The goal of business enterprises is to generate profit, not to create jobs.
Liberal pundits seem surprised every time they rediscover this fact, which is basic to our economic system.
The latest ripple of excitement came last week when a 1985 Bain Capital promotional videotape was released in which Mitt Romney explained that one of Bain's goals when investing in companies was to "harvest them at significant profit."
As head of Bain, Romney had a fiduciary duty to investors to maximize profits. Not only is job creation not a part of this duty, it often is inconsistent with it. Labor costs represent the largest operational cost in many businesses, so the maximization of profit often requires layoffs.
A minor problem with the belief that job creation is a goal of businesses is that it is unfair to Romney. Unless he violated laws or ethical standards, the fact that Romney was successful at maximizing profit does not disqualify him from the presidency. His success merely highlights the fact that the goals of a president are not the same as the goals of an entrepreneur.
The greater problem with the misconception about the purpose of corporations in our economic system is that it prevents people from recognizing the legitimate governmental role in regulating business.
Capitalism is unmatched in its efficiency at allocating resources, but America always has recognized that businesses require some level of governmental oversight.
The importance of such oversight is well known to Alabamians. Poorly enforced regulations contributed to the 2011 oil spill that damaged the Gulf Coast. Building codes played a central role in the extent of protection people had when tornadoes struck. Like the rest of the nation, Alabama is suffering from economic upheaval that resulted — in part — from deregulation of the banking industry.
The balance the government should seek is enough regulatory control to make sure our economic system benefits the people, without so much oversight that the system loses the efficiencies and incentives that allow it to function.
While the people depend on an efficient economic system, they also need protection from a profit motive that, when unrestrained, routinely sacrifices the public interest for that of the shareholder.
Government's delicate role — one that requires a wise president — is to facilitate capitalism enough for America to enjoy its benefits, while restraining it when the social cost of corporate success is too high.
Blaming Romney for his success in an economic system that generally benefits U.S. citizens makes no sense. The legitimate question is whether the candidates can find a balance that permits capitalism to flourish in a way that benefits the voters and consumers who sustain it.
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