How Change Happens in David Brooks’ World

David Brooks

David Brooks published a hum-dinger of a defense of private equity firm capitalism yesterday in the New York Times, rallying for Mitt Romney in the process.   Very quickly, consider a couple points.

First, it is true that companies like Romney’s Bain Capital seek distressed business and many of those would not survive at all if private equity interests did not come to “save the day.”  You could argue that saving 20% of jobs is better than losing 100%, for example.

But these private equity firms have little at risk and plenty to gain.  In the process of saving a company they harvest profits through the liquidation of remaining assets and retain the profitable remainders.  The laws favor this sort of “risk taking” because it is supposed invigorate and reward local investment.  But “investors” like Bain take enormous profits through a process of capital redistribution that often leads to investments in other economies.  We can’t win a labor cost war in this country simply by downsizing employees and right-sizing management.

When Brooks and others talk about increased productivity, for example, they are not off the mark.  These companies do become economically more productive and efficient, but that happens at the expense of worker compensations, investments in other markets were costs are lower, increased use of technology, and other factors of production that often have little positive impact on people and communities that once thrived  in a previous economic era.

The answers here are difficult because we cannot go back to a 1950s post-WWII economy.  We are in a global economy.  But it is absurdly disingenuous for politicians and pundits to make the claim that increased efficiency and productivity is inherently good for the local economy.  Ransacking dying industries and saving a few thousand jobs isn’t really a forward-thinking way of revitalizing the economy for the long term.

And this notion that someone like Mitt Romney could bring his private equity investment experience to government is absurd, if not dangerous.  Government is not a business.  Public goods are not private goods.  Government and business have different goals and economic roles.  In fact it seems to me that having a so-called business ethic and experience in government is the last thing we want if we look at the current record.

Mitt Romney at one of his presidential campaig...

Mitt Romney, a hero for the American worker, being swell at one of his presidential campaign rallies. 

Let’s face it, business will turn to government when it suits business.  There is a reason why business invests billions lobbying government.  It isn’t all there just to cut regulation.  They want to save tax cuts and subsidies, too.  They want a contract that for $17,000 oil pans.

Republicans in Congress are not streamlining government favors for business, are they?  They’re streamlining public goods.  These people favor “job creators”, whoever they are, at the expense of the people.  Isn’t government a “for the people” institution?  By all means, put a business first president in the White House.

Finally, Brooks appears to lament the idea that Obama might be trying to resurrect campaigns from the “ancient past.”  By that I presume he means FDR?  Maybe Kennedy?  The truth is we could use more of this ancient past in our future.  When we entered the era of modern conservativism, things started to turn badly.

Under conservative leadership today we don’t need experts, we have no time for cooperation, and we seem to pay only lip service to the concerns of the people.  Unless you hold a golden ticket, you’re getting less and less.  Yes, you know that productivity Brooks talks about is true.  Worker output is at record levels.  What about worker compensation?  Not so good, is it?

The problem is a systematic one.  It is one that has everything to do with our place in a global economy and little to with false heroics staged by streamlining struggling old American industries.  As long as companies like Bain see low hanging fruit, we cannot expect them to invest in the immediate needs of our country.  Our competitive edge in labor is gone, likely forever in our historic core economies of industry and technology.  We need to invest in processes and infrastructure that will educate and attract a new economic advantage.  We compete global for both markets and talent.  Outsourcing our resources and investments to other economies hardly seems like the way to rebuild America.

Corporations weathered the economic recession relatively well.  Productivity is at record highs (along with executive compensation) and they are sitting on piles of assets.  When you see how they got there then you have to ask if that is the best model for running a government.  Ask again, what do governments do and what do businesses do?  Businesses are beholden to investors.  Governments serve people.

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2 thoughts on “How Change Happens in David Brooks’ World

  1. Pingback: Owls and Greece « A Little Tour in Yellow

  2. Pingback: Owls and Greece « A Little Tour in Yellow

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