FacebookTwitterGoogle+RedditEmail

From Teapot Dome to Enron

by T.W. Croft

The Enron debacle has major implications for the labor-capital movement. Not only did Enron’s collapse undermine the retirement security of all workers whose pension funds held Enron stock, the company’s melt-down revealed serious flaws in our nation’s financial system which threaten the security of the nation’s retirement system. Enron has already cost labor’s pensions billions of dollars in assets. Its collapse reminds us that there is truly something broken in our economic system.

Once Upon an Economy…”Captains of industry were less interested in economic efficiency than they were in extracting gains by transferring ownership via the medium of saleable rights to property (as) managers sought to enhance intangible assets rather than produce goods…It seemed obvious that production and output were entirely dependent on the pecuniary needs of the financiers…(taking) close note of interlocking directorates, holding companies, and watered stock. Their price policies…were geared to the maximization of profit through the enforcement of scarcity. Supply and demand could not be the genuine foci of attention in economics, so long as it was possible for business to resort to a ‘conscientious withdrawal of efficiency.’

“…Moreover, credit was pyramided, one form piled on the other, particularly through capitalized prospective earning power. The process became quite complex, so that the distinction between credit and the underlying tangible goods was obscured. Soon perceptible discrepancies developed between business values and the equipment they were supposed to represent. As the economy entered upon its anticipated state of euphoria, the growth of intangibles soon out-sped the expansion in real goods. A credit inflation ensued, which eventually turned into forced liquidation of assets. Creditors feared that the discrepancy between business and real values had gone too far, and the demand for debt repayment initiated the economy’s downward movement.”

A scathing review of the Enron Scandal? Off by 75-80 years. These paraphrased words were the indictments of the Teapot Dome era, the notorious oil scandal of the Warren G. Harding Presidency over three-quarters of a century ago, wherein secret insider oil deals allowed illegal drilling of the Naval Oil Reserves. These words were an indictment of “commercial sabotage”, the process whereby businessmen used the “arcane skills of bargaining, effrontery, salesmanship and make-believe…to make gains at the cost of the community”.

These were the ideas of a sociologist named Thorsten B. Veblen (1857-1929), the son of an immigrant Norwegian farmer in Wisconsin, who went on to teach at the University of Chicago. He was the author of The Theory of the Leisure Class, coined the term “conspicuous waste”, and pre-figured the conditions that led to crash of 1929. He could have obviously been talking about Enron.

The End-Runs…

The white-collar destruction of one of the largest corporations in America, leading to the largest bankruptcy on record, is but the icing on the bubble that was the 1990’s New Economy. “Commercial sabotage” seems an apt description of the Enron legacy, after thousands of workers and millions of investors and energy consumers have had their economic security disrupted and in some cases destroyed. Will the recent official suicide be the last? Probably not.

The End-Run Corporation is a distressing story of demented de-regulation, politicians on retainer, concocted off-shore shell corporations, duped investors, an exploited energy crisis, and obscene short-term profits. According to recent press investigations, insiders bailed out with illicit gains, cooking the books and robbing workers’ 401-k-plans. Now that Congress and a few johnny-come lately media watchdogs are investigating the collapse, it might be a good thing, as Martha Stewart says, to summarize the innumerable end-runs around acceptable standards of corporate governance, fiduciary responsibility and accountability, as the allegations mount:

End-runs around management fiduciary responsibility as 29 executives received $1.1 billion by selling 17.3 million shares prior to the decline of stock prices early last year (as $30 billion of shareholder value evaporated). End-runs around pension system fiduciary responsibility and integrity as workers’ savings were locked down while managers sold their shares, leading to the loss of $1.2 billion dollars in life savings at the same time that 4,000 Enron employees were losing their jobs. End-runs around the fiduciary responsibility laws of ERISA and rules protecting retirement security as billions of dollars of pension funds were lost in the melt-down, as investors relied on inflated stock prices.

End-runs around auditor accountability as Arthur Anderson destroyed thousands of documents, while engaging in separate consulting agreements. It is the “third strike” against Anderson (implicated in the Waste Management and Al Chainsaw Dunlap’s Sunbeam scandals). End-runs around accountability to democracy as the company ripped off billions of dollars from California energy consumers. Deregulation allowed the power industry to overcharge as much as $71 billion from California. The California energy crisis was orchestrated by a power industry freed from price regulation — costing $2,200 for every Californian. End-runs around political independence as Enron executives held secret meetings on public energy policies of the American people. Were there plans for Teapot Dome 2? End-runs around corporate board governance, independence and responsibility as former regulators were seated on the board of directors, and looked the other way as up to $1 billion in profits were overstated.

The Crooked E…The public
needs to avoid future Enrons:

Pension laws must regulate all workers’ savings, putting limits on investments of workers’ 401(k) plans in terms of their employers. Corporate board governance laws must guarantee board independence and oversight. Energy providers need to remain regulated, with proper public oversight. Auditers need to be reigned in and regulated by public authority, not peer review. Campaign finance reform must be enacted to minimize white-collar influence-peddling. The attempts to de-regulate and privatize social security and set up similar end-runs around the public trust must be halted.

