Enron: Capitalism in a nutshell (Part 6)
Time to wrest control from the corporate sector

by Anna Pha

Enron, not so long ago a shining star of the "New Economy", a market force 
in its own right, is now the subject of 15 or more Congressional and other 
inquiries. This model capitalist corporation, audited by one of the most 
reputable global accounting firms, turned out to be trading in virtual 
electricity, making virtual profits and hiding its debts through the use of 
secret off-the-books deals. The shockwaves continue to reverberate as the 
perpetrators and their accomplices duck for cover, and the victims attempt 
to come to terms with their shattered lives.

A study of Enron is a study of capitalism at the beginning of the 21st 
century. When Enron went down, some shrugged their shoulders: "Companies 
come and go", said US Treasury Secretary Paul O'Neill, "That is part of the 
genius of capitalism."

Companies do come and go. Last year HIH, Harris Scarfe, One.Tel, Bradmill, 
Pasminco, Agro Holdings, Diamond Press, Traveland, Karl Suleman Enterprises 
went, to name just a few Australian examples. And there was Ansett, which 
suffered a slow and agonising (for its employees and passengers) death.

Most of these bankruptcies involved such practices as "accounting function 
irregularities", "over-estimated assets and under-estimated liabilities", 
"aggressive accounting methods" and "channelling of funds offshore". Most 
people would call it theft and fraud.

"The genius of capitalism" behind these collapses were rewarded with huge 
payouts. The workers, on the other hand, were left high and dry and in the 
case of Enron, denied an opportunity to sell their shares.

Corporate takeover

Enron bought hundreds of politicians and decision makers, was involved in 
the drafting of the very deregulatory policies that enabled it to gain 
monopoly control of electricity markets and self-regulate its own 
activities. Enron bought accountants and lawyers, while state "watchdogs" 
turned a blind eye.

It was rewarded with control of one of the most important essential 
services — electricity.

Internationally US Government officials did Enron's bidding, pressuring 
other governments to give Enron contracts.

Some say that Enron put Bush in office. Enron, along with the dominant 
corporations in other key sectors of the economy, are the effective 
government of the US.

Much of it legal

"...for all of the potential criminal violations, much of the misbehavior 
connected to the biggest bankruptcy in the history of the world was 
perfectly legal", says Jonathan Alter, writing in "Newsweek"(18/1/02). "As 
for the politicians, accountants and regulators, most of what they did will 
likely turn out to be disturbing, even disgusting — but all-too-legal."

The greed, fraud, bribery, corruption, deceit, parasitism, speculation, 
theft of workers' entitlements, insider trading, tax avoidance, job losses, 
cosy relationships with accountants and governments, and the many other 
"disgusting" features of the Enron collapse are just business as usual for 
capitalism.

Worried about their image

The main question facing big corporations and governments is how to smooth 
it all over without too much fallout (e.g. re-regulation, government 
intervention) or destabilisation of the capitalist system.

Neither big capital nor the accounting industry is interested in 
fundamental change to address the causes of the problem. They are the 
problem. They seek a way out involving minimal change — just enough to 
restore public (particularly shareholder) confidence.

If the "the mums and dads" and superannuation funds lose confidence and 
turn to other more secure (e.g. real estate and bank deposits) forms of 
investment, it could bring stockmarkets crashing down.

The accounting industry, in particular, is in crisis. "Through the 
incompetent and probably corrupt audit of Enron, the appalling Joe 
Berardino, head of Andersen, has destroyed not just billions of his 
partners' wealth but also the standing of accountants everywhere", writes 
columnist Alan Kohler in the Australian Financial Review (23-
24/3/02).

Kohler quotes Michel Lafferty, former journalist for the Financial 
Times, who is organising a major world accounting round-table in London 
to consider the crisis.

"This crisis affects the personal balance sheet of every accountant and 
accounting firm in the world today.... it is a wake-up call — because 
there are more Enrons out there, some possibly of national dimensions."

Kohler goes on to point out that it is not just a crisis for accountants. 
He links it to the foundations of capitalism.

Enron is not some isolated incident. As one attorney from Enron's law firm 
Vinson & Elkin rhetorically asked, "Do you think it's any different from 
anything going on in L A or in Reagan's crowd. Or in Clinton's crowd?"

Various shareholders, trade unions, politicians and community groups are 
calling for reforms to protect investors from more Enrons.

