There’s a new villain in the Republican race for the party’s presidential nomination, and its name is business. More specifically, the villain has become GOP frontrunner Mitt Romney and his record at private equity firm Bain Capital, a company the former Massachusetts governor started in 1984. Since his decisive victory in the New Hampshire primary, Gov. Romney has come under attack from rivals such as former Texas Gov. Rick Perry (who, according to the Wall Street Journal, has dropped out of the race today), and former Speaker of the House Newt Gingrich
On the campaign trail in South Carolina last week, Perry accused Romney’s Bain Capital of practicing “vulture capitalism,” saying that it destroyed people’s lives and was a “get-rich-quick scheme” designed to make a quick profit. Gingrich took his anti-Romney, anti-Bain Capital attacks to a whole other level. A Gingrich-supporting “Super PAC” went Hollywood on Romney, producing a slick 28-minute video that portrayed Romney as a ruthless Gordon Gekko-like corporate raider that swooped down and preyed on companies, fired all of their employees, and then parceled off the carcass for a quick buck.
This anti-business line of attack from Perry and Gingrich is a risky strategy, as it sounds more like rhetoric from an Occupy Wall Street rally than it does talking points in a GOP primary. Unfortunately, the attacks also show an incredible lack of knowledge about the role of private equity firms in the marketplace.
As a former hedge fund trader in the 1990s, I worked with many private equity firms to help them identify profitable opportunities. Usually, these firms searched for underperforming companies that needed to become more efficient in order to survive. The private equity firm would usually make an investment in a company it identified as a having a good chance to turn things around. Often, increasing efficiency meant restructuring, and that sometimes resulted in layoffs. Ultimately, the goal was to make the company more profitable, and that’s what business is all about.
Sometimes private equity succeeds, sometimes it fails. In the case of Bain Capital, it had many more successes than failures, and we know that because of the only measure we have of a company’s success—its bottom line.
In essence, the Perry/Gingrich line of attack is an attack on the bottom line. It’s an attack on profits, on business, and on investors who put their money to risk in private-equity deals. It also doesn’t seem to be doing much damage to Romney.
While Gingrich is surging in recent days, according to a Politico poll released today, Romney still holds a comfortable lead over the former Speaker in South Carolina polls. Romney tops the field with 37%, followed by Gingrich with 30%, Ron Paul with 11%, Rick Santorum with 10%, and recent campaign drop-out Rick Perry with just 4%, with 8% of voters undecided. Reports are that Perry will endorse Gingrich.
We’ll find out on Saturday how South Carolina voters feel about the attack on private equity. If polls are any indication, South Carolinians are going to vote in favor of private equity, in favor of business, and in favor of profits.
The opinions contained in this column are solely those of the writer.
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