Chrystia Freeland

I had breakfast this week with Jeffrey R. Immelt, the chief executive of General Electric, and the main dish on the menu was tough love. In an interview before a packed hall in Times Square, the boss of the more than a century-old $177 billion global behemoth told me that Americans can still win in the global economy — but that they need to fight harder.

“We are not trying that hard,” Immelt said. “We haven’t really tried as hard as we can to compete, educate and sell our products around the world and I think we can do better.

“The world just plays harder than we play,” he said. “Whether it is on exports or whether it is on foreign direct investment, the rest of the world plays for keeps. And we just don’t have a similar philosophy.”

Chancellor Angela Merkel of Germany has her own reasons for feeling grim, but she can take some comfort from the fact that Immelt pointed to Germany, whose version of capitalism Americans are accustomed to dismissing as plodding and inflexible, as one nation that is outselling the Yanks.

“Chancellor Merkel flies from Berlin to Beijing, there’s 25 German C.E.O.’s that get off the plane right behind her. And they connect the dots. They play hard, they play to win, they play for exports,” Immelt said. “We’re not all-in the same way that the Germans are all-in.”

Those are harsh words to hear from one of the foremost business leaders of the country that likes to think of itself as the world’s top capitalist dog. But Immelt’s must-try-harder message is becoming the conventional wisdom in the United States, and not just among the angry 99 percent of the Tea Party and Occupy Wall Street movements. The 1 percent think so, too.

One measure of this elite consensus was the echo of Immelt’s remarks in a speech that a different national heavyweight, Secretary of State Hillary Rodham Clinton, delivered a few blocks north and a couple of days earlier at another New York power breakfast.

“We have to get better at playing offense,” Clinton said. “Other countries are much more on the same team between business and government, and we need to be back on the same American team.”

When populists on both the left and the right are angry enough to take to the streets, and when both a Democratic stateswoman and a Republican industrialist use almost identical language to describe America’s poor performance in the global contest for business, you can safely conclude this is a country suffering from serious self-doubt.

That inner-directed gloom fits uneasily in a national culture that still tilts toward a faith in self-improvement, second chances and, most important of all, a first-place finish. Which is probably why Immelt’s certainty that, if the United States does try harder, “I’m completely convinced that we can compete and we can win” struck such a receptive chord.

“Our competitiveness in this country today is the greatest it’s been in 25 years,” he said. “I have never seen our competitiveness as solid versus India and China as I do today.”

He repeated: “We need to be all-in.”

The competition Immelt and Clinton want U.S. companies to win is the battle for dominance in the global marketplace and for the checkbook of the growing global middle class.

“There are going to be one billion consumers joining the middle class in Asia. I think for us to reduce unemployment, exports are going to be a key way to do it,” Immelt said. “It’s this country’s only destiny just because most of the consumers are some place other than here.”

As a cautionary counterexample, Immelt cited Japan. “Look, when I was a young guy, when I first started with G.E., Jack Welch sent us all to Japan because in those days Japan was gonna crush us,” he said. “And we learned a lot about Japan when we were there. But over the subsequent 30 years, the Japanese companies all fell behind. And the reason why they fell behind is because they didn’t globalize. They didn’t have to go out and sing for their dinner in every corner of the world. That’s not the case with G.E. It’s not the case with other American multinationals.”

Immelt’s sunny enthusiasm for export-led growth captivated his audience. That is partly because Immelt is a consummate salesman — and proud of it. As he said, “first and foremost my job is to sell jet engines, gas turbines and scanners. That’s my job.”

After an hour of listening to him, I felt a strong urge to buy a gas turbine myself, and I eavesdropped on several conversations about what a great senator or even president a post-G.E. Immelt would make.

But it is also because an open global economy in which everyone is getting richer and in which a reinvigorated United States has the confidence to win appeals both to American patriots and to American internationalists.

As with all dream scenarios, though, there is a catch or two. The first is that export-led growth is a terrific strategy — there’s a reason everyone is looking these days to Germany and China — but it only works if some countries are taking the opposite tack of building their economies around consumption. As Lawrence H. Summers, a former secretary of the Treasury, likes to point out, there are no Martians. The whole world can’t be German or Chinese — you also need some Americans and Greeks, and the long-term fate of those consumer nations isn’t so pretty.

