The Fall Guy

by John Markley

The practice of finding scapegoats for the failures of statism has a long and ignoble history, necessitated by an even longer and more ignoble history of disastrous failure and unspeakable evil. This reached new heights- or depths- in the 20th century. The Soviet government would blame the poverty, misery, and starvation caused by socialism on hordes of imaginary saboteurs sent by the fascists, the capitalists, or the Trotskyites. The Trotskyites and other non-Stalinist socialists would claim that communism, or their own pet variant of collectivism, would have worked if only they had been in charge to fine-tune a few things.

So it goes with the fall of Enron. The popular interpretation embraced by the media is that Enron somehow represents the free market gone mad, and that more regulation is needed to correct the problem. This is ironic, (or just dishonest, if I wanted to be accurate rather than tactful) since Enron is a company that has always been intimately involved with governments on both the federal and state levels. Admitting this would raise questions about the value of state economic control, so government officials, academics, and members of the press shift the blame to an alleged lack of government involvement, confident that no one will be curious enough to investigate their claims.

Part of Enron’s demise was caused by it’s losses building a power plant in India. This project was made possible by subsidies from the Export-Import Bank, a federal agency that makes high risk loans to Third World governments that pay for projects involving American companies. This is allegedly done to stimulate the economies of poor countries, although it also serves as a nice way to hand out corporate welfare under the guise of foreign aid. In this case, the company built the power plant in India but was unable to sell the power, losing millions. This was only one of six Export-Import Bank subsidies Enron received. Enron also did twelve projects with money from the Overseas Private Investment Corporation, which contrary to what the name implies is another federal agency which gives loans to politically and economically unstable countries for the benefit of politically connected firms. Government payouts to Enron came to about 1.7 billion dollars.

Enron wasn’t shy about wielding the power of the state against it’s competitors, either. While Enron was supposedly pushing for deregulation of the power industry, it was lobbying to break up rivals, have governments fix prices for access to transmission grids, have operation of distribution systems be taken over by state governments, increase environmental regulation so it could make money selling emissions permits, and raise tariffs on oil. It was thanks to regulations like these that Enron was able to gain it’s power.

Yet, somehow we are being told that Enron failed because it was an out-of-control jungle capitalist, unbound by the benevolent hand of the government. This is reminiscent of the California power crisis, when shortages of electricity, caused by imposition of price controls in what was already one of the most regulated industries in the country, were also blamed on an imaginary lack of regulation. This sort of continuous deception is an absolute necessity, because nothing would kill statism stone dead faster than public honesty about it’s failures. And since they don’t have Trotsky to kick around anymore, capitalism makes the perfect scapegoat.

February 22, 2002 

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