GE’s John Rice warns that political stalemate is the worst outcome for U.S. economy
By Maria Saporta
The current stalemate in Washington, D.C. between Democrats and Republicans is perhaps the worst situation for the economy, according to John Rice, vice chairman of General Electric and president and CEO of GE Global Growth and Operations.
Rice, who is currently based in Hong Kong, had been living in Atlanta as president and CEO of GE Technology Infrastructure. While in Atlanta, Rice became deeply involved in the community — serving as chairman of the Metro Atlanta Chamber and as chairman of the Atlanta Education Fund.
He was the keynote speaker Monday at the Rotary Club of Atlanta.
In response to a question about the clash between the two political parties, Rice began by saying that Occupy Wall Street movement is “in a way a referendum on our democracy.” Saying he did not agree on the method, he understood people’s frustration with the breakdown of our democratic system.
“Do I want to pay more taxes? No,” Rice said. “But I’m going to end up paying more taxes. Let’s get on with it.”
Rice said the solution will be to have “a little bit of a revenue increase” while reducing the costs of government.
“This no action is the worst thing in the world,” Rice said. “If there’s ever been a time when democracy ought to work, it’s now.”
Rice, who has traveled to at least 40 countries so far this year, provided a global overview of the economy, and he shared his views of Atlanta now that he’s living overseas.
“The macro environment is somewhere between disorder and chaos,” Rice said. “This is a complicated time. We are all keeping more cash in our personal and company bank accounts.”
Rice said that economists don’t expect the European economy to grow more than .5 percent a year over the next five years. And the United States is not expected to have strong economic growth. So many companies are focusing on the growth markets in Latin America, Asia, Africa, Australia and even Canada.
Most of the countries that are growing have an economy tied to natural resources. Rice then said “chaos” was probably too strong a word and that a better word to describe the global economy was “turbulence.”
The good news is that a recent McKinsey study predicts that the world will have 3 billion people enter the middle class over the next 20 years, which will be the major driver for international growth.
Rice then explained that the global economy is so interconnected that it’s important for U.S. companies to be on the playing field rather than sitting on the sidelines.
The United States should fare well as long as it continues to have some of the best colleges and universities in the world teaching the next generation of engineers and skilled professionals.
While it might be possible to hire cheaper workers in other countries, the United States has some of the most skilled workers in the world.
“Competency trumps cost,” Rice said, adding that the United States must continue investing in its educational institutions.
Rice was asked what advice he would give Atlanta from afar.
“I would focus on building bridges and collaboration,” he said, adding that building trust was critical to solving the region’s problems.
Then he talked about how the business community was treated throughout the cheating scandal at the Atlanta Public Schools. It was “incredulous” that some critics believed business leaders “would want to create a school system that had people cheating,” Rice said.
After his talk, Rice elaborated on his APS experience. GE was the largest corporate investor in the system, contributing about $22 million. He was particularly concerned about the impact the reaction to APS situation would have on future business community involvement in the city’s toughest issues.
“There are a lot of people, having watched that, who would think twice about jumping on the next blue ribbon commission,” Rice said. “In 20-20 hindsight, there was a tremendous rush to judgment casting dispersions on volunteers.”
I also asked Rice about the widely-reported fact that GE hardly paid any taxes in 2010 and his thoughts about the corporate tax rate in the United States.
“We would welcome a simpler, more straight forward tax code,” Rice said. “Companies are going to have to do their part (in revenue increases). We also have got to whack costs.”
Rice went on to explain that the reason GE hardly paid any federal taxes in 2010 was because GE Capital had lost billions of dollars because of the global financial crisis.
Companies also have received tax breaks for investments in research and development as well as for job creation. Some may call those loopholes, but Rice said many of those have been intentional tax credits to encourage corporate investment.
Rice also estimated that for 2011, GE will be paying “billions of dollars in U.S. taxes.”
Lastly, Rice was asked if he and his wife, Cammie, planned to return to Atlanta when his post in Hong Kong was completed.
“We will always have a place in the United States, and that place will be Atlanta,” Rice said. And when he spoke to Rotary, it was obvious that Rice felt he was among close friends.
When he first came to Atlanta 11 years ago, Rice said he was struck by the civic commitment that existed among local companies.
“It’s great to come back,” said Rice, who added that he’s been traveling so much that places have become blurred. But it’s different in Atlanta. “Everybody is talking about what they can do for the city. For me, it’s a labor of love to come back.”