Mitt Romney's Ridiculous Defense of Bain Capital

Venture capitalists profit on the structures of corporate governance that free market idealists so detest.

By + More

I have to say, when I recommended a few ways that former House Speaker Newt Gingrich, then at his peak, could attack former Gov. Mitt Romney, it never occurred to me that he would bring up Bain Capital.

A lack of creative imagination, I confess!

For what it's worth, I think the populist critique of Romney's tenure at Bain is, at best, an oversimplification of a complicated area of finance; at worst, an opportunistic cheap shot.

[ Vote: Will Mitt Romney's Record at Bain Capital Be His Downfall?]

At the same time, I'm not swallowing whole the Bain Capital-is-free-enterprise and free-enterprise-is-Bain-Capital argument. The Weekly Standard's Bill Kristol is right: Capitalism itself, let alone private equity, is not the sum total of human freedom.

The private-equity industry is not coeval with the free-enterprise system as we know it. It has a beginning—and a relatively recent one, at that. Indeed, its growth occurred during the same post-New Deal period that, in the imagination of market ideologues, financial freedom steadily eroded.

How is that Presidents Woodrow Wilson, Franklin Roosevelt, Lyndon Johnson, and the rest of the gang successively laid waste to our natural economic liberties—and yet they neither foresaw nor forestalled the growth of private equity, venture capital, and leveraged buyouts? Some totalitarians they were!

[ See a collection of political cartoons on the economy.]

E.J. Dionne makes a nice point in his Washington Post column Thursday morning:

Capitalists of Romney's sort never want to acknowledge how much their ability to make money depends on what government does. How does it structure the laws related to property, taxation and debt? What rules does it write on how companies can be acquired and how power within firms is apportioned among shareholders, employees, managers and other stakeholders? These are not natural laws. They are the work of politicians and the lobbyists who influence them.

Dionne here reminds me of something George Will used to say:

[A] capitalistic economic system, with all the institutions, laws, regulations, dispositions, habits, and skills that make it work, is not part of the constitution of the universe ... It does not spring up from the social soil unbidden, like prairie grass.

Look, I don't think Romney was an evil bloodsucking corporate vulture. I want smart people to be able to locate economic efficiencies, and thereby ensure growth in the long term. I want venture capitalists to take risks and reap rewards ( "Bain," after all, is Gaelic for "harvest" or "reap"!). But the system in which this dynamism takes place is not prairie grass. It is an artifact of governance, both corporate and political—of accounting principles, auditing standards, bankruptcy law, securities regulation, and all the rest.

[ Read the U.S. News debate: Should the Dodd-Frank Act Be Repealed?]

The idea that we can't intelligently question the human costs of this arrangement; the idea that once one conjures an idyllic notion of "free enterprise," Mitt Romney and Bain Capital are above reproach; the idea that this is the end of an argument rather than the beginning—well, I'm sorry, that's just ridiculous.