Photographs by Simon Hayter
Jeffrey Immelt is the chairman and CEO of General Electric, one of the world’s largest corporations, and a member of U.S. President Barack Obama’s Economic Recovery Advisory Board. Since the financial crisis he’s been an outspoken critic of corporate excess and failed leadership. But he has also faced criticism of his own from GE investors who’ve seen shares fall 60 per cent since he took over in 2001. Immelt spoke to Maclean’s during a visit to Vancouver for the Winter Olympics.
Q: In a speech at the West Point military academy in December, you said we’ve come through an era when business went from tough-mindedness, which is a good trait, to meanness and greed. What did you mean by that?
A: Over a period of time, not enough effort has been put forward to investing in the capability and long-term growth of the productive middle class of the United States. Less money has been invested in research and development and manufacturing, with more of a transition to financial services. When a country from 1980 to 2010 goes from being an export powerhouse to an unbelievably consumption-driven net importer, that’s not a good trend.
Q: Can it be reversed?
A: It’s going to take lots of spending on R & D, and a real dedication to making our workforce more productive again. Seven per cent of U.S. GDP is exports. In Germany, it’s 35 per cent. Germany’s not a low-cost country. Germany is not Mexico. And there’s no reason why the U.S. can’t have some kind of destiny that’s like that.
Q: How much of this shift do you ascribe to greed? You’ve said the richest people made the most mistakes, but faced the least accountability.
A: There are lots of people that own hedge funds that have their own private capital at risk who should make a lot of money. But when a Ph.D. chemical engineer earns $200,000 a year, and a mortgage broker pre-crisis earned $5 million a year, that’s screwed up. That’s completely disproportionate to where the future of any economy is going to rest.
Q: In the dark days of early last year, there was a lot of talk about the need for reform, a belief that change was under way. You described it as a “fundamental shift in capitalism.” That seems to have faded. So was the economic crisis a reset, or just a pause?
A: When you look at capital markets and financial services especially, there needs to be regulation and reform. There needs to be things put in place so people can trust the system. On the other side, the financial service industry is a vibrant, important industry. So there’s a way to have financial reform on one side, without completely trashing bankers and lending. When I travel the world, there’s not one good economy that doesn’t have a vibrant banking industry.
Q: A lot of people point to Canada as a regulatory model. What do you think of that?
A: What’s clear is the rules were stricter, more transparent, and more conservative, and in the end that turned out to be really smart. What’s more contradictory is the fact that there are five big banks in Canada. So we [in the U.S.] in theory want to see splintering of banks but here, having five core banks actually added stability to the system. I do think there’s something to be said for having these large, healthy, well-run banks.
Q: What role should the government be playing in business?
A: Government should be a catalyst for change. In energy, a momentary signal on the price of oil doesn’t necessarily create the genesis for a 40-year investment. That’s where government comes in. In the U.S., there’s probably 15 or 20 per cent of the [energy] capacity that’s old coal plants that have to retire by 2020, but nobody knows what to do with it. Only the government can help influence [change] by having a price for carbon and technical incentives.
Q: A lot of people are very scared by talk like that.
A: Let me differentiate. Government has always been involved in energy in the U.S. Government is half of the market in health care. Always has been. So this notion that the government doesn’t already exist in the U.S. economy is just crazy. What people object to is volatility. If it looks like there’s going to be a new change every week, nobody can invest. In the end, the market is the best force, but in some places like energy, the government is going to play a role.
