The debate in the presidential campaign has degenerated into accusations over Mitt Romney’s financial past and present, and the counter-charge that Barack Obama is opposed to individual success.
Amidst so many words and hyperboles, we should be clear that the role played by Bain Capital is significant and deserves consideration.
The problem faced by Romney and Bain is not one of legality, but of appearance. The Republican candidate made a fortune in the financial sector, an area of the economy that grew by leaps and bounds in the past three decades.
Romney’s work and talent consisted of analyzing companies that showed potential for investing funds and making a good profit in a short amount of time. In practice, this generally involved restructuring the company to do more with less and get loans. In some cases Bain’s intervention was positive for these companies and they grew substantially; others went broke.
Romney’s responsibility was not to create jobs, but to make a profit for his investors. It is therefore irrelevant to argue over whether Romney was or was not at Bain when one of his companies sent jobs abroad. Romney’s commitment to his investors and his economic theory lead to the conclusion that he would not have stopped the investment in order to protect jobs.
This made him a fortune of hundreds of millions of dollars, and, like many in his economic situation, he has part of it invested in accounts abroad in Switzerland and the Cayman Islands. As a result, his taxes are lower in percentage terms -since they come from investments- than what the average American pays.
As noted above, none of this is illegal, but it reveals, with a clarity seldom seen, the world apart of privileges of a financial class that has gotten rich on speculations and bubbles.
Romney represents the mentality of Wall Street, and his wealth, gained in the financial sector, has now become a disadvantage for a candidate in the midst of a major economic crisis. Every one of his income-tax returns is a reminder of that fortune, obtained in a financially complex setting that is hard for the average voter to fully grasp.
That’s why, when the Democrats now attack Bain, the Republicans’ defense is to wrap themselves in the flag of the free market and accuse Obama of being an enemy of individual success and of the private sector. This is a weak response, because they wouldn’t dare defend the alleged benefits of the type of investments made by Bain Capital.
It is highly debatable whether success in the private financial sector can be carried over into the federal government. What is certain is that Romney, by placing Bain on the table, has opened up a debate over the financial sector’s value, earnings, and long-term impact on the economy. It’s too late to put those issues back on the shelf.