Why Did GE Fail?

Why Did GE Fail?

“The Man Who Broke Capitalism,” by David Gelles, reveals legendary GE CEO Jack Welch to be the root of all that’s wrong with capitalism today and offers advice on how we might right those wrongs.

In 1981, Welch took over General Electric and quickly rose to fame as the first celebrity CEO. He golfed with presidents, mingled with movie stars. Moreover, was idolized for growing GE into the most valuable company in the world. But Welch’s achievements didn’t stem from some greater intelligence or business prowess.

Rather, they were the result of a sustained effort to push GE’s stock price ever higher. Often at the expense of workers, consumers, and innovation. In time, Welch single-handedly ushered in a new, cutthroat era of American capitalism that continues to this day.

In “The Man Who Broke Capitalism,” Gelles chronicles Welch’s campaign to vaporize hundreds of thousands of jobs in a bid to boost profits, eviscerating the country’s manufacturing base and destabilizing the middle class.

Welch’s obsession with downsizing—he eliminated 10% of employees every year—fundamentally altered GE and inspired generations of imitators who have employed his strategies at other companies around the globe.

During his heyday, Welch was corporate America’s leading proponent of mergers and acquisitions, using deals to gobble up competitors and giving rise to an economy that is more concentrated and less dynamic. And Welch pioneered the dark arts of “financialization.”

As a result, transforming GE from an admired industrial manufacturer into what was effectively an unregulated bank. The finance business was hugely profitable in the short term and helped Welch keep GE’s stock price ticking up. But ultimately, it contributed to the collapse of GE and dozens of other Fortune 500 companies.

Eventually, Welch’s celebrated emphasis on increasing shareholder value by any means necessary. (layoffs, outsourcing, offshoring, acquisitions, finance, and buybacks, to name but a few tactics) became the norm in American business generally.

The book demonstrates how that approach has led to the greatest socioeconomic inequality since the Great Depression and harmed many of the very companies that have embraced it. And it shows how a generation of Welch acolytes radically transformed companies like Boeing, Home Depot, Kraft Heinz, and more.

Change is now afoot in corporate America.

The book also highlights companies and leaders who have abandoned Welchism. And are proving that it is still possible to excel in the business world without destroying livelihoods, gutting communities, and spurning regulation.

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