Running a Business Doesn’t Qualify You to Run an Economy

There has been a lot of discussion about the new Obama ad, “Steel”, attacking Mitt Romney’s tenure at Bain Capital. The ad portrays Romney as a heartless capitalist pig who destroyed lives and killed jobs.  Republicans have criticized the President for the ad claiming he doesn’t understand capitalism. They de-legitimize it by saying for every negative story about Bain there is a positive one as well.  Meanwhile Democrats view the ad as highlighting the problems of capitalism.  Although I have written before about the pros and cons of capitalism I think this is a completely separate issue. I think both sides are wrong.  The ad is not about capitalism.  However, the ad is effective and legitimate for another reason.

Romney’s whole message is that he knows how to create jobs. He’s the businessman candidate who is going to take his business world experience and translate that into running the government and the economy.  Here’s the problem, (and here’s why the ad is effective) running a business and running an economy is completely different.   Successfully running a business means finding ways to cut costs, and increase profits.  Successfully running an economy means achieving full employment with consistent GDP growth. Cutting costs doesn’t lead to full employment though; it actually leads to the opposite. When Republican governors across the country came into office and decided to run the government like a business and reduce spending (cut costs) we ended up with massive lay-offs of teachers, police officers, and firefighters – not good for a struggling economy.

Similarly Bain cut costs but did so at the expense of the employees.  And although Bain had success stories, the job creation was just a product of making the business more efficient and cost-effective. Running a business is not about job creation it is about the bottom-line, which is fine, it’s just not ideal for an economy, especially one with high unemployment. The point is that many of the practices of a successful business would be detrimental if they were carried over to an economy, like that of cutting costs to boost growth.

So the takeaway from the ad is not that capitalism is bad, or Romney is some fat-cat.  The takeaway is that being a business person, and owning and operating a business does not qualify a person to run an economy. Running an economy and running a business are categorically different. Trying to run an economy like a business is not only misguided, but irresponsible.


4 thoughts on “Running a Business Doesn’t Qualify You to Run an Economy

  1. So you are claiming that Romney isn’t qualified to be President.

    Lets go back 4 years to 2008. This country elected a one term Senator with no experience running anything. All he had was pre-conceived ideas about how this country is evil. He set out to demonize successful people and businesses in an effort to divide this country thru class-warfare. What happened to Hope and Change. Now he can’t evern run on his economic record. He has to distract us with things like Contraction and Gay Marriage.

    Following your logic – Romney is much more qualified then Obama. At least he ran a State.

    • The point of the post was not to disqualify or demonize Romney, but rather illustrate the difference between a business and the economy. I used Romney because although he was governor he rarely talks about his tenure as governor. He consistently claims that it is his business record that qualifies him to be president.

  2. You said “Bain had success stories, the job creation was just a product of making the business more efficient and cost-effective”. I guess being more efficient and cost effective should not be a goal of the government. I guess the goal of the governement is to be less effective so it can hire more government workers. Outside of police, firefighters, teachers and the military, it sounds like you support make work programs to keep people on the government payroll.

    You can cut government spending and grow GDP. Allow the private sector the room to grow without excessive taxation (to pay the blouted government workers) which reduces the incentive to invest in the U.S. Grow the private sector not the government. Growing the government is not sustainable. Look at our out of control debt.

    Still waiting for the Dem controled senate to propose their budget to solve our fiscal issues. Oh that is right – their plan is to let the GOP (Paul Ryan) propose a budget that tries to address our issues – then just say how the GOP wants to gut the middle class and poor. How about proposing a plan to get more people out of the poor house instead of increasing the number of people who are dependent on the government. The Dem’s love more people dependent on the Government so they can get votes. The GOP want everyone independent by creating opportunities for all.

    Interesting year coming up.

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