Two Cheers for Vulture Capitalists

An economist friend of mine made the point that being called a vulture capitalist is not an insult, but a compliment. He began his lecture, “What does a vulture do? They eat and clean the carcasses, thus reducing the chances of diseases spreading through nature.” After taking a sip of coffee, he then continued, “Look, what venture capitalists do is reallocate resources from dying or dead companies to those who still have a chance to survive. Yes, a venture capitalist may choose to cut jobs in a company, but if a particular company is in trouble, the venture capitalist will transfer resources from the least efficient part of a company to the more productive portion in an effort save the company.”

My friend then diagnosed the problem with the Romney campaign when he noted, “If you want to know the weakness of the Romney campaign, just look how he can’t defend what he does for a living. The best defense of his previous job has been done by others like the Wall Street Journal piece noting how Bain and other venture capitalists were part of the successes of the 1980’s. Romney is being propped up by his surrogates but he has to defend himself or else, he will lose.”

My friend concluded, “If someone called me a vulture capitalist, I would turn it on them. I will simply point out the importance of the vulture in nature by cleaning the carcass and keeping disease from destroying nature and other animals. The vulture capitalist allows the market to function and allow resources flow where they are needed. The final result is job creation.”

I must admit, I never thought of the vulture in that way, but yes, he was right for the vulture does an important service in nature. The venture capitalist is essential to keeping capital flowing where it is needed the most. If the venture capitalist did not exist, many a dying companies will continue to suck capital and keeping needed capital from up and coming businesses. Bain and other companies allowed the United States to prosper and we are now witnessing what happens to an economy when businessmen are vilified and capital is being moved not to where it is needed, but to where the politically connected can direct capital. This brings us to Mitt Romney. Romney has shown a reluctance to be bold since he is afraid due to his wealth; he would be criticized to be pimping for the rich. Romney is losing his grip on the Republican nomination simply because he is having problem in defending in what he did for a living. At a time when even some within the Republican ranks are deserting free market principles in attacking Bain and Romney, Romney has been hesitant or unwilling to do a major defense of his former job. This is also shown in his defense of his tax return.

Romney is presently paying a lower rate since he is living off his investment but throughout much of his life, he paid a higher rate so why should he be embarrassed by living off his investment, for did he not spend a lifetime earning that rate? No one ever criticized John Kerry for being rich when he ran for the Presidency in 2004. There is one big difference between John Kerry and Mitt Romney, Kerry married into wealth and Romney actually earned his. But if Romney can’t defend being a vulture capitalist, then he won’t win and nor will he be deserving of being nominated.

 

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