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Enron: the end of capitalism as we've known it
By MADELEINE BUNTING
Tuesday 29 January 2002
It's hard to overstate the enormity of the impact of Enron's implosion. The
biggest corporate collapse in US history is now dragging politicians,
banks, accounting firms, other corporations, pension funds, investment
analysts, the reputations of so-called business experts and millions of
investors into an astonishing vortex where they risk losing billions of
dollars and some of the most trusted reputations in corporate America.
It claimed its first death last week - a multi-millionaire former Enron
executive was found dead in his Mercedes beside an "explosive" suicide
note. John Baxter was facing a class action from former Enron employees
whose share certificates, once worth millions, are now being traded on
the Internet as souvenirs of the catastrophe. Baxter stood to lose his
Mercedes, his Enron mansion, and everything.
With at least 10 investigations beginning work on Enron, we have
glimpsed only a fraction of what will be the repercussions of this
corporate disaster. The main focus of interest so far has been the stench
of political corruption: can anything be pinned on the Bush
administration? For the first time in history, the US Congress is suing the
White House to find out the exact details of the cosy relationship
between "Kenny boy" (Kenneth Lay, chief executive of Enron) and
Vice-President Dick Cheney, which produced $US326million
($A630million) for the Republican party over three years.
Enron provides a textbook case of how corporate power subverts the
political process in whatever country it operates, through donations to
political parties combined with intensive lobbying. It's mucky stuff, and
heads will roll, but it's also a very familiar theme. What makes Enron such
an extraordinary story is that it spells the end not just to some nasty
pork-barrel politics but to an ideologically driven, vicious corporate model
that was rippling from its Houston base across the globe.
This vision of a Darwinian dog-eat-dog market drove Enron's political
campaign for privatisation and deregulation. Its pitch rested on a
near-fundamentalist faith in the self-regulating efficiency of the market;
true believers claimed there were simply no limits to its application. To
Enron's legion of admirers on Wall Street, in the Harvard Business School
and elsewhere, it epitomised the free-market philosophy that emerged in
the US and shaped the Thatcher-Reagan era before being exported to the
developing world under the aegis of World Bank and IMF deregulation
and privatisation programs ever since.
The anti-corporate movement's struggle to assert that the world is not
for sale - and certainly not to the casino gambler types of Enron - has had
a massive shot in the arm from Enron's demise. Plenty will drive that point
home at the World Economic Forum in New York this week. Just how
much of that free-market fundamentalism, if any, will survive Enron will be
a key theme. The tide began to turn against deregulated free markets
after the Californian blackouts, in which Enron played a notorious role.
Now it's in full flood. Re-regulation is back on the agenda and in the US its
remit will run from accounting procedures, power supplies and all other
public utilities to pension provision.
Let's be optimistic and predict that Enron will come to be seen as the
high-water mark of the state's retreat before deregulated corporate
power. There are plenty of Ohio teachers who have lost their pensions to
drum home the point, not to mention Enron pensioners now dependent
on social security. But these hard-luck stories are just one part of a
spectacle of unprecedented corporate humiliation: egg on famous faces
all round the US. The list is long of management experts, business school
professors, journalists and Wall Street analysts who fell over themselves
to lavish praise on the radicalism and innovatory brilliance of Enron. These
are allegedly some of the cleverest people in the US, and almost all were
duped by the emperor's new clothes.
Only a year ago, Fortune magazine, which ranked Enron as the most
innovatory company in the US for six consecutive years, admitted that it
was "largely impenetrable" to outsiders and it was impossible to answer
even a basic question such as how it made its money. Fortune brushed
aside its reservations, blithely concluding that "in the end it boils down to
a question of faith".
Most intriguingly, Enron fooled the vast majority of its employees. Alleged
whistleblowers came very late in the day. It boasted of hiring the
brightest MBAs in America - 250 a year. It generated a corporate culture
that was intensely competitive (10per cent were weeded out every year in
a "rank and yank" performance review process). A turbo-charged
workaholism left no room for dissent or even doubt. One former executive
likened Enron to the Taliban.
Enron prided itself on the daredevil entrepreneurial freedom it cultivated
among its youthful employees who could rise at dizzying speed. Andrew
Fastow, architect of the off-balance-sheet debts, was 36 when he was
made chief financial officer.
Enron became the example par excellence of how, in the late '90s, US
corporate culture hijacked and inverted '60s radicalism. Business guru
Gary Hamel praised Enron's "activists" who saw themselves as
"revolutionaries". They lived the rule of "creative destruction" in which all
conventional assumptions were to be challenged. In their adverts, they
had the cheek to liken themselves to Gandhi and Martin Luther King. It
bred a culture of breathtaking arrogance that Enron could do the
impossible.
The most astonishing piece of the puzzle is why the Enron "activists" were
believed by everyone even when their balance sheet was no longer
understood. In part, it was presumably greed as the share price soared
1700per cent in 16 years. In part, it is down to the bizarre millennial fever
of the late '90s, which bamboozled many into believing that the Internet
had revolutionised all business and that nothing was going to be the
same again. As such, Enron was the biggest of the dot-bomb explosions.
With any luck, Enron has finished off a pernicious ideology that markets
with minimal regulation are an effective way to organise and deliver the
public interest and that they develop organically the self-correcting
mechanisms to ensure its smooth functioning. Instead, we have
witnessed how market capitalism can throw up an astonishing charade of
greed, ambition, stupidity of even the cleverest, and irrationality.
- GUARDIAN
from
http://www.theage.com.au/news/state/2002/01/29/FFXZC565ZWC.html
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