Fall of the arrogant Enron's demise has discredited a vicious market
ideology and given a boost to the anti-corporate cause
Madeleine Bunting
Monday January 28, 2002
The Guardian
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 multimillionaire 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 Republican administration? For the first time in history,
Congress is suing the White House to find out the exact details
of the cosy relationship between "Kenny boy" (Kenneth Lay,
CEO of Enron) and Vice-President Dick Cheney, which had
been bankrolled by $326m to the Republican party over three
years.
Enron provides a textbook case of how corporate power subverts
the political process in whatever country it operates (the US, the
UK or India) 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 which was rippling from its Houston base
across the globe.
This vision of a Darwinian dog-eat-dog market, which could be
applied to everything from gas supplies and fibre-optic capacity
to hedging against the weather, 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
Harvard Business School and elsewhere, it epitomised the
free-market philosophy which 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's deregulation and
privatisation programmes 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 and at its alternative counterpart in Porto
Alegre, Brazil. 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 black-outs, 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've 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, which ranked Enron as the most
innovatory company in the US for six consecutive years,
described Enron as "It stock" even while admitting 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 whistle blowers came very late in the day. It
boasted of hiring the brightest MBAs in America - 250 a year. It
generated a corporate culture which was intensely competitive
(10% were weeded out every year in a "rank and yank"
performance review process) and fanatically loyal to Jeffrey
Skilling, then CEO. A turbo-charged workaholism left no room
for dissent or even doubt. One former executive likened Enron to
the Taliban. Another admitted that every time Skilling spoke, "I'd
believe everything he'd say." The result was "cult-like", admitted
the Economist before the crash. Skilling favourites got to go
glacier hiking in Patagonia or off-road motorcycling in Mexico
with him.
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 under stood. In part, it was presumably
greed as the share price soared 1,700% in 16 years. In part, it is
down to the bizarre millennial fever of the late 90s, and 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.
m.bunting@guardian.co.uk
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