New Hampshire’s first-in-the-nation presidential primary (I don’t want to hear it, Iowa) offers plenty of feel-good kitsch: Rosy-cheeked volunteers with yard signs; candidates meeting farm animals, and the occasional voter; town halls and old-fashioned democracy. Popping up on the local news during yesterday’s voting was an 106-year-old woman who cast her first vote for Calvin Coolidge. Yesterday, she punched her ticket for former Massachusetts Governor Mitt Romney, who easily won the primary.
It’s an apropos full circle, since Romney—should he stay the course—will be the first major presidential candidate since silent Cal, also a former governor of Massachusetts, to be defined nearly completely by his business career. In a party that swears its allegiance to the free market, Ronald Reagan told stirring stories about business but was foremost an actor, while George W. Bush was surrounded by businessmen but failed at the job himself. Even independent Ross Perot was a little too kooky to capture the sober mien of the tall guys in the blue suits and helmet hair.
That would be Mitt Romney, and his win last night means you’ll be hearing much more about his experience as a businessman over the next few months. And while by any conventional measure he was a very successful businessman indeed, the problem is that those conventional measures of success are becoming outmoded. Romney’s career (and the way he talks about it today) reveals a man whose economic model is set firmly in the previous century, before the lessons of the Great Recession and the broadening view of what businesses can accomplish—and what their responsibilities are—began changing today’s economy from the inside out.
As a management consultant at Bain & Co., the Harvard MBA/JD excelled at advising companies like Monsanto, Corning and Burlington Industries on how to improve their performance. After a few years, he and his colleagues at Bain set up a new company called Bain Capital to take further advantage of their skills. It would play in the private equity world, purchasing existing companies or funding new ones, applying its management expertise, and reaping direct profits from the firms’ successes rather than mere consulting fees.
In his time leading Bain Capital, Romney had many successes; perhaps most notable was getting the fledgling Staples off the ground. But the company made its biggest impact in the leveraged buy-out business: taking flagging public companies private, turning them around—often through mass layoffs and other cost-cutting measures—and then selling them or taking them public anew to cash out. Companies like Dominos, Duane Reed and Sports Authority received the Romney treatment, and he was quite good at the job, making millions for himself and his partners.
Romney’s success was part of a trend in American business that saw maximizing a company's value to its shareholders as the most important thing management could do; as Benjamin Wallace-Wells writes, it came at a time when sclerotic managers at major companies were not seen as doing enough to make their companies competitive, and helped usher in economic growth in the '80s and '90s. By driving the shareholder-value revolution, Romney and his colleagues were performing an economically valuable service: creative destruction that cleared away economic deadwood so that innovative new firms could thrive.
But as necessary as this kind of efficiency-seeking must be, the kind of obsession with the single metric of shareholder value has helped inculcate the obsessive short-termism that has driven so many recent cases of overreach and business disaster. It also elides the very human costs that come with restructuring—the lost jobs, the changed towns, the dislocation. In representing a company’s shareholders, Romney forgot that they aren’t its only stakeholders. That’s the same worldview that allows corporations to ignore the public costs of pollution and led bank executives to make highly profitable short-term mortgage deals they knew would blow up in due time.
Today, Romney argues that his work as a businessman helped create jobs, but that analysis is both difficult to prove and irrelevant: He wasn’t trying to create jobs; he was trying, as even his defenders admit, to increase the value of the companies. But that same confusion—between creating jobs (our shorthand for creating an economy where everyone gets their fair share) and maximizing the wealth of a specific class of people—is at the heart of the Republican Party’s economic platform. Making shareholders rich doesn’t always help workers, and cutting taxes on the wealthy doesn’t create jobs.
Romney’s plan to sell himself to American voters hinges heavily on convincing them that someone with business experience is the right person to manage the economy; a one-two punch that exploits deserved dissatisfaction with President Obama’s efforts so far and the promise that Romney has the experience to succeed. Setting aside the fact that running a company and running a country are in fact extremely different challenges, the question voters will ask themselves is, “Do we really want the guy whose main credential is his success in the economy that just disintegrated beneath our feet?” Photo via (cc) Flickr user Gate Skidmore