Sunday, June 5, 2022

A book argues that Jack Welch's tenure at GE catalyzed the transformation of 'good' capitalism into the bloated monster it is today. Reviewer says it's a hit job.

Kurt Anderson, How Jack Welch Revolutionized the American Economy, NYTimes, June 2, 2022. Anderson reviews THE MAN WHO BROKE CAPITALISM: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America — and How to Undo His Legacy, by David Gelles.

David Gelles describes unbroken capitalism’s exemplary big companies in the 20th century that treated employees fairly and focused on long-term growth — such as G.E. After the New Deal and the enormous unionization it enabled, economic fairness increased significantly along with prosperity in the United States, as “corporations, workers and the government enjoyed a relatively harmonious equilibrium,” and “worker pay grew in tandem with worker productivity.” With a “steady rise in earnings” through 1980, G.E. was “more profitable than all but nine other companies in the Fortune 500.” And its chief executive immediately preceding Welch earned the equivalent of $743,000 a year, just “12 or 13 times what new management recruits to the company took home” and a mere 5 percent of what the median big-company C.E.O. is paid these days.

In the 1980s, as American culture and politics were suddenly celebrating money and robber-baronism with a new go-go giddiness, [...]] By means of all-out “downsizing, deal making and financialization,” [Welch] became “the personification of American, alpha-male capitalism.”

As he explained to The Harvard Business Review back then, “G.E. has had an implicit psychological contract based on perceived lifetime employment,” which produced a “fuzzy kind of loyalty” — sentimental humbug to Welch. He “instituted a series of mass layoffs,” and enthusiastically industrialized even this process by rating every employee and then each year firing the lowest-rated 10 percent.

As a maniacal deal maker, Welch oversaw the acquisition, on average, of one $130 million company every week for 20 years, and sold off a business every two weeks. And, man, did he financialize, instead of inventing or producing better products pleasing Wall Street and increasing G.E.’s stock price, period. This was the one area in which he made sure G.E. continued innovating — by reducing costs with his “rank-and-yank” regime, and turning G.E. into “essentially a giant, unregulated bank” that used more and more of its profits to buy up its own stock.


But while Gelles’s basic takes are all correct, they’re also relentlessly basic, in the new, pejorative sense: unsurprising, unoriginal, conventional wisdom conventionally expressed, passable in thousand-word pieces of journalism but not at book length. All his clichéd and colorful prose bits — “empires of yore,” “risible assertion,” “gilded lifestyle,” “helicopter pilot with supermodel looks,” “pinstriped conquistador with the spoils to prove it” — might be forgivable if accompanied by fresh ideas or by deep, revelatory reporting.

Final paragraph:

After 200 pages of a lot of ham-handed critique, Gelles devotes most of his last 30 to a fairly ham-handed celebration of the chief executives of Unilever and Paypal and the other “lonely voices in the business world” — in particular the founder of the billionaire-convening World Economic Forum in Davos — who “call for a more holistic approach to capitalism.” He finishes with boilerplate progressive prescriptions: “renounce the toxic myths that allowed our current system to become so horribly imbalanced,” improve pay and benefits, “make a habit of distributing profits” to workers, enact higher taxes on big business and “a wealth tax on the very richest” individuals. Yes, absolutely, great — but Gelles doesn’t begin to suggest how or if any of those reforms might come to pass, because nowhere has he closely examined the entrenched and powerful political foundations of the system his book is about.

Sounds to me like Gelles has made Welch a scapegoat for changes in corporate culture that he doesn't like, but doesn't understand, much less have a clue about how to change things for the better.

1 comment:

  1. Sounds like Welch established his prominence concurrently with the dramatic changes the insurance industry started wielding in medical care. He secured the template of the aggressive CEO whose responsibility for the "greater good" was radically transformed into a financial focus that further divided the haves and have nots affecting many layers of peoples' needs and wants.