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Marco Rubio slams CEOs for bad China deals, short-term thinking and not investing in U.S. workers
By James Hohmann
May 15, 2019
Washington Post
 
THE BIG IDEA: Marco Rubio argues that the escalation in the trade war with China stems more from corporate chieftains selfishly seeking big paydays for themselves by agreeing to bad deals with Beijing over the past several years than President Trump’s latest brinkmanship over tariffs.
 
“If you go to China, they promise you ‘X percent’ of their overall market share,” the Republican senator from Florida said in an interview yesterday. “You make money, and you look good in front of your shareholders, but you’re also turning over your intellectual property and eventually they’re going to replace you. But who cares? You won’t be CEO in 10 years when that happens.”
 
Rubio said Trump’s biggest problem right now is that Chinese leaders are unaccustomed to a president going to the mat this way and have therefore miscalculated his resolve. “They have traditionally been able to unleash the American corporate class to march up to D.C. and pressure their policymakers to back down because so many of these companies have established a market presence in China that in the short-term is very beneficial but in the long-term is probably suicide for those companies,” Rubio said. “That’s what’s happened in the past. This is the first administration that has not backed down.”
 
The senator’s comments on China came as he uncorked a broader, extended critique of American corporate culture. Rubio, the chairman of the Senate Committee on Small Business and Entrepreneurship, faulted CEOs for focusing too much on the next quarter and not enough on the next generation. He blamed warped incentives from Wall Street and Washington for driving this shift. And he complained that the “shareholder primacy theory” – which is taught at business schools and accepted as gospel in the C-suites of most Fortune 500 corporations – has prompted too many business leaders to care more about returns for shareholders than the people who work for them.
 
Rubio gave me the first look at a 37-page report he plans to release later today on the decline of business investment over the past several decades. It details how nonfinancial corporations, for the first time, now consistently spend more on acquiring financial assets than on capital development. “At its core, the problem is that, beginning in the 1970s, the primary objective for companies became maximizing return to shareholders, and that came at the expense of investing in new capacities and in innovation,” Rubio said. “In essence, it’s coming at the expense of the things that lead to growth. In key industries that are critical to our national security and our national interests, that’s even more problematic.”
 
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“What it’s resulted in is that you can become a very profitable company that returns a lot of money to shareholders by taking your productive capacity and sending it to China or by turning over your intellectual property because they’re allowing you market access, which is generating new revenue,” he added. “That’s great for the short- to mid-term. Your stock performance can be very good. Your shareholders are going to be very happy. But it’s devastating for American workers, and in the long term it’s devastating for America.”
 
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As a political matter, Rubio has concluded that the GOP focused too much in the past on catering to corporate executives at the expense of their consumers and their employees. This year he’s rolling out a series of proposals aimed at restoring the balance between businesses and their workers. “We have a free market, but that free market operates under the conditions created for it by policymakers,” he said. “Those conditions should reflect our national priorities. And one of our top national priorities should be creating strong and stable jobs upon which strong families and strong communities can take root.”
 
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Rubio added that he also came to understand why government must play a more muscular role in doing something. “We need to get back to a point where we don’t solely analyze the American economy on traditional economic measures,” he said. “GDP growth is important, but that alone doesn’t tell us the full story. It has to be not just growth that we care about, but the kind of growth that creates stable jobs that allow strong families and strong communities to develop, which are the backbone of a strong economy. Our public policy should reflect that.”
 
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