for destroying jobs, businesses, and communities. Rick Perry called the former Massachusetts governor a “vulture capitalist.’’ Jon Huntsman said, “Romney enjoys firing people.’’ Even Sarah Palin — how can we miss her when she won’t go away? — jumped into the anti-Bain Capital fray.
What made these critiques so remarkable wasn’t that they were untrue, but rather their source. If there is any myth that Republicans like to ascribe to themselves, it is that they are the unwavering advocates of the free market. But here were leaders of the GOP ripping into Romney for — horrors! — being a capitalist. Karl Marx himself would have been proud.
How could this have happened? Part of the answer is that the GOP has never been as pro-capitalist as it might like to think. It was Richard Nixon, remember, who instituted national wage controls, a move as deeply anti-free-market as one could ever imagine. It’s probably more correct to think of Republicans as pro-business, which often just means supporting the status quo. Capitalists, particularly the brand typified by private-equity firms such as Bain Capital, make their living out of upending that status quo.
Moreover, most of the current Republican presidential field has no real understanding of what capitalism means. Except for Romney and (arguably) Huntsman, none has a business background. To them free markets are more a talking point, and one imagines their vision of capitalism to be some hardy entrepreneur up at 4 a.m. selling fresh-baked bread from a cheery store in a quaint small town.
Shopkeepers are an important part of the economic firmament, but the real stuff of capitalism is the “creative destruction’’ of unceasing competition and constant innovation. The “destruction’’ part of that oft-used term - meaning failing industries and companies - is something politicians of any stripe are, understandably, loath to embrace.
Did Romney actually end up creating jobs while at Bain Capital? He says it’s a net 100,000, and he may be right. By other measures, though, the numbers could be entirely different. Consider Staples, a well-known Bain Capital investment that is a key part of Romney’s claim to boosting employment. But Staples in turn bankrupted small stationery shops and office supply stores across the country. Livelihoods were lost; employees were fired. Its success came at a high cost to those against whom it competed.
So would we be better off if Staples had never been created? Not at all. Staples succeeded because it was able to deliver wanted products to consumers more cheaply and more effectively. At the macroeconomic level, it improved productivity, a very good thing which in the long-run that should create more wealth and more jobs. Still, try explaining that to the owners of shuttered stationery stores.
In fact, “jobs created’’ is probably the wrong measure of Romney’s success at Bain Capital. In the economic scheme of things, Bain Capital’s purpose was to allocate capital efficiently. Romney’s experience there may have given him insight into how government can best create the conditions necessary to promote a strong national economy. But it’s incorrect to think of him in the narrowest sense as a “job creator.’’
There’s been much pushback to the attacks on Bain Capital and the rumor is that Gingrich and others are now backing off. That’s not necessarily good for Romney. As the nominee, he would undoubtedly face exactly the same hits from Democrats. The current onslaught made for a good dress rehearsal.
Then too, the questions raised about Bain Capital suggest that a healthy discussion about capitalism might well be a valuable thing for the country itself to have. As much benefit as unfettered capitalism can bring, it also causes tremendous pain. There is a tension between keeping markets free and providing individuals with protection and a safety net. It’s worth debating how we can achieve both.
Originally published in the Boston Globe on January 14, 2012.
