October 2, 2022

Economix: C.E.O. of the U.S.A., Part 2

A couple of months ago I observed that many of the Republican presidential contenders were emphasizing their business experience as an asset for turning the economy around. In many ways, though, being chief executive of a company is very different from being chief executive of the United States.

Especially when it comes to jobs.



Dollars to doughnuts.

Corporate executives want to minimize labor costs, just as they want to minimize the costs of all their production inputs. They also do not hire people because they want to put more people to work; they hire people only if doing so helps the company make more money. That’s what capitalism is about. This is not quite the case with presidents, who want to maximize employment and raise wages (albeit hopefully in an efficient, sustainable arrangement).

This disconnect between corporate and macroeconomic policy goals came up when President Obama asked Jeffrey Immelt, the chief executive of General Electric, to head his jobs council.  And Bloomberg had a smart piece today about how Mr. Romney, a Republican presidential candidate, must now grapple with these same issues.

Mr. Romney is currently promoting his business experience at Bain Capital as a credential for managing the economy and accelerating job growth, but he must square that message with his record as a private equity executive. In that role, part of his job was to buy companies and trim their payrolls:

At Dade Behring Inc., a medical-testing company based in Deerfield, Illinois, Bain cut at least 1,600 jobs during a series of acquisitions before the firm entered into bankruptcy in 2002. Romney foreshadowed those cuts in a speech to employees shortly after Bain acquired the firm.

DDi Corp., an electronics company in Anaheim, California, filed for bankruptcy in 2003 after Bain sold shares in the company generating at least $85.5 million and billed $10 million in management fees.

GS Industries Inc., a steel company in Charlotte, North Carolina, filed for bankruptcy in 2001 after workers said a chief executive hired under Bain made missteps, including installing managers who lacked industry expertise, former employees said.

Employees who lost jobs at Bain-controlled companies more than a decade ago say they still hold Romney responsible.

“I would not vote for him for anything,” said Phyllis Detro, 68, who lost her job at a Bain-owned office paper products factory in Marion, Indiana, closed in 1995. “I’d like to see the jobs that he’s created. He has taken away jobs.”

Of course, making an economy run more efficiently — just like making a company run more efficiently — is a good thing in the long run.

But when jobs are shed to make an entire economy more efficient, those laid-off workers must be reallocated elsewhere to keep the economy strong. Companies generally don’t have to worry about finding new jobs or lifelines for the workers they’ve cast off.

Article source: http://feeds.nytimes.com/click.phdo?i=4747f1c08e3b9bcac23101ceecf8d5b7

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