ECO:nomics: Immelt vs. the ideologues

GE CEO explains practical realities to free marketeers

Posted by David Roberts at 12:14 AM on 13 Mar 2008

Read more about: business | energy | carbon trading | carbon tax | Competitive Enterprise Institute

The Wall Street Journal's ECO:nomics conference is taking place at the Bacara Resort, a gorgeous old Spanish-style complex perched on the edge of the Pacific Ocean. Just outside, the cherry-red sun is setting as a warm breeze blows and waves quietly lap at the sand. Inside, however, things have gotten a little stormy.

Jeffrey Immelt.

Photo: Genesis Photos

"I came because I was invited," says the man on stage heatedly, squaring off his shoulders to the packed crowd. "I don't need to be lectured by anybody in this room about how to compete!"

From another speaker it might sound defensive, but in this case it is the CEO of GE, the second largest company in the world. Jeff Immelt knows whereof he speaks.

Immelt's outburst came toward the end of a Q&A session that saw him repeatedly assailed by ideological conservatives angry over his involvement in the U.S. Climate Action Partnership, a coalition of large businesses lobbying for a carbon cap-and-trade system, and his leadership role in pushing the business world to embrace clean energy and sustainability.

First it was Kimberly Strassel, conference co-host and member of WSJ's notoriously hard-right editorial board. He answered her patiently, explaining that it's better for businesses to get out in front of what's coming than wait on the sidelines. Then it was Fred Smith Jr., president of the Competitive Enterprise Institute, who lamented the capitulation of business leaders before the onslaught of Big Government. Immelt smiled tightly, paused, and said, "it's a great country -- we can disagree about this."

What put him over the top was Terry Anderson of the Property and Environment Research Center, a right-wing think tank. Anderson asked what real entrepreneurs -- the ones who don't have the resources to lobby for favorable treatment from government -- are supposed to do when a carbon cap cripples the economy.

Real entrepreneurs. That set Immelt off. "We compete our asses off," he snapped. "We're No. 1 at what we do!"

At points, Immelt seemed keen to let his antagonists know that he was one of them. "We read all the same books!" he said plaintively to Strassel. "I'm not an environmentalist," he insisted later. At the end of one exchange, he protested, "I've never voted for a Democrat!" adding with a mutter, "until tonight, maybe ..."

Conservative in good standing he may be, but Immelt has practical considerations to attend to. The day after this law is passed, he said, "you can write about something else. But I've got to go to work that day." He returned to several points repeatedly:

The ideologues "worship false idols." There are no completely free markets. The government has its hand in every industry: Housing has mortgage tax credits; GE got into commercial aviation because the DOD helped fund it; in healthcare there's Medicare and Medicaid and the NIH, researching and funding new drugs. Only in energy, for some reason, "we've decided that the only regulation will be the price of a barrel of oil. That's crazy!"
Businesses always forecast doom, but regulations can often work to spur competition. The SOX trading program worked. OSHA 1910 worked. CAFE standards worked. The production tax credits work. About the PTC, Strassel asked, "how many wind turbines would you have sold this year without government subsidies?" Immelt: "The same number. Just outside the U.S."
Rising energy costs are not some theoretical worry; they're happening. Costs are rising. Better to get out ahead and take control than wait for it to be thrust on you. By the time a law is written, it will be five years too late.
If business doesn't take a seat at the table, regs will be determined by politicians and activists (some of which, he said with evident horror, want to do away with coal entirely!). USCAP may not be perfect, but it replaced a vacuum.

Interestingly, criticism from the right came only from pundits and think tankers. Every CEO that addressed Immelt was supportive. Duke Energy CEO Jim Rogers shared an old saying: "The pioneers get the arrows and the settlers get the land." Patricia Woertz of ADM talked about how mission-driven business can attract great employees. H. Lee Scott Jr. of Wal-Mart talked about how odd it is that conservatives oppose programs that are, in effect, reducing waste.

Ultimately, Immelt's most powerful argument came in the form of a simple question. At the end of another defense of carbon caps, he paused for a moment and then asked, "What's your favorite part of our current energy policy?"

