Here’s a letter to the New York Times:
Explaining how (non-cronyfied) financial institutions raise living standards by promoting economic efficiency, David Brooks writes “Private equity firms are not lovable, but they forced a renaissance that revived American capitalism” (“How Change Happens,” May 22).
A better description is that Bain Capital and other private equity firms facilitated and expedited (rather than “forced”) a revival of American capitalism. What ultimately forces the growth-promoting efficiencies that private equity firms facilitate and expedite are consumers. They do so by refusing to purchase goods and services from inefficient suppliers. Were consumers indifferent to the prices they pay and to the product quality they receive, inefficient producers would be just as profitable as efficient ones. Private-equity investors could not then profit by buying and revitalizing inefficient firms.
So if politicians and pundits really wish to excoriate those responsible for shutting down hopelessly inefficient producers and for forcing others to operate more efficiently, they should blame consumers. These pols and pundits should demonize the likes of families and small businesses that greedily seek to get as much as possible in return for each dollar they spend.
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030