Here’s a letter that I sent on July 3rd to the New York Times:
Mehrsa Baradaran’s case against “neoliberalism” and its alleged “looting” of America is long on assertions about facts but short on actual facts (“The Neoliberal Looting of America,” July 3). Indeed, she presents only three sets of numbers. Two are red herrings while the third, when put into context, is comically insignificant.
One of Prof. Baradaran’s red-herrings is private-equity executives’ fee structure and the amount of investment funds entrusted to these executives. The other red-herring is the number of banks (five) that “control” half of all bank assets. Regardless of how gargantuan these numbers are – we’re given nothing to compare them with – they say nil about how well or poorly the economy is performing.
Prof. Baradaran’s other set of numbers appears ominous: “In the last decade, private equity management has led to approximately 1.3 million job losses due to retail bankruptcies and liquidation.” But this appearance is deceptive. As reported in the pages of this very newspaper, between 2006 and 2018 “even excluding the recession months, the monthly average number of workers in the United States who lose their jobs is around 1.75 million. In a normal year, then, the number of workers laid off or dismissed averages 21 million.”
In other words, according to Prof. Baradaran, one of the singular evils of private equity is that the share of monthly job losses that it contributes to America’s great job churn is – drumroll! – 0.6 percent.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030