Newt and Co. abandon their principles to pile on Romney

Mitt's GOP rivals are pouncing on his record at leveraged-buyout firm Bain. But Bain's creative destruction is a key tenet of conservative economics

Over the last few months, we've grown accustomed to people on the Left attacking capitalism in Occupy camps across the nation. Proclaiming themselves "the 99 percent," these protesters seize public land — and in some cases, private land — to pitch tents and shout about the inequities of government bailouts and Wall Street "fat cats." For a while, Occupiers became quite a fad.

Who knew that Republican presidential candidates would be joining them? In New Hampshire this week, Newt Gingrich led fresh attacks on Mitt Romney's past Wall Street experience with Bain Capital, a firm that used leveraged buyouts to take control of struggling companies. Gingrich was soon joined by fellow GOP presidential aspirants Jon Huntsman and Rick Perry, all of whom accused Romney of being a Gordon Gekko-style corporate raider that profited by destroying jobs, rolling in dough while average Americans suffered.

If Republicans can't stand for conservative principles among themselves, what confidence can we have that they will stand for them in a general election, or in office?

At the center of this attack is a new 27-minute film (being promoted by a super PAC that supports Gingrich) about Romney's experience at Bain. The film will get distribution thanks in large part to a $5 million contribution from Gingrich supporter Sheldon Adelson, who is active in conservative causes. Adelson owns the Venetian/Palazzo casino, entertainment, and retail complex in Las Vegas, the only non-union shop on the Strip. (Full disclosure: Last year, I stayed at the Venetian at no cost at the request of the casino while covering a Salute the Troops weekend that honored and entertained wounded combat veterans.)

This funding is rather ironic considering the attack on Bain, and by extension, capitalism. Bain's business was and is, essentially, gambling on businesses. Romney and other speculative capital firms like Bain sought out struggling companies that showed promise of future growth, and placed very large, significant bets on their future by buying them outright or purchasing a controlling interest,  to restructure them for survival. That process will often result in downsizing to generate more efficiency and a more competitive organization.

This process — generally referred to as creative destruction, a term coined by economist Joseph Schumpeter — is not painless. It's also not limited to private-equity buyouts, but happens whenever one company buys another, as anyone who has survived, or more to the point, not survived, a merger or acquisition knows. One of the first strategies employed is the elimination of duplicate functions, which usually results in lost jobs, and the defunding of profitless efforts, which also results in job losses. That's especially true if the purchase involves bond sales, which are loans provided by investors in the business. The larger the sale, the more pressure there is to increase efficiency to meet debt payments and provide investors a healthy return.

None of this, by the way, is terribly esoteric. This is a basic process in capitalism — the use and redistribution of capital to the most efficient uses.  When done properly, the result is stronger, more efficient companies, more secure employment, and profit that can get invested in other ventures to create even more jobs. When done poorly, investors lose their shirts and more jobs get lost. When not done at all, struggling companies fail — and those jobs still get lost, while assets in personnel and infrastructure go to waste, and less capital exists to invest in other startups.