I made a mistake this Memorial Day weekend; I sat through the Sunday political talk shows. And what I witnessed was a uniform line of criticism from the left on Mitt Romney's experience at Bain Capital that bordered on incomprehensible.
Echoing President Obama’s remarks from earlier in the week, the left’s argument du jour was consistently some variation on this: Romney’s time at Bain doesn’t prove anything about his ability to boost employment because his responsibility was to maximize profits, not to create new jobs. This line of reasoning is staggering in its economic illiteracy.
While the Obama camp is implicitly suggesting that this focus on profit sets venture capital apart from the rest of the American economy, there is only one example I can think of a business whose main concern is increasing jobs: an employment agency.
The truth is that almost all for-profit businesses have as their primary focus a return on investment rather than a maximization of employment. Grocery stores don’t open up to provide the maximum available number of positions for checkers and bag boys; they open up to make a profit. Department stores don’t exist to create a market for sales associate positions; they exist to make money off of the goods they offer. The jobs they create are an effect, not a cause, of the success of their business model.
This represents a staggering blind spot in the economic thinking of the left. In essence, they are attempting to wish the demand side of the market out of existence. I’ve made the point before – and suggested that Mitt Romney make it as well – that business is a form of service. Government subsidies aside, the only way any job comes into existence is by creating value for the employer – who in turn is creating value for the customer.
Now, it’s certainly true that there can be a short-term tension between profit maximization and employment. The point at which a firm is most profitable is rarely, if ever, going to be the point at which they have maximized their hires. But given the near-holy reverence that our friends on the left reserve for the word “sustainable,” you would think they would understand that keeping employment artificially high while cutting into a business’s bottom line – and thus jeopardizing prospects for future employment – is a fool’s errand.
One final note: there is a germ of truth to the criticisms of equating Romney’s private-sector experience with public-sector expertise. They are very different skill sets. The public sector’s role in allowing economic growth to blossom hinges largely on things like tax rates, spending policies, and the scale and scope of regulation. A leader in private industry can gain enhanced exposure to the real-world effects of these policies, but it doesn’t follow that they have any special talent for directing them (see Corzine, Jon). But that's not an argument against Romney -- it's just an argument for the fact that biography is not necessarily a determinative guide to how someone will govern.
Even that very narrow argument would be a decent one for Obama to make if he had presided over successful economic policies. Having failed to do so, however, the Obama campaign will continue to shoot blanks on this issue – a development that should be the source of great comfort at Romney headquarters in Boston.