Book Review: The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America—and How to Undo His Legacy, by David Gelles
If this book doesn’t boil your blood you’re part of the problem. In this account of the late GE CEO Jack Welch, David Gelles illuminates the essence of what is wrong with corporate business—and exactly how we got here. Gelles documents how the three principles of Welchism are still in action today: Downsizing, Deal Making, and Financialization. It centers on valuing profits and share value over all other factors, including tone deafness to its detrimental effects on people and society.
Welch was instrumental in actualizing the theories of Hayek and Friedman, and it resulted in the extensive human suffering these practices produced. Gelles illustrates how the policy of shareholder primacy led by Welch destroyed the economy for everyone else. This book traces how the Financialization practices (i.e. creating pseudo-profits by cooking the books) pioneered by Welch had created hollow shells out of formerly healthy companies with no one getting rich except private equity firms and those who played along with them. It’s incredible that anyone today would think these theories viable, as (in a statement attributed to Keynes) Capitalism is the extraordinary belief that the nastiest of men for the nastiest of motives will somehow work for the benefit of all.
Gelles’ suggestions to remedy the economic and social damage done by Welchism may be the very reverse shock therapy to that of neoliberalism needed to remove that toxic dogma from serious consideration—and achieve a world beyond Welchism. One suggestion in the book is stakeholder capitalism, which empowers others (such as employees and customers) in addition to just investors, and it is the antithesis of Welchism—we need more of this. Another example is the public benefit corporation, with a stated purpose of serving the public good in addition to shareholders—Gelles illustrates how these are naturally complementary and do not conflict with one another.
Although parts of Europe are ahead of the US in this, as it becomes increasingly evident that the Welch playbook is long past its expiration date, progress is being made in the private sector external to government policy initiatives. At this stage, there is no alternative to dispensing with Thatcherism—and the Welchism is enables. As a more socially aware investment community expands, bringing with it like minded CEOs, a healthy business environment may once again be in our future.
—