E.J. Dionne Jr. argued in his syndicated column of February 19, 2002 that Enron highlights a new kind of conflict in American capitalism- the conflict between insiders and outsiders. Both shareholders and workers suffered from the short-term mentality that led to Enron’s collapse, and worker-shareholders suffered most of all. Dionne suggests that this fact could lead to a new kind of politics based on a worker-shareholder alliance, which is the kind of politics that the labor capital movement is trying to advance. As David Dreyer, a former Treasury Department official, put it, “It used to be said that because so many people had 401(k)s, you couldn’t do class politics anymore. Now, with Enron, because so many people have 401(k)s, you can do class politics.”

Time to Ask Questions…A large number of workers and their families in Houston will never fully recover from the Enron implosion. The next time an institution appears to be destroying a workplace, not to mention the public trust of the nation, maybe its wise to ask why.

The Teapot Dome crooks went to prison. The same fate should face the smooth-talking insiders at Enron–the kind of people that Veblen called “predatory business tycoons”–along with some of their board, legal and auditing accomplices.

T.W. Croft is the Director of the Heartland Labor Capital Network

(C) 2002 T.W. Croft

 

 

 

 

 

 

 

 

 

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
July 21, 2017
Friday - Sunday
Kevin Zeese
Green Party Growing Pains; Our Own Crisis of Democracy
Jeffrey St. Clair
Red State, Blue State; Green State, Deep State
Paul Street
“Inclusive Capitalism,” Nancy Pelosi, and the Dying Planet
Anthony DiMaggio
Higher Education Fallacies: What’s Behind Rising Conservative Distrust of Learning?
Andrew Levine
Why Republicans Won’t Dump Trump Anytime Soon
Michael Colby
Ben & Jerry’s Has No Clothes
Bruce Dixon
White Liberal Guilt, Black Opportunism and the Green Party
Edward Hunt
Killing Civilians in Iraq and Syria
Matthew Kovac
Is the Flint Water Crisis a Crime Against Humanity?
Mark Harris
The Revolutionary Imagination: Rosa for Our Times
David Rosen
America’s Five Sex Panics
Robert Fisk
Saudi Arabia: the Kingdom Whose Name We Dare Not Speak At All
Jack Heyman
Class War on the Waterfront: Longshore Workers Under Attack
Kim C. Domenico
Marginalize This:  Turning the Tables on Neoliberal Triumphalism
Brian Cloughley
Trying to Negotiate With the United States
John Laforge
Activists Challenge US Nukes in Germany; Occupy Bunker Deep Inside Nuclear Weapons Base
Jonathan Latham
The Biotech Industry is Taking Over the Regulation of GMOs From the Inside
Russell Mokhiber
DC Disciplinary Counsel Hamilton Fox Won’t Let Whistleblower Lawyer Lynne Bernabei Go
Ramzy Baroud
The Story Behind the Jerusalem Attack: How Trump and Netanyahu Pushed Palestinians to A Corner
Farzana Versey
The Murder of Muslims
Kathy Kelly
At Every Door
David W. Pear
Venezuela Under Siege by U.S. Empire
Maria Paez Victor
Venezuelan Opposition Now Opposes the People
Uri Avnery
Soros’ Sorrows
Joseph Natoli
The Mythos Meme of Choice
Clark T. Scott
High Confidence and Low Methods
Missy Comley Beattie
Glioblastoma As Metaphor
Ann Garrison
Organizing Pennsylvania’s 197: Cheri Honkala on Frontline Communities
Ted Rall
What Happened When I Represented Myself as My Own Lawyer
Colin Todhunter
Codex Alimentarius and Monsanto’s Toxic Relations
Graham Peebles
Europe’s Shameful Refugee Policy
Louis Proyect
Reversals of Imperial Fortune: From the Comanche to Vietnam
Stephen Cooper
Gov. Kasich: “Amazing Grace” Starts With You! 
Jeffrey Wilson
Demolish! The Story of One Detroit Resident’s Home
REZA FIYOUZAT
Billionaire In Panic Over Dems’ Self-Destruct
David Penner
The Barbarism of Privatized Health Care
Yves Engler
Canada in Zambia
Ludwig Watzal
What Israel is Really All About
Randy Shields
Matters of National Insecurity
Vacy Vlanza
The Ministry of Utmost Happiness: Through Eyes of an Activist for Palestine
Cesar Chelala
Dr. Schweitzer’s Lost Message
Masturah Alatas
Becoming Italian
Martin Billheimer
Lessons Paid in Full
Charles R. Larson
Review: James Q. Whitman’s “Hitler’s American Model”
David Yearsley
The Brilliance of Velasquez
FacebookTwitterGoogle+RedditEmail