Workers' Liberty #2/2


The rule of greed and deceit

'An unholy convergence of greed, incompetence and deceit' is how the Financial Times describes the events leading to the collapse of Enron, once the USA's seventh largest company, now the biggest bankruptcy ever declared.

Enron boasted of being 'asset light'. It traded. It didn't produce anything. It generated 'virtual wealth through virtual companies'. It created 3,500 affiliates and 'off-balance-sheet' partnerships, many managed by Enron executives. At its height, $27 billion of its $60 billion assets were off-balance-sheet. It used those side-companies in various ways, to draw in outside investors, to inflate seeming profitability, and to hide losses.

For example, it would make deals with off-balance-sheet partners at the end of each financial quarter which increased its paper income, and then cancel them at the beginning of the next quarter.

With long-term energy contracts, it would book as current income money that might not be realised for ten years, and seriously underestimate commodity costs to itself in the later years of a contract. These practices are described by the former Enron accountant as 'skirting the edges' of legality.

Enron also avoided taxes during the period when its stock was riding high. Between 1996 and 2000, when its pre-tax profits totalled $1.79 billion, it received $381 million in US federal tax rebates and only once paid tax - $17 million in 1997.

All these practices were well known to Enron's partners, including most of the big players in world finance, Citigroup, CIBC, Deutsche Bank, Dresdner Bank. JP Morgan Chase actively advised on the fiddles. As the FT points out, 'The fancy manoeuvring was surely not practised by Enron alone.'

Now thousands of employees and pensioners have lost their jobs and their savings in the collapse - 60% of the Enron employee retirement plan was held in now-worthless Enron stock - while the top executives have made hundreds of millions of dollars personally by selling their shares before Enron's collapse became public knowledge.

And still the IMF, the World Bank, the World Trade Organisation, and the governments, big corporations and banks behind them, tell us that 'the market' is the only rational and efficient system for coordinating economic life - impersonal, impartial, robust.

In fact, the rule of 'the market' means clearing the way for the rich to get richer by greed and deceit, just as the Enron bosses got rich. When governments talk of bringing 'market discipline' into public services, it means that global capitalism is on the rampage and public services are the main target, the new 'dark continent' to be opened up for exploitation. New Labour accepting Enron's 'cash for access' is a small thing compared to their planned dismembering of what is left of our public services - handing them over to the Enron clones and aspirant clones.

Back to the contents page for this issue of Workers' Liberty

Back to the Workers' Liberty magazine index

[ Home |