President Obama has been quick to bash Mitt Romney for his time at Bain Capital, a venture capital firm. Romney has maintained that his tenure at the firm should instead be considered a strength, as it better prepares him to manage America’s troublesome economy.
In order to better clarify the validity of the claims, it’s best to start off the with facts. Bain Capital was co-founded by Romney to provide venture capital, but it later morphed into a more general investment firm. While at Bain, Romney made investments with the goal of profit. Some companies, due to the invested money from Bain, were able to grow and hire new workers. (Ever heard of an office supplies start-up called Staples?) Other companies, because of restructuring under the influence from Bain, laid off workers.
Obama’s campaign has criticized Romney of heading a firm that destroyed jobs as part of a scheme to make a profit. This accusation skews the real logic behind Bain’s investments. Bain restructured and cut jobs to improve companies, and these improved companies brought higher returns. The ‘improvement’ step is important. After all, jobs at an inefficient company are in danger, but stronger companies are better equipped to provide secure jobs for their employees. Just as better employees improve businesses, better businesses improve the job security of their employees. Obama’s accusations of job destruction don’t hold up when examining from the business point of view.
A better critique, and one that Obama is starting to embrace, is that Romney’s business experience does not adequately prepare him for the presidency. Romney’s argument all along has been that his time at Bain Capital has strengthened his ability to grow the nation’s economy and create jobs. The growing the economy half makes some sense. Bain’s venture capital helped to grow businesses, and Romney can logically argue that these skills can be applied to the nation’s economy as a whole. However, the job creation argument falls apart quickly for the same reason that Obama’s argument fell apart. The reason: Bain was never designed to create nor destroy jobs. It’s investment goal was to improve businesses and profit from the improvements. Any jobs lost or created were side effects of Bain’s involvement.
Romney seems to come out slightly ahead in this war of rhetoric. However, he should worry about the Bain issue becoming a Pyrrhic victory. After all, the more the news discusses his time with Bain, the more the elitist image many voters have of him becomes ingrained. The average voter did not have the opportunity to help found and run a venture capital firm before the age of 40!
Both Romney’s and Obama’s statements on Bain’s job creating/destroying tactics are flawed. Romney does have an arguable position that the growth associated with venture capital can be applied to growing an economy. Still, any positive is in danger of being cancelled out by the negative, elitist stigma Bain gives Romney in some voters’ minds. No game-changing effects have come from both campaigns arguing about Bain, so let’s hope they find a more meaningful topic of discussion.