We, the People, call Dvid Gelles to testify on “How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America and How to Undo His Legacy”
Gelles: “..there is one CEO above all others..revered as a cultural and economic hero in his own time..who radically transformed the world around him and continues to hold sway even after his demise, who seized on changes in the zeitgeist and used them to rewrite..rules of our economy: Jack Welch.”
Gelles: “There is capitalism in America before Jack Welch, and after him…Look at..trend lines for any number of key economic indicators – wages, merger and acquisitions, manufacturing jobs, union representation, executive compensation, corporate tax rates – and its clear..right around 1981, the year Welch took over, things started to go off the rails.”
Gelles; “American manufacturing jobs peaked at nearly 20 million..nearly a quarter of full-time employment. [Then}.. he began his merciless campaign of cost-cutting and outsourcing.. Today [2022], there are roughly half as many manufacturing jobs in the United States as there were in 1980.”
Gelles: “Mergers and acquisitions Were relative rarities..acts of unusual corporate ambition or desperation. In 1980, the value of all..corporate deals in the United States amounted to a few tens of billions..Welch changed..that…that figure doubled and doubled again during the early years of Welch’s reign. By the end of his tenure, the value of mergers and acquisitions topped $1.5 trillion annually..”
Gelles: “..Welch’s lawyers did their best to pay the Internal Revenue Service the absolute minimum necessary..the share of taxes U.S. corporations paid..government steadily fell. When Welch became CEO, the effective tax rate on capital income was 46%. Twenty years later..35%..Today it is just 21%.”
Gelles: “Wealth grew more concentrated during his reign. Before Welch, Corporate profits were largely reinvested in the company or paid..to workers rather than sent back to stock owners…By the time o Welch’s retirement, a much greater share of corporate profits was going to investors and management..”
Gelles: “..Welch’s outsize pay packages helped usher in an era of runaway executive compensation that has steadily taken wealth out of the hands of workers..In 1980..average pay for a CEO of one on..top American companies was $1.85 million. In 2000, it was $21.5 million…CEO compensation has grown..940% since 1978…the average worker’s wage has increased..12%..”
Gelles: Welch’s star remained largely undimmed after he left GE..his opinion continued to hold great sway..he disparaged organized labor..he extolled mass layoffs..it amounted to a 20-year campaign to make his warped vision of capitalism the norm.. ahis extreme practices became commonplace. The myth..Welch’s way of doing business lived on..his influence reshaped the economy, eroding this country’s middle class, sowing distrust in once revered institutions, chipping away at the tax base, and exacerbating inequality.
“The empty factories, hollowed-out cities..unemployed workers – all lorded over by a wealthy ruling class – have contributed much to the broad sense of disenfranchisement afflicting so much of the country..”
Gelles: For..fifty years before Welch took over, corporations, workers..government enjoyed a relatively harmonious. equilibrium. Most companies paid decent wages, employees put in their time, just about everyone paid their taxes, regulations were accepted as necessary safeguards..government invested in things like education and infrastructure. It wasn’t perfect..but..worked well for much of the 20th century, giving rise to a diverse, thriving economy and a prosperous middle class.”
Gelles: “Then in the 1970s, the established order came under attack. A cadre of economists including Milton Friedman reimagined the purpose of the corporation and its role in society, laying..philosophical groundwork for an upending of the economic order. In their view, companies ought to maximize profits for shareholders at any cost, markets should be free, governments should stay out of the way, and the rest of society ought to take care of itself..anathema to the postwar balance..”
Gelles: “Welch decided to take GE – the epitome of..benevolent postwar employer – in a sharp new direction. He embraced..strategies promulgated by..economic revolutionaries on the right, devised his own mercenary twists, and refashioned GE from the inside out>
“Welch employed three main tools in his crusade: downsizing, dealmaking, and financialization…he instituted a series of mass layoffs that destabilized the American working class…He found the notion..a company should be loyal to employees..laughable…He fired workers by the thousands, convinced…a leaner work force meant lower labor costs..juicer profits..a higher stock price…Welch developed a new policy..Each year, managers rated..employees. Those who were in the bottom. 10% were let go.”
Gelles: “Welch championed offfshoring..reveled in outsourcing…Welch’s affinity for downsizing, which..employees called the “campaign against loyalty,” fundamentally altered GE…It became the..place..even a long-tenured employee might find themselves suddenly out of a job just before retirement, a company where what mattered most was not..quality of its people, but,,quantity of its profits.”
