One of our most respected conservative financial publications exposed the hypocrisy of Mitt Romney’s claims of “creating jobs.”
Dan Primack of Fortune magazine pointed out that Bain Capital has actually never done a systematic job of arriving at a realistic number of jobs created.
From Fortune magazine, December 22, 2011:
Why Bain Capital doesn't track lost jobs
There's a good reason why private equity firms
don't track jobs created or destroyed.
Mitt Romney likes to say that he helped create around 100,000 jobs through his work at Bain Capital, even though Bain Capital itself claims to have never tracked such figures. And since reporters rarely challenge Romney on the claim (latest example here), it's basically Romney's word vs. that of skeptics.
But earlier today someone asked me why Bain Capital didn't track such numbers. Shouldn't it have, as a measure of its effect on the overall economy? Or, at the very least, because employment growth/decay would be an important metric for an investment firm to have handy when approaching a new takeover candidate?
My answer is that while net employment may indeed be helpful to track, it would be extremely difficult to do. In fact, I think people would poke all sorts of legitimate holes in Bain's numbers—and by extension, Romney's credibility—were they to exist...
... Or what about when companies do layoffs in preparation for a takeover (something which often happens)? Do those count in the negative column? Or what if Bain takes an underperforming company, helps turn around its finances by cutting jobs and then sells it to someone else who is able to hire based on growth Bain helped create?
And should quality of jobs matter? Is creating 100,000 minimum-wage jobs better than creating 50,000 jobs that pay a living wage? And do we count jobs at Bain Capital itself, which has over 100 investment professionals and an untold number of support staff?
There are no correct answers to any of the above questions. Just opinions. No wonder Bain and many other private equity firms don't think it's worth the hassle.
In addition to the issues raised in the article, there are even more important considerations relating to the impact of private equity firms like Bain Capital:
• The top corporate executives of the “saved” company are always paid (bribed) huge bonuses for agreeing to the deals Bain sets up. They are richly rewarded, no matter what happens later to the corporation.
• Bain Capital executives and their investors take a huge percentage of the financial transaction for themselves, leaving less for the “saved” company.
• They leave the saved company with huge debts. It’s through taking on more long term debt that allows the two conditions above to exist. The long term debt also puts a lid on workers’ wages and decent working conditions. Future managers will claim that “We can’t raise your wages because we won’t be able to meet our debt payments. We’ll go out of business, and you’ll lose your jobs if we raise your wages or give you better working conditions.”
Wages are stagnating or going down relative to inflation for many reasons, but the practices of corporations like Bain Capital is certainly a major one.
To read other excerpts from the conservative press that support liberal economic arguments, go to Previous Conservative Press Reports.