|
1. We must realize that this is a crisis not just of one
company but of the larger political-economic system.
Some of our political and economic leaders have tried to portray
the Enron collapse as a problem limited to one company and
certain individuals. Yet Enron1s bankruptcy—the largest
in U.S. history—is symptomatic of deep structural flaws
in our system, a system that needs a major overhaul rather
than mere tinkering.
2. We must debunk and move away from the free market dogma
that laid the basis for the Enron disaster.
For three decades now, U.S. economic policy has been dominated
by market fundamentalism: privatize government-owned assets,
deregulate government oversight of the corporations, and trust
"market forces" (i.e., those with the most money)
to allocate resources and set prices. Enron was a powerful
lobbyist for reducing government oversight of corporate behavior.
The lack of effective government regulation allowed a company
valued at more than $60 billion a year ago to crash, losing
99 percent of its shareholder value. This meant that retirement
funds lost huge amounts (e.g., Florida state workers lost
$325 million; California state workers lost more than $230
million), and thousands of workers at Enron and related companies
lost their jobs and their savings at the same time.
The task now confronting U.S. citizens is nothing less than
redefining what government is. We must move away from the
free market dogma that says government is bad and should get
out of the way of the corporations, to a democratic definition
that sees government as a tool of the people to defend us
against any person or institution that would lie to the people
and break the law as a way to satisfy their own greed.
3. We need far-reaching campaign finance reform to ensure
that elected officials are working for all the people, not
just those who can write large checks.
Enron stands out as unique in many ways, but it was just like
most other large corporations in the way it sought influence
with elected officials by making large and frequent donations
to members of both major parties. For example, House Majority
Whip, Tom Delay (R-TX) received $28,900 from Enron over the
past 12 years; the head of the Senate investigation of Enron,
Joseph Lieberman (D-CT), received $2,000 from Enron in the
early 1990s; former chair of the influential Senate Banking
Committee, Phil Gramm (R-TX), is a close friend of Enron founder
Ken Lay and is the second largest recipient of Enron cash
among all senators. A majority of members of the U.S. Congress,
at one time or another, benefited from Enron largesse. When
elections are determined by money rather than good ideas and
morality, we get the best government money can buy. It turns
America into a different kind of melting pot: the bottom gets
burned and the slime floats to the top. Only sweeping restrictions
on money in politics can solve this problem. The major piece
of campaign finance reform legislation, Shays/Meehan, had
been blocked by Republicans and conservative Democrats for
years, but it was recently jarred loose by the Enron scandal
and it passed the House in mid-February. Yet this legislation
does not go far enough: it limits "soft money" (donations
to the political parties or election committees rather than
directly to the candidate) but does not stop the dynamic of
legislators being more accessible to the rich than to average
citizens. Until we get full public financing of campaigns,
the golden rule will mean he who has the gold makes the rules.
4. We must end the close relationship between corporations
and the regulatory agencies that are supposed to protect the
citizenry by overseeing corporate behavior.
Case in point: Wendy Gramm —wife of Sen. Phil
Gramm (R-TX), the ranking Republican on the Senate Banking
Committee—served as chair of the Commodity Futures Trading
Commission where, in mid-January 1993 (just before Bill Clinton
took over as President), she pushed through approval of an
Enron request to exempt futures contracts from government
regulation, and soon thereafter she began a stint on the Enron
board of directors that has earned her more than a million
dollars to date.
Case in point: Secretary of the Army, Thomas White,
was an Enron executive for more than ten years and collected
more than $300 million selling his Enron stock before the
company1s devious bookkeeping methods were made public.
Case in point: Lawrence Lindsey, President Bush1s
top economic advisor, was a consultant for Enron.
Case in point: President Bush's top political advisor, Carl
Rove, attended strategy sessions regarding U.S. energy
policy while he was in the process of cashing in his holdings
of Enron stock.
Case in point: Robert Zoellick, the U.S. trade representative
who allegedly represents all U.S. citizens in World Trade
Organization talks and other trade negotiations, was on Enron's
Advisory Council.
Case in Point: One of the meetings whose minutes Vice
President Cheney refuses to release to Congress took place
between his top energy aide, Andrew Lundquist, and
members of the Clean Power Group, a corporate coalition funded
by five large power companies, including Enron. The group
wanted the task force to replace some environmental rules
with a plan that would allow industries to trade pollution
credits among themselves. Enron stood to make hundreds of
millions of dollars if the plan was adopted. (Newsweek, 2-11-02)
The meeting had been arranged by Brad Card, a paid
lobbyist for the Clean Power Group and brother of White House
Chief of Staff, Andrew Card.
