“Creative destruction is unquestionably stressful — on workers, managers, owners, bankers, suppliers, customers, and the communities that surround the affected businesses,” Romney wrote. “The pressures these groups put on political leaders to clock game-changing innovations can be intense.”
Romney argued, however, that the benefits to the broader economy are worth it.
Economists generally agree.
“From an economic perspective, that’s always what the U.S. economy has done best is to let things fail,” said Douglas Holtz-Eakin, the former Congressional Budget Office chief who served as GOP nominee John McCain’s top economic adviser in 2008.
But Holtz-Eakin added, “That’s a difficult thing to sell in a political campaign.”
Meanwhile, the presumption that what’s good for companies is ultimately good for Americans is being tested as the U.S. economic recovery continues to stall. Corporations have bounced back to record profits, while millions of people have been unemployed for more than six months. Those who still have jobs have largely seen their wages stagnate.
‘Corporations are people’
Thus far, the most memorable line of Romney’s presidential campaign may be his retort to a heckler at the Iowa State Fair: “Corporations are people, my friend.”
That comment — in response to the man’s demand for higher corporate taxes — echoed the very complaint that some have made about Romney’s rise to fortune.
While Romney was making millions buying, restructuring and selling scores of companies for well-heeled investors, his critics say, he was paying too little regard to the human toll behind the balance sheets. In later years, Romney agreed.
In his last bid for the GOP nomination — at a time when the seemingly healthy economy was not high on the list of Americans’ concerns — Romney said the constituencies he served after leaving the business world had given him a different perspective.
“The experience of the last eight years, running the Olympics and being a governor, would make me take an even more sensitive look at the impact of business decisions on the lives of suppliers and employees and others who are involved,” he told the New York Times in 2007.
Romney declined to be interviewed for this article.
Private equity, and particularly a deal of the sort commonly called a “leveraged buyout” in those days, works like this: A firm, such as Bain Capital, raises money from big investors to form a fund. The private-equity firm then acquires companies with money from the fund, but mostly money from lenders.
With the added leverage, firms can buy up enormous companies and turn them around for even bigger gains. But the private equity firm needs cash flow from its acquisitions to keep the banks happy.