Enron and the Next Revolution
|March 8, 2002||Posted by Staff under Progress Report, The Progress Report|
How Much Will People Tolerate?
Enron and the Next Revolution
Here are portions of a recent Texas Observer article by economist James K. Galbraith, son of John Kenneth Galbraith, on the Enron scandal.
by James K. Galbraith
“It is true, so long as no change of base is made, what is confidently to be looked for is a regime of continued and increasing shame and confusion, hardship and dissension, unemployment and privation, waste and insecurity of person and property — such as the rule of the Vested Interests in business has already made increasingly familiar to all the civilized peoples.”
Nowadays there are three classes in America: working people at the bottom, professionals above them, a tiny elite at the top. Democrats represent the professionals, Republicans represent the CEOs. No one, much, speaks for working people, who must rely on the occasional sympathy of leading Democrats for most of the little they get.
Our politics accordingly mirror corporate life.
But the Enron scandal could change that. In details complex, the scandal is essentially simple. A handful of rich men, closely tied to the Texas Republican Party led by George Bush and Phil Gramm, decided to become richer still. Their grand strategy included deregulation of energy, deregulation of derivatives, corrupt accounting practices, overseas tax scams, and even U.S. diplomatic pressure (delivered by Dick Cheney himself, on India, where Enron had sold a white elephant power plant). And then, as the game unwound, they sold their own stock while freezing employee pension accounts. In the end the gang made off with over a billion dollars, that we know of.
Enron’s real business was politics. Enron paid for favors promptly: $100,000 to the Democrats in 1997 to push the Indians around, $25,000 to Texas Governor Perry one day after an Enron division chief got to run the Public Utilities Commission in Texas. Wendy Gramm, who moved smoothly from the Commodity Futures Trading Commission to chair Enron’s audit committee, got nearly two million. We still don’t know exactly what Enron contributed, in intellectual terms, to Cheney’s energy policy. But they paid well for it: Over time, the big boss George Bush got over $600,000 in Enron cash. That we know of.
The Administration proudly refused to intervene on Enron’s behalf once bankruptcy loomed. But here’s the catch. They weren’t asked to. Their friends had already cashed out by then. Saving the mere professionals, or the company, was not on anyone’s agenda.
But modern corporate America runs on the collaboration of professionals with the elites. In big and small ways, managers, accountants, lawyers and engineers make the system work. In each firm, they have to trust that the big boys are not stealing fiom them. And they control — through their pension finds — vast sums which they must also entrust back to corporate America, through the stock market.
Before 1988, the professionals of Japan also felt that by working and saving, borrowing and investing, everyone would get rich. The crash of that year taught otherwise. The Japanese middle classes felt betrayed, because they were betrayed. Their money, what was left of it, went back under the mattress, where it remains. Japan has not recovered in fourteen years.
Now suppose that American professionals come to feel the same way? The economist Thorstein Veblen, back in the days of Teapot Dome, wrote that the revolution here would not be led by workers. Rather, revolution could only come to America in the hands of technicians, “the General Staff of the industrial system,” a normally contented class, “harmless and docile,” in ordinary times. The technicians however, held the real power. And they might, someday, realize that the absentee landlords, the Vested Interests and their political lackeys, serve no productive function.
Enron just might start a chain of events that could, in time, prove Veblen right.
James K. Galbraith’s latest book is Inequality and Industrial Change: A Global View.
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