If you look at historical data about the US economy, you often notice that something has changed in the late 1970s or early 80s. Incomes began to grow more slowly for most workers, and inequality increased.
David Gelles — a Times reporter who has interviewed CEOs for years — argues that American businesses have helped fuel these trends. Specifically, David points to Jack Welch, the leader of General Electric who has become a role model for many other executives. I talked to David about these ideas, which are the focus of his new book on Welch (and an era story based on it).
How do you think American business has changed since the 1980s in such a way that earnings have grown so slowly?
For decades after World War II, large American companies fell behind to distribute profits widely. In General Electric’s 1953 annual report, the company proudly talked about how much it was paying its workers, how its suppliers were benefiting, and even how much it had to pay the government in taxes.
That changed with the ascent of men like Jack Welch, who took over as CEO of GE in 1981 and ran the company for the next two decades. Under Welch, GE ushered in a wave of mass layoffs and factory closures that other companies followed. This trend has destabilized the American middle class. Profits begin to go not back to workers in the form of higher wages, but to large investors in the form of share buybacks. And GE started doing everything possible to pay as little tax as possible.
Friend clarify that many other CEOs looked to Welch as a role model and imitated him. So why wasn’t there a Jack Welch before Jack Welch, with the wealth and fame that came to him after his tenure?
This is one of those moments when an exceptional individual at a pivotal moment really goes on to shape the world.
Welch was ambitious and fiercely competitive, with a ruthlessness the American company had never seen. At GE, he took control of a large corporation that has a history of setting the standards by which other companies operate. And Welch arrived at the time that there was a reassessment of the business’ role underway. The change in thinking was introduced by the economist Milton Friedman, who Written in The Times Magazine that “business’s social responsibility is to increase its profits.”
Is Welch’s approach good for corporate profits and bad for employees – or ultimately bad for the company? You lean towards the second answer, based on GE’s post-Welch struggles. Some other writers shown that many companies have thrived with Welch-like strategies. I’m still wondering if Welchism is a zero profit for shareholders or not good for everyone.
Welch transformed GE from an industrial company with loyal employees into a corporation that made a lot of money from its finance department and had a much better trading relationship with its workers. That served him well during his time as CEO, and GE was for a time the most valuable company in the world.
But in the long run, that approach failed GE. The company doesn’t invest in research and development, buys out other companies to drive growth, and its finance division was hit hard when the financial crisis hit. Things began to unravel shortly after Welch retired, and last year GE announced it was going to split on its own.
Similar stories have played out at dozens of other companies where Welch’s disciples have attempted to replicate his book, such as Home Depot and Albertsons. So while Welchism can boost profits in the short term, the long-term consequences are almost always disastrous for workers, investors, and the company itself.
Welch replied real problems at GE and the American economy in the 1970s and early 80s. If his cure created even bigger problems, what could be the better alternative?
An important first step is to rebalance the wealth distribution that our largest companies generate. For more than 40 years, we have lived in the era of the dominant shareholder that Friedman and Welch created. Meanwhile, the federal minimum wage remains low and remains at just $7.25, and the gap between worker wages and productivity continues to widen.
There are some signs of change to be expected. The labor crisis and pressure from activists have prompted many companies to raise wages for frontline workers. Some companies, such as PayPal, are delivering items to employees on a daily basis.
But it will take more than a few great CEOs to fix these problems. And while I know it’s risky to put our trust in government today, policy has a role here: finding ways to get companies to pay living wages, investing in their people, and preventing race to the bottom with corporate taxes.
American companies can be competitive and profitable while also taking great care of their workers. They have been like this before, and I believe they can again.
More about David Gelles: He was born in New York and got his first full-time job in journalism working for the Financial Times, where he interviewed Bernie Madoff in prison. His book on Welch is called “The one who broke capitalism. “He recently talked about The role of the media in celebrating Welchism.
NEWS
War in Ukraine
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A Ukrainian official angrily refused A plea from French President Emmanuel Macron not to “humiliate” Russia.
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A farmer in eastern Ukraine continues to work, despite the danger: “I can’t leave everyone.”
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An American warship arrived in Stockholma sign of the protection that NATO membership would bring to Sweden.
Gun violence
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Gun control measures could have prevented nearly a third of mass shootings since 1999.
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911 Coordinator got fired for hanging a supermarket worker calling for help in the Buffalo shootings last month.
Other great stories
FROM COMMENTS FROM WOMAN
Sunday Question: Will graphic imagery change the gun debate?
The publication of photographs of shooting victims will fuel support for reformtrauma surgeon Amy Goldberg arguments. Manipulative political views mean that such images will hurt readers and viewers but little change of mindMSNBC’s Michael A. Cohen transaction counter. (Susie Linfield wrote more about the debate in Times Opinion.)
New York problem: As new waves of immigration change the population and culture of the city, New Yorkers will once again redefine what they want the city to be, and who they want to be there. Many new people come to work with some roommates. Some are Cash withdrawals hurried weeds. Others come to New York for all sorts of reasons, including trees and cakes.
Read full problem.
WEEKEND
What to watch
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House Democrats said they plan to pass a series of new gun control bills this week.
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Tuesday is the busiest Election Day before November, with primaries in California, Iowa, Mississippi, Montana, New Jersey, New Mexico and South Dakota.
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The House committee investigating the January 6 attacks held its first public hearing on Thursday night.
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Last month’s inflation data will be released on Friday.
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President Biden chaired the Summit of the Americas this week, the first in the US since 1994.
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Apple’s Worldwide Developers Conference is happening this week. The company often uses this event to announce future software updates.
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The final of the men’s French Open takes place this morning. Rafael Nadal will seek his 14th title in the tournament and face Casper Ruud.
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College softball will be crowned a champion this week in the College Women’s World Tournament.
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The MTV Movie Awards will air tonight. Vanessa Hudgens is the host of the show.
What to cook this week
