Sunday, Sep 7, 2008
Free-market ideologues said the energy titan's triumphs proved them right. Now they should admit its humiliating collapse proves they were wrong.
Dec 14, 2001 | "I believe in God and I believe in free markets," Enron CEO Kenneth Lay told the San Diego Union-Tribune back in February. What's more, continued this titan of the energy business, Jesus himself was something of a '90s-style libertarian: "He wanted people to have the freedom to make choices."
Maybe, then, it was the Lord's work Enron was doing as it pushed electricity deregulation through the 1990s, and transformed itself from a gas pipeline company into an energy trader designed to provide choices and maximize profits in the freewheeling aftermath. After all, what better sign of the Almighty's favor could there be than Lay's compensation for the year of Our Deregulated Lord 2000: $141.6 million, a full 184 percent increase over 1999. Blessed indeed are the market makers! "We're on the side of angels," the company's former CEO Jeff Skilling told Business Week a little while ago. "In every business we've been in, we're the good guys."
Fortunately for the rest of us, though, Enron didn't inherit the earth. The company may have promised to deliver greater "transparency" to energy markets, but upon inspection its own affairs turned out to be a tangled mess of lies, nepotism and exaggeration that included the overstatement of profits by some $586 million -- a revelation that caused panic among investors and a catastrophic collapse for the mighty energy trader.
Nor will the obvious implications of the Enron affair be suppressed for long. Enron's failings were in fact directly related to its corporate ideology, to its zealous, cult-like love of free markets. According to Wednesday's Wall Street Journal, Enron fought fiercely and paid lavishly to limit or abolish federal oversight of its trading business; its trading business then collapsed for lack of oversight and accountability. It isn't a coincidence when those who run ads mocking government regulators and saluting themselves as colossal rule breakers turn out to be engaged in literal rule breaking and regulation circumvention. Why are we feigning surprise?
Enron was the peerless darling of the all those who believed that free markets were the acme of existence. Its wreckage is as good a place as any to sit down and take stock of the deregulated, privatized state into which we've been so rudely hustled over the last decade. And here is what it looks like: Top management walking off with hundreds of millions of dollars while employees lose their jobs, investors lose millions and customers get to look forward to more rolling blackouts. Profiteering. Bought politicians. Stock market bubbles that inevitably burst. Workers thrown out on the streets. Left to its own devices, this is what the free market does.
Yes, Enron hoodwinked the world financially. But ultimately the more remarkable aspect of this tawdry corporate tale is the way Enron tricked us politically, the way its leaders persuaded the world that their passion for free markets, particularly in the field of electricity, was somehow equivalent to "revolution," to "creativity," to human freedom itself. That only when the corporations were free to romp the worlds as gods would we truly have achieved popular democracy.
For management gurus, Enron was a particularly hallowed operation. Once a simple natural gas pipeline concern, Enron turned itself into an energy trader with awesome ambitions, buying and selling contracts to deliver power across the country. Who needed pipelines and power plants and other mundane physical assets in the age of the Internet? This was a "new economy," and in its last years Enron's starstruck fans took to describing it as a full-blown "market maker," a near-divine bringer of entrepreneurship and profit-taking to those slow-moving reaches of the economy where before there had only been regulation and an outmoded fixation on public service -- water, electricity, "bandwidth." And -- Holy shit! -- just look at those profits!
This is why recent years saw such precious expressions of Enronphilia as Gary Hamel's 2000 book, "Leading the Revolution," in which Enron is characterized as a "revolutionary" company, the home of "radical ideas" which "come from radical people," where "new voices have the chance to get heard," and where top brass say nice populist things like, "People are smarter than we are at the top." Before Enron's troubles became a crisis, Hamel and his hero Lay were even scheduled to appear together at a high-profile November guru-fest called the "Revolutionaries' Ball." (The event's logo featured a red flag.) Enron's own TV commercials exhorted viewers to ask the "confrontational" question, "Why?" -- a word that supposedly has the power to "bring years of conventional assumptions to a jarring halt." The company even equated its quest for free markets with the doings of folks like Gandhi, Lincoln, and the civil rights protesters of 1963 Birmingham. (I guess Jesus wasn't available when they were filming.)
In April 2000 Fortune magazine imagined Enron as Elvis Presley, the mythical bringer of hipness to the desert of 1950s culture. I still find it hard to believe this passage appeared in a responsible magazine of business, so I reproduce it here in full:
"Imagine a country-club dinner dance, with a bunch of old fogies and their wives shuffling around halfheartedly to the not-so-stirring sounds of Guy Lombardo and his All-Tuxedo Orchestra. Suddenly young Elvis comes crashing through the skylight, complete with gold-lamé suit, shiny guitar, and gyrating hips. Half the waltzers faint; most of the others get angry or pouty. And a very few decide they like what they hear, tap their feet ... start grabbing new partners, and suddenly are rocking to a very different tune. In the staid world of regulated utilities and energy companies, Enron Corp. is that gate-crashing Elvis."
The adulation persisted right up to the end. The cover of the September edition of Business 2.0 carried a photo of Jeff Skilling, then the company's CEO, giving the reader a big finger-over-lips "Shhhhhhh!" The secret Skilling wanted us to keep was not the devastating truth about Enron's profits, but that the "Revolution Lives." Yes, the dot-coms had tragically gone bust, but who cared about that? Enron's metamorphosis into a "virtually integrated company" offered "glimmers of a possible future." One trip to Enron's Houston headquarters and anyone could see that the "revolutionary" truths of the new economy still thrived.
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