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  Tuesday October 21st, 2014    

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Bain vs. Obama Capital (01/22/2012)
By John Edstrom


     
The verbal ‘rassling matches, otherwise known as debates, between the Republican presidential candidates provide the usual preponderance of smoke vs. light, but comments made by Newt Gingrich and Rick Perry regarding Mitt Romney’s tenure at Bain Capital are very enlightening. Bain Capital is a private equity/venture firm which invests in new enterprises or buys up failing or underperforming companies that it hopes to turn around at a hefty profit.

While it is true that some of the companies taken under Bain’s wing eventually went bankrupt with attendant job losses, many were turned around or achieved success, creating, on the whole, far more jobs than were lost by Bain’s activities. Bain made its investors lots of money by generating value, which inevitably generates jobs.

Gingrich called this “rich people figuring out legal ways to loot a company” while Perry said that Romney “was worried about pink slips, whether he had enough of them to hand out.” These are the formulations of desperate pols willing to say anything to stay in the race, but worse, indicative of the grossest ignorance of how capitalism and free markets operate, the engines which have generate America’s traditional wealth and prosperity.

Winonans who are confused about this can take a simple lesson in how enterprises like Bain work to rescue companies and save jobs by considering J.R. Watkins Inc., one of Winona’s biggest employers for more than a century. Despite phenomenal success for many decades, the company floundered through the sixties and early seventies, and it was widely assumed that Watkins was doomed to go under with the loss of all hands. Then, in 1978, it was purchased in bankruptcy by Irwin Jacobs, whose business was somewhat similar to Bain Capital. Unflattering characterizations were made of Jacobs at the time, and it was widely assumed that he would sell off Watkins piecemeal for what it would bring. Instead, he recognized the potential of direct sales and visualized how the company might be reorganized to realize that potential and more, remade into a strong and viable new business utilizing its traditional strengths guided by new organizational and marketing strategies. And, equally important, Jacobs had the capital to implement his vision, which would not have been forthcoming from a conventional bank.

By 1996, Irwin’s son Mark was involved in the day-to-day business here in Winona, becoming CEO in 1998. The rest of the story is well-known, with J.R. Watkins a local employer of around 300 people, still manufacturing its products here, strong, profitable, poised for continued growth – and hiring.

This column is not meant to be an endorsement of Mitt Romney, about whose positions in many areas I have my doubts. But in a time of continuing recession and economic hardship, who is better equipped to guide our economy? On the one hand you have Mitt Romney, whose experience is not only in business, but recognizing real potential and opportunity and how to actualize it using private funds, not tax dollars, where mistaken judgment results in real loss to real people. Or there is Barack Obama, whose near trillion dollars in deficit spending did not improve our economy, nor create the touted jobs, but only bury our country in mountainous debt. His major accomplishment as a business maven is Solyndra, the solar company which went belly up shortly after receiving $500 million dollars in federal loan guarantees, with the loss of 1100 jobs.

J.E.

 

 

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