Throughout his campaign for both the Republican Nomination and Presidency, Mitt Romney has come under intense scrutiny for his decade-plus working at Bain Capital, a private equity firm which was founded in 1984 by partners at management consulting firm Bain & Company. While Bain has had its share of failures, as every investment firm can attest to, it is the successes of Bain and the thousands it has helped to employ that fail to get a fair shake in the media and among Romney’s detractors.
As a private equity firm, Bain Capital invests in a variety of companies of varying ages and pedigrees and restructures them, eventually selling many of them at a profit. Bain Capital, however, differs from other private equity companies is its origin. During the 1980’s, higher ups at Bain & Company realized that companies that had hired them and taken their advice were making enormous profits. Wanting to share in these large profits, Bain Capital was thus formed as less of a private equity firm and more of a management consulting firm that buys stakes in companies it advises rather than charging those companies fees.
While one needs only to look at Bain Capital’s profit statements to acknowledge its immense success, any firm which engages in risky investments will not be successful 100 percent of the time. Obviously, a few of the firms that Bain Capital invested in went under, and that has provided plenty of faces that lost jobs to be used in attack ads Romney and Bain.
The attacks started during the primary, when a SuperPAC backing former Republican speaker of the house Newt Gingrich inexplicably put out ads attacking Romney for his time spent at Bain. This was confusing because Republicans are generally supposed to be supportive of free market capitalism. In the last two weeks, however, the attacks on Romney and Bain hit a new low when an advertisement by Priorities USA Action, a pro-Obama SuperPAC, tied the closing of a steel plant owned by Bain Capital to the death of a former employee’s wife. The ad alleges that because Joe Soptic lost his health insurance as a result of Bain closing the plant, his wife died of cancer shortly thereafter. Of course, a closer examination of the fact reveals that Soptic was offered a buyout from Bain Capital and that his wife was diagnosed with cancer five years after he lost his job.
The real issue in the death of Joe Soptic’s wife is how health insurance is tied to one’s employer. In case you haven’t noticed, most products, including car and life insurance, are purchased by individuals for themselves, not by companies for their employees.
French economist Friedrich Bastiat tells us that the difference between a good and bad economist is that the good economist can see what is not readily apparent, or what is unseen. While hundreds of people lost jobs when Bain’s investments and reorganizations were unsuccessful, countless more were and continue to be employed by companies Bain Capital successfully financed or turned around. The laundry list of success stories includes companies such as Dunkin Donuts, Sports Authority, Staples, Domino’s Pizza, Burger King, and countless others.