When people are allowed to go back and forth from government
to corporate leadership they are able to trade on their contacts
and insider knowledge to benefit corporations to the disadvantage
of average citizens. We need much stronger laws restricting
the revolving door of employment between high levels of government
and corporations, and we need tighter disclosure rules and
restrictions regarding government officials owning stock in
corporations affected by the policies they implement.
5. We need an overhaul of corporate practices that allow
companies to deceive stockholders by hiding debt and losses,
thus making their operations look more profitable than they
really are.
A central principle of the free market ideology is the notion
that stockholders can reward good companies and punish bad
ones by purchasing or selling stock. But for this to work,
stockholders must have accurate information about the real
performance of companies. The Enron scandal has revealed corporate
practices designed to make companies look more profitable
than they really are and thus boost the sale of their stock.
A post-bankruptcy investigation by an independent auditor
found that for the past five years Enron1s debts had been
understated and its profits had been grossly overstated.
A key practice utilized by Enron is off-balance-sheet secret
partnerships
that can incur debts and make deals beneficial to the parent
company but not
show the debts on the company's books. Many companies have
used this ploy
but Enron used it so wildly that bankers, stock analysts,
auditors, and
Enron's own board failed to comprehend the risks in this heavily
leveraged
trading giant, according to Business Week. (12-17-01) The
problem with
accumulating debt in off-balance-sheet partnerships in order
to pump the
sale of your stock is that when things turn negative it can
create a mutually reinforcing cycle of plunging stock prices
and escalating costs of borrowing new money to pay off old
loans. The result is bankruptcy, with huge amounts of money
spent on court costs as creditors and aggrieved shareholders
try to recoup some of their money. Not exactly an efficient
system!
Perhaps the practice that drew most anger from the public
was the way
Enron1s top officials sold off their own stock while the price
was still
high but prohibited rank-and-file employees from touching
their Enron-heavy
401(k) retirement plans. This has happened before but the
Enron case was so
blatant and involved such huge losses that Congress is now
being pressured
to pass laws that will prevent this abuse in the future.
6. The accounting profession needs to be less driven by
corporate profits
and more accountable to the public.
Accounting companies, especially the Big Five, have grown
increasingly
dependent on consulting contracts with the same corporations
they audit.
Companies such as Arthur Andersen, the main accounting firm
overseeing
Enron1s books, make more money from consulting fees than from
auditing. This
creates a conflict of interest that undermines the trustworthiness
of accounting firms. In the Enron case, not only did Andersen
not report on questionable accounting practices that eventually
brought down the entire company, but they destroyed Enron
documents, even after the Justice Department had announced
its investigation of Enron. There is also a cozy relationship
between large corporations such as Enron
and the Wall Street investment firms that shape opinion in
the stock and
bond markets. In recent years Enron paid $323 million to Wall
Street
investment firms who helped finance Enron deal-making. One
hundred
executives at Merrill Lynch invested a combined $16 million
in just one of
Enron's off-balance-sheet partnerships. Enron's incessant
deal-making
generated huge fees for Wall Street investment banking houses.
And guess
what? Wall Street loved Enron. Even when it became clear last
fall that
Enron was engaging in creative bookkeeping, almost no analysts
recommended
selling the stock. (Newsweek, 1-21-02) If we can't trust accounting
firms or the Wall Street investment houses, how can anyone
assume that Social Security savings should be privatized and
individuals will be able to make safe investments with their
retirement money?
7. We need to tighten our government's tax laws and enforcement
so wealthy corporations can no longer avoid paying their fair
share of the tax load.
Despite its massive revenues, Enron failed to pay taxes in
four of the past five years. One of the major mechanisms used
by the company was a standard corporate practice known as
transfer pricing. By owning front companies in low-tax countries
such as the Cayman Islands, corporations can juggle their
books to have profits accrue in the low-tax countries and
show no profit in higher tax countries such as the United
States. This practice has grown to such an extent that there
is an expensive, specialized journal called The Journal of
Transfer Pricing that regularly explains for corporate officials
the intricacies of avoiding taxes by moving their capital
transnationally.
Corporations want all sorts of government services and subsidies
but do not
want to contribute toward the cost of maintaining the same
government that
provides these benefits. This is one of the main reasons why
our federal
government (not to mention many state and local governments)
is trillions of
dollars in debt: more and more demands are made for government
spending,
while our tax code contains numerous loopholes by which large
corporations
are able to avoid carrying their fair share of the tax load.
8. We Americans need to be much more attentive to how
we are perceived around the world, and we need to make a transition
from being an empire to being just one nation in a community
of nations.
Enron is a classic case of crony capitalism. It's success
was partly due to bribing government officials to reduce oversight
and remove regulations.
