There Are Plenty of Good Reasons to Dislike Mitt Romney – “He Fired People” Isn’t One of Them

Posted by Enrique on 01.18.2012

Creative destruction



With current polls showing Mitt Romney in a strong position to win next week's South Carolina primary, it appears Republican voters are grudgingly about to nominate the one guy they all agree they don't like, supposedly because he's "electable." [Update: Or is he?] I seem to recall Dem voters used a similar logic when they nominated John Kerry in 2004, and I suppose we should all be grateful they spared us the agony of a Kerry/Edwards presidency – although the revelation of sitting Vice President Edwards' fooling around would have been precious.

Now that Romney is emerging as President Barack Obama's likely challenger, the angles of attack are beginning to take shape. For example, did you know that Romney is rich? And did you know he used to work at a private equity firm? And did you know that when private equity firms restructure companies it may result in people losing their jobs? Romney's a monster!

Of all the legitimate reasons to criticize Romney – for example, he's never said anything that wasn't completely full of crap – the fact that he directly or indirectly fired people isn't even in the ballpark. It would be less frivolous to criticize him for being Mormon.

The story so far…


It is my understanding people are upset that Mitt Romney used to work for this guy

Now that everyone assumes Romney is going to be the GOP nominee, the "narrative" (as they say) is beginning to unfold. As a wealthy white Republican, all the usual boilerplate about how he's out of touch and racist will be part of it. More to the point, it seems some folks are itching to criticize Romney for having kinda sorta fired people in the past. I work under the assumption that Jon Stewart represents mainstream lefty opinion, and last year he memorably described Romney as "the guy who looks like everyone who ever fired your dad." What better indicator that Romney's history of downsizing would be a campaign issue in the general election?

Some of Romney's more desperate Republican challengers couldn't wait that long. Rick Perry has referred to Romney as a "vulture capitalist", and described Romney's previous work at private equity firm Bain Capital as "tak[ing] companies apart so they can make quick profits and then people lose their jobs." Meanwhile, supporters of Newt Gingrich released a half-hour movie portraying Romney as a "predatory corporate raider." Gingrich has notably refused to condemn that and other ads attacking Romney's private equity past. Just the other day, Gingrich called a couple of Bain investments "exploitive."


Every internet post about Romney and Bain is required to use this picture, so here you go

One wonders if either of these jokers have any idea what private equity firms do. In short, private equity firms invest in non-publicly traded companies. They might invest in small companies to help them get off the ground (i.e., venture capital) or they might invest in mature companies to help them grow. Sometimes helping a company grow may result in layoffs in the short term, particularly if the company is operating inefficiently. All of this is done with the objective of making more money than the initial investment, something that economists refer to as "profit."

Presumably, a lot of ignorant people—including Perry, Gingrich, and a large majority of Democrats—think that private equity firms do hostile takeovers and fire people, mostly women and minorities, probably while laughing and pointing and lighting cigars with $100 bills. What they may not understand is that firing people and reducing overhead at one point in a company's life may put it in a position for future growth and ultimately more jobs down the road.

But you don't have to take my word for it:

Recently, a team of researchers led by Steven J. Davis, of the Booth School of Business at the University of Chicago, released a new paper that sheds some light on the complexity, and eventual outcome, of private equity transactions. It finds that while private equity transactions do often lead to job loss, they also lead to job gains -- and the net results are nowhere near as dramatic as widely believed. […]

The researchers found that on average, job losses from private-equity transactions are not as steep as popularly believed: About 3 percent over two years and about 6 percent over five years. Although private-equity investments do often lead to big layoffs, they also often lead to a lot of new jobs. But those jobs tend to be at different areas of the company and don't happen in one big blast.

Surely, some of those jobs are lost and never come back. But if a company is struggling and doesn't attract new investment, it will go out of business. Is that supposed to be a preferable outcome?

There's nothing wrong with scrutinizing the work of Bain Capital, and surely it's had its fair share of questionable practices in almost 30 years. But if anyone is going to criticize Romney for his work at Bain, it should be based on specific instances of misconduct, not the whole business of private equity, or because there's something wrong with firing people in general.

As Romney himself has said, firing people can be enjoyable, particularly if they have provided you with inferior service.



Romney took some heat for that comment, even though it's the philosophy that governs the activity of all normal adults. If you go to McDonald's and they provide suboptimal service, you can "fire" them by patronizing Burger King instead. Try firing your local public school if it provides shitty service.

As it happens, Romney's firing comment was in response to a question about healthcare policy at a campaign event. Immediately preceding "I like firing people," Romney said, "I want individuals to have their own insurance. That means the insurance company will have an incentive to keep you healthy. It also means that if you don't like what they do, you could fire them." If Romney deserves criticism for that comment, it's because he's a transparent phony for having once advocated universal healthcare and now claims he wants people to have their own insurance. His desire to fire people/companies who aren't holding up their end is perfectly sensible.

Even with a high unemployment rate, it's important to keep things in perspective. People lose their jobs all the time. It isn't a death sentence. Dear reader, if you have never been fired or laid off, you will be eventually. And you know what? You'll find another job. It will be a pain in the ass for a while, but you'll be fine. And while you may never feel positive about the people who let you go, the mere fact that they fired you shouldn't in and of itself disqualify them from running for president, and there's no sense in criticizing them for it.

Now, if they ever supported universal health care, that's a different story.