The second, related catch is that, for all the talk of Team Germany and Team U.S.A., that’s only partly how the world economy works. Immelt is proudly and emphatically American — “I love the U.S., period” — but he told me that his successor might well come from the emerging markets. That’s no surprise: Smart businesses have figured out how to globalize. We don’t yet know if countries can do the same.

UPDATE — Since I wrote this column early on Thursday morning, my prediction (in the final paragraph), that we would today hear more about Immelt and his ideas on how to create U.S. jobs has been vindicated: President Obama this morning appointed Immelt to lead his outside panel of economic advisers. To hear more from Immelt, watch my exclusive interview with him here.

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For Jeffrey Immelt, the CEO of General Electric, the 130 year-old American industrial behemoth, the financial crisis marked the end of the age of America’s economic dominance.

“I came to GE in 1982,” Immelt told me this week in Washington. “For the first 25 years, until the bubble crashed in 2007, the American consumer was the definitive driver of the global economy.” But Immelt said the future will be different. For the next 25 years, he said, the American consumer “is not going to be the engine of global growth. It is going to be the billion people joining the middle class in Asia, it is going to be what the resource-rich countries do with their new-found wealth of high oil prices. That’s the game.” A lot of that game will be played in China. At a moment when it is compulsory on the American right to pay homage to the exceptionalism of the United States, Immelt, a life-long Republican, is matter-of-fact about China’s inevitable rise.

“It is going to be the biggest economy in the world,” Immelt said of China. “The only question is when.”

In the U.S. public discourse, the big strain in the American-Chinese economic relationship is the yuan, and what many Americans view as the government-manipulated undervaluation of the Chinese currency.

Some U.S. business people—who share Immelt’s enthusiasm for the Chinese market—are so keen to court Sino-investors that they are reluctant to publicly to criticize China’s exchange rate policy.

Immelt is bolder. He supports the open complaints from Obama and his administration about the exchange rate – but not why you might think. For the GE chief, the yuan is a valid focus of U.S. economic policy, not because of its impact on his company’s bottom line, but because of its impact on American public opinion.

Here’s how Immelt explained GE’s perspective: “Is it the one, two, three, four or five issue for GE? It isn’t, because we make and sell things in so many different countries around the world.” Yet Obama was right to complain, Immelt added, because “it’s important for the President to do the right things inside our country so that people feel like China can be a partner, and if it means sometimes you have to talk tough … then I want the President to do that.” But the GE chief had a warning for those Americans tempted to attribute China’s rise, and possibly their own country’s economic malaise, to the Chinese exchange rate.

“If the American people sit back in the comfort of their home, whether it is in Ohio or New York state, and think that the only reason the Chinese succeed is because of the cheap currency, they’re missing the point. And I think that’s dangerous.” The China challenge, in Immelt’s view, is about much more than a manipulated exchange rate and “cheap labor.” “It is the adaptability, it is the speed with which they move, it is the unanimity of purpose, it is the productivity of thought,” he said, adding that when he visits his interlocutors at the Ministry of Railways in Beijing, the mandarins are at work on Sunday.

Nor does Immelt flinch when, in conversation, it is suggested that this “business model that works for them” is Communist authoritarianism. “That has been very effective,” he said. “They’re in their 12th five-year plan and they’ve done quite well.”

Immelt thinks he knows what America needs to do to thrive in this changed world. “If you want to be a great country, which the U.S. has every right to want to be, you have got to be thinking about being a better exporter,” he said. “Our only destiny can be as a high-tech exporter, that creates jobs, high-paying jobs … Export-led growth is the key to national success.” Happily for Immelt, that national destiny would be very good indeed for high-tech manufacturers, like – to take one not very random example – GE.

Both the approach, and the man who advocates it, are finding favor in a White House keenly aware that Obama must be seen as trying to reduce stubbornly high unemployment.

Expect to hear more on Friday, when Obama and Immelt, who is a member of the President’s Economic Recovery Advisory Board, are scheduled to visit GE’s birthplace in Schenectady, N.Y., and talk about … how to create American jobs in the competitive global economy.

Earlier this week in her exclusive interview with Jeff Immelt, Chrystia asked whether the GE head would replace Paul Volcker as chairman of President Obama’s outside panel of economic advisers.  Immelt ducked the question a bit, saying he would leave that decision to the President.  Today it became clear why he was noncommittal as the White House announced that Immelt will chair a new Council on Jobs and Competitiveness, the successor to the President’s Economic Recovery of Advisory Board which Paul Volcker chaired.

