A Call to Arms for American Business
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Throughout my career, America has seen so much economic growth it was easy to take it as a given. Many bought into the idea that America could go from a technology-based, export-oriented powerhouse to a services-led, consumption-based economy – and somehow still expect to prosper. That idea was flat wrong.
While some of America’s competitors were throttling up on manufacturing and R&D, we de-emphasized technology. Our economy tilted instead toward the
FIRST –We need to significantly increase investment in research and development from an all-time low of 2 percent of the Gross Domestic Product (GDP). The only way to sustain a real competitive advantage is to invest in the needs of tomorrow.
The federal government has always been an important contributor to innovation. But federally supported research and development (R&D), as a percentage of GDP, has been declining since 1985. In the stimulus bill, we have increased basic research funding for the first time in recent memory. This trend should continue. But we need other improvements as well.
If we’re going to be serious about innovation in this country, then we’ve got to do a much better job training the next generation innovators, future engineers and scientists. At the same time, American companies must reinvigorate their technical efforts.
Technology is what makes people and countries feel wealthy. Technology is also the source of competitive advantage. An American renewal will be built on technology. GE’s R&D budget has not been cut. And that’s a course of action I’d recommend to every company that wants to get through the economic crisis even stronger than before.
SECOND –America should get busy addressing the two biggest global challenges – clean energy and affordable health care. In the future, we can have far greater energy diversity and security, while reducing global warming. In the future, we can also reduce health care inflation.
In 2005, we launched an initiative we call “ecomagination” that focuses all the innovative powers of GE to solving the problems of energy use and environmental stewardship. We’ve brought to market 75 new products to help our customers benefit from renewable technology through serious reductions in the cost and use of energy, nearly quadrupled revenues from environmentally friendly technology to $17 billion in just four years and created 50,000 jobs at GE and our suppliers.
Solving the clean energy challenge will create broad economic opportunity in this country. If the United States would drive a renewable energy standard of 12 percent by 2012 — up from 5 percent today — we would create 250,000 green jobs in the economy.
Similarly, GE this year launched an advanced health care improvement initiative called “healthymagination” and committed to investing $6 billion to lower our customers’ costs, broaden access to care and increase the quality of outcomes.
Aligning the American renewal with the challenges of energy and health care will keep our country on the leading edge. There is no question whether there will be breakthroughs in these areas – just by whom and when. The leader in these fields will dominate the global economy in the decades to come.
THIRD –We must make a serious commitment to manufacturing and exports. This is a national imperative. We all know that the American consumer cannot lead our recovery. This economy must be driven by business investment and exports.
We should set a national goal that high-valueadded jobs and manufacturing jobs be no less than 20 percent of total employment, about twice what it is today. And we should commit ourselves to compete and win with American exports.
We would do well to observe the example of China. They’ve been growing fast because they invest in technology and they make things. They have no intention of letting up in manufacturing to evolve into a service economy. They know where the money is and they aim to get there first.
America has to get back in that game. It is in great need of an updated manufacturing infrastructure. This means better roads and airports; pervasive broad-band capability and a bigger and smarter electricity grid. Old factories can become more productive with upgraded infrastructure.
The other secret to manufacturing competitiveness is a well-trained team. Annually, we invest $1 billion in training that has impact on the factory floor. It used to take us 100 days to make a locomotive; now we can do it in 20. Through the use of lean manufacturing techniques, our 100-year-old Erie factory can export to Mexico and Brazil.
In some areas, we have outsourced too much. We plan to “insource” capabilities like aviation component manufacturing and software development. This will make us faster and more competitive over the long term.
We recently made the decision to build capability in our appliances plant in Louisville, adding 420 new jobs. These workers will build an innovative, hybrid water heater that uses 50 percent less energy. We could have made this product in China. But our Louisville team has committed to quality and productivity standards that make them competitive. We can make the same profit by manufacturing in the United States, and our team deserves its chance to compete.
The renewal of American industry will require us to be a globally competitive exporter. Business should reinvest in new American jobs that will create leadership in the future. …
FOURTH –We should welcome the government as a catalyst for leadership and change. Business and government should work together, setting goals for productivity, job creation and exports.
There’s a long history in this country of government spending that prepares the way for new industries that thrive for generations. Think of the National Institutes of Health (NIH) or the National Aeronautics and Space Administration (NASA), and all the innovations that came out of these programs – from computing to communications to health care.
America has that kind of chance with unprecedented levels of new government investment. Congress and the administration have decided to invest in job creation, and the amounts of money involved can make a big difference – not just by putting people to work, but also by aligning with basic national purpose.
The federal stimulus legislation set aside $20 billion for new health care systems. This reinvestment, along with the quality standards that accompany it, will transform health care.
The stimulus is a real opportunity to accelerate investment during the downturn to create long-term growth. This is all upside.
The challenges we face won’t be solved by the free market alone. But through a real public-private partnership, we can dramatically improve America’s competitiveness. An American renewal will be shaped by the public and private sectors, and – more than ever – by a willingness to act boldly for the good of the country.
FIFTH –It is possible for a global business leader to also be a good citizen.
The primary job of business leaders is to build competitivecompanies that win over thelongterm in every corner of the world. We must have the courage to invest and set compensation policies that reward long-term growth in earnings and cash generation and reflect company success.
We have made our companies globally competitive; now we must do the same for our country. We can help to solve some of these difficult problems and create an optimistic future.
Over the last generation, America’s “service strategy” was too weak and our goals were too low. This approach must be abandoned. In its place, we should create an American Industrial Renewal by moving on five fronts: Invest in new technology; win where it counts in clean energy and affordable health care; become a country that is good at manufacturing and exports; embrace public-private partnerships, and promote leaders who are also good citizens.
From economic chaos we will create new opportunities. We will once again be prosperous, but more importantly, we will be proud.
It is time to think big again. We must hold ourselves to a higher standard and we must renew America’s economy to embrace the same kind of dream that transformed this country and this world not so long ago.
Jeffrey R. Immelt is the Chairman and CEO of GE. Since beginning his tenure in 2001, he has laid the vision for GE’s ambitious “ecomagination” initiative and has been named one ’s Best CEOs” times by Barron’s. article is excerpted from a speech he delivered at the Detroit Economic Club.