The reforms being debated focus on accounting practices and auditing 
standards; regulation of essential services; the electoral system and 
campaign donations; protection of workers' entitlements; retirement 
schemes; job security; tax havens; off-shore investments and banking; 
public accountability of executives and corporations; relations between 
government, corporations, law firms and accountants; protection of 
whistleblowers; and the high risk, speculative activities of corporations.

Many of these issues are being debated in Australia as well as the US, 
particularly in the light of the HIH crash, which saw one of Australia's 
largest general insurers suddenly go to the wall.

Regulation and public ownership

Capitalism faced a similar crisis during the years of the Great Depression 
of the 1930s. Millions were unemployed. Poverty stalked the capitalist 
world, including in Australia. The idea of socialism spread rapidly. 
Communist Parties grew in membership.

The answer of the capitalists at that time was found in Keynesian economic 
theories which called for a tightening of the reins on the free marketeers. 
Industries and financial institutions were regulated and some were 
nationalised. Government intervention was seen as necessary if capitalism 
was to be saved and future crises prevented.

Keynesian economic theories did save capitalism. The depression slowly 
passed. Capitalism was also given a new lease of life with the Second World 
War and the huge military expenditure injected into the system at that 
time.

Monopolies grew in size and power. Monopolies became transnational 
corporations and with the breakup of the Soviet Union they were emboldened 
to launch a great offensive not only against the working people of all 
countries but also against every vestige of public ownership and the 
welfare services which had been won in the 40 years following WW2.

What is to be done now?

If the attempts to "reform" some of the most disgusting aspects of fraud 
and manipulation and some re-regulation takes place without challenging the 
power of the corporations, that is the private enterprise system, nothing 
much will have changed. History will merely repeat itself at some future 
date.

We have to think in terms of a new type of government that will start to 
wrest control from the corporate sector and to democratise the provision of 
essential public services and key industries, and make them publicly 
accountable.

This can only be done by extending public ownership to at least the key 
industries and enterprises in the economy. The whole rationale for the 
existence of enterprises has to be turned around from one of making profits 
to meeting the needs of society.

Such a change would enable universal access at uniform prices to be 
restored to all essential consumer needs.

The motive for continually attacking workers' wages and working conditions 
would also cease and advances could be made in reducing working hours and 
creating job security.

Health care, the housing needs of the people, environment protection, the 
public education system could all be given the necessary priority.

The private enterprise system only gives these needs attention to the 
extent that they serve the interests of the big corporations.

Protecting workers' entitlements

Central funds such as Manusafe for the investment of workers' entitlements 
and industry superannuation funds offer more protection than hoping for 
something to be left in the till when a company goes bust and the boss has 
siphoned the lot off.

A government funded pension scheme is a much more secure system than the 
present superannuation scheme. As workers in the US have found, funds 
invested in capitalist enterprises will always be insecure. It's a gamble.

Super funds invested in various companies depend on the survival of those 
companies and the present spate of bankruptcies is a warning of danger 
ahead. Those receiving the government-funded pension do not have such 
worries.

Likewise employee share ownership schemes are extremely risky, and if a 
company goes under the worker is hit by a double whammy — no job and 
savings down the gurgler.

Who controls?

The central issue is who controls the economy and for what purposes.

The aim of a capitalist corporation is to make bigger and bigger profits, 
to accumulate more and more wealth, provide larger and larger capital gains 
and dividends for shareholders.

Public ownership on the other hand provides the opportunity to run such 
enterprises with a view to the service that they provide for the community. 
That does not mean that they be run inefficiently with no responsibility to 
balance the books. The fact is that public enterprises in Australia have, 
in the main, been efficiently run and their profits have assisted to swell 
government revenues.

Furthermore, public ownership is more democratic in that ownership is 
vested in the community not in a few large shareholders or even one 
individual, or by a board of directors in another country.

Publicly owned enterprises in Australia and government departments were 
pacesetters in the provision of the best wages and conditions and 
employment security for workers.

There are many other reforms that the Enron collapse (as well as the 
bankruptcies in Australia) make essential.

The new type of government suggested calls for a new type of political 
representative. The Howards, Costellos, Beazleys and Creans have proved to 
be failures in recent years because they are wedded to the big corporations 
rather than the interests of the people.

It is left and progressives representatives who have proven their 
commitment to different policies and have fought hard as members of trade 
unions, community organisations and as members of left and progressive 
political parities for the real interests of the majority of the people.

A start has to be made in this direction and the establishment of a new 
type of government would be a big step towards changing the direction of 
economic, political, social and environmental policies in the interests of 
the majority of the people of Australia.