Welsh supplied a playbook that hundreds of other corporations copied, helping to hollow out America’s industrial base and shift the economy’s center of gravity from the factory floor to the trading floor.
Welch turned GE into both the emblem and the engine of America’s transition from a society that built things to one that trades paper claims on the value others create.
He was the original Wall Street darling, laser-focused on quarterly earnings and stock price. Welch aggressively offshored and outsourced manufacturing overseas to reduce labor costs and taxes.
- in the twenty years Jack Welch was the CEO, he eliminated more than 100,000 GE jobs, shuttered dozens of US factories, moved production abroad*
Since R&D and CAPEX take a long time to yield results, they are abandoned in favor of projects that generate returns in the next quarter.
If financial engineering boosts the P&L immediately, why bother with real engineering?
Welch famously quipped “GE is not in the business of making engines or light bulbs, it is in the business of making money”.
This has become the ethos of Wall Street and high street.
Greed alone drives the behavior of these businesses in the capitalist system. After all, making money is the lone purpose of a business, as Welch proclaimed.
Executive compensation, often tied to stock performance, has grown dramatically, while financial speculation has disproportionately benefited high-income earners who own financial assets.
US CEOs regularly make 300 to 400 times the total comp of average employees today, compared with 20 – 30 times in the 1960s.
The Welch era: the moment when deindustrialization and financialization became conscious corporate strategy
Yes businesses need to be profitable but not at the cost cheapen nondurable products.
“Made in USA” is no longer a sign of quality [there are exceptions of course].
In a world where profit margins dictate priorities, the quality of everyday consumer goods has taken a dramatic nosedive. Items that were once symbols of durability and craftsmanship are now pale imitations of their former selves.
China focuses on the long range. They are & will eat legacy automakers with their EVs & hybrids.
They have great strides in AI with cheap processing semiconductor chips.
Also in military jets & maybe commercial jets. And in semiconductor chips.
Chinese economist Jin Keyu on the China economy: