Tuesday, January 24, 2012

And, By the Way, Romney Didn't Create Any Jobs

As we discussed in this post on economic stimulus and job creation, hiring people is radically different from creating new jobs. Matt Yglesias goes the extra mile and addresses that point in light of Mitt Romney's job creation record at Bain Capital.
Romney knows very well that he was primarily in the private equity and leveraged buyout industries, and chose very deliberately to emphasize instead Bain's relatively minor venture capital activities. That's because as a matter of affect, it sounds way better to be providing seed capital to new firms than to be adding debt to existing ones and attempting to restructure them to suck more money out of the underlying assets. But I do think it's worth emphasizing that if what you're interested in is the systematic impact on the economy and the labor market there's no particular reason to see venture capital as "creating" jobs while private equity "destroys" them. 
The venture capitalists behind the computer industry, for example, have destroyed many jobs in the typewriter manufacturing sector. They've decimated the ranks of America's type-setters and photographic chemical manufacturers. X-Acto Knives are still for sale, but the market for them has been badly hit by computer innovations. The Internet has been deadly for the encyclopedia industry. That doesn't mean that the pioneers of word processing or desktop publishing are bad people or that word processing has been bad for the American economy. It's simply that significant innovations have wide-ranging consequences for the world. Businesspeople create or manage businesses, but the kind of "job creation" that happens when your product turns out to be really appealing so you need to hire a bunch of people to make and sell it has nothing to do with the kind of "job creation" that increases the overall volume of employment in the economy. A lot of the attacks on private equity are unfair, but the story of Mitt Romney Job Creator doesn't make sense either. 
Even if it were true that Romney's investment in Staples was typical of his business career, the mere fact that a lot of people work at Staples tells us nothing about the systematic impact of Staples on the economy.
But we do know something about that impact.
Dunder Mifflin, the fictional regional paper company at the heart of [The Office], is facing an increasingly competitive marketplace. Like many smaller players, it just can't compete with the low prices charged by big-box rivals like Staples and Office Depot, and it seems to be constantly bleeding corporate customers that are focused on cutting costs themselves. 

Quill.com, an affiliate of Staples, now sells Dunder Mifflin copy paper.

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