PART 1 OF 2
15. CITIZEN GE
Corporations, by their nature, do not function as democratic organizations, yet it is they who have seized the political ground left vacant by citizens, the political parties and other mediating institutions. Business and finance stepped into the vacuum created by failed political institutions and took up the daily work of politics. Their tremendous financial resources, the diversity of their interests, the squads of talented professionals -- all these assets and some others are now relentlessly focused on the politics of governing.
This new institutional reality is the centerpiece in the breakdown of contemporary democracy. Corporations exist to pursue their own profit maximization, not the collective aspirations of the society. They are commanded by a hierarchy of managers, not by democratic deliberation. Yet the modern corporation presumes to act like a mediating institution -- speaking on behalf of others and for the larger public good. It is corporations that have taken the place of political parties, to the extent anyone has.
With varying degrees of sophistication and intensity, hundreds of these large corporate political organizations are now astride the democratic landscape, organizing the ideas and agendas, financing electoral politics and overwhelming the competing voices of other, less well-endowed organizations and citizens. They portray themselves as "good citizens," doing their part for public affairs.
For obvious reasons, this institutional arrangement is bound to disappoint democratic expectations. The contest of politics becomes mainly an indistinct competition among rival behemoths. The political space that once belonged to parties and other mediating institutions is usurped by narrow-minded economic interests. Citizens at large vaguely perceive that government is being steered by these forces and they naturally resent it.
The transformation occurred partly by default and partly by design. Corporate political organizations set out to seize the high ground, but they also simply learned how to do politics in the modern setting more inventively than anyone else. By necessity, they have adapted effectively to the new conditions of mass-media politics and the diffusion of government authority, while citizens and rival organizations have not.
Corporations, however, enjoy an anomalous status not available to anyone else: In the lawless government, corporate "citizens" are the leading outlaws. They may regularly violate the law without surrendering their political rights -- committing felonious acts that would send people to prison and strip them of their citizenship. This contradiction is crucial to what has deformed democracy; the power relationships of politics cannot be brought into a more equitable balance until citizens confront the privileged legal status accorded to these political organizations.
In order to understand the power of corporations, it is not necessary to track the myriad political activities of hundreds of companies. The reality can be adequately demonstrated by describing the politics of one outstanding example among the many -- an especially skillful and energetic political organization known as the General Electric Company. Like others, "Citizen GE" energetically promotes its own civic reputation while it tenaciously pursues its interests across an extraordinary range of matters. Like many other major companies, "Citizen GE" does its everyday politics despite its anomalous status as an ex-convict.
***
At forty-three, Benjamin Heineman, Jr., had the sort of political resume that marked him as a future Cabinet officer, if the Democrats ever again won the White House. The son of a politically prominent Chicago industrialist, Heineman studied at Harvard, Yale and Oxford and became known in Washington for his quick and serious intelligence. He served as assistant secretary for planning at HEW in the Carter administration, then became managing partner in the Washington office of Sidley & Austin, one of Chicago's leading law firms. To some, it seemed a diversion from destiny when Heineman left the capital in 1987 to become general counsel of the General Electric Company in Fairfield, Connecticut.
Not at all, he explained to an interviewer. General Electric offered him the opportunity to influence public policy, across an extraordinary front of governing issues, from the tax code to defense spending, from broadcasting to environmental regulation, from banking law to international trade, from Head Start to Star Wars. "GE is a mirror of the world economy," Heineman told the American Lawyer. "You have an opportunity to see everything."
Philip A. Lacovara, a former Watergate prosecutor and the top litigator in another Washington law firm, joined GE for the same attraction -- the chance, he said, to be "involved in major policy and issues." As GE's chief of litigation, Lacovara expected to write friend-of-the-court briefs on such diverse matters as the First Amendment and securities law, government contracts and corporate responsibility.
"American industry has been reticent," he explained. "GE recognizes that as a major economic entity it has the stature and responsibility to form opinions."
One of Lacovara's first projects at GE was to try to head off the new corporate-sentencing guidelines being prepared for the federal courts, guidelines intended to stiffen the consequences for corporations that break the law. General Electric has more than a theoretical interest in this policy question since the company itself has been convicted of a series of crimes in recent years, including defrauding the federal government. The legal standards for corporate criminality, Lacovara argued, "should be narrowed substantially."
Companies cannot be held responsible for the transgressions of far-flung employees, Lacovara explained in comments he filed with the U.S. Sentencing Commission. Instead of stiffer penalties for corporate Violators, Lacovara suggested that federal prosecutors ought to offer special rewards to companies that cooperate with them -- lenient fines and forgiveness -- in order to encourage what he called the "good corporate citizen."