Watch Chrystia’s exchange with Immelt and read the transcript of his remarks below:

You know, I’m going to leave that alone. I’m going to leave it to the President. What I would say is that I think American companies and American CEOs need to be as constructive as we can be to help, you know, resolve some of these mistrusts and residue that exist in the environment today. 9.5% unemployment is not a tenable situation for any of us. You know, even though, it’s not directly my responsibility, in a broader sense, it’s all of our responsibilities. And so, I think there’s nothing wrong with working constructively with this President to try to drive growth and job creation.

Posted by Peter Rudegeair.

Chuck Schumer, the senior Democratic senator from New York, already has one of his talking points for 2012 — he plans to lambaste the Republicans for their “tax cuts for millionaires,” a reference to the right’s refusal to end the Bush tax breaks at the upper-end of the income distribution.

That’s a big deal, because for much of the post-war era, class has been a forbidden subject in U.S. politics. Americans were sold on the idea of living in the land of opportunity — their country, after all, was the one huddled masses fled to for the chance to build a better life. That self-image was so appealing and so powerful that politicians ran against it at their peril—Morning in America played better on the campaign trail than class war.

Schumer is a centrist whose constituency includes many of America’s plutocrats —he has sometimes been called the Senator from Wall Street. He is also one of the country’s savviest politicians. So his judgment that “millionaires tax break” will make a good bludgeon for Republicans says a lot about how deep the chasm has become between America’s super-elite and everyone else, and how worried middle-class Americans are that the old promise of social mobility is no longer delivering.

Liberals concerned about this divide have focused on the ways in which it has been created by pro-rich tax policies, a concern documented in Winner-Take-All Politics by Jacob Hacker and Paul Pierson, and further stoked by this week’s tax deal. That’s a legitimate gripe.

But the two Americas are moving further and further apart for another reason, too, and it is one over which U.S. legislators and U.S. voters have little control. After a century when succeeding in America was the surest route to commercial success, the country’s best businessmen and women have realized that the way to win is to go global.

A favorite complaint of foreigners has been to point out that Americans, for all their international might, are actually rather parochial. That slightly smug assertion is true: to take one example, according to research by head-hunter Elisabeth Marx, in 2007, nearly one third of British FTSE 100 CEOs were foreign nationals; in the U.S., just 10 per cent of Fortune 500 chiefs were foreigners.

Now that the American century is over, however, America’s business leaders are catching on fast. One sign of the times was the recent decision, first reported by my Reuters colleague Megan Davies, of Stephen Schwarzman, the trend-setting boss and co-founder of private equity group Blackstone, to move to Paris for three to six months next year. Another major New York private equity house hopes to send one of its partners to Hong Kong.

Nor is this shift limited to finance. In a speech at Stanford business school this year, GE CEO Jeff Immelt said that when he was an up-and-comer at the industrial giant in the 1980s, developed nations accounted for 80 per cent of global economic growth. In the coming decade, he said, that equation is expected to flip, with 80 per cent of international growth coming from emerging markets. Like Blackstone, GE is moving its chiefs to where the action is: last month John Rice, a GE vice-chairman, was reassigned to Hong Kong, where he will oversee non-U.S. sales, marketing and operations.

Or consider McKinsey, the premier management consulting firm, founded in Chicago in 1926. Today, McKinsey’s managing director is a Canadian, Dominic Barton, who lives in London, but whose assistant is based in Singapore. “There are more and more global CEO meetings in the emerging markets, especially China,” Barton told me over breakfast in midtown Manhattan late last month. He was due to see Schwarzman later that day, but recalled that “the last time I saw Steve was in China” where Blackstone held a meeting this fall. Barton himself was traveling to Chile later in the week, then on to Sao Paolo, where McKinsey was holding its own board meeting.

The Luddites and isolationists in both parties are already starting to argue that this globalization of American business is a bad thing. They are wrong — surely America would be even worse off if its brightest businesses leaders were missing out on globalization and the rise of the emerging markets. But the shift of American capital and American capitalists outside the U.S. will further polarize an already bitter national debate. By 2012, Americans won’t just be arguing about tax-breaks for millionaires, they’ll be targeting the millionaires who spend 6 months a year in Paris or Hong Kong. That will be dangerous not just for the global super-elite, but for the entire world economy.