Let's take a look at the economic crisis through the lenses of three prominent businesses. We have local, and quite different, case studies at hand with Washington Mutual, Boeing, and Microsoft.
The former WaMu is perhaps Exhibit A of what went wrong in the financial sector. High-flying, heedless officers and directors overpaid themselves, took the company recklessly into mortgage-backed securities, and then were forced by the feds to an acquisition by J.P. Morgan Chase. Employees lost their jobs and shareholders their money because of front-office folly. Let us hope The Russell Co. moves into the nearly empty WaMu Tower and eases the downtown Seattle office-space glut.
Boeing, born and bred locally, moved its headquarters to Chicago for no apparent good reason — except, speculation went, that it would find it easier to close local facilities from a distance than close at hand. It has been hard-nosed in its relations with its unions. The company is well known in Washington, D.C. for its heavy-handed tactics, as exemplified by its efforts to gain a multibillion-dollar air tanker contract from a Pentagon that did not want the tankers, and current efforts pressing Congress to order more cargo planes and fighter jets. Here at home, Boeing got multibillion-dollar public subsidies, courtesy of then-Gov. Gary Locke, the Legislature, and local constituencies when it threatened to move assembly operations elsewhere. It also has gamed the federal tax code to its advantage. In the years 2005-08, according to Business Week magazine, its effective tax rate was 3.2 percent, owing to tax breaks related to overseas sales, research and, to a lesser degree, philanthropy.
Boeing's future is cloudy. Its Dreamliner is way behind schedule and short on sales. Defense Secretary Bob Gates' Pentagon reform plan is likely to be tough on Boeing, beginning with its renewed bid for that air-tanker contract. In a tough state economy, when the Legislature has just been forced to close a $9 billion state budget deficit, Boeing is again declaring it wants new public subsidies or could move operations elsewhere. Bill Boeing's company, known for its loyal, professional cadre of engineers and aircraft makers, is ancient local history.
Microsoft, also deeply rooted here, is making no such threats, and it seems to be weathering recent difficulties. Although it is new-economy, it has been led in a quite traditional way by Bill Gates and, now, Steve Ballmer. I read recently the text of Ballmer's remarks last February 6 to the House Democratic Caucus's retreat in Williamsburg, Virginia. He made the point that, in recent years, unsustainable private debt had replaced innovation and productivity as key drivers of economic growth. Microsoft, he said, had historically resisted corporate debt, even when the company was criticized for it.
Ballmer insisted that American companies would not pull themselves out of the present trough simply with cost-cutting but would need fresh research-and-development investments. He also made a strong case for government investments in human capital, public infrastructure, and basic research. Ballmer's reputation is that of a hard-headed, practical manager. But his remarks showed him to be more than that. They received a strong reception from the Congressional Democrats but, I suspect, would have gotten an equally good reception from the House Republican Caucus.
Microsoft has its critics. But it is does not operate recklessly financially. Nor does it demand billions from local taxpayers, or else, when its profits flatten. WaMu has come and gone. Boeing is not what it was but, instead, is on a down curve in which it depends too greatly on federal and state subsidies and tax breaks. Microsoft has long since supplanted it as the leading private-sector force in the region. It all comes down — as in the public sector — to the character and intelligence of the people in charge.
