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Not all of Bain’s investments were such a clear success, of course. One Bain venture that has been the subject of media scrutiny in the New York Times and likely will be again if Romney is the nominee is Bain’s investment in a medical company called Dade International. The short version of the story, and one that Democrats will dwell on, is that Bain took over the company and embarked on a painful cost-cutting program. After laying off 1,700 people, Bain drove Dade into bankruptcy, all while squeezing the company for $242 million in fees. The full story, however, is more complex.
For starters, Dade already was going bankrupt when Bain took over the company in 1994. And while Bain did make job cuts – cuts that would have been inevitable given the company’s flagging financial fortunes – it also invested in it to the tune of nearly $27 million. It does appear that there were those at Bain who preferred to flip Dade for a quick profit rather than putting it on sound financial footing, but that course was vetoed by none other than Romney, who wanted to see the company genuinely turned around.
Which it was. Between 1995 and 1998, according to the Times, Dade’s annual sales surged from $614 million to $1.3 billion, while its assets grew from $551 million to $1.5 billion. To be sure, by taking out millions in profits, Bain also saddled the company with long-term debt that ultimately drove it into bankruptcy. Many of those fired during the bankruptcy process complained about Bain’s profiteering. But there is still more to the story. Bankruptcy turned out to be beneficial for Dade. It allowed the company to restructure its finances and emerge a more efficient enterprise. In 2007, the German conglomerate Siemens bought Dade for $7 billion. The name was changed but the company endured.
This is not to say that Bain’s business decisions benefited everyone. The goal of most businesses, including private equity, is to maximize its profits. That means cutting costs and, sometimes, jobs. Though Romney contends that Bain Capital created more jobs than it eliminated, that would have been little consolation to those who lost their jobs through no fault of their own. But as Democrats gear up to demagogue the reality of the private sector, where businesses rise and fall, it is worth remembering that many of the layoffs for which Romney is being blamed would have happened regardless, and that, without Bain’s intervention, many struggling companies never would have recovered. At a time of lagging economic growth, the kind of market-driven wealth and job creation that Bain Capital oversaw should be commended, not condemned.
Whatever one’s view of Bain Capital’s individual acquisitions, the fact remains that private investors are far better suited than government bureaucrats to assess the risk of a business venture (see: failed solar panel manufacturer Solyndra). What’s more, their investments are typically made with private capital rather than taxpayer dollars. Taxpayers were not forced to shoulder the cost of Bain’s failed investments. The same cannot be said of failed government job creation schemes like the $787 billion stimulus package.
Democrats – and, apparently, Newt Gingrich – believe that they’ve found a winning issue in Romney’s involvement with Bain Capital. But as voters search for a candidate to lift the country from its economic malaise, they may well take a more charitable view of Romney’s role in a company that has managed what the current occupant of the White House has not: bolster businesses and create jobs.
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