Acton Commentary

Enron is Still With Us


Enron and corporate executive greed no longer dominate our headlines, edged aside by world events and other economic issues such as tax cuts, the G-8 Summit, and the Middle East. That is too bad since it is apparent that its root moral-cultural problem—a disease I will call the Enron syndrome—is still very much with us, notably illustrated in the recent Jayson Blair plagiarism fiasco at the New York Times.

What do corporate Texan energy executives and prestigious East Coast editors have in common? “Enronizing” the truth, fudging the facts, and turning blind eyes to the facts—for the sake of a greater good. The greater good in this case included crass profits for shareholders and employees—whose future hopes for financial security were tied in to their company’s success. But it's more complicated than that. America needs energy, preferably cheap energy, and creative financing schemes were helpful in drawing investment into Enron for that noble purpose. Since states themselves appear complicit in these cheap energy schemes, Enron’s success, so it could be rationalized (though it is a stretch!), was a matter of national interest. Isn’t it reasonable that Enron should stay afloat for the greater good? So what if “mild distortions” on numbers are needed to achieve this greater good.

I frankly don’t buy the previous elaborate rationalization but, isn’t it somewhat odd for those who actively support and promote a wide diversity of progressive social causes to raise a hue and cry about creative use of numbers for noble purposes? Consider the following issues that all depend on numbers to convince the voting public that urgent governmental, regulatory action is required: Global warning, the number of the homeless, battered women on Super Bowl Sunday, the academic performance of middle school girls, suicide rates among teenage gay boys, the happiness and well-being of children in day care and situations of divorce, the percentage of persons in the general population with a homosexual orientation, the “wage gap” between men and women, deaths directly caused by second-hand smoke, the poverty level, the notion that more money is needed for favored causes such as public education and AIDS research.

While this list could be expanded, the point should be clear. Fudging with and even misrepresenting numbers for a greater good is a fact of our public life. And the academy is itself a major culprit; it has is own version of Enron. Affirmative action admissions and grade inflation misrepresent real accomplishment in order to achieve a greater social good such as diversity, or even reparation for past evils. Enronizing goes beyond the world of big business to include the academy and government itself. Politicians who fudge the numbers on Social Security, make claims about tax cuts being only for the wealthy, etc. are hardly in a moral position to condemn similar acts in other spheres. Whether or not some agree with my examples in the previous paragraph, it does seem clear to me that lying about numbers is endemic in today’s society. Enron is ubiquitous.

But here’s the truly noteworthy angle in this story. Though American business is the traditional target of progressives for accusations about corruption and cheating, it is striking that it is only in the world of business that the corruption gets exposed. Even Times reporter Jayson Blair got “caught” thanks to free market forces on the press. Why? Answer: Market mechanisms in a free society provide high levels of accountability.

Contrary to conventional leftist wisdom, businesses do not have absolute power. The state has coercive power to tax and it is quite possible for governmental entities (Post Office?) to lose tons of money and still stay afloat. Schools at any level that are publicly funded do not need to deliver on their educational promises to keep on going. They too are backed by the state's coercive and compulsory claim on the resources of citizens.

In fact, the education example is particularly instructive because it is becoming apparent that the surest, perhaps only, means of improving education is also by way of market mechanisms. In two ways. When employers become sufficiently harmed by the lack of a literate, competent work force cutting into productivity and quality and protest the educational system, public schools will be forced to improve or risk being replaced by schools set up by business itself. Short of that prospect, merely introducing genuine competition into public education by charter schools or vouchers will provide a challenge to the education establishment. Monopolies protected by the coercive power of government have no incentive to be efficient or productive.

That brings me to my final point. While it is true that business does not possess the coercive power of the state, corporations do have considerable clout. Societies do have reason to be concerned about monopolies of any kind. My point is not to make the libertarian claim that all legal regulation of the business world is wrong. I simply call attention to the mistake made by those who give the impression that the major form of corruption in our society is found in the free market exercise of commerce.

On the contrary, corruption is most readily exposed in sectors of a free market economy. Lying and creative accounting is wrong, period. Whether deceit is found in politics, the academy, or in the world of commerce makes little difference. Lying is wrong, period. Businessmen just get caught more quickly and are punished more definitively than, say, politicians. Businessmen cannot produce profit out of thin air the way academics create mythical evils such as invisible institutional racism, “the patriarchy,” or “the man,” or how abusive tyrants use the coercive power at their disposal to silence their critics.

The problem is not that certain classes of people are more corrupt than others; the ready moral acceptance of lying and deceit is the problem. And there is nothing more dangerous than those with power that lie and cheat in defense of what they perceive as a noble cause. Our problem, with apologies to Samuel Taylor Coleridge is:

Enron, Enron everwhere
no other way to think.
Enron, Enron everwhere,
and all our souls did shrink.