How it Starts

"We are excited. I can't tell you how excited we are about the president's commitment to lead us to the future." IBM CEO Sam Palmisano

R types will tell you President Obama (D) is rapidly moving America to fascism as he makes GM into Government Motors. They're correct, but they usually neglect to acknowledge that their candidates move America down the same road. Rs warning of D-invoked fascism is a case of the pot calling the kettle black. Lest they forget, the TARP bailout enacted less than a year ago was championed by the Bush (R) administration and supported by Rs and Ds alike. Bush administration Treasury secretary Paulsen forced out AIG CEO Robert Willumstad just as President Obama has now forced GM CEO Wagoner to resign. But because car manufacturers produce something more tangible than insurance, the government takeover of GM is a more blatant example of a state-controlled enterprise.

So how do government and corporations get tangled up in the first place? Usually in times of "crisis" under the guise of solving some pressing problem, and always for the "common good"--whatever that is.

A recent example occurred in response to the imploding economy, when on January 28, 2009, Honeywell CEO Dave Cote and IBM CEO Samuel Palmisano fawned over the new President as they shilled for his eventual $787 billion (CBO estimate pdf) stimulus package.

Palmisano started the performance, blathering about the honor of being led by the President in creating jobs with taxpayer money:

"We are excited. I can't tell you how excited we are about the president's commitment to lead us to the future.

"And the support for health I.T., the support in the area of smart grids, the support in the area of education and broadband, all those things are essential. They're essential in the short term, because in the research we've done, working with the transition teams, we know that $30 billion could create a million jobs in the next 12 months. But it's also every bit as important, because we touch so many factors in the ecosystem that'll create jobs for decades to come.

"So we're honored to be here. I'm honored to be speaking on behalf of the business community. And I would just say that it's an imperative that business and government come together, we help the president get the package through, and we get to work. And we have a lot of work ahead of us."

Palmisano's words belied recent IBM layoffs which didn't create new jobs, but eliminated thousands of IBM jobs in North America. According to a January 30, 2009 Times-Herald article:

"In 2007, 121,000 of IBM’s 387,000 workers were in the U.S., down slightly from 2006. Meanwhile, staffing in India jumped from 9,000 workers in 2003 to 74,000 workers in 2007.

"But for $30 billion, Palmisano promises a million jobs will come to America."

Apparently Palmisano prefers that US taxpayers subsidize job creation in America.

Next at the podium, Dave Cote, Honeywell CEO and a member of board of directors of JPMorgan Chase introduced the President (video) and warned "the situation is dire":

"We very much appreciate an aggressive approach here, and think it makes a lot of sense. Getting money out fast to people who will spend it, and getting the velocity of the spend. And then the reinvestment, investment in the future of the country, whether it's infrastructure, energy efficiency, math and science, which is particularly important to us. All these things need to happen."

In his introduction, Cote started a theme he has since repeated at the London School of Economics and Political Science this June about climate change, where he spoke about the desirability of government mandates for energy saving products, products which, coincidentally, Honeywell happens to manufacture.

"You look at energy efficiency, there are great strides that we can make in this country in energy efficiency. There are a number of solutions out there that are possible. And we just need to encourage people to do it. It improves our energy security. It just -- just makes sense."

Cote nearly outdid Palmisano's hypocrisy about creating technology jobs in America saying:

"We have to make math and science cool again in the U.S. It has to become cool. We need this-- we have a desperate need for engineers. That's all math- and science-based. We need to make that cool again, it's one of the best investments we can make."

Cote was alluding to the tired refrain that Honeywell and other technology companies are forced to hire foreign workers because there just aren't enough qualified Americans to hire. Cote has since bragged about spending $50 million to open a second research and development center in Bangalore, India and about the growth of Honeywell employment in India from 1,000 employees in 2002 to 10,000 today--the opposite direction of Honeywell jobs in the US. Honeywell and Cote's attempts to make engineering "cool again" in the US entailed systematically cutting jobs in the US and moving them overseas:

• September 2001: Before Cote is CEO, Honeywell announces 7600 layoffs, the majority in aerospace.
• October 2002: Cote announces 5000 layoffs across all divisions in a conference call .
• July 2005: Honeywell announces 2000 US layoffs in its aerospace division, first denying it was part of an outsourcing strategy, and then acknowledging plans for an increase in foreign hiring by 5000 workers.
• February 2008: Honeywell announces 420 jobs to be eliminated in aerospace manufacturing moving the jobs to Indonesia and Malaysia.
• November 2008: Honeywell aerospace announces 700 manufacturing jobs to be moved to Mexico and the Czech Republic.

By "cool again," at least for American engineers, Cote must mean a pink slip and an updated resume.

Like Palmisano and IBM, Cote wants US taxpayers to subsidize Honeywell engineering jobs in the US while Honeywell uses its own money to create jobs elsewhere in the world. Despite what Cote says about making "engineering cool again," he's really looking for government assistance in the form of more government contracts and laws mandating Honeywell products.

While economists debate the merits of outsourcing in general, to find the answer to whether it's good or bad for a particular company just let that individual company succeed or fail without government intervention. Unfortunately, corporate leaders, as exemplified by Palmisano and Cote, under the guise of helping in a crisis, really just smell cash handouts for themselves and their corporations. They gladly let taxpayers bear the financial burden while they reap the financial rewards, all while pretending government intervention in the market is for the "common good." As a member of the JPMorgan Chase board of directors, Cote has already seen the benefits of a public-private partnership between business and government as part of the TARP bailout.

The next time you hear that the government is forming a partnership with an industry for the common good or you read that an executive at a failed institution is now a high-ranking government appointee. . . that's how it starts.