“This economic crisis doesn’t represent a cycle. It represents a reset,” Jeff Immelt, the CEO of General Electric, said today. “It’s an emotional, social, economic reset.”
And the biggest impact of this “reset” will be greater government involvement in the economy, and in the affairs of business, for better or worse.
“People who understand that will prosper,” Immelt said. “Those who don’t will be left behind.”
Immelt spoke to the annual conference of Business for Social Responsibility, an association of about 250 companies that are looking for more sustainable ways to do business. About 1,200 people from companies, NGOs, consulting firms, PR shops and government agencies are here for the group’s powwow in New York.
The GE chief executive didn’t put it exactly this way, but he made clear that the meltdown on Wall Street and the election of Barack Obama will bring an end to a couple of decades of nearly blind faith in free markets and deregulation. (Heck, even Alan Greenspan has admitted that.) Going forward, stronger government intervention will be a fact of life, here in the U.S. and around the world.
The question, of course, is how deep and how wide the government involvement will be. You can be sure that the Obama administration will regulate the financial industry. But will Washington bail out the automakers? Freeze foreclosures? Tax fossil fuels? Make it easier for workers to join unions? All of the above?
Adjusting to this new reality will take some doing, Immelt said. “I’m a free market guy and fundamentally a Republican,” he told BSR. (That put him in a distinct minority in this crowd, which is packed with Obama fans. A BSR survey released today found that nine in 10 of the conference participants believe Obama will have a positive impact on advancing the agenda of corporate responsibility.) But while he may be a free market guy, Immelt’s no ideologue. He acknowledged that the government has always been deeply involved in the economy; research funded by the defense department helped spur the technology revolution of the 1990s, for example. What’s more, he said, prosperity depends on what he called four “pillars” of education, energy, health care and a financial services sector that promotes innovation. Education is a government obligation, of course, and the other three sectors he cited–energy, health care and financial services–have always been heavily regulated.
Interestingly, Immelt suggested that President-elect Barack Obama make clean energy a top priority when he takes office. Energy’s a big problem, he said, but unlike, say, health care, it is a problem that can be solved relatively easily, and with substantial benefits for the economy and the environment. Not incidentally, GE, a big player in wind energy and nuclear power, and a wanna-be provider of “clean coal” plants, stands to gain from an aggressive government push for clean energy.
“Clean energy is a combination of technology and public policy,” Immelt said. “I think this is imminently solvable. It creates jobs. There’s not a lot of downside.” GE, he said, is devoting about half of its $6 billion a year in R&D investment to clean energy and clean water technologies.
Immelt also sounded a positive note about his work with the U.S. Climate Action Partnership, an alliance of GE, DuPont, Alcoa and other big companies with environmental NGOs like Environmental Defense Fund and the World Resources Institute. The GE executive is the big cahuna behind U.S. CAP, which favors mandatory regulation of greenhouse gases, a role that has taken him a long way from his days as a young GE plastics exec who had developed a “healthy dislike for environmental NGOs.” Now he’s pals with the likes of Fred Krupp of EDF and Jonathan Lash of WRI.
Having said that, Immelt made clear that neither his position on climate change, nor his belief in GE’s much-hyped EcoMagination initiative, spring from any personal love for the outdoors. “I’ve never camped,” he said. “I don’t fish.”
But the science of climate change is “pretty much irrefutable,” he said. What’s more, GE’s business of selling products that help solve environmental problems is growing, from about $5 billion when EcoMagination was launched to about $17 billion today.
Besides, big companies don’t like uncertainty and there’s an enormous amount of uncertainty right now about what a President Obama and Congress will do to regulate greenhouse gases. Even worse, Immelt noted, you could argue that the U.S. already has de facto, unspoken regulation because of the growing opposition to coal-fired power plants.
“The last 49 coal plants haven’t gotten permits,” Immelt said. “Guess what. When that happens, you do have an energy policy. You just don’t know it.”
Better to have a full-scale democratic debate about what our energy policy should be. You can be sure that when that debate unfolds next year, GE’s voice will be heard.
Several years ago, Lew Hay, the dynamic chairman and CEO of FPL Group, which is the nation’s leading provider of renewable energy ($16 billion in 2008 revenues), gave an impassioned speech at a Goldman Sachs climate change conference in New York, arguing for a tax on emissions of carbon dioxide to deal with the threat of global warming. A carbon tax, he said, would be simple and fair and speed the transition to a clean-energy economy. By contrast, he said, a cap-and-trade system inevitably would be overly complicated, negotiated in Washington back rooms, subject to political horse-trading and shaped not by the public good but by special interests.
