The ignominious collapse of Houston, Texas-based Enron - at $62 billion the largest bankruptcy is US history - is a powerful reminder of how "business as usual" is conducted in the epoch of capitalist decay and imperialism. Formerly seventh on the Fortune 500 list of large corporations, its stock fell from a high of $90.56 in August 2000, to $0.30 on January 16, 2002. This formidable downfall has had far-reaching effects, and there are many lessons that the working class can learn from it.
The Enron implosion is a classic example of how shaky the supposedly rock-solid capitalist economy really is. Massive companies, which are supposed to be pillars of stability and examples of "good business practice", can disappear almost overnight, leaving behind a cloud of unemployment, fraud, lies, and cover-ups. Founded in 1986 from the merger of natural gas pipeline companies Houston Natural Gas and InterNorth, it was GW Bush's home state of Texas' second largest company after Exxon-Mobil. It was the largest natural gas pipeline owner in the United States, and its foreign holdings included major pipelines and power plants in Europe, Asia, and Latin America, and the entire industrial gas business in Jamaica. A powerful advocate of deregulation and "free trade" in the US, Britain, and several developing countries, Enron expanded its operations from building natural gas pipelines to an ever-expanding array of businesses ranging from internet backbones to water supply, and even to advertising space. Much of the profit that was gouged out of Californians during the energy crisis last year ended up in Enron's bank accounts. Through its over 900 subsidiaries in tax havens, it paid no federal corporate income taxes in four of the past five years - its revenues were almost pure profit. It was the world's largest energy-trading company - one would expect at least relative permanence from such a monster - and yet it too was unable to build solid foundations in the capitalist economy, based as it was on inflated profits and fictitious capital.
Effects on Enron Workers
For the working class there can be no stability as long as their economic future is controlled by a handful of capitalists interested only in their own profit and power. The US economy is now officially in recession and unemployment has risen to 5.8% - the highest since 1995. For Enron's 21,000 employees, the shock of the collapse was a hard lesson in the realities of life under the anarchic market system. Thousands lost their jobs overnight, their 401k retirement funds ruined, as they were heavily dependent on now worthless Enron stock. Just before it filed for bankruptcy and laid off 4,000 workers on Dec. 2, Enron had paid $55 million in retention bonuses to top managers and executives.
Top Enron executives and directors made almost $1 billion in sales of the company's stock over the last two years. Founder and CEO Kenneth Lay made $123 million in 2000, and $25 million in 2001, and sold his Enron stock before the meltdown at a massive profit. At the same time he was encouraging employees to buy up the soon-to-be-useless stock, telling them that "the third quarter is looking great", and predicting that the value of the company would increase 800 percent or more in the next decade. Employees were forbidden from touching their shares in the company, and many whose retirement funds were worth $1,000,000 in August 2001 were left with life savings worth little more than $4,000 by Christmas. Businesses work hard to develop a "corporate culture", and employee loyalty. For thousands of workers, the reward they got for believing that they were "part of the team" was a ruined bank account and an uncertain future. It is experiences like this that will hammer home the fact that the working class and the ruling class do not share common interests, no matter what the CEOs may say! Unfortunately the shocking loss of jobs at Enron will not be the last during the current economic downturn. Already many other traditional powerhouses like Ford and Boeing have announced huge layoffs. Such is life under a system that puts profit before people!
But in spite of Bush's present soaring approval ratings, many workers are already beginning to come to the conclusion that all is not well in the best of all possible capitalist worlds. Almost two-thirds of Americans in a CBS News poll think the Bush administration is either hiding something or lying about its relationship with Enron. Just over half said the company's calls to the Bush administration for help were wrong, and More than half said Enron had at least some influence on the Bush administration's energy policy and even more said the influence was inappropriate. Only a year into his presidency, Bush is faced with a crumbling domestic economy, skyrocketing unemployment, and a volatile economic, social, and political situation on a world scale. The growing doubts about his abilities will continue to grow, as will working class opposition to his policies at home and abroad.
In his work Imperialism: the Highest Stage of Capitalism, Lenin explained that in this epoch, there is a merging of finance and industrial capital - with finance capital assuming a greater predominance. The rise of colossal monopolies and the interconnections between the owners and leaders of the banking sector and the industrial sector become more and more absolute. There is also an almost total fusion of the magnates of capital with the bourgeois state machine. The national bourgeoisie in the advanced nations, unable to find an outlet for their capital within the narrow confines of the national state and market, export capital to the colonial world in an effort to secure the highest possible profit. Internationally, this leads to a struggle between the rival imperialist powers for spheres of influence and colonial possessions. This leads to outright wars between the main powers, proxy wars fought through local pawns, trade wars, protectionism, and virulent nationalism - all in the interests of the national bourgeoisie.
At the present time, with the entire world sinking deeper and deeper into recession, the contradictions between the imperialist powers are becoming increasingly sharp. They all want to lessen the impact of the economic downturn at home, and must therefore seek out every possible outlet for their goods and services. This leads the corporate leaders to put pressure on government to defend the interests of national corporations on a world scale.
