You gotta love the headline of George Will’s latest piece: Newt Gingrich commits a capital crime. Mr. Will really lays down some heavy snark as he takes Gingrich apart limb by limb. It’s unusually good writing from Will. But he still misses an important point. Here is Will’s defense of Vulture Capitalism:
Romney, while at Bain, performed the essential social function of connecting investment resources with opportunities. Firms such as Bain are indispensable for wealth creation, which often involves taking over badly run companies, shedding dead weight and thereby liberating remaining elements that add value. The process, like surgery, can be lifesaving. And like surgery, society would rather benefit from it than watch it.
I don’t really disagree with what Mr. Will is saying here, but he isn’t defining what he means by ‘society.’ He’s also failing to acknowledge that it matters how you go about “connecting investment resources with opportunities” to create wealth. Too often, Bain Capital has created wealth only for themselves. The most famous example is American Pad & Paper Co. (Ampad), which they bled dry until it was forced into bankruptcy. And it didn’t help that they were simultaneously funding mega-retailers like Staples that only exacerbated Ampad’s problems.
When a company specializes in outsourcing jobs to other countries with cheaper labor, the ‘society’ that benefits is global. The wealth that is created no longer benefits our local communities. And when a company enriches itself by bleeding their acquisitions into bankruptcy through excessive fees, it isn’t even performing its job as a scavenger. It’s acting as a predator.
We need scavengers to create efficiencies, but we don’t need a race to the bottom on wages, nor do we need predators to come into our communities and destroy our jobs. That’s what Bain Capital did under Romney’s leadership. He didn’t serve the country. Too often, he didn’t even serve the investors in the companies he acquired. He served himself. So, as far as I am concerned, Gingrich’s criticism that Romney earned his money “bankrupting companies and laying off employees” is a completely valid criticism.
