Paul Pillar

Applying Romney's Business Experience to the Presidency

Mitt Romney’s highly profitable career in the private sector forms the basis of much of his appeal. People aspire to wealth; when someone has been conspicuously successful in acquiring it, the belief follows that the person in question must be doing something right. Romney’s campaign has played up the idea that the candidate’s business acumen is just what the country needs in its chief executive. What it really would mean to transfer to government the skills and approach Romney demonstrated in his private-sector career, however, requires closer consideration not only of the approach itself but also of how the tasks of a government chief executive resemble or differ from the tasks Romney performed while making his fortune.

He made the fortune (i.e., the part that was not inherited) as head of Bain Capital, a private-equity firm that bought companies (often mostly with borrowed money) with the hope of reselling them for a profit. His mission was not to build businesses but instead to extract as much profit as possible from temporary ownership of them. The extraction was ruthless, which more than made up for the losses from bets that did not pay off. Although in the current economic climate Romney naturally has talked a lot about job creation and tried to associate that concept with business experience, his own experience had at least as much to do with slashing jobs as with creating them. And although Romney and his associates at Bain added value to the management of firms they bought (if they didn’t, it would be hard to resell them for a profit), ultimately the long-term soundness of a company did not matter to them because they did not intend to keep them for the long term.

Even acquisitions that could be counted as successes were handled in a way in which Bain Capital’s profits always came before the health of the acquired company. A profile of Bain’s handling of a medical-equipment company it bought shows all the ruthlessness, including the extracting of fat management fees to Bain, the layoffs, and the penny-pinching treatment of employees who were not laid off. The last act of Bain Capital’s ownership of the firm was to squeeze the firm's managers into using borrowed money to buy back Bain's share and much of its partners' shares. The transaction put the company so heavily in debt that it soon went into bankruptcy (although it later recovered).

The management of government has several important and fundamental differences from all of this. Government obviously does not have profit as a standard of success and failure. It doesn't have any single standard. Governmental leaders have to deal with multiple and often conflicting domestic interests, reflecting multiple constituencies. In this regard, the kind of private-sector business experience that would be most relevant is not the private-equity game in which everything is reduced to the game-player's profits but instead the management of a company that actually provides a good or service and in which managers have to deal regularly and over the long term with customers, suppliers, creditors, shareholders, local communities and other constituencies. Multiple and conflicting interests, moreover, are not just a matter of multiple constituencies. They also show up in many aspects of foreign and security policy, even if the nation as a whole is considered a single constituency.

Another difference is that a head of government cannot pick and choose which lines of business he wants to be in. He cannot buy into lines that look attractive, stay out of ones that don't, and cut losses in ones that he tried but that did not work out. The services that are demanded of government, moreover, are mostly permanent. The only thing permanent about Bain Capital's activities was Bain Capital's financial coffers.

In the face of this incongruity, the application of Romney's private-sector experience to politics takes a form that can be seen in some respects in his current campaign. Monetary profit becomes electability, measured not in dollars and cents but instead in poll numbers and votes. Winning an election and taking office becomes the equivalent of closing a deal and taking ownership of a company. In this framework, Romney's notorious flip-flopping is unsurprising. Just as temporarily owned companies are only means to the end of a private-equity artist's profits, so too are policy positions only temporary means to the end of greater electability. Here again, different private-sector experiences would have different implications. The line manager of an operating company may be deeply, even passionately committed to building the best possible widget and offering it at the lowest possible price—and in so doing not just making a fair profit but also providing a needed good or service. The private-equity artist's world is devoid of any such substantive commitment.