Bain Capital, or the Bane of Capital?

By | May 24, 2012 | 0 Comments

It may not be a coincidence that the word “capital” can mean wealth, but it can also mean the city where a national government is located. This dual meaning suggests a deeper relationship.
This relationship was pointed out by Maggie Thatcher, who famously remarked that socialists always run out of other people’s money. No matter how well-intentioned politicians may be, and no matter how high-minded their theories may seem, nothing will happen until someone else produces the wealth to pay for it.
We can raise taxes until we stifle economic activity, and we can print money until it loses its value, and we can borrow money until the lenders discover we are deadbeats. But at some point that is sure to come, the roof will fall in – on us, and on our children and grandchildren.
This leads us to ask a key question: Which candidate has spent his life creating wealth, and which has spent his life fantasizing how to spend it? This question has obvious practical implications. Our faltering economy is a crucial problem. Which candidate has a better grasp – or any grasp at all – of how an economy works, and how wealth and jobs are created? Which candidate ever created or ran a business, and met a payroll, and lived in the realm of reality – and which candidate spent his time in academia and politics, and lived in the realm of theory?
But the question also has a moral aspect. Which is more moral, or more honorable: To create wealth and help others create it, or to take by force the wealth others have created, and decide how it should be spent – regardless of the wishes of those who created the wealth in the first place?
In the end, this moral aspect may be more meaningful than the practical aspect. Americans give more to charity, and volunteer more time, than do Europeans. And in America, conservative states give more to charity than do liberal states, even correcting for income levels. The generosity map is strikingly similar to the election map. This tells us something important about the actual results of socialism. Socialism is intended to make society more humanitarian, but it makes people less humanitarian.
It’s easy to talk glibly about fairness and equity, but it’s much more difficult to actually produce the wealth that raises living standards. Europeans are finding this out after a half-century of (as the Soviet Union termed it) “building socialism.” Instead of repeating this failed experiment, we should learn from their sad experience. But will we?
The Obama campaign is concentrating on Mitt Romney’s role as head of Bain Capital. The company is being described as an example of “vulture capitalism,” while Romney is being called a “vampire.” In contrast, Obama is depicted as a “job creator.”
But what is the truth? In the heat of a political campaign, with biased mainstream media, is it even possible to determine the truth? Can we separate the occasional facts from the countless spurious claims? Not always, and not easily, but at least we can try.
Bain tried to help companies in trouble. Sometimes it succeeded in starting a company; sometimes it succeeded in saving a company; and sometimes it failed to save a company. Sometimes jobs were created; sometimes jobs were lost. But that is the nature of any dynamic system. When the personal computer was developed, jobs were created in producing, repairing, and operating computers; but jobs were lost in producing, repairing, and operating typewriters. If we want to fix blame for the failure of a steel manufacturer, we should point at dumping by China and other nations, not at Bain Capital, which tried to save it.
On the other hand, what jobs can the government create? Government jobs But the government can hire new employees only by taking money away from private individuals, rendering them less able to buy products or services, and less able to hire new employees. These lost jobs are never counted in the government’s “jobs created” figures. If you doubt this, consider the extreme case. If the tax rate were 100%, no one could afford to buy anything or hire anyone.
On November 6, we will not be presented with a choice between Mitt Romney, an imperfect conservative, and some ideal liberal candidate. On Election Day, we will have to choose between two actual human beings, with actual records of accomplishment – or non-accomplishment.
There is one sure way never to lose money in business, or never to have to lay off workers, or never to have to close a plant to save the business from bankruptcy, or never to be accused of making a bad business decision: Never be in business at all. That way, you can fabricate all the economic theories you want, and formulate all the hypothetical programs your heart desires, and never make a mistake.
Years ago, when I was a medical student, we had a professor who had written a book on the medical uses of wine. We knew that on the ward, he was past his prime as a physician. But we assumed he was an expert on wine. Then I met a colleague who really was an expert on wine. He related that he had visited a well-known winery. The head vintner asked whether my colleague knew the professor. When my colleague said yes, the vintner said, “Tell me the truth – does he know any more about medicine than he knows about wine?”
The professor was an expert on only one thing – being a moving target. To us, he was the wine expert who didn’t know much about medicine. To the vintners, he was the medical expert who didn’t know much about wine. If he moved fast enough, most people never discovered that he really didn’t know much about either. But he spoke smoothly and with self-assurance.
I learned then that smooth talk and self-assurance are no guarantees of anything except more smooth talk and self-assurance. And I learned that the only way to discover whether someone knows what he is doing is to watch him do it.
“Green” fiascos like Solyndra and Abound Solar? Trillions in debt that will weigh down our grandchildren? Astronomical deficits, while NASA can no longer send astronauts into orbit? What Groucho Marx said in jest, Barack Obama says seriously: “Who are you going to believe – me or your lying eyes?”
Watching Mitt Romney teaches me that he knows how to create wealth, how to save jobs, and how to repair faltering businesses. Watching Barack Obama teaches me that he has many innovative ideas on how to spend wealth, how to stifle growth, and how other people should manage their businesses – and their lives. But actual results? After three and one-half years, not so much.
On Election Day will have to choose between Mitt Romney, who proved himself managing Bain Capital, and Barack Obama, who is proving himself to be the bane of capital.

Do you believe that all the government’s decisions on health care are based on the patients’ welfare rather than saving money? Then read this.

 Dr. Stolinsky writes on political and social issues. Contact: You are welcome to publish or post these articles, provided that you cite the author and website.

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