The above-linked op-ed piece has been running on Reuters for a couple of days now, in which Chrystia Freeland recounts a breakfast with featured speaker Jeffrey Immelt, CEO of General Electric and the head of the president’s “Council on Jobs and Competitiveness.” The name of this council alone says it all about what Obama thinks about our huge trade deficit. It seems we should all blame ourselves for not trying hard.
“We are not trying that hard,” Immelt said. “We haven’t really tried as hard as we can to compete, educate and sell our products around the world and I think we can do better.
“The world just plays harder than we play,” he said. “Whether it is on exports or whether it is on foreign direct investment, the rest of the world plays for keeps. And we just don’t have a similar philosophy.”
He goes on but, before we get to that, I thought it might be interesting to explore just how well Mr. Immelt has done with competing and creating jobs at G.E., where he took over as CEO in September, 2001. Since that time:
- GE’s stock price has plunged by 60%.
- Global employment at GE has fallen from 310,000 to about 287,000 today.
- U.S. employment at GE has fallen from 158,000 to about 133,000 today. In other words, all of the reduction in employment at GE has occurred in the U.S. Employment has actually risen by about 2,000 in the rest of the world.
- GE’s revenue has risen from about $126 billion per year to about $150 billion per year. However, adjusted for inflation, this actually represents a decline of about 3.3% in revenue.
Apparently, investors don’t have much confidence in GE under Immelt’s leadership. So why should Obama or any American have any confidence in his ability to lead the creation of jobs? There’s nothing in his record that suggests he’s qualified for either role.
With that said, let’s take a closer look at some of the other things he had to say at that breakfast.
“Chancellor Merkel flies from Berlin to Beijing, there’s 25 German C.E.O.’s that get off the plane right behind her. And they connect the dots. They play hard, they play to win, they play for exports,” Immelt said. “We’re not all-in the same way that the Germans are all-in.”
And how many American executives have gotten off the plane in Beijing, Mr. Immelt? Hundreds. All of them play hard and play to win for their companies. The end result has been an historic shift of wealth and jobs to China. Are you saying that the result will be different if they accompany American officials? Are you saying they will then eagerly work against their own interests in an effort to bring those jobs back home? Of course Germany has a trade surplus with China. Germany is twice as densely populated, consumes far less, and is even more dependent on exports for survival than China is.
But then Immelt goes on to refute his own argument:
“Our competitiveness in this country today is the greatest it’s been in 25 years,” he said. “I have never seen our competitiveness as solid versus India and China as I do today.”
Wait a minute! In one sentence he says that we need to try harder, and then he says we’ve never been more competitive! It begs the question: if we’ve never been more competitive and we’re losing badly, is it possible that it’s not about competing? Don’t we need to start looking elsewhere for answers?
The U.S. is the most productive, most competitive nation on earth – far more competitive than China. Consider this: with a work force of approximately 150 million, the U.S. generates a gross domestic product of approximately $15 trillion – or about $100,000 worth of goods and services per worker. China’s GDP is about $6 trillion, generated by a work force of about 600 million. So Chinese workers generate only about $10,000 worth of goods and services each.
That means that American workers are ten times as productive as Chinese workers. Ten times! And yet we have to “try harder?” We have to be “more competitive?” This kind of illogical gibberish isn’t unique to Immelt. It’s spouted by virtually every economist on earth.
The problem isn’t competitiveness, but a lack of understanding of what may be the most fundamental and profound relationship in economics – the inverse relationship between population density and per capita consumption. The next quote by Immelt illustrates that lack of understanding:
“There are going to be one billion consumers joining the middle class in Asia. I think for us to reduce unemployment, exports are going to be a key way to do it,” Immelt said. “It’s this country’s only destiny just because most of the consumers are some place other than here.”
See? He, like all business leaders, political leaders and economists, thinks that every person can be an American-style consumer, regardless of their circumstances. They’re all absolutely ignorant of the role that high population density has in eroding per capita consumption and, with it, employment, making high unemployment and poverty an inherent characteristic of their economies. Only if some nations like America are foolish enough to come to their rescue by ceding the manufacturing sector of their economies to them do they have any hope of rising from their poverty. Nations like China, Germany and Japan are not export powerhouses because they are “more competitive” and “try harder.” Rather, it’s because they consume so little that they’re utterly dependent on exports, and utterly dependent on America to consume their exports to have any kind of viable economy at all. They can never consume enough to consume their own productive capacity, much less to begin consuming American exports.
Before I end, there’s one more “Immelt-ism” that can’t be allowed to pass without comment:
“Look, when I was a young guy, when I first started with G.E., Jack Welch sent us all to Japan because in those days Japan was gonna crush us,” he said. “And we learned a lot about Japan when we were there. But over the subsequent 30 years, the Japanese companies all fell behind. And the reason why they fell behind is because they didn’t globalize. They didn’t have to go out and sing for their dinner in every corner of the world. That’s not the case with G.E. It’s not the case with other American multinationals.”
Hey, Immelt, here’s a news flash for you: Japan is still kicking our ass in trade! Have you not noticed that they still have a trade surplus with us that, on a per capita basis, dwarfs China’s? You think that Japan doesn’t “sing for their supper in every corner of the world?” Where have you gone in the world where you don’t see Japanese cars all over the roads?
I can’t help but wonder if Immelt has ever pondered the fact that GE’s revenue would be higher if high tariffs on foreign-made engines meant that every plane in the U.S. was powered by a GE engine and every kitchen in the U.S. was equipped with GE appliances. Nah. Better to let that bone drop in favor of that big, juicy one he sees reflected in the waters of his imagined, bottomless pool of Chinese consumers.