What Can We Learn From Enron?
So much comes together in the Enron story--deregulation, New Economy fantasies, the links between business and government, the increased role for the stock market in the running of big corporations, professional corruption. It should be read as the failure not of just one firm, but of a whole set of assumptions about how the economy should be run.
With Enron circling the drain, many of the strategies that the company was based on are discredited. So defenders of those policies in the media are busy trying to rescue those big ideas.
New York Times reporter Neela Banerjee worried that with Enron gone, no one could lead the charge for electricity deregulation. Of course, the downfall of Enron-not to mention last year’s disaster in California--was inseparable from the deregulation agenda.
Financial Times columnist John Plender worries that the wipeout of Enron employees’ 401(k) plans could compromise the business agenda-backed by the Bush administration--to move away from the old "paternalistic" pension system.
By that he means the traditional “defined benefit” plans, in which workers are guaranteed a fixed pension and employers bear the risk. Business wants “defined contribution” plans, in which employers contribute funds but the amount workers will receive is at risk. They also, of course, want to throw workers’ Social Security into the stock market playpen.
The philosophy is that programs that put a floor under everyone and that have an equalizing effect are too comfortable. Every worker should have to invest for retirement individually-as Enron employees did by buying stock in their company. The spectacle of thousands of Enron employees with their golden years up in smoke calls that model into question.
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The Enron fiasco is reminiscent of the savings and loan fiasco of the 1980s: it was made possible by reckless experiments in deregulation--with a nice theoretical grounding provided by prestigious economists--compounded by deceit and incompetence. Then, as now, regulators, politicians, executives, consultants, pundits, accountants, lawyers, rating agencies, and the press cheered on as the bubble was inflating, and seemed shocked when it burst.
The S&L mess should have inspired serious questioning of how we do economics and politics in the U.S., but that never happened. We spent some $200 billion of public money on the S&L bailout with little debate.
It would be nice if the Enron disaster gave rise to a bit of critical self-reflection, but that is probably too fond a hope. A few people may go to jail, but it would be a shock if it were more than a few.
A 1990 Wall Street Journal retrospective on the S&L crisis said that the list of wrongdoers was "so long that some observers conclude there is something profoundly wrong with the country's political and financial systems, which appear easily undone by feckless and reckless behavior. In fact, they say, the behavior of this legion calls into question the performance of this nation's professional class itself."
Workers, of course, are used to being messed over by greedy and untrustworthy companies. At Enron, top management was also betraying middle managers and other professionals. That's seems to be the story of American political economy today--the top 1 or 2 percent vs. everyone else.
Doug Henwood is editor of the Left Business Observer.