The Agenda

Jeffrey Friedman on Bain Capital and the Real Rationale for Capitalism

Having linked to William Galston on anti-Bainism yesterday, I wanted to share a different perspective, from Jeffrey Friedman. Friedman is, among other things, the editor of the always-provocative interdisciplinary journal Critical Review and the co-author, with Wladimir Kraus, of Engineering the Financial Crisis, an indispensable guide to understanding how poorly-designed capital rules may have exacerbated financial instability and, more broadly, a valuable contribution to normative political theory.

Friedman asks whether or not Romney is pursuing exactly the wrong strategy with regards to his role at Bain Capital. Rather than offer an inch-by-inch defense, rooted in the fate of one or several of the firms in which Bain Capital played a role, Friedman tentatively suggests that Romney, and his allies, embrace a broader approach:

Don’t you think that in this case, for once, the best tactic (for Romney) might be to make an argument about the real rationale for capitalism–which is not at the level of this or that firm or employee, but economy-wide?

It’s an abstract argument, to be sure, but the point would be: “Even if every company that Bain made more efficient did that by cutting jobs, the money consumers saved by being able to buy those companies’ products at a lower price would have been spent on other products, increasing employment at those other companies.”

My inclination is to think that such arguments are political losers, which would explain why they are never made. They may be too complicated for voters to grasp, and they sound almost mystical, a la the “invisible hand.”

But in this case, the alternative is to get into even more complicated and contestable “counts” of how many workers were added or subtracted at Bain-funded companies–as Galston, in effect, advises. This is defensive and inconclusive–and it makes anecdotes about this or that fired employee’s troubles fair game. By contrast, the other strategy allows Romney to go on the offensive both for his candidacy and, willy-nilly, for capitalism, by explaining how short-sighted his opponents and, more importantly, Obama are.

If Romney cannot explain and defend the real justification for Bain by getting voters to “see the unseen,” then he may be toast unless the economy tanks again. It would also be quite an interesting test case as to the limits of political debate about complex issues. Does personalizing and “the seen” always beat abstraction?

I agree with Friedman: this is an interesting test cause. Would voters embrace the idea that the economy is a complex, interrelated system, and that the demise of, say, the typewriter industry wasn’t an entirely bad thing insofar as it freed resources for other investments? 

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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