Staples vs. Solyndra

Mr. Romney helped create Staples, a start-up that worked and created tens of
thousands of jobs. Mr. Obama financed Solyndra, which did not work. Neither did Abound Solar. The many Obama alternative-energy ventures play in different market segments, but they struggle for the same reason: They serve political agendas more than customers.

(Reblogged from Wallstreet Journal Online)

SAPLES vs. SOLYNDRA

Mitt Romney needs to make a better argument for Bain capitalism.

Can a President seeking re-election with a stagnant economy and high unemployment really be winning the jobs argument against a man who backed hundreds of thriving businesses? Can a President who sank taxpayer dollars into green-energy failures now succeed by attacking an opponent who funded winning start-ups with his own money?

Yes, President Obama’s attacks on Mitt Romney and the company he founded, Bain Capital, are deceptive and hypocritical. But Team Romney is compounding the damage from this character assault by conceding too much of the Obama critique.

When attacked for “outsourcing jobs,” the Romney camp responds by saying that Mr. Obama does it, too. Or the Romney campaign suggests that their candidate had already left the firm to save the Olympics when Bain was doing all the really bad stuff. Thus the trivial back-and-forth over when he really, finally, left Bain for good.

Tuesday’s Romney response was that Mr. Obama has collected more than $100,000 in contributions from Bain employees even as he has viciously attacked them.

This is a fair (if still insufficient) point, and the Romney campaign could add that the President may have benefited himself from Bain capitalism. Firms like Bain may have helped pay Mr. Obama’s salary when he taught law at the University of Chicago. While he was a professor there, the school ramped up its investments in private equity, enjoyed outsize returns and, according to a 2000 article in Pensions and Investments magazine, was a limited partner in more than 80 private-equity funds. The school won’t say whether Bain funds were among them.

But the next time Mr. Obama talks on the campaign trail about his rise from humble roots, he might also express some gratitude to the Mitt Romneys whose private-equity investments helped to build university endowments and thus helped underwrite Mr. Obama’s career in academia. Those same endowments have also helped pay for the education of thousands of middle-class students.

In any event, hitting Mr. Obama for his hypocrisy still won’t win the argument, if both men merely share the blame for acts of capitalism committed by Bain. Instead, Mr. Romney should enthusiastically defend Bain, and the job-creating contrast with Obamanomics that it represents. Did Bain have to cut some jobs as it built companies that ultimately created many more jobs? Yes, but its companies created more than they lost, and this dynamic spirit of improvement and enterprise represents a far better path to prosperity than the government-directed, political investing of Mr. Obama.

Mr. Romney can happily claim credit for Bain’s entire impressive history, rather than just the period through 1999. He has every right to do so as the company’s founder. And it will help illuminate the basic difference between his Bain career and the President’s 3.5 years running America’s economic policy to deliver 8.2% unemployment.

Mr. Romney’s Bain worked so well that it became the model for an entire industry. Mr. Romney helped create Staples, a start-up that worked and created tens of thousands of jobs. Mr. Obama financed Solyndra, which did not work. Neither did Abound Solar. The many Obama alternative-energy ventures play in different market segments, but they struggle for the same reason: They serve political agendas more than customers.

Mr. Romney has attacked Mr. Obama’s Solyndra investment in particular, but he hasn’t linked it consistently to the President’s failed model of government-led investing or contrasted it with the successful culture Mr. Romney built at Bain.

What Bain did is what all successful organizations do: Seek to deliver products and services that are better, faster, cheaper. In some instances that means fewer employees, even if Mr. Obama still can’t or won’t grasp the concept that we live in a competitive world. How many readers of this editorial have jobs today because the founders of their companies figured out how to spend more money on a slower manufacturing process to create goods of lower quality?

Overall, Bain capitalism means more successes than failures, and many more jobs. In March of this year, the managing directors of Bain Capital wrote to their investors and reported that, over the firm’s 28 years, companies backed by Bain have grown their revenues more than twice as fast “as both the S&P and the U.S. economy.”

The managers went on to note that after Bain invested, companies have grown their revenues by more than $105 billion globally, including $80 billion in the United States. Bain-backed companies, they added, have opened more than 5,000 stores and facilities during their ownership.

Mr. Romney may have thought that debating Bain was a distraction from focusing on the failed Obama economy. But with Mr. Obama using Bain as his main argument against Mr. Romney’s record as a job creator, the Republican has no choice but to fight back or he’ll lose the election. Americans will choose Bain capitalism over Solyndra crony capitalism, if Mr. Romney makes the case.

A version of this article appeared July 18, 2012, on page A14 in the U.S. edition of The Wall Street Journal, with the headline: Staples vs. Solyndra.