When the Justice Department endorsed a draft of the more severe sentencing guidelines in the spring of 1989, the GE lawyers took their complaints to the White House. An associate of Lacovara's warned the president's counsel that the proposed guidelines were "a corporate death sentence." George Bush's lawyer made some phone calls. The Justice Department backed off and withdrew its endorsement. [2]
As the episode suggested, there are no longer any distinct boundary lines between law, politics and corporate management. In the modern milieu of governing, these are all the same subject. General Electric recognizes this reality more astutely than most and, as Ben Heineman explained to the American Lawyer, was beefing up its legal department to take "an aggressive, offensive look at the problems of the company." GE's lawyers, he said, would track not just litigation, but also new legislation and regulation, alongside the company's lobbyists. "Preventing litigation is one thing," Heineman said. "But how do you calculate [the benefit] if you change a regulation or work something out with Congress?"
One of Heineman's new hires was a former colleague from Sidley & Austin, Stephen D. Ramsey, who had previously served as assistant attorney general for environmental enforcement in the Reagan administration. At the Justice Department, Ramsey had developed the liability rules for enforcing the Superfund law, the law that requires corporations to pay their share for cleaning up the thousands of dangerous toxic-waste dumps they created around the nation. At Sidley & Austin, Ramsey worked on how to stymie the Superfund law.
A legal memorandum prepared by Ramsey in 1986 provided a playbook for how corporate lawyers could confound the government's efforts to collect the billions owed by polluters. His Superfund memo was widely circulated among the law firms that defend corporations against Superfund claims be cause it spelled out the step-by-step tactics for hanging up the liability process in the tangle of court challenges. Ramsey, for example, advised fellow lawyers:
"Bear in mind that district courts, unlike courts of appeals, are generally unfamiliar with record review. This suggests opportunities to expand the record.... Use Freedom of Information Act, broadly and often, and challenge withholding of relevant documents.... There is an added appearance of arbitrariness and procedural sloppiness if the government refuses.... Artful use of the Book-of-the-Month-Club response ('If we do not hear from you, we assume you agree with us').... Take full advantage of every opportunity to comment. . . . Force the government to respond to your comments.... And, document when they do not, to lay foundation for later challenge." [3]
EPA's chief of enforcement was sufficiently alarmed by Ramsey's memorandum that he issued an in-house warning to EPA legal and technical staff, urging them to "be prepared to handle challenges suggested by it."
General Electric is much in need of Stephen Ramsey's legal specialty. GE has been listed as a "potentially responsible party" at forty-seven Superfund sites -- more than any other U.S. corporation. The forty-seven toxic-waste dumps are on EPA's priority cleanup list, sites where GE either was the operator or contributed significantly to the chemical wastes. Ramsey became the company's vice-president for corporate environmental programs. ''I'll be ensuring that GE at a corporate and business level is doing everything they can to comply with existing laws and government regulations and to go beyond that," he declared. [4]
Heineman's imaginative recruiting spun the "revolving door" in other fields as well. A former Treasury Department legislative counsel from the Carter administration was hired to be GE's chief lawyer for tax planning and policy. A former energy counsel from the Ford administration was hired to be the top lawyer for GE's appliance division.
But Ben Heineman was simply applying to the legal department the same sophisticated political sensibilities that GE management has demonstrated for many years. The former chairman of the Joint Chiefs of Staff, retired Air Force General David C. Jones, is on GE's board of directors. So was Ronald Reagan's former attorney general, the late William French Smith.
But critics who focus on the career-ladder aspects of this phenomenon generally miss the larger meaning. The "revolving door" is not about personal opportunism, but about the organizational reality in American politics. A company naturally wishes to hire the best people to do its political work, since its bottom line depends directly on the political outcomes -- not just now and then, but continuously every day, every year.
General Electric, like every other major corporation, is thoroughly engaged in the politics of governing -- more intimately and extensively than any individual citizen would ever feel the need to participate, more aggressively than even hyperactive political activists could imagine. The company's practical politics is a function of economic necessity, not the ideology or civic sensibilities of its managers.
General Electric's wingspan is almost as broad as the government's. While it is too large and diverse to be considered typical, GE is an outstanding prototype of the modern corporation doing politics, since its product lines and corporate interests intersect with practically every dimension of the federal government's decision making. GE makes the things that government buys but also the things that government regulates and licenses: light bulbs and locomotives, jet engines and nuclear bombs, TV broadcasting and nuclear-power plants and financial services.
GE is the second-largest plastics manufacturer and, therefore, keenly interested in environmental law enforcement. But then it also manufactures pollution-control systems. Its medical-diagnostic equipment leads the world market -- as do GE circuit breakers, industrial turbines, electric motors, aircraft engines. The company is intensely engaged in trade policy and the emerging global economy.
