United Liberty

We’re beginning to see some backlash against Newt Gingrich and Rick Perry’s (and to a lesser extent, Jon Huntsman) anti-capitalist attacks against Mitt Romney’s time at Bain Capital. The National Review, an influential voice in the conservative movement, lashed out at Romney’s critics:

Gingrich and Perry have between them about eleven minutes’ worth of relevant private-sector experience — Perry being subsidized by the federal government to farm cotton, Gingrich subsidizing himself by farming his political connections — and therefore may not know (or care) what a private-equity firm such as Bain does. (Gingrich might consider asking his friends at leveraged-buyout firm Forstmann Little, where he was on the board.) Bain is involved in, among other things, leveraged buyouts, meaning that the firm and its investors borrow money from banks to acquire companies, usually firms that are in trouble but believed to be salvageable. These firms generally are bought on the theory that they represent fundamentally sound underlying business enterprises that are for one reason or another performing deficiently, usually because of incompetent management. Strong, thriving companies rarely are targets for leveraged-buyout acquisitions — if things are going well, there is no incentive to sell the company. If the firms are publicly traded, they often are taken private, their stocks delisted from the exchanges, and then reorganized. Once the company has been returned to profitability, it is taken public again or sold to a private buyer, in the hopes of turning a profit on the deal.

As you can imagine, companies that are buyout targets often are in very poor shape, and reviving them is no small thing. Many of them go into bankruptcy. Product lines are discontinued, retail locations are closed, assets are sold off, and, almost inevitably, jobs are lost. Some never recover. When the restructuring is successful, reinvigorated firms expand, add locations, develop new products, and create jobs. That is the creative destruction of capitalism. Staples has 2,000 stores instead of one store because of a Bain investment. And, as Herman Cain is well-positioned to appreciate, Burger King was severely underperforming when Bain and a group of franchise owners acquired it from corporate parent Diageo in 2002. The restructured burger chain, which went public a few years back, is now valued at more than $3 billion. Household names from Dunkin’ Donuts to Guitar Center have been among Bain’s projects.

Bain’s business is high-risk and high-reward. Romney made a pot of money — by investing in real businesses, which, it bears noting, employ many thousands of real Americans. Governor Perry likes to brag about the jobs created in Texas during his tenure: Perhaps he should subtract from that admirable sum those positions at companies in which Bain invested, for the sake of his intellectual integrity.

Romney also is being roasted for saying that one of the things he prefers about the private sector is that when it comes to the incompetent or the unsatisfactory, “if you don’t like what they do, you can fire them. I like being able to fire people who provide services to me.” Choice — including the choice to fire a non-performing employee, or to fire your bank if you prefer another one — is the essence of the free market. In education, health care, and any number of other spheres of American life, more choice desperately is needed. An education system in which incompetent teachers could be routinely fired would be a real improvement over the current regime of tenure and “rubber rooms” — and Romney has nothing for which to apologize in connection with that remark, nor for taking on the thankless task of explaining the goodness of profits to an Occupy Wall Street heckler. Huntsman mocked Romney for the remark — but whoever the next president of the United States is, he should be provided with a very long list of people in the federal bureaucracies who need firing. If Huntsman does not have one, he has not thought hard enough about the issue.

Wall Street has its share of miscreants, and they should be recognized as such when appropriate. But to abominate Mitt Romney for having been a success at the business of investing in struggling American companies, connecting entrepreneurs with capital and producers with markets, is foolish and destructive. Republicans ought to know better, and the fact that Gingrich et al. apparently do not is the most disturbing commentary on the state of the primary field so far.

And Romney was also defended from an unlikely source as Ron Paul, a frequent defender of free market ideas and principles, knocked the other candidates’ anti-capitalist attacks in an interview with ABC News:

In an exclusive interview outside a Manchester polling place, Ron Paul lashed out at fellow Republicans for making unfair and ignorant attacks on Mitt Romney’s business record.

“I think they’re wrong. I think they’re totally misunderstanding the way the market works,” Paul told me. “They are either just demagoguing or they don’t have the vaguest idea how the market works.”

Paul also came to Romney’s defense for saying “I like to be able to fire people.”

“I think they’re unfairly attacking him on that issue because he never really literally said that,” Paul said.  “They’ve taken him way out of context. … He wants to fire companies.”

In Paul’s view, Romney is right to say that he created jobs by restructuring companies.

It’s disgusting to see this sort of attack, as I wrote on Monday, because it sounds like it could come from Barack Obama’s campaign. And sadly, many so-called “conservatives,” most of whom are rabidly anti-Romney, are repeating these talking points.

On my way home last night, I heard Erick Erickson, who hosts a local radio show in Atlanta, copped out on the attacks. He said that he disagreed with them, but he was glad they were coming because Romney hadn’t developed a satisfactory response to them. Romney really doesn’t have to because these attacks are eventually going to turn-off conservatives as conservative talking heads realize that they are playing into Obama’s hands by attacking free markets.

And while his rivals in the race say that Bain Capital is going to hurt Romney in the election, they really have no record to stand on as far as it goes; because, as the National Review notes, they’ve never spent any time on their own in the business world.

As I’ve said before, I don’t like Romney, so I don’t really want to defend him. But Gingrich and company are showing their true statist colors with these attacks.