Ouch. Romney really didn’t need this at a time when his background at Bain Capital – something he hoped would be an asset in his presidential run – is steadily becoming a liability. It seems that workers at a Bain-owned plant that manufactures sensors for the automotive industry in Illinois have signed a petition asking Romney to use his influence at Bain to stop the plant from being moved to China. (Bain owns a controlling share of Sensata, the company that owns the plant.)
In all fairness to Romney, he had no role in these moves, which all took place after he left Bain. The problem is that this is exactly how capitalism, lacking any trade boundaries, works. Romney can’t deny that any more than he can deny that that’s how it worked while he was at Bain. As much as Romney would like to deny it, the fact is that venture capitalists have been net job destroyers in America for a long time.
That’s how trade between two nations grossly disparate in population density work. When American companies, disgruntled with their mature market of 300 million consumers at home, were suddenly presented with a virgin, untapped market of 1.2 billion consumers in China, they rushed in to build plants there to supply that market. But, once there, while that market was still in its infancy, they needed to immediately start selling those products. What better market to dump them on than the one with the hungriest consumers – America? Now their American plants – already operating on thin margins and dependent on maintaining their high sales volume, were faced with a massive increase in competition. They were almost instantly forced to close. In a free trade world lacking boundaries to prevent the inescapable trade imbalances driven by population density disparities, that’s how capitalism works. It’s painfully obvious to most Americans. As much as Romney may want to deny it, such denials are coming across as disingenuous at best.
Some of the specifics here are interesting.
Sensata was created in 2006 when Bain bought Texas Instruments Inc.’s sensors and controls business. The company now employs 11,400 people worldwide. Almost all of its products are manufactured outside the United States, in countries such as Mexico, China, Bulgaria and Malaysia.
Mexico, China, Bulgaria and Malaysia. What do you think is the per capita consumption of Texas Instruments products in those countries compared to the U.S.? A very small fraction. And what is the population density of those countries compared to the U.S.? 2X, 4X, 2X and 3X the density in the U.S. respectively. Combined, their population density is close to 4X since the other three are dwarfed in size by China. They come to the trade table with vast, idle labor forces, looking for jobs, but with virtually no market to offer in return. Is it any wonder that manufacturing jobs are disappearing?
If there’s any benefit to be derived from this election campaign, it will be the erosion of economic myths – the shining of light into the dark room where we’ve all been treated like mushrooms – kept in the dark and fed a bunch of B.S.