GE is a stockbroker, since it owns the Kidder Peabody brokerage. GE is also a major bank, since its financial subsidiary, GE Capital, has $91 billion in assets-equivalent in size to America's fourth-largest commercial bank. General Electric is also a media giant, since it owns the NBC network and NBC's seven local TV stations as well as footholds in television broadcasting in three other countries. It purchased Financial News Network and closed it down in order to eliminate competition for its own cable venture, the Consumer News/Business Channel. [5]
For all these reasons, General Electric is a conglomerate that, in addition to its productive, profit-making activities, also functions as a ubiquitous political organization. With great sophistication and tenacity, GE represents its own interests in the political arena, as one would expect. But that is not what makes it so influential.
General Electric also tries to act like a mediating institution -- speaking on behalf of others. GE, like many other companies, assumes the burden of representing various groups of other citizens in politics -- workers, consumers, shareholders, even other businesses and the well-being of Americans at large. GE has the resources to develop and promote new political ideas and to organize public opinion around its political agenda. It has the capacity to advise and intervene and sometimes veto. It has the power to punish political opponents. It also has the sophistication to lend its good name to worthy causes, such as the Urban League, only remotely related to the company's profits.
The permissive culture of the grand bazaar is especially well suited to the corporate style of politics. Corporations have both the money and the economic incentive to play politics on both levels -- bargaining outcomes in obscure places that manipulate laws and mobilizing ideas and opinions to influence the visible public contest. To negotiate successfully in the grand bazaar, a political interest must have lots of lawyers, preferably with Washington connections. To influence the broad public debate, a political organization needs the status of "good corporate citizen," and GE has acquired that reputation too.
Other governing elites, including most elected politicians and the media, have found the corporate mode of politics congenial to their own interests. At least they have come to accept the corporate presence as the prevailing constant in how democracy now functions. Given the failure of other institutions to adapt and revitalize themselves, corporate politics has become the organizational core of the political process -- the main connective tissue linking people to their government.
***
General Electric is a deeply Republican institution for obvious historical reasons. As the inheritor of inventor Thomas A. Edison, the company was one of the brilliant pioneers in the rise of America's industrial corporations early in the twentieth century and has always naturally aligned itself with the party of business. In the 1950s, it sponsored Ronald Reagan's TV career and launched him on the lecture circuit as a crusader against big government.
But the company's upper management is also now sprinkled with "country club Democrats" like Ben Heineman and, since New Deal days, the corporation has been active in designing social programs usually associated with liberal Democrats. For years, GE has been a faithful contributor to mainline civil rights organizations and to education projects for racial minorities.
General Electric's political director, so to speak, is Frank P. Doyle, an executive who bears the stylishly contemporary title of senior vice-president for "relations." A Democrat, Doyle ranks just below GE's CEO, John F. Welch, Jr., and alongside the senior vice-presidents for finance, research and development, executive management and legal counsel. Though he seldom appears as a public witness for company policy, Doyle is in and out of Washington regularly on myriad matters and he also spends a lot of time in Brussels, the capital of the European economic community.
His attention, it is said, is roughly divided between developing broader social issues such as education and' job training, the consolidation of GE's position in Europe's emerging common market and the hardball politics of pursuing GE's specific lobbying agenda, from fighter planes to taxes. [6]
"Jack Welch has a sophisticated, modern vision of the corporate social role," said a congressional aide who has dealt frequently with GE on a spectrum of issues. "In politics, they are heavy-handed, big-stick players on their own issues, but they're not Dow Chemical. GE spends much more time on education, for instance, than other corporations. No one else is close, And they reap enormous benefits when they come around to collect their own nickels."
General Electric's political capacities depend upon an impressive infrastructure of different components-an elaborate team of lawyers and lobbyists, continuing financial investments in both charity and politics and programs of education and propaganda. These elements work together in both obvious and subtle ways as the institutional predicate for GE's political power.
In Washington, GE has a permanent team of two dozen lobbyists with a large support staff but, as the need arises, it regularly hires outside lawyers and lobbyists for targeted assignments.
Like other companies, GE finances the politicians in both parties. During the 1988 election cycle, GE PACs contributed $595,000 to congressional campaigns. One year, the company also paid $47,000 directly to senators and representatives to listen to them give speeches (the speakers, it turns out, were mostly members of the armed services and defense appropriations committees). The second-ranking lobbyist in GE's Washington office, Robert W. Barrie, is a leading "money guy" for congressional Democrats and always willing to get on the phone and canvass the lobbying community for money. [7]
GE is also a social philanthropist. Its tax-exempt foundations gave away $18.8 million in 1989, mostly to colleges and school systems, including major commitments to scholarships for the poor and racial minorities. Like any other good citizen, GE donates to United Way and other local community projects. Alongside the company's 1989 earnings of $3.9 billion, GE's sense of charity does not seem immoderate.
