the decline and fall of the arrogant?

["Ian Murray" <seamus2001@xxxxxxxxx>]

[if we could only hope..]

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@xxxxxxxxxxxxxx