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Why Mitt Romney Should Be Praised For His Role At Bain Capital


Over the last few weeks, Republican Presidential candidate and former Governor Mitt Romney has been under scrutiny for his role in the private equity firm, Bain Capital.  In the process, the business of private equity has been demonized as a vehicle for “bad” capitalism.Mitt Romney

By definition, private equity firms operate in just about every sector, aiming to to create a thriving business so the private equity firm can sell its investment stake at a profit.  Private equity firms mostly invest in failing companies with the aim of turning them around to create a successful business.

Essentially, this is not a hindrance to the job market, actually it’s quite the opposite. Rather than letting an enterprise fail, private equity firms save companies and therefore, jobs.  In the process, jobs may be  lost to cut costs while the company rebuilds, but once the company is rebuilt it can actually create more jobs than were cut originally.  If the company then fails, the jobs are lost for good, but the only way these companies turn a profit is by creating value in jobs.

Furthermore, many times successful venture and growth funds create something out of nothing, and hence, could not be guilty of destroying jobs.  It is quite possible that everyone would lose jobs at the distressed target if private equity did not swoop in and save the day.

The company for which Romney is catching heat is actually a non-governmental solution to situations similar to the auto bailout.  Rather than a failing company creating chaos in the market, and the government then “bailing out” companies with taxpayer dollars, private investors of their own free will, un-mandated by the government allocate resources to save companies that would presumably fail and layoff workers without any hope of creating new jobs.  Examples of this kind of success can be found in  Staples, The Sports Authority, Domino's Pizza, and Steel Dynamics,  companies that at the end of the day employ hundreds of thousands, but may not if not for the work of private equity firms.

At a time when national unemployment is still at a high 8.5%, smart men and women should embrace the free enterprise system which aims to save companies through private dollars, even if it temporarily cut jobs during a rebuilding stage.  The catch is that the investors take the risk of investing millions of dollars into an unstable company, where failure is still an alternative outcome.  Private equity investors are making high-risk investments, and they hope that huge returns from a few successes will cover the risks from all of the failures, but their success is not guaranteed.  But that money comes from private investors, not mandated taxes on all Americans at the time decided by government bureaucrats.  

For any objective person, private equity ventures should exemplify the most successful form of capitalism.  It embodies the most basic principal of economic freedom.  Americans have the ability to take something from nothing and turn it into a profitable asset.  Private equity firms do seek to turn profit, to make money, but don’t we all?  In the long run they also create employment that American families so desperately need right now, and always for that matter.

Contact Alyssa Bonk at abonk08@gmail.com

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Check out more of Alyssa's work at Luckandhustle.blogspot.com and Smart Girl Politics

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