President Obama is announcing today that General Electric CEO Jeffrey Immelt will take over as head of a key economic advisory council. With the financial crisis officially over, the President's Economic Recovery Advisory Board is being shuttered, as former Fed Chief Paul Volcker, who chaired the board, steps down. It will be replaced with a Council on Jobs and Competitiveness. After all, now the big challenge the U.S. faces is creating jobs to reduce severe unemployment. Is Immelt a good choice to head this council?
From a pure knowledge perspective, it's hard to imagine someone who has much more experience with business and staying competitive than GE's CEO. It's one of the most significant companies in the world. So there's little doubt that Immelt will be have the background to provide some valuable advice.
The one sort of obvious criticism, however, is conflict-of-interest. This role is a part-time gig for Immelt, as he will stay on as CEO of GE as he serves as the council head. Critics of the coziness between big business and Washington aren't likely to be pleased with today's announcement. Business doesn't get bigger than GE, and it's certainly possible that Immelt could use this role to the advantage of his firm.
For example, let's say that the Council decides to tackle corporate tax reform. Currently, some tax laws benefit large corporations, which have successfully lobbied for ways to exploit loopholes that benefit their size. Reform should level the playing field so that smaller businesses wouldn't be at a disadvantage due to having a larger effective tax burden than big corporations who enjoy such loopholes. Can we trust that Immelt would disregard his own company's interest to argue in favor of such reform?
"It's never been a free market; it's never gonna be a free market. That's just the way it is."
Indeed, Immelt has published an op-ed in the Washington Post today about how the U.S. should create jobs to coincide with the President's announcement. He lists three priorities for the council to focus on: Manufacturing, trade, and innovation. The last of those three is sort of an Econ 101 no-brainer, but the other two specifically speak to aspects of business that would benefit GE in particular: it's a global firm that has a huge manufacturing presence. These may be legitimate ways to create jobs, but it's not surprising to see GE's CEO, in particular, excited about finding ways for the government to support these ends in particular.
Immelt has never been shy about his belief of the importance for big firms to develop a cozy relationship with the government. At an event he spoke at in 2009 conducted by WIRED, he explained his philosophy saying about the U.S., "It's never been a free market; it's never gonna be a free market. That's just the way it is." He went on to add:
The fact that I'd like GE to work in concert with where government policy is in the U.S. doesn't mean that I'm a traitor or a bad guy, I think it's just being practical that that's gotta happen.
To be sure, holding a position that will place him closer to President Obama's ear will definitely allow him to work in even greater concert with the government than before. And it will provide GE with a distinct advantage compared to other companies in that regard.
With all that said, it isn't exactly unusual for corporate leaders to play a role on advisory committees like this one. Washington often likes to get private sector superstars together to recommend ways to improve the economic prowess of the U.S. And Immelt will have no special powers for rulemaking, though he can certainly recommend strategies for the President or Congress to take. Moreover, he held a lesser advisory role in the past, so his influence won't be brand new, just greater.
So ultimately, Immelt will be provided some additional influence in this role. But at the end of the day, he's just another advisor. The key to ensuring that his influence doesn't unjustly benefit GE will be to consider how his company will benefit through any of his policy suggestions. Given his role as CEO of the firm, however, it's hard to imagine that he'll find it easy to be unbiased.
This article available online at: