Justin's Political Corner

In recent weeks, Barack Obama and Mitt Romney have accused each other of being an “outsourcer in chief,” as their campaigns have tussled over Romney’s past at Bain Capital and the (non)release of his tax returns. But all this scuffling hasn’t taken into account an until-now unreported fact about Romney’s days at Bain: When he was running the private equity firm, he invested tens of millions of dollars in a pair of companies that specialized in outsourcing high-tech manufacturing and that developed offshore production facilities in Mexico, China, and elsewhere to build electronics for US firms. 

In March 1999, shortly after Romney left Bain to take over the troubled Winter Olympics in Salt Lake City, Brookside Capital Investors Inc., a Bain-related entity wholly owned by Romney, filed a report with the Securities and Exchange Commission that listed dozens of companies in which Brookside held a stake the previous quarter. The roster included investments in Singapore-based Flextronics International ($13 million) and Florida-headquartered Jabil Circuit Inc. ($41 million), two companies that were leaders in the fast-growing field of outsourcing electronics manufacturing and offshoring production to low-wage countries. Together, these two investments represented almost 10 percent of Brookside’s $559 million portfolio.

For much of the 1990s, most overseas outsourcing involved unsophisticated products like apparel. But in the second half of that decade, US high-tech companies producing computers, telecommunications equipment, and other electronics began contracting out their manufacturing to firms that had established production facilities both in the United States and in overseas locales where labor was cheap.

In the late 1990s, Flextronics built a facility in Guadalajara, Mexico, to serve its US clients, including Intel. A Wired magazine profile described the firm this way: “Incorporated in Singapore with its management offices in San Jose, Flextronics has factories worldwide. Its industrial parks, which house suppliers onsite, are concentrated in Brazil, China, Hungary, and Mexico. Workers earn from 70 cents per hour in China to $4.50 in Brazil…By manufacturing in low-cost regions, Flex can cut 75 percent of the price of labor.”

The value of outsourcing manufacturing to cheap-labor regions is a matter of debate; it’s a practice that can be beneficial for US consumers (though not workers) and bolster the competitiveness of US firms, and it might be partly inevitable in a globalized economy. But, if there’s a question over which of the two presidential candidates sought to make millions of dollars by investing in outsourcing and offshoring, there’s no debate. In the late 1990s, Romney and his Brookside Capital Investors Inc. believed it was right to bet on US and overseas firms that were capitalizing on outsourcing. Now his campaign says that was just a routine business decision—yet one with a political cost that has, as they say in the financial world, been carried over.

H/T: David Corn and Nick Baumann at Mother Jones