is a colossus bestriding the waterways of energy trading and like
the Colossus of old; it looks like it is about to vanish from the
to continue the aquatic metaphors, they are awash in mega-debt and
a solemn lesson in honesty and good housekeeping is about to be
learnt by other aspiring corporates who may think the end justifies
of what may have contributed to this impending demise are manifold.
Did California’s price controls on Enron during a time of rising
energy prices strain the hidden debt further? How much exposure
did Enron have in the derivatives market? Is this the LCTM story
all over again as a player in those energy markets but with virtual
insider knowledge as a distributor of large supplier of energy?
How foolish was it to practically run your own fractional reserve
banking system in energy trading but without the inflationary deposit
guarantee schemes of real banks?
more I look at this the more I see the debt debacles of such Nasdaqites
as Lucent and Nortel not being unique to this current economic fin
hope not, but with billions of dollars potentially in the realm
of defaultdom and with the Federal Reserve spigot already in full
flow, one wonders again if this is the much spoken of but never
seen catalyst, which plunges the Western economy into monetary crisis.
The easy money shakedown continues and it is a wonder to behold
such multi-billion dollar behemoths crashing into their self-dug
graves. The free market favours the brave but punishes the foolhardy.
I say free market? Of course, our idealistic entity does not exist
in an age of State interventionism but it still walks through the
world like some spirit shackled in ball and chain awaiting the curse
to be lifted from its feet. Nevertheless, a handicapped free market
can still clean up the mess left by Enron as companies like Dynegy
hover over the carcass.
in Enron’s case, there is also the ugly sister of State interventionism.
Her name is State favouritism and behind the various big deals that
Enron struck across the globe, we see a decidedly suspicious trail
leading back to swelling party donations and backhanders.
Ron Brown, President Clinton’s Commerce Secretary. The allegation
loudly made was that corporations had to “pay to play” to get a
seat on his plane as he embarked on visits to foreign governments
promoting American business. It was, of course, very useful if your
company was in on these delegations and cutting the deals for big
third world projects. At the very least one would have enlarged
their business contacts and possibly gained the promise of foreign
accompanied our secretary on a trade mission to India in 1995. They
came out with three contracts worth a total of about $2.5 billion.
When Enron accompanied Brown to Russia in 1994, they got a deal
to develop a market for Russian gas in Europe. Who needs the free
market when you have a personal, symbiotic relationship with politicians?
customers do and this is perfectly exemplified in the aforementioned
Indian contract, which included building a power station at Dabhol.
New York Times reported in 1995 that the U.S. ambassador “constantly
cajoled” Indian officials over the contract and that Enron was also
helped by the CIA, which provided privileged information on competing
this is denied, but six years on and we see the fruits of an uncompetitive
bid beginning to unravel over disputes of high prices being charged
by Enron (who have a 65% stake in the plant). Enron had signalled
their intention to pull out, now they have no choice and the Indian
banks are left nursing unpaid $1.4 billion loans. Sin in haste,
repent at leisure.
Enron signed a deal in 1995 to supply a 900-km gas pipeline in Mozambique,
the country’s natural resource minister was reported as saying:
“Enron was forever playing games with us and the embassy forever
threatening to withdraw aid. Everyone was saying that we would not
sign the deal because I wanted a percentage, when all I wanted was
a better deal for the state.” (From a report in the 1995 Houston
were Anthony Lake, President Bill Clinton’s National Security Adviser,
the U.S. Agency for International Development (USAID), and the U.S.
Embassy in Maputo, who put pressure on the government to sign with
1993 Enron won a contract to build a 105-megawatt, diesel-fired
power plant in the Philippines that critics said would cost the
Philippine National Power Corporation (NPC) eight cents a kilowatt
hour – 20 percent more than NPC charged consumers. The controversy
led to resignations in 1993 of all seven members of the NPC board.
to say, Enron have made large contributions to the Democratic Party
coffers. Interesting to also note that Ron Brown was the former
chairman of the Democratic Party who at the same time worked as
a highly recognised deal-making lobbyist for Patton, Boggs and Blow.
Some things do not seem to change.
even the present incumbent at the White House is not left untainted
by this scandal, if reports are to be believed. Kenneth Lay, Enron
chief, was also a friend of the Bush family and a major contributor
to the Republican party and hosted the Republican national convention
in Houston in 1992.
1994, the Nation magazine alleged that Dubya phoned Argentina’s
public works minister in 1988 to ask him to award Enron a contract
to build a natural gas pipeline. The minister is alleged to have
said, “I felt pressured. It was not proper for him to make that
kind of call.” Enron went on to to get the contract and George W.
Bush later denied he made the phone call. To this we could add several
stories of the Bush family and Enron.
am I somehow standing shoulder to shoulder with reds and greens
in decrying corporate capitalism? No I am not, and let us not forget
that they would be even more interventionist than the current powers
that be. When things get scandalous, the usual holler goes up of
“Dirty capitalism!” and they are off to the next World Trade Summit
to shake a few fences and hug a few trees. Why, even Soviet Communism
was nothing more that State Capitalism we are told!
know bad money drives out good money and Statism is the perfect
foil for companies not wishing their products to be found wanting
by the searching beam of the free market. Just as State interventionism
distorts market prices, so does State favouritism if it means more
dollars for the political propaganda machine.
corporates be banned from donating to political parties? No, just
ban government departments of trade, industry and commerce and you’ll
soon see the corporate dollar vanish from the party-begging bowl.
them prove their own worth in the free market and discard the Statist
Watson [send him
mail] writes from Edinburgh, Scotland.