Against the Current, No. 97, March/
On Lessons of Enron and War
— The Editors
Accuride: A UAW Local's Lonely Strugge
— Dianne Feeley
Why Mumia Should Just Go Free Now
— Steve Bloom
Race and Class: Why Black Patriotism?
— Malik Miah
Palestine-Israel: "One Minute to Midnight"
— David Finkel
Pakistani from Pariah State to Partner
— Tariq Amin
— Daniel Ximenez
Nicaragua's Elections Under the Eagle's Talons
— Phyllis Ponvert
What's Happening in France?
— Sophie Béroud, Pierre Cours-Salies, Patrick Le Tréhondat and Patrick Silberstein
Random Shots: Dubya's Many Axes of Evil
— R.F. Kampfer
- Women's World of Struggle
Gender and Identity in Pakistan
— Shahnaz Rouse
Feminism in the New Gender Order
— Johanna Brenner
Review: Women in a Sweatshop World
— Mary McGinn
The Rebel Girl: Celebrate Women and Global Justice!
— Catherine Sameh
Fred Halliday and Pax Americana
— Phil Hearse
A Response to Critics on Capitalist Origins
— Ellen Meiksins Wood
A Critical Look at Social Decay and Transformation
— Cynthia Young
- Letters to Against the Current
Letter to the Editor on Genoa
— Peter Drucker
Letter to the Editor on Fate of the Russian Revolution Review
— Paul Hampton
- In Memoriam
Remembering Marty Glaberman (1918-2001)
— Seymour Faber and Linda Manning Myatt
IF THE USUAL relationship of economics to politics applied in the United States right now, the Bush administration would be in deep trouble. Not only has this government presided over the first recession in ten years; not only has it turned budget surpluses into deficits; it has done this by an astonishing program of tax giveaways to the super-affluent and corporate elites, having nothing to do with genuine economic stimulus, but rather driven by a mixture of right-wing ideology and greed so gross that much of the ruling class itself is embarrassed by it.
On top of all this has come the implosion of the energy-trading giant Enron, in which figures in the highest echelons of the Bush-Cheney apparatus are implicated. Without the lucky coincidence of September 11 and a gloriously successful (so far) overseas war, this administration might be a candidate for premature termination.
We won’t examine here the details of Enron that have been widely discussed throughout the media, more of which emerge every day. The point is that this spectacular collapse, and the enormous human “collateral damage” in the form of lost jobs and evaporated savings and pensions, brings together all the features of the highly-touted “new economy” of the suddenly disappeared 1990s.
- Enron was a company whose expansion was based on producing nothing, but on trading a complex array of energy futures and derivatives and clever schemes cooked up by its “intellectual capital.”
- Its ability to grow in this way was a product of massive and chaotic deregulation of energy, for which Enron aggressively lobbied “almost from its start in 1985 as a gas pipeline company . . . . It supported the 1992 Energy Policy Act, which opened the utility companies’ wires to electricity merchants such as Enron.
“It also worked with the Commodity Futures Trading Commission—then chaired by Wendy [wife of Texas Senator Phil] Gramm—for a regulatory exemption for futures trading in energy derivatives, which later became Enron’s most lucrative business. Soon after Gramm stepped down in 1993, she was appointed to Enron’s board.” (Dan Morgan and Juliet Eilperin, “Campaign Gifts, Lobbying Built Enron’s Power in Washington,” Washington Post, December 25, 2001: A01)
- Enron chief Kenneth Lay was a top-level Republican fundraiser who also played golf with Bill Clinton; Enron poured millions into Republican campaign funds but hundreds of thousands into the Democrats as well. Its lobbying budget for 2001 (this is aside from political contributions) was $2 million.
- Enron disguised its losses by means of a vast shell game of partnerships and subsidiary companies, in which it was aided and abetted by either a slothful or criminally complicit accounting firm, Arthur Andersen, which itself was a business partner of Enron through consultantship arrangements.
- As the hidden losses mounted, Lay and other top executives sold their Enron shares. While these insider-trading, energy price-fixing, high-rolling champions of rugged free enterprise walked away with millions of dollars apiece, the Enron employees’ pension funds invested in the company were frozen, leaving them stuck with shares which have lost 92% of their value.
That’s the story in a nutshell; the question is what can be learned from it about economics and politics in the capitalist world we live in.
First of all, we learn that the normal priorities in bourgeois politics have been partially suspended in the United States. Right now, the top priority is not this administration’s economic mismanagement and corruption, but its wildly successful application of military and political muscle in the “war against terrorism.”
Remember when it was fashionable to demand the breakup of South Korean “crony capitalism” in the wake of the 1998-99 Asian financial crash? There is no more perfect illustration of “cronyism” and its consequences than the Enron affair. Nonetheless the Bush-Cheney administration will be shielded from serious inquiry about its role in creating Enron’s virtual-reality empire.
Serious inquiry is certainly in order—about the role not only of this administration, but also the previous one. Consider the murky affair of Enron’s 1993 Power Purchase Agreement with the Indian state government of Maharashtra. When that deal unravelled, Clinton’s U.S. Ambassador to India Frank Wisner (subsequently an Enron director) intervened heavily to restore it.
As reported by Arundhati Roy in The Nation, February 18, 2002: “In August 1996 the government of Maharashtra signed a fresh contract with Enron that would astound the most hard-boiled cynic . . . . The `renegotiated’ power purchase agreement . . . legally binds the Maharashtra State Electricity Board to pay Enron the sum of $30 billion!” All this for power twice as expensive as Enron’s nearest competitor and seven times the cheapest available price.
