by Gwynn Guilford
Josh Barro says Romney's private equity track record, while entirely defensible, traps him in an oversimplified argument about the roles of business and government. The problem? His allegiance to conservative doctrine makes him unable to talk sensibly about the relationship between business and government.
Private equity defenders must stand up for the idea that firms do not have a social obligation to retain and pay their employees; their function is to produce products and profits and getting them to do so more efficiently is good for consumers and for the economy as a whole.
Who, then, does have an obligation? In neoliberal thinking, that role falls to government. "A dynamic private sector…needs a substantial welfare state to support the people who fall through its cracks," explains Barro. A substantial welfare state like, say, Romneycare. Says Barro:
The problem for Romney is that his base consists not of neoliberals but of conservatives. They do not want the government taking on increased safety net responsibilities.
What's worse are the convenient elisions that typically accompany the pro-creative destruction argument:
[The answer] more commonly employed by conservatives…is to deny the existence of a problem created by the free market. As this argument goes, a fast-growing and free private sector will make it easier for people to get jobs and health insurance; no government action is needed.
But even policies that do lead to aggregate job growth and GDP growth don’t benefit everyone. Creative destruction entails destruction, and there are always people like the Soptics, who lose out personally due to economic changes that make the country as a whole better off.
Barro also makes the interesting point that Romney has been framing his Bain experience as venture capital – funding the creation of new companies – rather than private equity, which usually refers to restructuring companies for improved profitability. While PE is complicated, the VC story of new jobs and new technology and new products and America, Fuck Yeah! innovation is always a winner.
Fair enough. But VC too thrives when you provide that neoliberal social safety net – a critical point that has been crowded out by lower taxes-are-good-for-business nostrums. Max Chafkin served up the best discussion of this in recent memory in an Inc. article a few years back, looking in particular at startups in Norway:
Whereas in the U.S., about one-quarter of start-ups are founded by so-called necessity entrepreneurs—that is, people who start companies because they feel they have no good alternative—in Norway, the number is only 9 percent, the third lowest in the world after Switzerland and Denmark, according to the Global Entrepreneurship Monitor.
This may help explain why entrepreneurship in Norway has thrived, even as it stagnates in the U.S. "The three things we as Americans worry about—education, retirement, and medical expenses—are things that Norwegians don't worry about," says Zoltan J. Acs, a professor at George Mason University and the chief economist for the Small Business Administration's Office of Advocacy.
Acs thinks the recession in the U.S. has intensified this disparity and is part of the reason America has slipped in the past few years. When the U.S. economy is booming, the absence of guaranteed health care isn't a big concern for aspiring founders, but with unemployment near double digits, would-be entrepreneurs are more cautious. "When the middle class is shrinking, the pool of entrepreneurs is shrinking," says Acs.
The Dish 