OINK, SAYS JEFF IMMELT, SMACKING HIS
LIPS. While his company’s stock has shed two-thirds of its value
over the last year and a half, GE’s chief is looking heavier than
ever. Burying one’s nose in the public trough can do that to a
man.
Oink, oink, says Wal-Mart’s Mike Duke,
signaling his support of the government’s health care plans. His
company is actually doing rather well. He is keen to take advantage
of a situation that would allow super-sized Wal-Mart to gain market
share at the expense of smaller and more entrepreneurial
rivals.
Oink, oink, oink, says JP Morgan
Chase’s Jamie Dimon, grunting happily on the front page of the
Sunday New York Times. Dimon basks in the glow of White House
adulation. The former Wall Street wonder boy has become his
industry’s ambassador to the court of King Barack. The king has
rewarded his fealty by patting him on the head and calling him
“Jamie”-which is the cute and affectionate handle that his mom
bestowed upon him when he was a little baby. Even then, his soft,
moist eyes had a special pleading quality that set him apart from
his littermates.
It is sad to see, and hear, so many prominent CEOs going out of
their way to curry favor with the government-a government that is
madly determined to mismanage the economy and to bend private
enterprise to its will in the pursuit of social objectives.
In a speech to the Detroit Economic Club on June 26, Immelt
announced the opening of an “Advanced Manufacturing and Software
Technology Center” just outside Detroit, which is of course home to
Government Motors and the UAW. He gushed about how “We should
welcome the government as a catalyst for leadership and change,”
saying, “There’s a long history in this country of government
spending that prepares the way for new industries that thrive for
generations….Think of the NIH or NASA and all of the new
innovations that came out of those programs-from computing to
communications to health care. America has that kind of chance with
unprecedented levels of new government investment.”
Right on, Mr. CEO. Hooray for unprecedented levels of wasteful
public spending that threaten to bankrupt the economy and will
certainly result in raising taxes on individuals and businesses
alike.
In another part of his speech, Immelt, or “Jeffkins,” as the
king calls him, spoke of how GE’s new technology center “will
develop technologies that can change peoples’ lives-clean energy,
better transportation, affordable health care.” Will Immelt be
using TARP (Troubled Asset Relief Program) money to finance this
wonderful investment? Since late last year, GE Credit has raised
billions in long-term debt with the help of federal loan
guarantees. Without these guarantees, GE’s stock would no doubt be
even deeper in the toilet. According to some analysts, GE would be
in the same approximate position as the CIT Group.
In his latest announcement of dismal quarterly earnings,
Jeffkins pointed to an emerging bright spot in the nation’s
economy: stimulus spending. GE expects to get as much as $200
billion in stimulus money targeted for clean energy and health
care. A friend of mine who quit GE years ago to set up his own
business, which has become the world leader in supplying low-cost
carbon fibers used in making the world’s most advanced wind
turbines (a part of the market in which GE is a non-player),
expects the slow-moving and bureaucratic GE to do an excellent job
of winning government grants-and an equally exemplary job of
wasting every cent that the government gives it.
A FEW MONTHS AGO, Wal-Mart’s Duke sent a letter to the White
House announcing his support for proposed new legislation requiring
all but the smallest employers to provide health insurance for
their employees. This left the National Retail Federation, the
industry’s main lobby, feeling “flabbergasted.” One of its
spokesmen said that a blanket mandate would be “the single most
destructive thing you could do to the health care system shy of a
single-payer system.”
But was Wal-Mart’s move really all that surprising? As the Wall
Street Journal reported on July 16, “In the past four years,
Wal-Mart Stores has undergone a stunning metamorphosis-from
whipping boy to the political left to corporate leviathan now
welcomed with open arms by a Democratic White House.”
The metamorphosis began when Lee Scott, Duke’s predecessor as
CEO, hired Edelman PR executive and longtime Democratic political
operative Leslie Dach to head corporate communication. Over the
past several years, the company has spent millions to broadcast its
tender and heartfelt concern for the environment.
Just the other day, the company announced that it will tell
suppliers they must calculate and report the full environmental
impact involved in making their products, and be prepared to submit
to a rating system that Wal-Mart will devise and disseminate
alongside prices for everything from clothes to electronics.
