When economies and markets were booming, it was easy to be a hero. But now that the precarious edifice on which our “prosperity” was based is being exposed, many of those great reputations are crumbling.
Take the lead editorial in today’s Financial Times. I can’t recall the FT ever getting so angry in an editorial. It concludes:
This was not a failure of markets; it was a failure to create proper markets. What is to blame is a certain mindset, embodied not least by Mr Greenspan. It ignored a capitalist economy’s inherent instabilities — and therefore relieved policymakers who could manage those instabilities of their responsibility to do so. This is not the bankruptcy of a social system, but the intellectual and moral failure of those who were in charge of it: a failure for which there is no excuse.
Piling on to Greenspan is hardly radical these days, but he’s not the only titan thrown into the dustbin. What perplexes me is some of the reputations that seem to be escaping scrutiny.
Foremost, for me, is Jack Welch. When he left GE he was hailed as one of the greatest corporate titans of all time. The market cap of GE soared in the Welch years, becoming the most valuable company on Earth at one point. His books were heavily promoted bestsellers, he commands fat fees for speaking, and he still has a high-profile column in Business Week. But does Welch’s legacy really stand up to scrutiny? It was under his tenure that GE Capital became the key element of GE. He was the master of “smoothing” earnings, which now looks like a pretty dodgy fiddle (John Hempton has all the dirt).
Jeffrey Immelt is taking all the heat, and he certainly has a lot to answer for. He is, however, trying to manage the house that Jack built through the worst storm in 80 years. And I don’t think you can find many voices outside odd corners of the blogosphere who thought that the house needed major renovations.