Governing and Creative Destruction

January 12, 2012
Posted by Jay Livingston

Mitt Romney’s work at Bain was basically “creative destruction” – capitalism, rational and ruthless, making money by reforming or trashing businesses.* No Bain, no gain.  Romney emphasizes the creative part; his critics emphasize the destruction.  But is any of this relevant to the Presidency? 

Nearly a year ago, I expressed my skepticism (here) about business executives’ claims that their business skills would transfer to their government work.  I contrasted these claims with this more realistic self-assessment by a former pimp, who, in an interview with Sudhir Vankatesh,  was asked how his skills in that job might transfer to legitimate work.

You learn one thing [as a pimp]:  For a good blow job, a man will do just about anything. What can I do with that knowledge? I have no idea.

 Will Wilkinson at The Economist blog asks the skills-transfer question about Romney.

Even if Mr Romney's firm did in the end create more jobs than it killed by increasing the allocative efficiency of the market, what does this have to do with the tasks facing a president?

Wilkinson’s answer is Yes.  He quotes Pascal-Emmanuel Gobry**  to the effect that what a president does “is also very similar to what a private equity investor does in a buyout: analyze the business, decide on a strategy and hire, retain (and fire) managers.”

This seems a bit of a stretch.  Look at Obama’s difficulties in putting his policies (analyses and strategies) into effect.  Even in his hiring of managers (i.e., making appointments), Congress has thwarted him.

George W. Bush ran for president touting his own business credentials and, once in office, styled himself “the CEO president.” Unlike Obama today, Bush had the benefit of a co-operative Congress.  But the outcomes of the CEO presidency don’t seem to have been so wonderful.   The last president before Bush to have been successful in business was the wealthy peanut farmer Jimmy Carter.

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*Those corporations, presumably, were people too, my friend.  But capitalist efficiency and profits required that friends be fired and businesses bankrupted, while Bain made out like bandits.

** Gobry is not exactly Romney’s biggest fan – “a fundamentally dishonest liar with obvious contempt for his fellow citizens.”

UPDATE Jan. 13.  Paul Krugman in today’s Times (here) draws a conclusion similar to mine though for a different reason:  business strategies that are good for company profits are far different from economic policies that will be good for a country.  :

Making good economic policy isn’t at all like maximizing corporate profits. And businessmen — even great businessmen — do not, in general, have any special insights into what it takes to achieve economic recovery. 

Krugman also skips over Bush and Carter as businessman-presidents.  

the last businessman to live in the White House was a guy named Herbert Hoover.