pairagraph.com/dialogue/755e3b11feb44c4cb951893cb3f70b2f/2
Lonsdale: "If someone calls for the end of private equity, they are basically saying that there should be no competition for the big banks and pension funds that hold almost all of today’s capital. Far from an all-powerful behemoth, private equity today represents an important corrective to more centralized investors on the American scene.
Matt [Stoller] cites a handful of cases, without numbers or evidence, where he says private equity has wrecked an industry, or “looted” it. Yet there are a wealth of studies, including one that looked at over 35,000 manufacturing plants, which have showed that private equity buyouts cause substantial increases in productivity. And few would deny that the U.S. venture capital industry, which still has over 50% of the global market, is one reason the U.S. creates the world’s most successful companies, such as Amazon, Google, and Apple.
Private equity also can’t be blamed for “monopolization,” since concentration has actually decreased in recent years. The Fortune 500 firms have a lower percent of all workers and profits than they did back in 1980. And private equity helps explain why Fortune’s list only has 20% of the same companies as in 1960. Private equity helps create a dynamic economy with real turnover and competition, not stasis.
Matt somehow manages to blame the small private equity industry for recent declines in productivity and even life expectancy. Yet America experienced a doubling in productivity growth between 1995 and 2005, just as the private equity industry took off. And although the financial crisis put a damper on that growth, private equity neither caused the collapse nor received the federal bailouts that big banks and corporations got. I think the decline in life expectancy since 2015, as the economy grew, can hardly be laid at the feet of a few private equity investors.
In sum, private equity is a small but essential part of today’s capital market. It counteracts the tendencies of concentrated and run-prone banks with stable and nimble funding for new ideas. As a nation, we should be excited about the prospects for this industry."
Submitted October 25, 2020 at 07:32PM by Odd_Paleontologist80 https://ift.tt/31EKSyA
