Yes, Jack Welch was a false prophet who worshiped at the altar of capitalism. There I’ve said it! And I feel good about that because this is exactly what I thought for many years but was afraid to say.
I just read a new book by the title, 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, that supports this theory and takes Welch’s career apart as expertly as old Neutron Jack took apart GE and left it an unsustainable disaster.
You see, Welch was an advocate of the economist Milton Friedman, who built his entire career around the idea that the only purpose of business is to make money for the shareholders. Now let’s not mix up shareholders with stakeholders. Shareholders are the owners of the company whether they be individuals or people who own shares. Stakeholders are everyone associated with the company including owners, employees, and customers.
Armed with Friedman’s false theory Welch proceeded to take GE apart, division by division, by only focusing on one thing, making money for the shareholders. And of course, Wall Street loved him. But then again Wall Street always gets it wrong, but we continue to believe in them whatever they do, right or wrong, including bailing them out when they are completely wrong. 2008 anyone?
So, I gloat. I gloat because this “Greed is Good” thinking created the 2008 fiasco, where according to our wiser economists our economy was close to collapsing.
The reason I decided to pounce on an old dead white guy, or a couple of them actually, was to point how the problems we have today are a direct result of the business theories of Neutron Jack and that other practitioner of corporate cruelty, Chainsaw Al Dunlap. Both were proclaimed super heroes of their day. Both were daily recipients of Wall Street standing ovations while they were doing their daily dastardly deeds.
To further my point here are the policies that these two “geniuses” lived by.
- The company is not a family and there is no need for work force loyalty. If employees don’t like what we are doing, then they can leave. Everyone from the best operations manager to the lowliest worker is dispensable. Employees are a dime a dozen and we’d rather keep the dime than the dozen. Welch’s first act at GE was to lay off the first of the hundreds of thousands of people who made GE one of America’s most respected companies. And Wall Street gave him that standing ovation.
- Stop investing in the future. The time for profits is now. Wall Street and our shareholders want profits now, so quit wasting money on R&D. Welch’s theory was to make money now. No updating facilities, no investing in the future. And if you wonder how that worked out, just ask his successor Jeffrey Immelt who was left holding the bag of crap that Welch left behind. And Wall Street gave Welch that standing ovation.
- Developed the cheapest supply chain possible. Move manufacturing to countries that have cheap labor and are unencumbered by pesky government and EPA regulations. And Wall Street gave him that standing ovation.
And they continued standing and applauding even after he retired. He was wined and dined and lauded as a great American who had done great things for GE and the economy. He was on the cover of every business magazine in the country. He gave classes where he taught the next generation of company leaders to follow in his destructive footsteps. And he even sunk so low as to publicly condemn his successor Immelt, who was truly the direct victim of the disastrous legacy he left behind at GE.
My big problem with all of this is how much Welch was emulated. How much he influenced other companies who followed his lead of having no respect for employees, or even customers. Companies who followed his path to cheap offshore supply chain links. Companies who beat on their American vendors (nearly to death in some cases) for the good of the shareholders. Companies who learned from him how to play fast and loose with government regulations, knowing that they were too big to reprimand and as we learned in 2008, too big to fail.
Remember Welch when you are affected by his true legacy (and we all are everyday) which has given us:
- Lack of general respect for corporate America
- A destruction of the American supply chain leading the most independent country in the world having to depend on our frenemies for, well, just about everything as Covid has taught us.
- A complete and disastrous labor shortage that will affect us for years. The employees are in charge now, right? They are the ones making the decisions now, right? It was their fathers, mothers, grandfathers, and grandmother’s that Neutron Jack and Al Chainsaw Dunlap axed by the hundreds of thousands, damaging the very fabric of their families lives for ever and making this new generation more than wary about putting their own lives in the hands of corporate America.
Thanks for the memories, Jack, yeah thanks a whole bunch.
It’s only common sense.