Stark lessons looming for us all in Enron trial

Newcastle Herald 14 January 2006

By Kellie Tranter

Former Enron bosses Ken Lay and Jeff Skilling will go on trial at the end of the month for their part in the huge financial scandal that led to the collapse of the energy trading giant on 2 December 2001.

The giant multinational corporation Enron grew from being essentially a gas pipeline company in the 1980s, into the world’s single largest energy trader, accounting for around 25% of energy trade in both US and European markets. In 2000 Enron was ranked 16th on the Global Fortune 500 and 8th on the US Fortune 500.

In the notorious California energy crisis, the massive rise in energy costs translated into massive profits for suppliers like Enron.  Residents and businesses in the country’s largest state suffered through six days of rolling blackouts in early 2001 following a tenfold increase in energy prices.  California state investigators focused their investigations on the holding back of power supplies through plant shutdowns in order to rapidly raise prices and generate mega-profits.

What makes Enron symbolic is firstly its notion that anything can be commoditised, and secondly its use of “lobbying”, political “donations” and access to political power to influence national and international policies to its own advantage.  The latter is now a common “business strategy”; the former is now an economic catch-cry.

Most significantly, the company became a major player in influencing GATS (General Agreement on Trade in Services) negotiations at the World Trade Organisation.  Its aim was to expand the scope of the rules to include all public services, ranging from health care and education to energy, water and transportation services.  The push for commercialising and privatising all forms of services and utilities, implied a drastic restructuring of the role of government with respect to public access to essential social services across the world.  As a leading member of the US Coalition of Services Industries (UCSI), Enron became a prime example of how large multinational corporations can not only influence, but actually determine, global trade rules at the WTO.  

The free market ideology of unregulated markets, tax breaks for the rich that allegedly trickle down to the poor and privatisation of the public sector has been brought into question by the collapse.

Features of the Enron collapse include top executives escaping with hundreds of millions of dollars while employees lost their jobs; investors losing millions and customers suffering rolling blackouts; profiteering;  bought politicians; government acting as a business arm;   international human rights and environmental abuses; losses to government insured commercial and investment banks;  investment bankers who “talked up” the stock and the stock market bubble that eventually burst.

What to look out for in the forthcoming trial?

Who received political campaign contributions? Who served on the Enron Board?  Who was involved in secret policy meetings? Was Enron exempt from regulation? Who ordered the shredding of documents? Who were Enron’s advisors? Who was involved in the development of the US Energy Policy? Who profited from the collapse? Who was ultimately responsible for hiding the losses?

Why is this relevant to Australia? To us? Because the mantra of commoditisation, privatisation and deregulation of essential services has been and is being taken up enthusiastically by our State and Federal Governments (for example, with electricity, water and roads) and may well lead to similar scenarios. 

The rise and fall of Enron must surely lead to a deeper questioning of economic and political systems, including our own, which can generate such a situation.