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Vulture Capitalism

Comment

Now that Mitt Romney is likely to be the Republican nominee, we can expect new attacks on his "vulture capitalism." That's how Rick Perry characterized his private equity work. Newt Gingrich's supporters ran an ad about Romney's firm, Bain Capital, that said, "Their greed was only matched by their willingness to do anything to make millions in profits."

Give me a break.

"Greed" means you want more for yourself. Fine. If you obtain it legally, without force or privilege — say, by buying a business and making it more efficient, or shifting resources to where consumers prefer them — that is a good thing. "Creative destruction" makes America richer.

Shifting resources does mean some people lose their jobs. That is sad for those who are fired.

But on balance, it's a good thing. Intuition tells us that it would be better if no one ever lost a job and that capitalists who close businesses are evil. But America would not be better off today if elevator operators and factory workers who made typewriters had their jobs preserved by a "compassionate" government.

America is richer today because those workers lost their jobs, because money once paid them is put to better use. In addition, most of those workers found new jobs where their skills better served consumers. Some even say they were glad that they were fired, because now they are more productive, and being productive makes people happy.

But we in the media almost never tell that story. That's because we only report what we see.

We can see, and interview, the sad people who get fired. We take pictures as they leave their jobs on that last day when the factory closes. We interview them about the hardship to their families. It's a sad and moving story. We tell it well. But we never tell the flip side, the creative part of creative destruction. That's because we don't see it. We don't see the better things that are done with capital that once went into the factory. We don't see what many of the workers do next.

None of us covered the first few weeks of Apple or Google or Staples or Domino's Pizza.

We had no clue that those companies were about to produce cool new things, thousands of jobs and billions of dollars in value. Staples and Domino's, by the way, were funded by Bain Capital.

Not all bankers and private equity firms create wealth, because some make bad decisions. But if government does not bestow privileges, those that don't create wealth go out of business, and those that fund good ideas grow. Some may call that "vulture capitalism" and sneer at "hostile" takeovers, but if the takeover is not enabled by government force, it is likely to be a good thing. It makes America more prosperous.

Michael Moore says, "Capitalism has no moral core."

Is that right? Since the word "capitalism" is ambiguous, the answer depends on what we mean. If it's crony capitalism — well, yeah. It stinks. Handouts to Solyndra and special deals for Goldman Sachs and GM are not capitalism. That's "crapitalism."

Many people hate banks, private-equity firms and mortgage brokers. In light of the last few years, this isn't totally unjustified. I resent the bankers who got rich by taking foolish risks and then, when they failed, got bailed out with our tax money.

I guess I shouldn't blame bankers. I should blame the politicians. They gave our tax money away. If someone offered me money to cover my losses, I'd take it, too.

The real evil bankers are the government cronies, like those at Fannie Mae and Freddie Mac. They took our money by force, our taxes, then paid themselves fat salaries and promised us that none of our money was at risk. And then they squandered more than $100 billion, betting that housing prices would always rise and few people would default.

I resent them and their backers in government.

But in a real free market — no government privileges or barriers to competition — capitalism is great. It's the only system with a moral core because it's based on freedom, not force.

John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "Give Me a Break" and of "Myth, Lies, and Downright Stupidity." To find out more about John Stossel, visit his site at <a href="http://www.johnstossel.com" <http://www.johnstossel.com>>johnstossel.com</a>. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

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Comments

3 Comments | Post Comment
Oh it was such a sad, sad day
When the factory did shut down.
I left my job with my last pay,
Nothing to smile about - just frown.
It was my job for twenty years.
Each product made with loving care,
And then the need just disappears.
So called progress is hell, I swear.
I don't know what I'm gonna do.
How will I pay for room and board?
I'll have to beg, maybe steal too.
So to hell with you, Henry Ford.

Through teary eyes and trembling lips,
I bid goodbye to buggy whips.
Comment: #1
Posted by: Ima Ryma
Thu Mar 8, 2012 8:15 AM
Capitalism is good, unlimited free trade is not. Unless you can live on the average third world wage. Huge container ships, instant communication, and stable international banking have allowed business to locate production halfway around the globe and siphon money out of local economys. Modern productivity has concentrated most of the wealth to the top few while the average worker fears for his job and will make almost any concession to keep his job.
Speaking of buggy whips, yesterdays typewriter assembler is now making iPads, unfortunately he is in China. It is 2012, not 1952, we are not getting paid to rebuild Europe and Japan. We can no longer afford to police the rest of the world or adsorb Central America's unemployment. Our 15 trillion economy would quickly swell to 20 trillion if we recirculated our money and had full employment. How can you talk about being productive when a fifth of the work force is unemployed or can only find part time work.
As for the examples of successful company s, Apple makes expensive toys in China, Staples sales inexpensive office supplies made in China, Google sales advertising and your privacy while finding porn for you. At least Dominoes makes something good to eat right in your neighborhood and give Mom a break from the kitchen.
Comment: #2
Posted by: jdmeth
Thu Mar 8, 2012 8:34 PM
Glad someone finally stood up for Mitt when even his fellow GOP candidates didn't. Good for you, and shame on them! Pretty hypocritical to say you are for freedom and then use one of Obama's arguements against one of your fellow Republicans. Win at all costs, you say?

I commend Stossel for saying so plainly that venture capitalism is good and a key ingredient to our expression of freedom, free enterprise, and the merits of healthy competition that ultimately helps strengthen America here and abroad. Although it is very sad to lose a job, that person still has skills..no one took them away, and those same skills can prove valuable to another company. Find and need and fill it with quality and quantity and success is inevitable!

Our Forefathers came here with no expectations, except to be free, to choose for themselves what they should do with their lives and talents and resources, and take responsibility for their actions and decisions. That's what is wonderfully unique about America and why we shine above all other Countries. Obama wants to rob us of this key to prosperity and individual growth, in exchange for a centralized Government who will rule over every factor and facet of our lives, and when the welfare runs out we will be no different than all those European countries that are on the pathway to oblivion. Freedom is not free. It requires personal responsibility and accountability.

Romney is the only candidate who not only talks the talk, but has spent the better part of his life walking the walk!
Comment: #3
Posted by: David Viger Jr
Fri Mar 16, 2012 3:34 PM
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