Gelles; “The second main weapon Welch employed..was dealmaking. Through compulsive mergers and acquisitions, he transformed GE from a proud domestic manufacturer to a cash-spewing collection of unrelated businesses, unleashing an M&A boom..well beyond GE… GE made nearly 1,000 acquisitions during Welch’s tenure, spending..$130 billion…GE sold..408 businesses for about $10.6 billion. No company had ever done so many deals so quickly. The biggest took GE far from its industrial roots. Often..deals were disasters. Sometimes, Welch quickly sliced up..companies he bought, then sold them off for parts…dealmaking served several of Welch’s greater goals. Welch wanted every business GE operated to be number one or number two in its respective category. If it couldn’t achieve that, it would be jettisoned… By selling companies – even ones..central to GE’s identity – Welch was able to retain only what he beieved..the most profitable..even if they had little to do with GE’s legacy manufacturing operations.”
Gelles: “The third dark art..Welch mastered was financialization…By the time he retired, the company derived much of its profits from GE Capital..essentially a giant unregulated bank. Welch got the company into all manner of risky debt instruments, insurance products, and credit cards. The finance division became GE’s center of gravity, ultimately accounting for 40% of revenues and 60% of profits. With so much money coursing through the finance division, Welch used it to his advantage…extracting whatever he needed to meet or beat analysts estimates for nearly 80 quarters in a row, an unprecedented run. Earnings targets were achieved using dubious accounting methods…profits flowed, and Welch used them to reward shareholders..”
Gelles: “..these tactics..served the same aim..aiding his endless quest to enrich his investors. if that meant cutting hundreds of thousands of jobs..companies were acquired and then sold for parts..playing fats and loose with accounting rules, what was the harm?….simply reducing what motivated Welch to greed is insufficient. He was possessed with a world-beating ambition..to make his GE a company for the ages…Welch was the embodiment of the shareholder primacy dogma hatched by Milton Friedman, and for 20 years just about everything he did worked. GE did become the most valuable company on earth. GE shareholders were showered with riches. Welch was revered as the greatest CEO of all time.””
Gelles; “..he elevated the role of..chief executive from..people manager to something closer to a pop star…The business press adored him…Business schools treated Welch like an oracle, turning his strategies into case studies and curricula. Wall street analysts marveled at his seemingly magical ability to hit the numbers, quarter after quarter… Welch was the personification of American, alpha-male capitalism…His exploits were so over-the-top, his personal wealth so enormous, it was impossible for other executives not to emulate him. At the end of his illustrious career, Fortune magazine dubbed him “Manager of the Century.”
Gelles; “That kind of success..made Welch singularly influential in the corridors of economic power…He was the first celebrity CEO..golfed with presidents..his love life was tabloid fodder, and his gargantuan pay packages..glorified at a moment when conspicuous consumption..in vogue. His roaring success inspired countless imitators… Welch redefined how corporations measured success, setting the standard for a genertion..”
Gelles: “..his strategies ultimately destroyed what he loved..Not long after he retired, GE fell into a spiral of decline set in motion by Welch’s short-term decision-making. Within months of his departure, it became clear..GE was deeply troubled, and in a matter of years, the corporation was falling apart…Welch’s underinvestment in research and development caught up with the company as it failed to introduce new, innovative products..incessant dealmaking resulted in. a series of bad trades that burdened the company with money-losing divisions..the quest for ceaseless growth in the finance division led GE to become a major holder of sub-prime mortgages just in time for the financial crisis of 2008. At its nadir, GE needed a $139 billion rescue from the Obama administration and an eleventh-hour investment from Warren Buffett to stave off collapse..”
Gelles: “Although Welch’s legacy was tarnished by the collapse of GE, his worldview continues to shape much of corporate America..methods he devised..still in use..priorities he established still shape decision-making in boardrooms..some of his disciples are still in charge of major multinational corporations…Welchism..the conviction..companies must prioritize profits for shareholders above all else..executives are entitled to enormous wealth and minimal accountability..everyday employees deserve nothing more than their last paycheck. Welchism ascribes moral worth to material success…the Welchist worldview adopts a Darwinian attitude toward the labor market, a smug conviction..those who don’t make it are to blame for their own misfortune..the poorest among us ultimately deserve their fate. The closest historical analog to Welchism is probably imperialism.”
[note; the above is a very brief sampling of Gelle’s book, “The Man Who Broke Capitalism.” If YOU. want another look at. WHY. the America of 202r5 is. NOT. like the America prior to 1980 – then read this book, in addition to many others cited here; in addition to unspun statistics from Census, IRS, CBO, GAO. Dig into the Chicago School of economics, and the”economists’ like them who have excused the unmatched post-1980 greed among the top 1%. Pulitzer and Nobel Prize winners have told. YOU. why “The American Dream” was stolen. Jack Welch is one of the perps who did it. He has many accomplices who eagerly rigged an economy that worked for all Americans into one that victimizes most Americans. And it only took 40 years for them to overturn much of 1789 – 1980 American democratic thought, intent, policies. The top 1% lies to accomplish this are matched only by the massive corruption it took to rewrite the rules.]o
With Justice For All 