The Enron Scandal

The Enron Scandal

In a front-page article with no less than four by-lines (7/03, "Enron Triggers a Slew of Proposed Fixes But What Will Stick?" by Steve Liesman et al.), The Wall Street Journal reports, "As more than 10 congressional committees pursue inquiries, 32 Enron-related bills have been introduced to address ills ranging from auditor conflicts of interest to the scams of an unregulated derivatives market. The Securities and Exchange Commission pledges to reform accounting rules, get tough on fraud and overhaul auditor oversight. General Electric Co. says it will issue a disclosure statement the size of a phone book, if that's what investors want." The trouble is that such a phone book, if it reflected the state economic science in its present gelded form, would omit the phone numbers of all emergency departments, the building inspectors, and notably the university faculties dealing with scientific method.

An exaggeration? By no means. The supposed mathematical foundations of the official model assumes that all actors in the economy are of such tiny size that nothing they do or don't do individually can have the slightest effect on prices, supply, and demand. That assumption turns up in the derivatives that were at the bottom of the supposed "risk management" of big hedging disasters like Enron, Global Crossing, and the celebrated Long Term Capital Fund that almost brought down the international financial system in 1998. That assumption was brought in to set up the fiction of "the level playing field" certainly the most overworked catchword among policy-makers in recent decades. It is supposed to cover the relationship between transnationals and the employees of their subcontractors in Latin America and Asia, of Wall...

... middle of paper ...

... to the WTO, has said: "We had no idea at the outset how much sovereignty would be given up." The reason is that this prominent academic had a head full of "the level playing field" mantra. For decades she had been infecting her students with it.

The WSJ article refers to this master power mechanism whereby fiction replaces fact: "Now the big question is: How many of these changes will melt away like forgotten New Year's Resolutions and how many will endure? New accounting rules will likely make it harder for companies to conceal some transactions off the books, but they're unlikely to outlaw all the different tricks of the trade. Accountants are likely to lose the ability to reap huge consulting fees from some companies whose books they audit, but the industry is fighting a more sweeping ban.

Mark Stanton

Bibliography:

cnn.com

Wall street journal