But the corporation's philanthropy also serves its own political objectives in direct ways. GE's tax-exempt contributions went, for instance, to lobbyist Charls Walker's American Council for Capital Formation (an "educational" front group that campaigns against the corporate income tax and for a national sales tax), the Institute for International Economics (a think tank that promotes the multinational corporate line on trade and economic policy), and Americans for Generational Equity (an issues front that campaigns for cuts in such entitlement programs as Social Security). GE gives substantially to the major policy think tanks that promote the conservative business perspective -- Brookings and AEI-though not to zealously right-wing outfits, such as the Heritage Foundation.
GE is also directly active in political education and propaganda. It sponsors the McLaughlin Group, a right-wing TV talk show that is popular among political devotees for its quick, abusive style of discourse. GE is a leading member in the Business Roundtable, which disseminates the political agenda of Fortune 500 corporations. GE also enters dozens of trade associations and a continuous galaxy of temporary joint ventures like the Superfund Coalition formed to prepare public opinion for business objectives.
The Committee on the Present Danger, founded with defense-industry financing in 1976, created the propaganda base for the huge defense buildup of the 1980s. The Center for Economic Progress and Employment, despite its public-spirited title, is a front group formed by GE, Union Carbide, Ford and other manufacturers to weaken the product- liability laws. The center financed a lengthy study attacking liability lawsuits and, for added authority, arranged to have the Brookings Institution publish it. [8]
General Electric also fosters a positive political image directly through its own advertising -- soft-focused TV spots that portray GE as an admirable citizen. According to INFACT, the Boston group leading a boycott of GE products, the company tripled its image advertising to $26.8 million a year after it came under attack in the mid-1980s as a producer of nuclear weapons. The increased self-promotion also coincided, however, with GE's embarrassing criminal indictment for cheating the government on defense contracts.
General Electric's commercials are more tasteful and entertaining than the hard-sell "issue" ads sponsored by some other companies. The TV spots usually tell compelling stories from GE's inventive past -- the pioneering of jet engines, the development of lighting that ushered in night baseball. However, the contemporary GE is better known not for inventing new products, but for its hard-nosed corporate restructurings, buying and selling and taking apart whole companies.
One of GE's loveliest commercials depicts its role in helping to bring freedom to the people of Hungary. It is a gorgeous montage of Hungarian citizens joyously celebrating their liberation from communism, mixed with images of GE managers completing the purchase of Hungary's state-owned Tungsram Company, eastern Europe's major manufacturer of light bulbs. Like all effective propaganda, the commercial amplifies something that is true but strips away complicating facts that would conflict with the heartwarming message.
While GE was buying Tungsram for $150 million in late 1989, a flying squad of GE lawyers and lobbyists was blitzing the governments in Washington, Brussels and Budapest -- wiring the deal against political risks. The U.S. Justice Department was quickly persuaded to waive antitrust questions, though GE was already the world's second-largest maker of light bulbs. The Overseas Private Investment Corporation, the federal insurance program for corporate overseas investments, was lobbied to insure the venture against political upheaval -- the largest policy in the agency's history and its first in eastern Europe. GE used a former general counsel of OPIC to sell the deal. Simultaneously, GE lobbyists managed to defeat a crippling legislative amendment on the Senate floor.
Accomplished under tight deadlines, the multifront lobbying was a splendid example of GE's ambidextrous political capabilities. But GE's assistance to Hungarian freedom, as depicted in the TV commercial, might seem less noble and daring if the audience knew that the GE lobbyists had beforehand secured political protection for the venture. [9]
Anyone who watches television regularly knows that, in recent years, major corporations have significantly increased the millions they spend on both soft and hard propaganda -- commercials designed to promote corporate images and political attitudes, not to sell specific products. According to annual surveys by Public Relations Journal, the volume of corporate-image advertising reached $941 million a year by 1987 in broadcasting and print media -- enough money to finance four or five presidential campaigns. [10]
Americans are saturated in "feel good" messages about the largest business corporations. Dow Chemical, notwithstanding its notorious reputation as a polluter, portrays itself as an old friend of nature. AT&T saves eagles. IBM teaches children in the ghetto. Northrop, facing trial in Los Angeles for criminally defrauding the Air Force, began broadcasting commercials on Los Angeles TV that featured legendary test pilot Chuck Yeager extolling the high quality of Northrop's aircraft. The presiding federal judge was so upset he banned the ads on the grounds that Northrop was trying to influence potential jurors for its trial. [11]
What difference does all this propaganda make in terms of political action? Market research suggests that, while corporate propaganda may not do much to reduce the public's collective distrust of business, individual companies can significantly dilute the hostility toward themselves.
