Advancing a Free Society

Mafia in Pinstripe: The Real GE Scandal

Friday, April 15, 2011

The transition from street thug to state mafia took a decade in Russia. I was an eyewitness to the Russian process: In 1992, I saw businesses being shaken down by bullies in jogging suits and shaved heads. Six years later, I talked with business owners harassed by crooked tax, sanitation, police, and fire inspectors. Under Putin, these petty thugs were replaced by officials in pinstripes, politely shaking down businesses in meetings in government offices and swank hotels. It has become civilized, but the outcome is still the same.

What does the Russian story have to do with GE?

GE is unique among American corporations. Since its founding, it has been consistently in Fortune’s Top 10 – the only long-term survivor of Schumpeter’s creative destruction. GE adapted better than others to changing tastes and technology under executives like Gerard Swope, Charles Wilson, and John Welch Jr., who wrote the book on the art of corporate management.

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