Imagine that! Wal-Mart, as the nation’s largest employer and
retailer, now stands ready to act as a kind of global Environmental
Protection Agency, policing its suppliers. This should put them in
good stead with the likes of Al Gore, but it also means that that
the company is prepared to sacrifice the customer’s desire for the
lowest price on the altar of environmental activism. That will be
the inevitable result of forcing suppliers to spend more on living
up to tougher standards and conforming to a more demanding and
bureaucratic purchasing department inside Wal-Mart. The increased
costs will be passed along to Wal-Mart shoppers.
AND THEN THERE IS DOE-EYED Jamie Dimon, whom the New York Times
describes as “President Obama’s favorite banker.” The New York
Times, which happens to be the president’s favorite paper, got the
scoop on how JP Morgan Chase is holding a meeting of its board for
the first time in the nation’s capital with a very special guest
speaker: White House chief of staff Rahm Emanuel. The paper noted
that Treasury Secretary Tim Geithner had declined an invitation to
join the party “out of concern that he would be seen as too cozy
with a company that has numerous business issues before the
department.” Silly Tim! Bad Tim! This is a playground where
everyone is supposed to share their toys.
Jamie understands that. He is one of those visionaries with the
uncanny ability to read the writing on the wall. According to
Obama’s favorite newspaper, in 2007 Jamie “assessed his own
performance for his board and gave himself a ‘D’ for effort in
Washington. He subsequently revamped the firm’s government affairs
office, mindful of Democrats’ ascendance.” He now calls government
relations the firm’s “seventh line of business.” But wouldn’t it
make better sense to think of it as a “third rail”-one that doesn’t
kill outright but does the next worst thing: reducing those who
touch it to a zombie or vegetative state? However, if one of
Jamie’s trusty lieutenants dared to suggest any such free market
heresy, that person would be fired on the spot.
For Jamie Dimon and JP Morgan, the government relations business
involves a good deal more than boring old banking. It means
constant trips between New York and Washington, D.C. It means
constant banter-via phone and e-mail-with his pal Rahm Emanuel
(whom he tried to hire back when he was second in command at
Citigroup). One gets a sense of the extraordinary chumminess and
simplemindedness of this dialogue from this exchange included in
the front page story in the president’s house organ:
He [Emanuel] recalled that Mr. Dimon once phoned to protest the
anti-business populism taking hold as voters tired of bailouts, and
snapped, “Washington doesn’t get it!” “You guys don’t get the anger
out there,” Mr. Emanuel replied. “Jamie, you’re asking then
American people to bail out the industry. And if they’re going to
bail out the industry, it’s got to change its habits.”
With its lofty motto of “All the News That’s Fit to Print,” we
must assume that the New York Times demurely deleted all the
F-words that studded at least one side of the conversation.
Of course, another part of being in the government relations
business involves making the right noises about the environment,
diversity, etc. And the darling Jamie does not disappoint here
either. Among other bits of gratuitous information, we learn from
the JP Morgan website that the bank’s “portfolio includes interests
in 54 wind farms as well as several solar projects that together
can power close to 1.5 million U.S. homes annually.” There is no
mention of how many coal-fired electrical generating plants are in
the “portfolio,” or how many U.S. homeowners have them to thank for
cheap and abundant energy.
IN THEIR DREAMS OF revving up the economy, saving the planet,
and meddling in the nation’s politics and social affairs, the three
CEOs seem to have lost sight of the basic idea that the business of
business is business. They may think they are gaining “a seat at
the table,” but what they are really doing is playing a sucker’s
game in inviting further intervention into the marketplace by
people who have no respect for the marketplace.
A long time ago, Milton Friedman pointed out why he distrusted
businesspeople who run on about the “social responsibilities of
business in a free-enterprise system.” It is because “the doctrine
of ‘social responsibility’ involves the acceptance of the socialist
view that political mechanisms, not market mechanisms, are the
appropriate way to determine the allocation of scarce resources to
alternative uses.”
This is certainly the case with the Obama administration,
whether one is talking about job creation, economic stimulus,
health care reform, trade policy, limiting carbon emissions,
financial and auto company bailouts, or changing the rules to make
it easier for unions to monopolize the supply of labor at more
companies.
Absolutely the last thing that this government wants to do is to
encourage market mechanisms at
the expense of political mechanisms.
Jamie and Jeff and Mikey-you can trust me on this one.
But maybe you still don’t get it. So let me be real clear:
BEWARE THE BIG BAD WOLF. He may act nice…but he really doesn’t
have your best interests at heart.
