Capitalism In The Enron

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Capitalism, in its purest sense, could well be a nearly-perfect system. The idea of free enterprise, in which a provider offers goods or services to a needy consumer, and in which supply and demand determine price is a concept that is fair to all who participate in the process. Conversely, it can also be a breeding ground for greed, allowing the more powerful to control the markets. On might argue that some greed is necessary to power the market toward producing a better product. But when human greed is allowed to corner the market through fraud and corruption, then the system works only for the few, leaving consumers with fewer and poorer quality goods or services. Therefore, regulation is required to keep the market in balance for all. It …show more content…

Skilling accepted only promising new shakers and movers from the cream of MBA education and vying for them shrewdly against the best investment banks (Thomas). He demanded aggressive investing. (Skilling) As the company grew to include water supply, electricity, and power plants, as well as internet video and broadband communications, it also set itself up to fail in many of its endeavors at a cost of billions. The balance sheet, however, showed steady profits from over $13 billion in 1996 to astonishing $100 billion in 2000 (Enron). But why were those heavy losses not affecting their bottom line? Once again, Jeffrey Skilling worked his magic. He developed an innovative new method of accounting called “mark-to-market” (Enron). Outstanding contracts were valued by market prices, varying accordingly. This method left room to alter prices artificially. By setting up SPE’s or special purpose entities, Enron could hide its gains and losses at will within their books, thereby removing them from Enron’s books. These new side ventures looked respectable on paper, to; the company seemed to be ever-expanding (Enron). Andrew Fastow was posed to come on board with Enron with an MBA from North Western University. He had been enticed away from continental Illinois National Bank and Trust (Fastow). Fastow quickly fell in line behind Skilling as Skilling had with Lay. …show more content…

Their employees were being persuaded to invest their salaries and bonuses solely in Enron stock. Brilliant earnings reports were dangled in front of investors’. They did not matter that those reports were erroneous. To make matters worse, upper officials were embezzling profits. Of course, the public was kept in the dark about the new and interesting accounting practices, not to mention the faults profit-and-loss reports. Even the rolling blackouts that played the California electrical grid are not believed to be artificially created in order to drive of the price of Enron stocks by causing s shortage in supply (Peavler). By applying Jeffrey Silling’s gas-bank model to other commodities, Enron enabled itself to create a demand for virtually anything: its futures contracts included “coal, paper, steel, water and even weather (Thomas). By the end of 1996, the Enron Capital and Trade Resources division had grown in revenue from $2 billion to $7 billion. Two hundred employees became two thousand. It was the biggest trader of natural gas and electricity in the world

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