Big Business and the State - Domestic Policy
Marx explained that the executive of the modern state is but a committee for managing the affairs of the ruling class. Enron's ties to government officials, Republicans and Democrats alike, were extensive.
- Lay was a close friend of GW Bush, and his top campaign contributor in the 2000 election (he and other Enron employees gave over $500,000). The Center for Public Integrity identified Enron as the single largest patron of Bush's political career, including $200,000 to help pay for the Bush inaugural festivities in January 2001.
- Vice President Dick Cheney (former chief executive of Dallas-based Halliburton - one of the largest oil-drilling, engineering and construction services providers in the world) met with Lay to discuss energy policy, and Enron executives met six times with members of the task force.
- Enron's political action committee and its executives donated $57,499 to Attorney General John Ashcroft's campaign during his unsuccessful bid for re-election to the Senate in 2000.
- Just a day before Enron reported losses of $618 million in the third quarter of 2001, Lay phoned his friend and Commerce secretary Donald Evans for help. It was soon revealed that Enron had also lost $1.2 billion in partnerships that weren't even counted on the company's books. Lay also called to exert pressure on Treasury Secretary Paul O'Neill and Federal Reserve chairman Alan Greenspan.
- Lawrence Lindsey, now President Bush's chief economic advisor, once served as a consultant to Enron, getting paid $50,000 a year for his work.
- Secretary of the Army, Thomas White served as Enron's vice president and owned up to $100 million in company stock.
- Former President George Bush Senior knew Lay from Lay's work as co-chairman of the 1992 Republican National Convention host committee in Houston. Lay and Enron also contributed $13,000 to the elder Bush's 1992 presidential campaign.
- Bush's chief political strategist Karl Rove owned $100,000 in Enron stock, conferred by phone with Lay on energy policy and appointment of an Enron-backed candidate to the Federal Energy Regulatory Commission, which has jurisdiction over some Enron operations.
- Commerce secretary during President Clinton's first term, Ron Brown took Lay on his 1995 tour of India to drum up new business for US corporations. During the 1991-92 election cycle, Enron gave nearly $30,000 to Democratic Party committees while Brown served as the chairman of the Democratic National Committee. Enron gave $42,000 to the Democratic Party in the 1993-94 election cycle.
- Enron gave generously to the campaigns of several Texas legislators (for example Republicans Phil Gramm and Tom DeLay received $97,350 and $28,900 respectively), and also gave to strategically placed Congressmen from other states such as Senate Energy Committee chairman Sen. Jeff Bingaman, a Democrat from New Mexico who received $14,124.
(Sources: Center for Responsive Politics, Associated Press, Center for Public Integrity)
And that is just the tip of the iceberg. Many other former government officials now work for Enron as lobbyists, and many current government officials were formerly in the pay of Enron or owned large amounts of Enron stock. Especially in the sphere of energy deregulation, Enron and its lobbyists have made a definite impact on the energy policy of the Bush administration. It is clear beyond doubt that the connections between the leaders of capital and the bourgeois state are far-reaching. Bush's recent economic "stimulus" package included $254 million for Enron. And still Bush denies that "Kenny Boy" (as he was known to the President) had any influence on his administration. But the facts speak for themselves - the extent of Enron's connections with government is astounding.
Connections Between Companies
Another noteworthy aspect of the Enron scandal is the relationship between Enron and its accounting firm, Arthur Andersen LLP. As we have already explained, the relationship between government officials and big business is fluid, but so too are the links between various major corporations themselves. With job positions and titles changing regularly we have situations like that of ex-President Clinton's Treasury Secretary Robert Rubin, who is now a top executive at one of Enron's primary lenders, Citigroup. He also made some calls on Enron's behalf in an attempt to save the company from bankruptcy. From a cabinet position in government, to the corporate world and back, the number of big capitalists controlling the economy and our futures is actually quite small. A handful of capitalists often sit on the boards of directors of multiple companies - and collect hefty paychecks from each company.
When the government announced it was investigating Enron, countless boxes of documentary evidence were destroyed by Enron and by employees of Arthur Andersen. Arthur Andersen is one of the top 5 international accounting consultants, which has contracts with the federal government totaling $37.8 million for the first nine months of 2001. As Enron's auditor, Andersen signed off on accounting practices that hid billions of dollars in off-balance-sheet debt and led to a $600 million reduction of four years' worth of earnings. Of course this is only "dishonest", "questionable", or downright illegal if you get caught! But they did get caught, and now the Enron fiasco has spread to other firms, particularly those financially exposed to the collapse of Enron - not to mention the heights of the government itself.
The bourgeois press is now going on about how they will introduce more "checks and balances" in order to prevent "another Enron", but in reality it is all a smokescreen to hide the fact that this is the way things work under capitalism. They only worry about public opinion on these issues when they get exposed so glaringly as in the case of Enron and Andersen. The working class is supposed to have confidence in its ruling class "superiors" - who are supposedly privy to special knowledge and methods of work which allow them to become filthy rich while the rest of us slave away for peanuts. But when the lies, cover-ups and sheer greed of these companies are exposed, it is natural that workers begin to question their right to control our economic lives.