In California, for instance, Chevron targeted messages in its "People Do" ad campaign at the most hostile segment of citizens -- the so-called "inner-directed" people with strong environmental values, who expressed heightened opposition to offshore oil drilling and low regard for Chevron. Two years later, the research director proudly reported, these people felt much better about Chevron and ranked it first among oil companies they trusted to protect the environment. They even bought more Chevron gasoline. They were still not, however, in favor of offshore drilling. [12]
General Electric's politics depends on all these various elements in its political infrastructure, but they are only preconditions for influencing political outcomes. In the public arena, what best advances GE's position is that, implicitly or explicitly, it is speaking on behalf of others.
GE accumulates power by pretending to serve as a mediating institution. The company lobbies expertly to enhance its own sales and profit, but General Electric routinely invokes millions of other citizens as the ultimate beneficiaries of its politics. When GE is threatened in Washington, it claims to be defending broader constituencies from injury. But when GE defines its policy objectives, it does not bother to consult the people it ostensibly represents. GE is a mediating institution that accepts no obligation to those for whom it claims to be speaking.
General Electric has 177 plants in the United States (plus 103 others in twenty-three foreign countries), which automatically provides a broad and varied platform of economic interests, including workers, whom it can plausibly represent. Some 243,000 Americans make their living working for GE. Approximately 506,000 Americans are stockholders. About 300 retailers, from Montgomery Ward to Levitz furniture, use credit-card systems run by GE Capital. The NBC network has 200 affiliate stations. GE's jet-engine assembly plants in Evendale, Ohio, and Lynn, Massachusetts, make the engines for two dozen different kinds of military aircraft.
In other words, the potential span of political interests that a corporation presumes to represent can be made to look much larger than the company itself. GE's political voice multiplies itself and intersects with millions of others -- people who mayor may not actually agree with its political objectives. GE mobilizes allies and its local cadres -- workers, managers, customers, suppliers -- when they do agree. If they don't, it simply invokes their names.
Frank Doyle, for instance, once protested to the Senate Foreign Relations Committee that, despite appearances, the Export-Import Bank's trade subsidies for such major corporations as GE and Boeing really help the little guys too, despite, as Doyle acknowledged, "a lingering perception that the bank is a big-company benefit." The smaller companies benefit, he insisted, because "they participate through us as sub-contractors." [13]
Defense issues, argued out in public on the esoteric plane of grand military strategy or weapons technology, are lobbied in private on an earthier stratum: How many jobs. in my district or state are attached to this bomber or tank? Though the Massachusetts delegation is as dovish as any in Congress, one congressional aide from the state said with only mild exaggeration: "Basically, the GE guy comes around and tells us which aircraft we are voting for because Lynn will make the engines for them."
Liberal members of Congress may be hostile to the bloated defense budget, but they love defense workers. "Yeah," Representative Barney Frank of Massachusetts acknowledged, "I guess I voted for the F-18 a couple of times because it has GE from Lynn. I'm sure I wouldn't have voted for it if the GE plant had been in Cleveland."
When General Electric speaks for its shareholders' interest in maximized profits, its approach necessarily becomes more oblique, since politicians are not likely to be terribly excited by the narrow goal of boosting stock values. The company's profit objective is, therefore, reformulated as a question of broad national economic policy -- how to stimulate the economic growth from which the multitudes will presumably benefit.
According to GE, this goal can be achieved by cutting its taxes. Reginald H. Jones, Welch's predecessor as CEO, was a much more visible political player in Washington, relentlessly selling his arguments for corporate tax relief. Jones "seemed to spend his life at the Senate Finance Committee, lobbying for tall breaks and with some success," said Robert McIntyre of Citizens for Tax Justice. "Jones was literally at every single Finance Committee hearing I ever went to. His line was the same old bullshit about how we have to increase American competitiveness and all you need to do to increase American competitiveness is reduce GE's taxes."
Phillips S. Peter, head of GE's Washington office, was simultaneously acting as a principal in the Carlton Group, the permanent caucus of corporate tax lobbyists who basically wrote the business provisions for the watershed tax-cutting legislation of 1981. As is now well known, the companies were well rewarded for their political energies. Hundreds of them -- including General Electric -- wound up paying no taxes at all for several years.
On such matters, economic blackmail is a standard tactic of corporate politics. On the eve of the 1981 tax vote, members of Congress were inundated with telegrams and personal visits from corporate CEOs, warning them in the most explicit terms that their districts would lose jobs if the business tax reductions failed to pass. Even a politician who dismissed these threats as specious was forewarned that his next opponent could accuse him of voting against jobs -- a charge that would be corroborated by the Fortune 500.
