Private Equity v. Labor: Debate Breaks Out at Davos

A fascinating debate over the concerns of labor about private equity funds took center stage at Davos this week. The link to the webcast is here: Labor v. PE

The debate between PE fund reps and a Swiss union leader is pretty fierce and interesting. The timing was perfect for the World Economic Forum because they issued today a report led by Harvard Business School professor Josh Lerner on the impact of PE funds.

The report can be found here: WEF PE Study

It is quite long so you can find an executive summary here: WEF PE Summary

The basic finding, after a study of 27,000 deals over thirty years, is perhaps not surprising: PE funds are better for everyone more or less. But the devil is in the details. The study does admit that jobs get cut when PE funds take over companies but argues that they get replaced by new so-called greenfield jobs. Sure, but at what wage rate?? That is the key.

My own view on this is set forth in the pages of latest Dissent Magazine. The online version is not yet available but you can order an issue here: Dissent

An earlier version of the article is available on line at PE and the new capitalist order

I argue that PE firms represent an evolution in the means by which capitalism extracts value from the labor force. It does not do this by financial manipulation but by much more intense pressure on the workforce and discipline of management. PE buyouts of public companies solve the agency problem that plagues the public company. This is not good news of course for labor and so it will be important for them to respond to the Lerner/WEF study.