Mitt Romney, Bain Capital, Staples, and job creation

While it is true that during this presidential election year I have not gotten particularly political in my blog posts, it is not something that I have purposely avoided. My intention for this blog is to post my thoughts on various subjects that I think about and consider insufficiently discussed in the media or in our general public discourse.

That being said, I have watched as the presidential campaigns have made points that favor their positions and accomplishments and have made points that call into question those put forth by their opponent. One particular point that I have not seen questioned in the way that I have considered it is the allegation that Mr. Romney has “created jobs” by virtue of the Bain Capital involvement with Staples. Well, I question it. I believe the reality of the job creation of Staples is misrepresented.

Staples has certainly created a large number of jobs....for Staples employees. In doing so, I believe that a larger number of jobs have been lost by those companies that Staples drove out of the marketplace.

It may be argued that Staples has improved the “productivity” of that sector of the market, and that may be true. But, that type of productivity is part of what I refer to as the “Walmartification” of our economy. Walmartification is the replacement of huge numbers of small businesses with large, multinational corporations that feed on American's obsession with low prices. Not that low prices are a bad thing, but low prices leveraged by the demands of these large corporations over its suppliers to force lower and lower prices are detrimental in a number of ways.

These low price demands degrade the quality of products and force outsourcing of production jobs to low wage markets, which most often means China. We have seen the quality of many, if not most, products decline in the face of these demands. Product longevity is disastrously low. Americans in their lust for low prices, seem content to have this be the case using the justification that the replacement cost for junk products is low. Of course that low price (low quality) is what created the need for replacement in the first place.

So, when Staples comes to town, small office supply stores that provided goods and services to small businesses are priced out of existence by the heavy hand of corporate competition based on these low price models. These local office supply stores, electronics stores, furniture stores, and others that are put out of business are creating job losses that are not put into the calculation of how many jobs are created/lost by the success of Staples. Meanwhile, the quality and longevity of the products declines creating waste that our planet cannot afford.

Another significant effect of Walmartification is the trajectory of the “money trail”. Prior to the “big boxification” of the office supply business, profits in this market were going to the owners of small office supply stores. In the Staples model, corporate profits go to the investors. Local money no longer remains local. Other small businesses which have become Staples customers, save a bit of money on cheaper office goods, so they think it is a good thing. But, there are less small businesses in the community by virtue of the loss of local office supply stores and others driven out by big box competition.

Improved “productivity” is a good thing when measured by the goal of out-competing your rivals. But, it is questionable as a source of net job creation. When more and more production is possible by less and less people, less people are employed as a result. Concurrently, the financial benefits of that increased productivity are shared by fewer and fewer people. This results in a redistribution of wealth towards the top, meaning the investor class. So our collective affinity and demand for low prices creates a downward spiral of prices, quality and employment, while the money trail leads more and more to the wealthy, creating more and more need for low prices for everyone else, leading to a continued downward spiral......

Real job creation is not accomplished by winning market share in an existing market.  Real job creation is creating jobs that provide new goods and services to a willing marketplace that were not being provided before that job creation.

The take-away for this post is that one should consider the realities of Mr. Romney's claims of job creation using Staples as his prime example when that job creation is based on one company's success in creating jobs for that particular company, and that that claim does not necessarily mean that the net effect on jobs, and the quality of products in the marketplace are positive.  So, do you believe Romney's claims that he knows how to create jobs?  Do you think he has created jobs?  Does his model for job creation seem like a good thing to you?