As it turned out, General Electric was possibly the biggest single winner in Ronald Reagan's celebrated tax cuts. It had corporate profits of $6.5 billion during 1981-1983 and, astonishingly, received a tax rebate of $283 million from the federal government. Its tax burden went from $330 million a year to minus $90 million a year -- money the government now owed GE. By rough estimate, the 1981 tax legislation yielded as much as $1.3 billion for General Electric over several years and probably much more in the long run.
GE's windfall did not, however, create any new jobs for Americans. On the contrary, the company was in the process of drastically shrinking its U. S. workforce -- eliminating nearly fifty thousand people from its payroll through layoffs, attrition and the sell-off of subsidiaries. The tax windfall, however, did help GE finance its aggressive campaign of corporate acquisitions, as it bought such important companies as Utah Construction, RCA and NBC. [14]
The same pattern was general in American business. After the generous tax cuts of 1981, capital investment by American corporations accelerated, but not in the United States. The new investments were primarily made in foreign countries. American taxpayers, in other words, were unwittingly subsidizing the globalization of their own industrial structure. [15]
As Congress struggled in subsequent years to recover some of the lost tax revenue from 1981, GE sometimes went its own way -- splitting from the corporate coalition on some crucial tax questions and skillfully protecting its own balance sheet. One of the most egregious loopholes created in 1981 effectively allowed companies to swap tax shelters with each other by leasing equipment instead of purchasing it. Since GE Capital was already a major leasing enterprise, this provision helped the parent corporation erase tens of millions in taxes. But, given all the new competition that the loophole was attracting into the leasing business, GE decided it would be better off with repeal.
On this issue, GE sang with the reformers and against its former political allies in business. Winning on its own terms, however, required the adroit use of GE's political connections. At the final hour in the 1982 debate, Bob Barrie, the GE lobbyist who is a valued fundraiser for Democrats, called in his chits with the House Democratic leaders. As Thomas B. Edsall of The Washington Post described the episode, Barrie made a nifty end run around the phalanx of corporate lobbyists who were on the other side of the tax- leasing issue.
"Barrie was able to get with Rostenkowski, with the Speaker, with the entire Democratic leadership to explain what was a horribly complex issue," an allied lobbyist told Edsall. "And he got them on board. From GE's point of view, it was quite a coup." [16]
General Electric does not always win, however, and eventually it was compelled to start paying taxes again. CEO John Welch bitterly opposed the 1986 tax reform measure, which set a minimum corporate tax and repealed the investment tax credit, but corporations lost in the end. Wealthy taxpayers, on the other hand, won with drastic reductions in individual tax rates.
By 1989, GE was paying $1.1 billion in federal taxes -- an effective tax rate of about 23 percent, still well below the statutory rate of 34 percent. GE, meanwhile, carries on its books $3.5 billion in legally deferred tax liabilities -- money it owes the government but, thanks to various loopholes provided for defense contractors, doesn't have to pay until sometime in the future. Overall, corporate tax revenue has consistently fallen $20 billion to $30 billion a year below what the 1986 reforms had predicted. [17]
***
Beyond their individual objectives, GE and the other corporate organizations also act in concert as important gatekeepers for the political debate -- guarding the public agenda with more purpose and consistency than the news media. When consensus develops among the major players of business and banking; ideas that were thought to be dormant or impossible suddenly turn into active issues in the political arena.
Universal health-care reform is the latest example. For decades, the American public expressed its support for national health insurance and such groups as organized labor actively campaigned for it. Nothing happened. Now major corporate leaders -- the CEOs of Chrysler, American Airlines, Ford and many others -- have declared support for basic reform for their own purposes, because the soaring cost of the private health-insurance system is devouring corporate balance sheets too.
The political community, therefore, is at last stirring on the subject. A goal that was routinely dismissed as "socialist" or too expensive has abruptly found a place on the agenda. High-level negotiations are underway between labor and the major corporations (including General Electric) on how to define the health-care solution. When the political solutions are proposed, they may be shaped as much by the cost-saving imperatives of major corporations as by the popular distress expressed by citizens. [18]
The distinctive quality in General Electric's politics is not, however, its behind-the-scenes deal making or the skillful ways in which it amplifies its own interests by invoking the interests of workers, small business or consumers. These are the standard approaches employed by corporate political organizations of every kind.
What sets GE apart from most other companies is the seriousness with which it represents people in the society whose lives are not connected to the fate of General Electric -- especially society's losers. These include children and poor people, disadvantaged racial minorities and even ex-workers, the tens of thousands who lost their jobs at General Electric during the 1980s. In various ways, as GE's leaders have figured out, this is good for the company.
