Jayachandran/Mint

Jayachandran/Mint

Off and out with Mitt Romney

Off and out with Mitt Romney

In a better America, Mitt Romney would be running for president on the strength of his major achievement as governor of Massachusetts: a health reform that was identical in all important respects to the health reform enacted by US President Barack Obama. By the way, the Massachusetts reform is working pretty well and has overwhelming popular support.

In reality, however, Romney is doing no such thing, bitterly denouncing the Supreme Court for upholding the constitutionality of his own health care plan. His case for becoming president relies, instead, on his claim that, having been a successful businessman, he knows how to create jobs.

This, in turn, means that however much the Romney campaign may wish otherwise, the nature of that business career is fair game. How did Romney make all that money? Was it in ways suggesting that what was good for Bain Capital, the private equity firm that made him rich, would also be good for America?

And the answer is no.

Jayachandran/Mint

In any case, however, Romney wasn't that kind of businessman. Bain didn't build businesses; it bought and sold them. Sometimes its takeovers led to new hiring; often they led to layoffs, wage cuts and lost benefits. On some occasions, Bain made a profit even as its takeover target was driven out of business. None of this sounds like the kind of record that should reassure American workers looking for an economic saviour.

And then there's the business about outsourcing.

Two weeks ago, The Washington Post reported that Bain had invested in companies whose speciality was helping other companies move jobs overseas. The Romney campaign went ballistic, demanding—unsuccessfully—that The Post retract the report on the basis of an unconvincing “fact sheet" consisting largely of executive testimonials.

What was more interesting was the campaign’s insistence that The Post had misled readers by failing to distinguish between “offshoring"—moving jobs abroad—and “outsourcing", which simply means having an external contractor perform services that could have been performed in-house.

Now, if the Romney campaign really believed in its own alleged free-market principles, it would have defended the right of corporations to do whatever maximizes their profits, even if that means shipping jobs overseas. Instead, however, the campaign effectively conceded that offshoring is bad, but insisted that outsourcing is OK as long as the contractor is another US firm.

That is, however, a very dubious assertion.

Consider one of Romney's most famous remarks: “Corporations are people, my friend." When the audience jeered, he elaborated: “Everything corporations earn ultimately goes to people. Where do you think it goes? Whose pockets? Whose pockets? People's pockets." This is undoubtedly true, once you take into account the pockets of, say, partners at Bain Capital (who, I hasten to add, are, indeed, people). But one of the main points of outsourcing is to ensure that as little as possible of what corporations earn goes into the pockets of the people who actually work for those corporations.

Why, for example, do many large companies now outsource cleaning and security to outside contractors? Surely the answer is, in large part, that outside contractors can hire cheap labour that isn't represented by the union and can't participate in the company health and retirement plans. And, sure enough, recent academic research finds that outsourced janitors and guards receive substantially lower wages and worse benefits than their in-house counterparts.

Just to be clear, outsourcing is only one source of the huge disconnect between a tiny elite and ordinary US workers, a disconnect that has been growing for more than 30 years. And Bain, in turn, was only one player in the growth of outsourcing. So Romney didn't personally, single-handedly, destroy the middle-class society we used to have. He was, however, an enthusiastic and very well remunerated participant in the process of destruction; if Bain got involved with your company, one way or another, the odds were pretty good that even if your job survived you ended up with lower pay and diminished benefits.

In short, what was good for Bain Capital definitely wasn't good for America. And, as I said at the beginning, the Obama campaign has every right to point that out.

©2012/THE NEW YORK TIMES

Paul Krugman is a columnist at The New York Times. Comments are welcome at theirview@livemint.com

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