In January 2001, the Maharashtra government announced it was suspending payments to Enron, accelerating what we now know was Enron’s slide into bankruptcy. This time it was Bush-Cheney who tried to put the muscle on the Indians. With this living example of bipartisanship in action, do you really expect Congress to probe to the bottom of Enron’s political cesspool?
Sure, a dozen Congressional and criminal investigations will busy themselves probing the Enron debacle; a few of the most crooked corporate executives may even spend eighteen months or so in a comfortable country-club prison for white-collar criminals. But there are limitations imposed both by self-interest and by reasons of state.
Among some 248 members of both houses of Congress who will be members of committees investigating Enron, 212 have received campaign contributions from the company. Even more important, right now prosecuting an imperialist war—rearranging the strategic map of Central and South Asia, beginning with the conquest of Afghanistan—trumps the handling of the domestic economy.
This is not the usual pattern: Richard Nixon, fabulously successful in his foreign policy with Russia and China, fell victim to Watergate as the economy suffered the oil shortages and price shocks following the 1973 Middle East War. George Bush Sr. looked unbeatable following the 1991 Gulf War but politically crashed in the 1992 recession. (“It’s the economy, stupid.”)
The right wing understands the present moment as one of unusual opportunity—so long as the war continues to be a string of unbroken successes with minuscule U.S. casualties—an opportunity at home to cross many red lines, from shocking violations of civil rights of immigrants, to open contempt for Geneva Convention rules governing prisoners of war, to a new round of destructive tax cuts for the wealthy, all of which would be politically impossible absent the war psychosis.
The likelihood is that popular support for these measures will be short-lived, though some of the damage will last a long time. This consideration suggests that this administration may have a stake in prolonging the “war against terrorism” so that it becomes a semi-permanent state of low-level emergency, hoping that the day of political reckoning with economic bad times never comes (as it inevitably will, however).
If the pathology of the immediate situation is the first lesson of Enron, there are a number of others that apply to the normal workings of the capitalist system.
- The regulation of things like utilities, banks, stock markets, etc. under capitalism is not some kind of bureaucratic aberration (much less a sign of “creeping socialism”). Regulation is required precisely because the “free market” enables and encourages the kind of practices that would destroy the system itself—as the system’s managers recognized a century ago with anti-trust legislation, and in the 1930s when catastrophic bank failures forced regulations on the financial sector.
Enron is only the latest case in point. The much-vaunted energy deregulation for which it lobbied so hard, supposedly to bring the benefits of competition and lower consumer prices, instead produced (e.g. in California) deliberately-manipulated shortages, obscene price spikes and the threat of outright revolt. Microsoft’s predatory practices also illustrate how the myth of “free market competition” actually generates monopoly.
- Government under capitalism does not act to protect a “level playing field” among capitalist competitors—let alone to give working people a fair chance. The capitalist state is an arena in which leading corporate interests organize and contend for special favors, subsidies and tax advantages, privileged access to markets—all of which is bought and paid for in political contributions and other forms of (mainly legal) bribery.
At the same time, of course, the capitalist class uses its own nation-state to organize its interests against capitalists of other nations, and above all to ensure that labor remains subordinate and where necessary, suppressed by physical force. But what the Enron case illustrates is that political manipulation is every bit as integral to capitalism-as-it-really-is as is the “free market.”
- All the new innovations in finance and electronic commerce don’t change the fact that economies ultimately rest on producing real goods and real services (aka “value”) that real people actually need. Stock prices that rise and rise on nothing more than the myth that they will continue to rise and rise will unavoidably crash.
More precisely put: When academic economists and TV pundits preach that stock prices are no longer tied to the production of goods, it is a reliable sign that the crash is imminent. It is really quite incredible that these people, who pretend to believe in the working of “the market,” would imagine that a self-inflating bubble could expand forever on the strength of its own hot air.
- The high-powered ideology of “deregulation” does not negate any of these observations. The mania of deregulation is driven by a combination of ideology and the naked interests of outfits like Enron—the very types which, because they do not operate as producers but as manipulators of price and supply, are among the most likely to operate at the outer margins of legality and accounting practices.
Those who lobby loudest against “excessive regulation” are those who should be most tightly regulated.
Enron in Perspective
The Enron debacle is the beginning-of-the-end for the most recent wave of banking and service deregulation in the United States. Letting corporate criminals (in the most literal sense) dominate the delivery of something as vital as energy, and flush their workers’ retirement funds down the toilet, without rudimentary oversight, threatens to do damage that the system cannot tolerate.
Unfortunately, regulation in and of itself is hardly a panacea so far as the interests of working people are concerned. Protecting ordinary people’s pensions and pocketbooks from the most grotesque ripoffs of price-gougers and speculators is not a bad thing. It does not touch, however, the workings of a system in which more and more people face permanent insecurity in their jobs, their health care and their future.
It is tragic that the labor movement is poorly positioned to take full advantage of a moment when the absurdity of the right-wing economic agenda is on display. While the AFL-CIO leadership has presented some effective criticisms of the Bush “economic stimulus” program, labor’s opposition to the administration is stalemated by its all-out endorsement of the “war against terrorism.”
All the more is this true as the Bush administration embarks on its war-without-end against Iraq and Iran, Somalia and Sudan, and expands its military interventions from the Philippines to Colombia.
Corporate America can wave the flag and put its hands in working people’s pockets at the same time. That’s literally business as usual. But labor’s strategy of waving the flag with one hand and trying to defend workers’ rights at the same time is a proven failure, over and over again.
That’s not exactly new, but it may be the ultimate lesson and the hardest to be learned.
from ATC 97 (March/April 2002)