Frank Doyle has testified eloquently, for instance, on behalf of greater federal funding for Head Start and early childhood education programs, invoking an economic rationale for the company's social concern. "A competitive America -- let alone a compassionate America -- will need every trained mind and every pair of skilled hands," Doyle declared. "But the appalling fact is that one in five of our teenage children and younger live in poverty." [19]
GE cares about these children, Doyle explained, because if they are not trained for high- skill work in the global economy, they will become future costs to the society in terms of welfare and crime. The company has also been an ardent advocate of government job- training and retraining programs for the workers displaced by economic change. With grants from the Labor Department, GE operates such programs for its own former employees.
"When the GEs and GMs and AT&Ts and USXs of America no longer have low-skill, low- value-added jobs -- because they have adjusted to a high-skill, high-value-added global competitive world -- those left out will be locked out of the great American middle class," Doyle warned. "And every time that happens, it is a tragedy for America."
While the rhetoric sounds public-spirited and compassionate -- even dangerously bleeding- heart for tough-minded businessmen -- General Electric's social concern serves its own long- term political interests. It provides a shield against hostile political action and deflects political attention from the company's own controversial behavior in the American economy. Above all, it defines the economic debate in the terms that are most congenial to GE's own future.
Like other major multinational corporations, GE wants maximum freedom to do as it chooses in the global economy -- shifting production and jobs wherever seems most efficient. And it wants minimal responsibility for the economic consequences that follow for the U.S. workforce -- the steady loss of high-wage industrial jobs. The company's "social concern" is, thus, quite shallow: It cares about educating little children, but accepts no responsibility for what economic dislocation does to adult workers and their communities.
GE and other important corporate voices, including the Business Roundtable, instead promote the argument that the remedy for job losses and the downward mobility of industrial workers is simply more education and better training. This analysis conveniently shifts the blame from corporations to the educational system and the workers themselves. But it requires the corporations to make a highly dubious claim: that America is facing a shortage of skilled workers.
"Our industrial economy," Doyle asserted, "is generating more jobs than we have people with skills to fill them." Many recent college graduates learned otherwise when they went out to begin their careers and were compelled to take work below their educational levels. The shortage they encountered was not one of well-trained workers, but of good jobs.
Labor economists from the Economic Policy Institute examined the corporate claim of an impending "skills shortage" and declared it a hoax. The corporate political objective, they concluded, is to divert attention from the real wage problems -- the proliferation of low-wage jobs and the declining value of industrial wages generally. [20]
Doyle's assertion of skilled-labor shortages, in fact, comes from a company that abandoned fifty American plants and shrank its overall workforce, foreign and domestic, by roughly one fourth during the last decade. The forty-six thousand American workers let go by GE since 1981 were not mainly janitors or unskilled general laborers or low-level clerks. They were people with premium wages -- machinists and electricians, engineers and white-collar managers.
Union leaders bitterly dubbed GE's CEO "Neutron Jack" because, like the so-called neutron bomb, Jack Welch eliminates the people and leaves the buildings standing. During the 1980s, GE bought more than three hundred businesses and sold off more than two hundred others, searching for the right mix of domestic and foreign products to lead in world markets. GE transformed itself from a company that was two thirds manufacturing and one third services to one that is the reverse.
Welch's strategy, widely admired in business and financial circles, is to create what he calls "a boundaryless company" -- a corporation that "will recognize no distinctions between 'domestic' and 'foreign' operations." In practice, his restructurings compelled GE unions to negotiate wage contracts that were really job-shrinking agreements with provisions for severance pay and early retirement.
For white-collar management, Welch also virtually eliminated the old, unwritten assurances of mutual loyalty and trust that used to prevail in companies like GE. "Loyalty to a company, it's nonsense," Jack Welch told The Wall Street Journal. Frank Doyle told Business Week: "We now want to create an environment where employees are 'ready to go and eager to stay.'" Business Week concluded that at General Electric the old social contract between employer and employees has been nullified. [21]
Throughout this transformation, however, Doyle and other GE spokesmen have reiterated their sympathy for the losers -- and encouraged them to improve their skills while they look for other jobs. "I'm not advocating a crude, vote-with-our-feet ethic or asking displaced workers and their families to crisscross the country reading the want ads," Doyle told the Congressional Competitiveness Caucus. "What I am advocating is the basic premise that people will change jobs, upgrade skills and switch industries, not once but several times in their careers." [22]
What Doyle and General Electric never adequately explained is where all these new, high- skilled jobs are going to come from -- when major companies like GE are busy eliminating them. It requires a mighty leap of faith to imagine that everyone will somehow climb up the "skill ladder," as Doyle called it, and become computer technicians. For the last twenty years, the American experience with industrial globalization has produced the opposite result for American workers.
