So was Mitt Romney a job creator or job destroyer in Colorado through such Bain Capital success stories as Sports Authority and failures such as Fashion Bar?
The answer: It doesn’t really matter. And those who think it does either have partisan motives or need a refresher course in how our economy works.
People don’t start businesses or — in the case of a private equity firm like Bain Capital — invest in businesses primarily to create jobs. They do it to create wealth. And that’s a perfectly admirable reason.
If they’re entrepreneurs, they also probably love what they do and believe they have a product or service that will be a boon to society. Yet how often have you heard a fledgling entrepreneur declare, “My goal is to employ as many people as I possibly can”? Does that sound like how a twentysomething Steve Jobs or Bill Gates would talk?
If they’re rational, their goal in fact will be to employ as few people as they possibly can, because the more efficient their business becomes, the more likely it will be to attract customers, and the more it will grow.
Job creation will be a byproduct of success, not its motivating purpose.
Americans are many times wealthier than their ancestors in part because capitalists determined to maximize profit, to use President Obama’s pejorative phrase (why not “create value”?), have managed to elevate productivity to levels once considered unimaginable. Not incidentally, along the way they’ve destroyed countless jobs in professions that now sometimes don’t even exist.
Don’t misunderstand: It was fascinating to read about Bain Capital’s investments in Colorado during Romney’s years at the helm, as recounted in a Denver Post article Tuesday by Aldo Svaldi and Kristen Leigh Painter. But it was also laughable to see the bloviating by the likes of former Denver Mayor Wellington Webb and state Democratic chairman Rick Palacio on the alleged depredations of big, bad Bain.
Yes, Fashion Bar bit the dust. But then so have thousands of other businesses in this state in recent decades, including a newspaper that once employed me. Welcome to a dynamic economy.
To be fair, Romney himself claims the mantle of “job creator,” thereby inviting others to inspect the claim. But that doesn’t mean the rest of us have to embrace the fiction that Bain’s net jobs tally is revealing. Either private equity firms play a generally constructive role in our economy — by upgrading management in the companies they acquire, for example — or they don’t.
And if they don’t, then how come one of the Obama campaign’s “co-chairs,” former Denver Mayor Federico Peña, is a “senior adviser” and one-time partner with Vestar Capital Partners, “a leading private equity firm specializing in middle-market management buyouts”?
As the CompleteColorado website reported last week, Vestar can be as ruthless as, well, Bain when it needs to be, if layoffs and plant closings are the yardstick.
CompleteColorado also located a profile of Vestar CEO Dan O’Connell at the Yale School of Management website in which he said “it wasn’t incredible to see 50-100 percent annual returns” in the early years of private equity in the 1980s because “the market was inefficient and there weren’t a lot of players.” Those returns have declined, he said, as more private equity firms entered the fray.
“There’s still an occasional bargain out there, but they’re fewer and far between,” he said. “The overall wealth creation opportunity isn’t what it used to be. But I can’t think of anywhere else you get such an engaged, personal touch in what you do.”
Why, it almost sounds as if O’Connell believes his firm is a force for good in society, and that he is something other than a vampire capitalist out to relieve middle-class Americans of their jobs, pensions and very dreams.
And so he is. As, of course, was Romney.
E-mail Vincent Carroll at vcarroll@denverpost.com. Follow him on Twitter @vcarrollDP.
