Monday, November 14, 2011



So Italy has a new premier, Mario Monti. If his past is any indication of what he brings to the table, Italy has a fighting chance. I wrote about Mario Monti at the beginning of Chapter 8 in my book, The Myth of the Free Market. Here's what I wrote about Monti in my book, and what we might be looking at in the immediate future ...

Months before the start of the Second Gulf War in 2003, Secretary of Defense Donald Rumsfeld chided Germany and France for not following the U.S. lead on Iraq – derogatorily referring to their leaders as holdovers from “old Europe.” The claim was both misinformed and full of hubris. Since 1945 Europe had embraced democratic and free market principles, was a solid ally during the Cold War, and pursued economic integration as a way to foment cooperation and allay past tensions in the region.

Rumsfeld’s comments demonstrated a willful ignorance of how “new Europe” fulfilled, if not exceeded, the aspirations of America’s post-war architects. Old Europe – if we are to get our history right – would not have waited for the U.S. to sweep into the Middle East. In the end, Rumsfeld would have done well to have spoken with General Electric’s former Chief Executive Officer, Jack Welch. He understands “new Europe.”

During his tenure as CEO Welch merged more than 900 firms with GE. When Honeywell became available in October 2000 Welch went into action. While Honeywell produced many of the same products as GE – plastics, chemicals, electrical machinery, and aircraft engines –Welch was not concerned about anti-trust legislation because he believed Honeywell’s products were “complimentary” rather than competitive. And, besides, why should he worry? He was Jack Welch.

After getting the green light from the U.S. Justice Department Welch met with Eurocrat, Mario Monti, the European Union’s Director-General for Competition (its “antitrust” division). In Brussels Welch would find “new Europe.” In The United States of Europe T.R. Reid described the introduction: “Welch flashed his friendly, casual smile, stuck out a hand, and said, ‘Mario – call me Jack’ … ‘Mr. Welch,’ [Monti] replied in his accented but precise English, ‘we have a regulatory proceeding under way. I feel the proper approach would be to keep things on a more formal basis. You can call me Sgr. Monti.’”

Monti’s team had done their homework. They secured information from both GE’s industry competitors and United Technologies (the firm GE outbid for Honeywell). At one point, when asked about aircraft electronic parts manufactured by Honeywell, GE’s team offered only blank stares. And on it went.

When Monti finally called Welch to tell him the “deal is over” he would end the conversation by saying, “Now I can say to you, ‘Good-bye, Jack.’” Fifty-five years after the end of WWII Mr. Welch learned the hard way that the system U.S. post-war architects wanted to build for the world had found a home in Europe. Welch learned something else: By creating the conditions for a prosperous and independent Europe to emerge America’s grand liberal strategy had – and apparently without Donald Rumsfeld’s knowledge – erased “old Europe.”


If Monti does his homework and can stick to his guns like he did with Welch, things could work out. I'm not hopeful (Greece and the larger debt situation are a mess), but Monti could give Italy and Europe a new lease on life.

- Mark

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