The deterioration of wages and incomes and the structure of the job market is the central economic question facing American families, but corporate political organizations have succeeded in deflecting the issue from serious scrutiny. GE favors federal aid for the unemployed, but it is opposed to any political measure aimed at the behavior of employers in the global economy (the subject explored directly in Chapter Seventeen). Politicians debate trade policy and bash Japan, but they do not scrutinize the loyalty of America's own global companies. Frank Doyle's most impressive political achievement is the debate that never occurs on the nature of the multinational corporations.
The politicians who attempt to stand and defend workers against these forces are ridiculed by elite opinion -- labeled irresponsible and reactionary or perhaps punished in other ways as well. "Let's be certain," Doyle warned the congressional caucus, "that those who should provide positive leadership don't seek retrogressive, fear-driven solutions."
Thus, the underlying political tension lies in the question of who really speaks for the best interests of Americans and their future. GE's rhetoric stresses "we" -- the warm-spirited Americanism of its TV commercials -- but its vision of itself as a "boundaryless" company does not really depend upon the general well-being of Americans, any more than it depends on loyalty to its own employees. In fundamental ways, GE's own long-term political interests are in conflict with the interests of many of the people it presumes to speak for-workers and communities and poor people, but also the general prosperity. Corporate politics, though it may intimidate politicians, cannot be expected to function as a trustworthy mediator for others. This connective strand only runs one way.
Given its girth and skill and other attributes, a politically active corporation like General Electric acts like a modern version of the "political machine," with some of the same qualities of the old political machines that used to dominate American cities. In form and behavior, the modern corporation has the same cohesion and sustaining purpose that made the old urban organizations so influential in politics. Its stubborn permanence is a force that others must contend with. Its supple sense of strategy permits temporary alliances with old enemies and occasional betrayal of friends. Except, of course, there is not just one corporate "machine" operating in American politics, but hundreds of them.
Like the old big-city organizations, the corporate "machines" can be maddeningly parochial but also occasionally farsighted. Fiercely loyal to its own interests and civic values, a corporation may be arrogantly dismissive of larger public concerns. And, like the old urban machines, the corporate political organizations often display a tolerance for corrupt behavior, so long as the corruption enhances the organizations' own well-being.
Unlike a party organization, however, a company like GE does not develop its political agenda by consulting its cadres or the constituencies for whom it speaks, not even the shareholders. Most of the old local party organizations, notwithstanding their negative qualities, did give ordinary people a connecting point to government and sometimes a genuine venue for speaking to power. Political decisions are closely held in the corporate machine, not unlike the worst of the big-city bosses. The dependent constituencies are reduced to a passive role resembling that of ward heelers, with not much choice except to follow the dictates of the organization.
The corporation has acquired many of the same political skills that party organizations are supposed to have -- it teaches and organizes, it agitates and leads. But it has no need to listen to its adherents or assume responsibility for them. For these political machines, there are no elections.
This organizational reality is a central element in what deforms and confuses modern democracy. The new political machines, like the old ones, dot the political landscape like free-floating baronies, independent and self-sustaining and unaccountable. They have similar interests and frequently merge their power in coordinated strategies, just as the big- city machines used to do. But they are also often in conflict with one another and it is those contests among competing client groups that usually define the largest issues and frequently stalemate them. If the government in Washington is unable to govern, it is stymied, not by reckless public opinion, but by the conflicting demands of the corporate machines.
The implications of this structure of power are obviously antidemocratic. Yet, as a political system, it "works." That is, it works in the narrow sense that it takes care of the everyday chores of politics. The corporations, together and separately, finance the parties and politicians. They sponsor the public-policy development needed to shape the governing debate. They mobilize public opinion around political agendas. In their own self-interested manner, they even hold elected officials accountable for failure to perform.
Above all, the formidable, ubiquitous presence of corporate political organizations persuades many citizens to retreat from the contest. That may be the gravest damage of all. Faced with this assembled power, many people accept their own impotence arid defer. They assume that the hard work of democracy -- debating public issues, contesting elections, helping to organize their own lives -- is work that belongs to others.
The price for this default is enormous in terms of what the government decides. When the corporate perspective defines the outlines of debate, it shrinks the nation's political values to the amoral arithmetic of the bottom line. The rich and complicated fabric of American life -- and the infinite political imagination of its citizens -- is reduced to sterile calculations of cost-benefit analysis. Competing political aspirations, whether for equitable taxation or environmental protection or affordable housing, are judged according to a narrow question: Is it good for the machine?