What are the biggest private sector employers in America today? If you toss that question to most voters or politicians they would probably point to some iconic corporate names: Walmart, say, General Electric, IBM or Citigroup.
But according to Michael Milken, the junk-bond-king-turned-philanthropist, the answers are mostly wrong. This week Mr Milken delivered a speech at the annual conference that bears his name, and produced a list of America’s top 10 private sector employers.
Walmart tops this list. But the next eight - yes eight - largest employers, according to Milken data, are private equity groups. And while Mr Milken refrained from identifying these anonymous entities, it is not hard to guess who they might be.
Carlyle and KKR, for example, are each estimated to employ about 700,000 people in their portfolio companies, which probably ranks them just below Walmart. Blackstone has “around 600,000” employees, as Steve Schwarzman, its founder, told the Milken event. Apollo, another private equity group, has 300,000 workers in its portfolio companies, and Warburg Pincus, General Atlantic and TPG are only slightly smaller. Lobby groups estimate that private equity firms now employ 11m people inside America (the data are not very transparent).
By any standards, these numbers are startling. After all, when politicians or voters talk about “capitalism” today, they usually present this in terms of stock markets, corporate earnings reports and mom and pop investors. But, as Mr Milken’s table shows, this image is outdated: American capitalism is also a place where listed companies increasingly move into private hands, exchange traded funds dominate stock market flows and family-owned offices and other asset managers channel money into all manner of private deals. If nothing else, it suggests that politics - and media - should update its image of market economics.
It also raises a bigger question: is it time for voters and politicians to demand that private equity groups come out of the shadows and contribute more to public policy debates. Until now, they have generally refused to do so. That is partly because of a secretive culture, but also due to their ruthless focus on efficiency and profit; these are entities better known for cutting jobs, not talking about social cohesion.
But even the most tone-deaf financier can sense the mood in America is changing: the White House has a president in Donald Trump who is obsessed with the goal of creating jobs.
Listed companies are already scrambling to respond. This week Infosys, the Indian technology group, announced plans to employ 10,000 more tech specialists in America. Walmart is running advertisements extolling its American suppliers. Companies such as IBM, Siemens and Dow Chemical are promoting new forms of job creation and training.
The jobs theme is now so dominant that it shapes much of the policy debate. “We have stagnant growth and stagnant middle-class incomes . . . collectively we as leaders have to do something about it,” says Jamie Dimon, chief executive of JPMorgan. “We want to help.”
But thus far, private equity behemoths have been notably quiet. Mr Schwarzman runs the president’s business council; but Blackstone is not running any Walmart-style advertisements about its creation of American jobs. Nor are groups such as KKR, Carlyle or Apollo championing new nationwide training and education schemes.
Maybe this will change. After all, some private equity luminaries now appear - belatedly - to recognise that their formidable size makes it harder to shun the limelight. Jonathan Sokoloff, from Leonard Green & Partners, admits that “our industry still has a lousy reputation” - and calls for “some better PR”. Meanwhile, Mr Schwarzman says that it was high time that people stopped viewing private equity as “marginal in terms of [its] contribution to society . . . If you had 600,000 employees, you might be a company - a responsible company,” he observes. “We are a responsible company.”
Perhaps so. But getting involved in these debates about job creation, inequality and social cohesion will not sit easily with the cultural DNA of private equity, least of all at a time when the sector faces intense competitive pressures. So perhaps Mr Milken ought to send his list to Mr Trump. It might show the president that there is more to the American economy - and workforce - than the listed corporate titans he likes to tweet about.