Silence.

"Make a list!"

More silence.

Then scattered laughter. Then waves of laughter. And finally, applause.

For story: ECO:nomics: Immelt vs. the ideologues
11 Comments | Post a Comment

Seems like things are getting pretty desperate

when Conservative/pro-business-types start turning on their own kind.

Well played, Immelt. What did Fred Smith and Kimberly Strassel think they were getting into by showing up at a conference that seeks to put the "Eco" in "Economics"? Why would anyone so against the "wastes of Big Government" be so vehemently in support of the "wastes of Big Business"?

A wise Republican for the Environment once said that no one should be more for conservation than a Conservative. Now is the time for unity in a common cause...or maybe I've just been listening to too many Obama speeches...

by Ashley Braun at 12:37 AM on 13 Mar 2008

Wow

"Free" marketeer think tankers are the ones who should want carbon trading. Carbon caps no, but carbon trading allows them a whole new venue for the hedge funds, they rely on to make them richer, to actually make them richer.

There's the problem, they want to own and trade the atmosphere, land, and oceans. But they don't want anyone to tell them what they can do with what they own. Especially government.

Some have suggested something like the fed to rule over the value of carbon and other new trading instruments. Instruments that trade the right to exploit land, sea, and air.

Just like the fed is supposed to maintain the value of the currency by limiting it's growth, this new institution would limit carbon emmisions to maintain the value of these trading instruments.

Without caps on carbon, what would give carbon trading a value system? The proudly ignorant Immelt, who boasts of his votes for the worst president in history (duuuhbya is proceeding to destroy the US manufacturing base, economy, military, etc.), as if it proves his "conservative" credibility, realizes that once cap and trade is instituted, environmentlists will be put in their place.

Corporatists will say, you got what you wanted, a carbon cap, now get out of the way and let the market work. The "free" market will take care of GHG climate problems, if there really are any, on their own without any regulatory interference from government.

After all, look how well the "free" market has worked to resolve the debt crisis. The same debt crisis that unregulated insider hedge fund trading created.

Wake up and smell the "free" marketeer coffee, once the Immelts explain how the cap and trade system coopts the environmental movement, even the nuttiest think tank wing nuts will embrace it.

Sure is nice that the same tyrant that owns foxnews now owns the WSJ, isn't it? Didn't we all know this would happen? The reframing would shift that fact into subtext and the wing nuts would reclaim the supposed credibility of the WSJ.

Eventually an ineffective capping system will be instituted, goals out to 2050, that sort of political parsing. A soft cap, that can be adjusted as needed depending on which party is in control. And the trading system will be the same one that is used to trade everything else, from farmland to weather futures.

An easily scammed unregulated insider trading system. Creating bubbles that burst, making the mega rich richer and the rest of us chattle. Wholy owned cannon fodder, cheap labor, and consumers.

Making life itself merely a tool of the bottomline, the next quarterly earnings reports the ultimate value system.

Our elected representatives elected by corporate lobbyist scamming, our government a ceremonial figurehead, like the british royal family. Rubber stamping the latest demands of corporate power.

http://amazngdrx.blogharbor.com/blog

by amazingdrx at 5:21 AM on 13 Mar 2008

Be careful

The right wing idiots are wrong. OK, fine. And Immelt is absolutely right about the fact that there is almost no such thing as a truly free market (I'm always a fan of CEI bashing, as they are among the worst purveyors of pro-business wolves dressed up in pro-market sheep's clothing.)

But just because Immelt is against those guys doesn't necessarily mean that he's right on environmental issues. Look at GE's line of environmental products and it's clear that they stand to make a lot of money off carbon sequestration - which may be good for CO2, if it stays down, but is disastrous on every other environmental metric and will cripple the economy. Jim Rogers even moreso, since (unlike GE) he runs a company that doesn't have to take any equity risk. He'd LOVE it if government mandated the most expensive possible fix to environmental problems.

