When the Dow Jones index was born in 1896, General Electric was one of the companies included. It’s been a constituent of the Dow continuously since 1907. In a sign of how far the company has fallen, GE has just been dropped from the Dow.
This isn’t a surprise development. Market watchers have seen this coming for at least a year, as the company has seen its stock fall, its CEO hit the exit door, and the company cast about for a new direction.
There’s plenty to say about this, but it’s crucial to remember GE’s heavy bet on federal industrial policy.
GE’s previous CEO Jeffrey Immelt landed a gig as Obama’s jobs czar. At the dawn of the Obama Era, he declared that the federal government would be “an industry policy champion, a financier, and a key partner.” GE is “a particularly desirable partner for governments,” he wrote.
“Everybody in Germany roots for Siemens” Immelt said once. “Everybody in Japan roots for Toshiba. Everybody in China roots for China South Rail. I want you to say: Win, GE.”
“Germany is the model” of “government and business working as a pack,” Immelt would say at the 2010 conference of the Export-Import Bank of the United States.
And sure enough, Immelt and the Obama and Bush administrations often traveled as a pack.
Bush’s 2007 State of the Union address proposed a handful of green-energy projects, almost all of which lined up with GE investments. GE was a key driver of Bush’s law effectively outlawing the traditional incandescent light bulb, which, by the way, was largely invented by GE’s founder. This was supposed to drive more business to higher profit-margin high-tech bulbs.
The Bush-Obama bailouts benefited GE. When former President Barack Obama opened up federal funding for embryo-destroying stem-cell research, GE launched a stem-cell business. When Obama announced an initiative to subsidize high-speed rail, GE hired Linda Daschle — wife of Obama confidant Tom Daschle — as its rail lobbyist. When Obama opened doors to Russia by backing away from an Eastern Europe missile shield, GE was the first company to pass through that door.
GE was also the poster child of Obama’s stimulus. “So those who talk about this is big government,” Vice President Joe Biden told a few hundred GE employees at their stimulus-subsidized plant in Kentucky, “well, this is big government giving a little bit of help to jump start America to lead the world in the 21st century.”
GE’s bet on big government hasn’t saved the company. GE has been trying to sell its struggling light bulb business, but failing.
When Immelt announced last year he was stepping down, I noted two superlatives:
So here’s one explanation of GE’s fall from grace: To borrow from Joe Biden, “well, this is big government …”
