Romney's Outsourcing Expertise Could Make Him a Strong President

He knows what makes companies weak--which could help strengthen the whole economy.


In the military, the best way to gather intelligence on the enemy's operations is to recruit a spy from within its ranks.

The same might be true for fixing the economy.

[See 5 reasons Obama's right about business "doing fine."]

President Barack Obama has begun to lambaste his Republican opponent, Mitt Romney, for outsourcing jobs as a private-equity baron who took over many companies and streamlined their operations. Obama TV ads dub Romney the "Outsourcer in Chief." Vice President Joe Biden called Romney "a job creator—in Singapore. And China. And India." The attacks are based largely on aWashington Post article that described Romney's old firm, Bain Capital, as a "pioneer" of outsourcing in the 1990s.

Romney's campaign has fought back by challenging the Post article and dickering over the meaning of "outsourcing." Some of those counterclaims may have merit. But Romney may also be missing a chance to highlight the specific ways that his intimate knowledge of business could help energize a stagnant economy.

[See Mitt Romney missing answers on jobs.]

When Romney ran Bain Capital, the firm's basic job was to buy companies that were undervalued, mismanaged, or otherwise struggling, make them more efficient, raise their value, and sell them for a handsome profit. Sometimes that didn't work. But many times it did, which is how Romney and his partners got fantastically rich.

One of the ways Bain accomplished this was to identify weaknesses that made companies top-heavy and inefficient. Bain would often contract out activities that weren't a core part of the business (think customer service or payroll administration) and could be done better and cheaper by another firm specializing in those things. If the work went to another American firm, that would be outsourcing. If the work went overseas—often the case with the assembly line work at manufacturing firms—that would be offshoring. Both types of streamlining caught on in the '90s and are mainstream today.

Bain certainly shipped some work overseas in order to cut costs at bloated firms and turn them around. But that kind of experience ought to be an asset for Romney if he becomes president, not a liability. At Bain, Romney's job was to maximize value so his investors could make money. The job of the president is very different, since in effect he must maximize the value of the whole U.S. economy. Whoever gets elected in November will have to find innovate new ways to turn around a decade of drift and make the economy more dynamic, so that private firms create jobs here, not overseas.

[See why Romney's record as governor barely matters.]

Who better to do that than somebody who knows American companies' biggest weaknesses? Knowledge is power, to be used for good or ill. At Bain, Romney used his knowledge of business to spot (and, perhaps, exploit) vulnerabilities at Bain takeover targets. To fix the U.S. economy, we need to start at the same place, by identifying what's wrong, then fixing it.

If an army battalion preparing for battle learned from a spy that the enemy had identified a weak spot in its formation, it would plug the hole immediately, and become stronger. It might even disguise the fix, to lure the enemy into a trap. Energizing the economy requires the same sort of tough, strategic thinking.

If politics were rational, Romney could plausibly tell voters that he knows where the bodies are buried, as it were, which makes him uniquely qualified to lower our economic mortality rate. He'd pledge to put his knowledge to use in ways that benefit the public good, the way expert hackers can often provide the best advice on electronic security.

But our elections tend to be base affairs characterized by political doublespeak and pandering to manipulable voters. So Obama will probably continue to score points by bluntly bashing at Romney the Outsourcer, while Romney ducks and weaves and seeks ways to counterattack. Outsourcing is apparently one more thing we won't have a serious discussion about during the election.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.