So yes, the criticism that's come to them is shoddy - but GE's motives are far from pure. And it speaks poorly to our media that two guys who deserve harsh questioning are only getting it from the loony bin. Where are the thoughtful harsh questions for these guys?

by Sean Casten at 5:55 AM on 13 Mar 2008

I don't know how right-wing I consider PERC

Is PERC pro-market? Yes. Conservative... right wing?? Eh...

I attended a seminar at PERC several years ago, and was pleasantly surprised at the pragmatism of the fellows and speakers there, who all seemed to have a genuine concern for the environment but saw alternative methods for effective environmental protection.

The guys at PERC often gray the line between the "free market" and "market mechanisms". In fact, Terry Anderson's seminal book "Free Market Environmentalism," while it does indeed argue for more property rights solutions to environmental problems, actually helped to popularize the "cap-and-trade" prior to the SO2 trading program. - not exactly the "free market".

Honestly, I think Terry probably had a good point about a program benefiting the ones who can afford the regulations as well as who can afford to lobby so that it benefits them more. This happened with DuPont and the phase-out of CFC's, so it's not completely off-the-wall. Of course, the CEO of GE is going to get defensive about a comment like that, but that doesn't make it wrong.

by naturescene at 7:05 AM on 13 Mar 2008

Watch out

If this guy is promoting Cap and Trade, it is because GE stand to benefit from it, period. They see how thing are turning, so they will do what they can to work it to there advantage.

by Reformed Republican at 8:14 AM on 13 Mar 2008

That would be his job

They see how thing are turning, so they will do what they can to work it to there advantage.

That's pretty much the definition of a CEO. I don't necessarily think that all of GE's ideas are great, but I'm happy to see such a big firm looking to the future instead of the head-in-the-sand approach of Strassel, Smith, and Anderson et al.

by wallrock at 9:24 AM on 13 Mar 2008

more...

I'm generally a fan of the cap-and-trade approach, although my ideal solution would be to first establish a property right to carbon for every citizen, and let them sell "carbon stock" to businesses in need.

But there's no doubt that Terry Anderson hit the nail on the head about the political economy of USCAP (I can do without the other two people and their arguments). I would have posed his question slightly differently, since by now we should realize that cap-and-trade won't "cripple the economy," but it sure could increase the costs of doing business for a lot of companies, many of which are competitors with GE and will not be able to withstand these extra costs. GE's motivation is not environmental... it is anti-competitive. Anderson was making a very valid point, grounded in economic theory and evidence of rent-seeking behavior in the face of coming regulations.

I know first-hand that the "ideologues" at PERC understand that there is no such thing as a true free market. The point of their work is to support "freer markets," and it is largely based on empirical research and pragmatism.

I encourage you to check out the PERC website, (www.perc.org) and even if you don't agree with their basic philosophy, you will see a striking difference between the tone there and the tone at say, CEI. One is constantly finding new ways to bash any and all things environmental, while the other works to show how markets can be made to work for the environment.

by naturescene at 10:23 AM on 13 Mar 2008

GLOBAL WARMING, GLOBAL COOLING - Consensus?

The debate over terminology of climate change can go on forever. Let's get to some consensus on what we're really doing to the environment and get on with it. Warming or cooling, either way we have to reduce our impact.

http://pacificgatepost.blogspot.com/2008/03/global-warmin ...

by PacificGatePost at 11:35 AM on 13 Mar 2008

Groovy

This guy sound like some hip exec trying to be "groovy" and get with the kids.

"They're into that Green stuff. 'Here [ he says to his assistant ] go out and buy me 3 of everything Green.'"

Two years later...it will all be forgotten...

Possibly the best Alternative Energy blog I read: New Energy and Fuel

by jabailo at 2:15 PM on 13 Mar 2008

It's still progress if...

... GE profits from a federal sustainable energy initiative as opposed to a DOD project.

by pcarbo at 2:44 PM on 13 Mar 2008

Hypocrite! Hypocrite! Hypocrite!

Do "free market" ideologues have any shred of evidence to back up their aspersions against the "hip execs"?

Wait, no. Aspersions without evidence -- that's the denialist way.

by frankbi at 8:18 AM on 20 Mar 2008

ADVERTISING POLICY

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