June 29, 2012

Before we talk about The Post news article that prompted Mitt Romney’s presidential campaign to demand a retraction and brought campaign officials to the newsroom this week for a tête-à-tête with senior editors, let’s talk about Bain Capital, the venture capital and asset-management firm that Romney started and built into a money-making machine.

Bain Capital didn’t and doesn’t make anything; it invests. It spots trends, looks at promising companies tapping into those trends, and then stakes its capital on improving a company, using Bain’s sector and financial experts to, say, help a company get over a capital shortage or help it expand.

One of the sectors that Bain invested in during the go-go 1990s, and not in a small way, was newly emerging companies that specialized in helping U.S. technology manufacturers outsource domestically, and move offshore, jobs that were not central to these manufacturers’ missions.

Microsoft is a good example. It wanted to focus on software development and not to be distracted by peripheral but necessary jobs such as assembling, packaging and testing its products, and setting up call centers to answer customer questions. At first, Microsoft outsourced these jobs to U.S. companies who put these back-office functions in rural, lower-wage areas of the United States. Later these outsourcing companies moved most of these jobs overseas.

The companies that Bain identified and invested in, while Romney was at the helm, and that were the subject of the disputed June 22 Post article, were these U.S. companies helping the Microsofts of the world to outsource and offshore.

These companies were small in the late 1990s, but they’re giants today. Stream Global Services, ModusLink, and StatsChipPac — present-day descendants of three companies that Bain heavily invested in during Romney’s era — are now among the biggest outsourcing companies in the world, with call centers, factories and facilities, mostly in Asia, but also across the globe, that support U.S. high-tech companies.

The mission of these companies was to help big U.S. companies outsource and offshore.

Does that mean that Mitt Romney shipped jobs overseas? Not exactly. Did Bain Capital precipitate the movement of U.S. jobs overseas? No, global forces far larger than any chief executive or U.S. president did that. But did Bain facilitate and feed the offshoring trend? I think there’s a good case for that.

The Post’s story does not say that Mitt Romney shipped jobs overseas, although it tiptoes right up to it. It says in its first sentence that, “Bain Capital invested in a series of firms that specialized in relocating jobs done by American workers to new facilities in low-wage countries like China and India.” And these companies were, as the story says, “pioneers in the practice of shipping work from the United States to overseas call centers and factories making computer components.”

It’s the “relocating jobs done by American workers” and the “shipping work from the United States” that gets tricky, and that Romney officials dispute.

The Romney campaign makes two points: First, no U.S. jobs were offshored by these companies during Romney’s tenure at Bain, which ended in 1999. And second, what happened with those companies after Romney left is irrelevant.

On the former point, the campaign makes a pretty good argument. They present a lot of data that show the outsourcing in the late 1990s in the companies was occurring on U.S. soil with U.S. workers, and that the foreign call centers and foreign factories set up by these companies were serving foreign customers — a call center in Japan using Japanese speakers to service Japanese buyers of U.S. software, for example.

Post reporter Tom Hamburger relied on these companies’ Security and Exchange Commission filings from the late 1990s — reports in which the companies outlined what they were doing and what they planned. And what did these outsourcing companies plan for the years ahead? More offshoring.

So Romney may not have done anything personally to ship U.S. jobs overseas before he left Bain in 1999, and the offshoring trend did accelerate after he left.

But Bain knowingly and far-sightedly made strategic investments, with Romney at the helm, in these pioneering outsourcing firms in the late 1990s, which grew into some of the largest outsourcing and offshoring companies in the world. And Romney and Bain shared in their profits while he was chief executive and after he left. Whether that’s good or bad depends on your politics.

Patrick B. Pexton can be reached at 202-334-7582 or at ombudsman@washpost.com.