Ross Douthat wrote about "The Benefits of Bain Capitalism" in yesterday's NY Times. He noted that:
... In the decades after World War II, the United States economy was highly regulated, highly taxed and highly successful. War, tyranny and ideological mania had devastated our competitors, and while Asia stagnated and Europe struggled to rebuild, America grew and grew and grew. It was a golden age for the liberal model of political economy, with a powerful regulatory state presiding over labor-management cooperation and a steadily expanding middle class.
But like all golden ages it passed. First in Europe and then in Asia, competitors emerged to challenge the United States’ economic dominance. In this new landscape, the pillars of the postwar economic order began to look like liabilities. Our heavily unionized industries seemed sclerotic, our regulatory system stifling, our tax rates punitive. And so American policy makers, C.E.O.’s and investors responded by changing their priorities — privileging growth over security, efficiency over equality, and embracing creative destruction on a scale that would have been unthinkable in the America of 1955. ...
... But keeping America’s edge came at a cost. Our economy became more efficient, but also more ruthless and Darwinian. Our G.D.P. kept rising, but the new wealth was less evenly distributed. The revolution delivered growth, but at the expense of stability and certainty. And for many Americans, even the “modest net impact” of private equity buyouts cost them a solid, good-paying job.
On the left, and now apparently in Newt Gingrich’s campaign shop, there’s a persistent suggestion that it could have been entirely otherwise — that the midcentury model could have somehow been sustained, that the private equity “vultures” could have been held at bay, and that what worked for the United States when Europe was in ruins and half the world was Marxist-Leninist could have worked in the age of globalization as well.
This is a fantasy, unfortunately — one that belongs to the world of Hollywood endings, where Gordon Gekko is defeated, Blue Star Airlines stays in business and Bud Fox’s dad gets to retire with a solid pension. Indeed, it’s such a fantasy that even Oliver Stone didn’t quite believe in it: In “Wall Street,” Blue Star was saved from Gekko’s clutches — and presumably, from the real-life fate of an Eastern Airlines or a Pan Am — not by a government subsidy or a benevolent Daddy Warbucks, but by a rival buyout specialist. ...Economists love competition for all the obvious reasons. Consumers benefit (in terms of prices, quality and choice) as they should. What Douthat does not mention is that not only did American cars get better, but so did the imports. Many had to withdraw from the North American market and re-tool. Huyndai and Kia are recent examples; Nissan was an earlier example. Some never returned. Remember Simca and Saab?
There are ways to create jobs that do not create wealth. But that is not sustainable.
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