This bit from Ezra Klein is the most compelling defense I’ve seen of private equity, but that’s not saying much :
On the other hand, many of the companies that Romney closed needed to be closed. It was better for them to die quickly, and for the money to go to productive uses in the economy, than for them to decline slowly. The Obama administration has presided over layoffs in the federal government, not to mention the auto industry, and it would surely argue some of them were necessary.
At its best, private equity acts as an accelerant of needed creative destruction. At its worst, it’s a particularly heartless form of vulture capitalism that kills companies that don’t need to be killed in order to enrich investors who are already very rich. The truth often lies somewhere in the middle.
An “accelerant of needed creative destruction” is an incredibly kind way of describing the modus operandi of companies like Bain. I think Robert Reich puts a finer point on it here :
Guys like Mitt Romney are vulture capitalists. They’re greedy gambling addicts who fool themselves into thinking hoarding wealth is the same as “creating” wealth. They don’t create anything. At all. The “creative destruction” they bring to the economy is a tangential benefit far outweighed by the unemployment they create, the tax burden the rest of us have to share, and the ever-widening income gap.
Mitt Romney may be a friendly person and a loving family man with a terrific sense sense of humor, but beneath that weird laugh is a scumbag who’s unwilling to acknowledge the pain businessmen like him cause and candidates like him let fester. As Ezra Klein put it :
What he could have learned from that experience is that, just as creative destruction is important for moving an economy forward, a safety net is important for catching those who are left behind. As head of Bain, Romney fired a lot of workers who were perfectly good at their jobs, who were committed to their companies, who had families they needed to support. That was his job as head of a private-equity giant. But his job as president of the United States would also be to look out for those workers.
. . .
Romney’s national platform, however, calls for doing less for the victims of the global economy. He wants to repeal the Affordable Care Act, which would guarantee that workers would get health insurance even if they lost their jobs in, say, a private-equity led restructuring. He wants to pay for large tax cuts and more defense spending by cutting funds for Medicaid, for food stamps, for worker retraining, and for housing subsidies. He wants to cut Social Security benefits. He has no detailed plans to improve the continuing education system, or worker retraining programs, such that displaced machinists have a better chance to find a new job.