Big Business and the State - Foreign Policy
As we explained in "George Bush's Foreign Policy" (http://www.marxist.com/usa/bush_foreign_policy_2001.html), foreign policy is an extension of domestic policy. There are many who claim that in the epoch of "multi-national" corporations, the national state is irrelevant, that these conglomerates lead an independent existence. Nothing could be further from the truth. Far from easing national antagonisms, the sped-up process of globalization has led to heightened economic, political and at times even military tension between the competing imperialist powers. As explained above, the lines between corporations and government are increasingly blurred, and national governments are forced time and again to intervene on behalf of their corporate financial backers. These interventions are normally of an economic or political character, but they often lead also to direct military involvement. It is worth quoting, former Major General Smedley Butler, of the US Marine Corps:
"I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912 (where have I heard that name before?). I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.
"During those years, I had, as the boys in the back room would say, a swell racket. Looking back on it, I feel that I could have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents." (From a speech delivered in 1933)
In order to protect US corporate interests abroad, the government operates the Overseas Private Investment Corp. and the Export-Import Bank of the United States, funded by taxpayer money in order to further the interests of US corporations. Between 1992 and 2000, Enron received $2.4 billion for its overseas energy projects. White House press secretary Ari Fleischer explained: "It's not uncommon for leaders of the United States, no matter what party they are, to help make certain that if contracts are to be awarded overseas, they're given to Americans. There's a lot of competition." Lenin himself couldn't have put it any better!
Enron's relations and influence with government officials extended far beyond the borders of the USA. The company eventually ran operations in more than 40 countries around the world, including plans for a Bolivia-to-Brazil pipeline project which drew sharp criticism from environmental groups over its failure to stick to pledges on adequately protecting sensitive habitats, including indigenous lands. Even before he was President, GW Bush threw his family name around in securing Enron its first contract in Argentina. The $300 million deal was part of the deregulation of the Argentine economy and provoked a political firestorm, drawing scrutiny from legislators and a special prosecutor. The present economic and political turmoil in the South American country is a direct result of these policies.
In India, Enron was involved in the Dabhol power plant in Bombay - India's single largest foreign investment at $3 billion. This project has been surrounded by contractual disputes and allegations of rights abuses by its private security guards. The Bush administration coordinated an effort last year to help the energy giant settle a dispute with the Indian government, which Enron hoped would deliver $2.3 billion as it was running out of cash in the weeks before declaring bankruptcy. Bush's National Security Council led a "working group" with officials from various Cabinet agencies to resolve Enron's troubles. The administration's efforts included Vice President Cheney's conversation with an Indian official, Secretary of State Colin Powell's discussion with India' Foreign Minister, and were to involve a personal appeal by Bush to Indian Prime Minister Atal Bihari Vajpayee.
These are just a few examples of the international dealings of Enron, and governmental efforts to further the interests of US corporations. Of course Enron is not the only US company benefiting from the efforts of governmental agencies and cabinet members. But Enron's disgraceful fall from the heights of power is a superb example of how imperialism functions in the epoch of capitalist decay. Enron's network of influence has been exposed only because it was impossible to hide the facts once it resulted in the largest bankruptcy in US history. Had it not imploded financially, it would still be operating as usual - the standard modus operandi of all big corporations and monopolies. But Enron was not an exception, and the links between big business and the state machine remain intact. It is only a matter of other titanic companies taking over Enron's former connections and spheres of influence.
So how can we combat this seemingly insurmountable might? The Enron collapse is a vivid reminder that there is nothing stable under capitalism - what today appears indestructible can be reduced to dust overnight. As we have explained before, US imperialism is a colossus with feet of clay. So long as it continues to rampage around the globe, we will face only instability, war, recession and unemployment. Militarily, politically, and economically, it may appear invincible, but that can change very quickly. If there is one thing which is absolutely clear from even a brief study of history, it is that nothing lasts forever - even seemingly permanent socio-economic systems.
The US working class must organize itself in the unions and in a mass party of labor which will defend the interests of working people. Only a workers' government and democratic workers' control over production, distribution and exchange can end the current chaotic state of affairs once and for all. In a world where the richest 1% of people earn as much as the poorest 57%, only the world working class can truly represent the interests of the majority of humanity, raising the standard of living for all humans. The workers of all countries live under common conditions, and share common interests that are entirely opposed to the interests of the capitalist class. Working people do not make a living by exploiting others - nor are they interested in doing that. They want to live and work in peace and stability, always improving their quality of life and that of their children. Capitalism cannot offer that - it cannot guarantee free healthcare, education, affordable, high-quality foods and transportation. It cannot guarantee a world free of racism, war, hatred, ignorance, and poverty. A workers' government would end the anarchy of the capitalist market, and produce goods and services in the interests of everyone. The wealth of society, produced by the working class, would be put to use in the interests of everyone - not just a handful a greedy capitalists who cannot even figure out how to run their own system!