Thoughts on Romney and Private Equity

I was reading the reactions to the debates last night in New Hampshire, and came across this video from Andrew Sullivan’s blog.

It opens:

“Capitalism made America great. Free markets. Innovation. Hard work. The building blocks of the American dream. But in the wrong hands, some of those dreams can turn to nightmares. Wall Street’s corporate raiders made billions of dollars. [News announcer: “Private equity leaders getting rich at the expense of American workers.”] Their greed was only matched by their willingness to do anything to make millions in profits. Nothing was spared, nothing mattered but greed. This film is about one such raider and his firm. Mitt Romney became CEO of Bain Capital the day the company was formed — his mission — to reap massive rewards for himself and his investors. [Bearded man: “Mitt Romney, them guys, they don’t care who I am.”] [Old lady: “He’s for small business is [sic] no he isn’t. He’s not.” (Other lady: “You’re gonna be on a get list, you know that.”)]”

The Daily Beast reports a PAC supporting Newt Gingrich is airing this documentary. This is an production you would suspect would come from Occupy Wall Street (if they ran ads) or the unions. It’s despicable that people claiming to be Republicans are running this ad.

Here’s why:

  1. If Capitalism made America great, then why disparage private equity? Free markets are free markets. Money earned through hard work one way is no different than money earned through hard work another way.
  2. Private Equity is the very definition of innovation. Do the authors of this hit piece believe that VC’s and private equity firms don’t have a role in innovation? If so, they are wrong. These firms have a key role in our economy and funded ventures like Facebook, Google, and other recent big market makers.
  3. Private Equity doesn’t come as a result of hard work? Oh, you must be trying to get people to think about Wall Street and the whole “Blue Star airlines” scheme. If private equity firms continued to sap out productive actors in the market, like the movie suggests, then free markets would respond and make the price unaffordable to robber barons. (Government regulators would respond in instances of fraud, like they did in Wall Street.)
  4. In the wrong hands? Welcome to class warfare, brought to you by Newt Gingrich’s supporters and in the debates, Newt himself. I don’t fault them for using this tactic, but it works. It is also dirty and wrong. This is an area that I agree with Santorum on — America does not have classes.
  5. “At the expense of American workers.” Nobody is forced to do any job these days. Jobs are voluntary exchanges with corporations. If they offer too little, nobody is obligated to work for them. This is class warfare and economic bigotry.
  6. “Made billions of dollars” vs. “made millions in profits.” Well, which is it? This is an intentional blurring of the line. Sure, over time, big firms make billions in of dollars, but are they profits? After expenses, usually not. Sometimes, yes. Profits, (if the authors truly believe in capitalism) need to be paid to investors, sometimes in the millions of dollars. There are only about 400 billionaires in the United States. Do the math.
  7. Their greed was only matched by their willingness to do anything to make millions in profits.” Um, yeah, that’s how capitalism works. If they don’t “do anything” to make those profits, than investors go elsewhere with their money to find profits.
  8. Mitt Romney, them guys, they don’t care who I am.” Why should they? Private Equity firms have thousands of employees within the companies they own, do you think the CEO gets to know all of them? Why not care for yourself? Remember that trading labor for salary is a voluntary exchange — maybe you should care for yourself a little bit more, rather than being a narcissist trying to sell socialist economic labor union tripe on television. If these companies were so bad to work for, people wouldn’t work there.
  9. “He’s for small business is [sic] no he isn’t. He’s not.” Respectfully, ma’am, when private equity buys your company, you’re not a small business anymore. Deal with it.

So, those are my thoughts on this disgusting advertisement.

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