Charles Laffiteau's Bigger Picture
This time out I want to look at Mitt Romney’s central campaign theme: that because he was once a successful business executive, Americans should vote for him since he can do a better job of creating jobs and reviving the American economy than President Obama.
Romney then cites the money Bain Capital invested in Staples and the thousands of jobs it created as it grew to become one of America’s top office product retailers. What Romney fails to note, however, is that retail giants also create low-paying jobs at the expense of smaller retailers who go out of business because they can no longer compete with the prices big retailers offer to consumers.
Retailers also can’t send their jobs offshore because they don’t make anything; they sell what other companies make. Since many of the people employed by smaller retailers lose their jobs when the retail giants enter the local market, the net gain in jobs – if there is a net gain – is usually very small. But that is not the case with companies that manufacture products or provide services for businesses and consumers. Because they need more highly skilled workers, their employees earn substantially more money that retail sales assistants do.
Romney also doesn’t discuss how much money Bain Capital made over the past 20 years by investing in companies that specialized in advising American manufacturers on how to outsource their manufacturing to overseas plants and their customer support services to overseas call centres. In 1993, by way of example, Romney and Bain Capital invested in companies like Stream that were pioneers in the area of outsourcing customer support, and advised technology companies like Microsoft on how to set up lower-cost overseas tech support call centres. Bain was also an early investor in Modus Media, a pioneer in outsourcing software and training products for Microsoft that has since expanded into outsourcing hardware assembly and packaging for computer manufacturers like Dell, HP and IBM.
As of 2006, the McKinsey Global Institute estimated that $18.4bn in information technology work and $11.4bn in business-process services had been moved from America to overseas locations. So far from creating American jobs, Bain actually reaped huge profits from investing in companies that advised others on how to send American jobs overseas.
And there’s more. Romney fails to mention how much money he and his partners at Bain Capital made from the fees they charged for the business consulting services they provided to companies they bought. Seven of the firms they purchased ended up going bankrupt, but Bain Capital still recovered most of its investment because in some cases the companies made their financial situation worse by borrowing money to repay Bain before they went under. In other cases, even though thousands of employees lost their jobs when their companies failed, Bain recouped much of its investment from the annual fees it had charged those companies.
Upon closer examination it would appear that most of Romney’s wealth and Bain Capital’s success was due to their singular focus on profits for themselves and their investors, regardless of what happened to the companies they bought or how many jobs were lost when those businesses went bankrupt. Yet Romney and most Republicans continue to insist that America’s government would be better if it were run like a business.
So what awaits America, based on Romney’s success as a business executive running Bain Capital? Well, given that most of Romney’s Presidential campaign is financed by a small core of wealthy donors and Republican ‘Super PACs’ that have announced plans to spend an additional $1bn in running ‘independent’ ads to support him, I think we would have to consider these donors to be his ‘investors’. Based on his track record at Bain Capital, if Romney does get elected President, you can expect his ‘investors’ will reap huge profits from their investments in Romney’s campaign.
As for the average American worker and voter? I guess you would need to talk to those who once had jobs at companies Bain Capital purchased and from which Romney and Bain’s investors leeched their profits.
Charles Laffiteau is a US Republican from Dallas, Texas who is pursuing a PhD in Public Policy and Political Economy. He previously lectured on Contemporary US Business & Society at DCU from 2009-2011.
