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The Problem with Bambi-nomics

Friday, January 27, 2012

On Mitt Romney, Bain Capital, and modern political discourse.

Mitt Romney's difficulty with his history at Bain Capital may be our most nearly perfect example of how ignorance and misunderstanding, willful or otherwise, render our political discourse impotent.

Businesses that do what Bain does are sensitive about the common analogy comparing them to scavenger species in nature. In large part this is owing to how we are trained from childhood to think of nature in terms of postcard vistas, pettable furry things with large eyes, and the romantic notion of some sort of sweetly cooperative community of creatures. We tend not to teach children about vultures, fungi, slime molds, or maggots. More importantly, we do not teach them why such things are every bit as important to the ecology as Bambi. Without them, the world would soon be tree-deep in corpses, large and small, and life would become impossible. With them, the soil is constantly enriched with recycled nutrients, and life continues abundant. But this kind of comparison clearly doesn't help Bain's image very much.

Marginally more helpful, from the public relations standpoint, might be an analogy to predators, which, as any number of nature films have taught us, contribute to the overall fitness of prey species by taking down the older and weaker members. Once again, though, the pictures in our heads—the tiger leaping onto the baby antelope, the house cat playing with a terrified mouse—are unlikely to elicit the kind of understanding that even a Bain partner craves.

To maintain that our present employment arrangements, however accidental, are sacred, that no job may be eliminated, and that firms may not be permitted to close or to move, is to condemn the entire economy to eventual extinction.

From a purely economic point of view, the work of a firm like Bain is not merely necessary, it’s salutary. Companies on the verge of failure, and companies unable to exit a dying industry, sometimes need to be pushed toward the inevitable. The quicker their liabilities are capped and their assets are redistributed to more productive uses, the better for the economy overall. There is growth, and there is an increase in wealth—overall.

This is what any economist—and any free-market apologist—will tell you in all sincerity. And it is true, so far as it goes. But averages, which are what "overall" points to, can hide as much as they reveal. Imagine that the world consists of just you and me, and that you have $10 and I have $12. After some time, during which various things happen, you have $11 and I have $379,842. We are both better off, and our average wealth has increased enormously, and yet you are noticeably ungrateful. Surly, even. This is why Romney is presently in the hot seat.

Ignoring the disruption at the human scale that flows from the creative destruction so celebrated by economic enthusiasts is certainly possible, just as it is possible to pretend that jackals and hyenas aren't really part of dear Mother Nature's realm. Strident Austrian or Randian pundits do it all the time, comfortable in the knowledge that, unlike a worker in an auto plant or a textile mill, their own skills are conveniently portable.

We tend not to teach children about vultures, fungi, slime molds, or maggots. More importantly, we do not teach them why such things are every bit as important to the ecology as Bambi.

At the other end of the spectrum, to maintain that our present employment arrangements, however accidental, are sacred, that no job may be eliminated, and that firms may not be permitted to close or to move, is to condemn the entire economy to eventual extinction. Those who argue in this way are burying their heads in the sand, which they'd better do pretty quickly before the sand itself is buried beneath the wreckage of all our industries.

It is in the field of politics that, ideally, a more comprehensive grasp of reality comes to prevail. And it is from the calculations of the BCS that, ideally, the nation's best collegiate football team is identified. So much for abstraction and the ideal. What we really see in the usual political discourse is the collision of blinkered half-visions and tendentious hackery that seeks only advantage, not solutions.

Of course, a political campaign is not the optimal time to explain to the American public why capital needs to be mobile, nor to notice that capital is more mobile than human beings with roots in a community. That ought to have been done before high school graduation. But, as former Defense Secretary Donald Rumsfeld might say, you campaign in front of the electorate you've got. Perhaps more to the point, and given that electorate, you campaign against opponents who will say whatever it takes to win, just as you will.

Robert McHenry is former editor of Encyclopedia Britannica and is a contributing writer to American.com. He is the author of How to Know.

FURTHER READING: Robert McHenry also writes “Bringing Mr. Smith to Washington” and “Et in Arcade Ego.” Steve Kaplan tells us “How to Think about Private Equity.” Kevin A. Hassett and Steven J. Davis argue “Private Equity is a Force for Good.” Marc Thiesson writes “Crony Capitalism Exposed.” And AEI President Arthur C. Brooks contends “The Value of Free Enterprise has Nothing to do with Money or Wealth.”

Image by Rob Green / Bergman Group

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