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Last Month's Resignation of GE CEO Harkens Back To 2008 Financial Crisis


Business  (tags: GE, CEO Immelt, resignation, americans, business, corporate, corruption, cover-up, debt, economy, ethics, government, investments, money, news, politics )

Fiona
- 713 days ago - jacobinmag.com
When General Electric CEO Jeff Immelt resigned last month, it was a sign of of the restructuring of political and economic power underway in the United States. Please note, comment, and forward.



   

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Fiona Ogilvie (562)
Saturday August 5, 2017, 6:04 pm
. His departure, and John Flannery’s arrival, reveals a lot about the new phase of financialization that has emerged from the Great Financial Crisis.

As financial markets and institutions became a more important part of the economy in recent decades, so too did they take on a larger role within corporations themselves, even ostensibly nonfinancial enterprises. This fundamental reorganization of corporate power eroded the institutional foundations of the New Deal’s so-called corporate liberalism, contributed to growing state authoritarianism, and allowed for the deepening penetration of financial markets and logics into every aspect of daily life.

Paradoxically, in the wake of the 2008 financial crisis, the state supported a further push toward consolidated financial control. As a result, a new phase of accumulation has stabilized, and finance has shockingly emerged from the crash even stronger than it was going in.

Observers widely attribute Immelt’s early retirement to pressure from a few activist investors, especially Nelson Peltz, whose Trian Fund Management had been publicly exerting pressure on GE’s management to improve performance. “Looking almost teary-eyed” in a videoconference announcing his retirement, Immelt admitted, “I always knew my name wasn’t over the door. You owned the company.” Indeed, Wall Street found his performance widely disappointing: shares fell 31 percent during his tenure, making GE the Dow’s worst performer.
 

Fiona Ogilvie (562)
Saturday August 5, 2017, 6:06 pm
But Peltz’s and Trian’s ability to play such an active role in unseating Immelt resulted from deeper shifts in American capitalism, which not only ended the era of corporate liberalism but also finally demonstrated that we cannot think of industry and finance as opposed.

The Corporate Liberalism of General Electric

At the end of World War I, a new layer of professional managers was stepping out from behind the long shadow cast by finance capitalists like J. P. Morgan. Supported by the state-led effort to organize war production, their new power laid the foundations for corporate liberalism.

Men like GE Chairman Owen Young claimed to represent a “New Capitalism,” free from the finance capitalist’s “buccaneering proclivities.” These professionals would govern firms technocratically in the best interests of all, guided by the new “managerial science.” Their new outlook called for expanding firm-level benefits such as pension programs, stock ownership plans, profit-sharing arrangements, and limited unemployment insurance.

But the 1929 stock market crash and continual strike waves proved that this model couldn’t deal with capitalism’s contradictions. Corporate liberals instead began promoting national corporatist schemes that would support industrial cartels and discipline labor, especially the National Recovery Administration.

GE President Gerard Swope was at the forefront of this group, who were brought into the state policymaking process to facilitate buy-in for state programs and aid in the crafting of policy. As head of Franklin D. Roosevelt’s Business Advisory Council, Swope worked to convince other capitalists that New Deal programs, which gave the state an enlarged role in coordinating the economy, were necessary to save the system and demobilize labor.

The development of the military-industrial complex, which wove together cutting-edge manufacturing firms, government-subsidized laboratories, and the university system, supported this combination of political and economic power.
 

Fiona Ogilvie (562)
Saturday August 5, 2017, 6:07 pm
GE executives were once again at the center of this process, especially CEO Charles Wilson. Wilson gained so much power in his role as head of the Office of Defense Mobilization in the early 1950s —which granted him unprecedented control over procurement, production, manpower, economic stabilization, and transportation issues — that the press began referring to him as the co-president.

The firm’s engineering operations were deeply embedded within this institutional framework. While universities and state-funded national labs conducted basic research, GE spun off and commodified this knowledge into new product lines. One such development was nuclear power, which had originally been developed — in collaboration with the military-industrial complex’s beating heart, the National Laboratory system — through the Manhattan Project.

Some within the state bureaucracy wanted to emulate the Japanese model of centralized administrative planning of science and technology development. However, American industrial policy became increasingly decentralized and marketized so that by the 1980s it closely resembled a venture capital operation — albeit one with a comparatively high tolerance for risk, and the ability to subsidize early stage research that may not have immediate market benefit.
 

Fiona Ogilvie (562)
Saturday August 5, 2017, 6:10 pm
The 1980 Bayh-Dole Act, which allowed patents on publicly funded research, and the Small Business Innovation Research program marked this transformation. Established in 1982, the latter required agencies with large research budgets to devote a specific — and growing — portion of their money to financing small firms and startups (Apple was one of the program’s beneficiaries.) Rather than creating a centralized industrial policy apparatus, state agencies independently financed new firms and technologies, which would then either market themselves to existing corporations or compete on their own.

GE’s reorganization into a financial group was reinforced by these broader economic and political changes. Rather than specializing in producing specific products and technologies, the firm was increasingly oriented toward buying and selling businesses, restructuring and selling off those that it deemed a drag on long-term performance. While internal corporate research and development (R&D) remained important, this was increasingly devoted to “downstream” commodification of state-developed technologies.

When Jack Welch took the reins in 1981, he decentralized the R&D operation so funding would come from specific businesses rather than central corporate planners. In just seven years, the company cut its central R&D staff by 30 percent, reflecting a shift to more “product-relevant” research activities: “We are not interested in incubating new businesses,” Welch explained.

Though Welch sold GE’s defense business (which later merged with Lockheed) to Martin Marietta in 1992, the company remained central to the increasingly marketized state-led innovation system. This was clear from the large volume of military contracts serviced by GE’s aerospace division, as well as Immelt’s investments in the “Industrial Internet of Things” and 3-D printing.

But GE’s restructuring didn’t mean that the company had given up its seat at the center of the military-industrial complex. Rather, it illustrated the changing mechanics of how this innovation system worked. What was emerging, alongside the financialization of the firm and the rising prominence of the financial sector in the economy more broadly, was a new fusion of finance, industry, and state power.

On site, read about the General Electric Financial Group.

The 1% shrinks in number, but continues to grow in wealth.
 

Peggy B (43)
Monday August 7, 2017, 7:07 am
TYFS
 

Ian Crory (31)
Monday August 7, 2017, 1:29 pm
TY :)
 

Hartson Doak (39)
Monday August 7, 2017, 2:59 pm
All I know is that after a decade of working for GR, I feel that I am being screwed on my pension, The CEO during the decade of the 70's got a 10 million dollar golden parachute after presiding over the break up of GE
I get $68/mo.
 

Janet B (0)
Monday August 7, 2017, 5:25 pm
Thanks
 

Colleen L (3)
Monday August 7, 2017, 6:19 pm
Thanks Fiona
 

Jim Ven (0)
Thursday August 10, 2017, 4:12 am
thanks for sharing.
 

Jim Ven (0)
Thursday August 10, 2017, 4:13 am
thanks for sharing.
 

Jerome S (0)
Thursday August 10, 2017, 4:45 am
thanks
 

Jerome S (0)
Thursday August 10, 2017, 4:45 am
thanks
 

Margie FOURIE (148)
Monday August 14, 2017, 11:52 pm
Thank you
 

Margie FOURIE (148)
Tuesday August 15, 2017, 2:19 am
Thanks again
 

Margie FOURIE (148)
Wednesday August 16, 2017, 12:41 am
Thanks again
 
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