Remember back in the late 1990s when economies in Asia that
were under the
tutelage of the free market promoters at the International
Monetary Fund
collapsed just like Argentina1s economy is collapsing today?
Pundits in
Washington blamed it, not on the IMF and the greed of Wall
Street currency
speculators, but on the "crony capitalism" practiced
in those countries.
This focused blame for the crisis on local people rather
than on the
dependent relationship between local elites and transnational
capital. Yet
now that we have a blatant case of crony capitalism in the
United States, we
don1t hear that phrase used by the corporate media. The Business
Standard of
India judged that: "The U.S. will no longer be able to
preach about crony
capitalism or corporate governance to others." The Strait
Times of Singapore
recently editorialized: "How could all this have happened
on Wall Street,
the benchmark (or so Asians were told in 1997) of corporate
transparency?
The simple answer is: The U.S. government let it happen."
Unless we use this scandal as an opportunity to clean up
the system and make
significant changes in the structure of corporate governance,
this will be
seen around the world as just one more case of American hypocrisy.
9. We need to put an end to secrecy in government.
It is an insult to the American people that Vice President
Dick Cheney and his energy policy task force met with Enron
officials on at least six occasions, and now the Vice President—a
public employee—refuses to hand over details of those
meetings to the General Accounting Office, the research arm
of Congress. For the first time in U.S. history, the GAO is
planning to sue the White House for the release of documents
to Congress.
Although the head of the GAO, David Walker, is responsible
for the lawsuit, he is also a Republican who worked for Ronald
Reagan and later was an executive at Arthur Andersen, so it
is questionable how hard he will push. Already he "personally"
decided to scale back the GAO's information request from all
the minutes of the meetings to just the names of those who
were present at the meetings and the topics discussed. Only
public pressure can ensure that Congress and the American
people will know what really went on in the crafting of the
Bush administration1s energy policies.
This transparency principle extends to global government
as well. The
powerful institutions that dominate world governance in the
realm of
economic policy (the World Bank, the International Monetary
Fund, and the
World Trade Organization) operate in secret. One of the main
reasons for the
growing opposition to these institutions is that they are
so secretive that
it is impossible for the public to play a role in policymaking.
Secret government—whether national or global—can
no longer be tolerated.
10. We need to make an immediate energy transition away
from fossil fuels to renewable sources and conservation.
Ask yourself this question regarding September 11 and
the Bush
administration's war on terrorism: Would this current conflict
be happening
if the major export of the Middle East were broccoli?
Our economy is more addicted to oil and more pollution-intensive
than any
other industrial economy. Sixty years ago, when British and
American rulers
were putting an undemocratic monarchy into power in Saudi
Arabia (the only
country named after a family -- the House of Al-Saud), large
auto-related
corporations such as General Motors were making sure that
America would
become dependent on burning fossil fuels. These corporations
formed a
consortium that went around the United States buying up more
than thirty
mass transit systems. These urban light-rail systems were
quite efficient.
Los Angeles had the largest light-rail system in the world
at that time.
These mass transit systems were then purposely gutted and
replaced with cars
and buses relying on internal combustion engines. The consortium
was taken
to court and was found guilty of a criminal conspiracy to
destroy mass
transit. Their penalty? A $5,000 fine and no jail terms!
In his excellent book, The Heat Is On, author Ross Gelbspan
proves three key
points: (1) climate destruction from the buildup of greenhouses
gases,
especially carbon dioxide from burning fossil fuels, is rapidly
becoming the
single most dangerous environmental challenge we face; (2)
the oil companies
are propagandizing the public to believe that global warming
is not a
serious problem; and (3) we can create more jobs making a
transition to
renewable energy than we can by sticking with the current
system of nuclear
energy and fossil fuels.
We need a transnational campaign that can (1) expose to the
public mind the
dangerous grip the oil companies have on our governments and
the economy,
and (2) promote a transition to conservation and renewable
sources of energy
such as solar, wind, geothermal, biomass and hydrogen fuel
cells. Many
groups around the world are working on these two sets of issues
but they are
not united. There is great potential for linking existing
struggles to
create a massive global network: we could call it Global Alliance
for a
Transition in Energy (GATE). GATE would link the groups that
campaign
against the oil, coal and nuclear companies with the positive,
alternative
vision of the renewable energy NGOs and enterprises. It could
start by
linking groups in the two major energy markets, Europe and
North America,
where alternative technology is most advanced and where the
oil companies
make most of their profits and are therefore vulnerable to
public education
campaigns. It would be essential, however, to integrate the
voices and
insights of activists from the global south so as to avoid
a colonial
relationship.
GATE could link many constituencies:
* Campaigners in the major oil markets (North America and
Europe -- areas that
the global justice movement needs to link up better anyway);
* Campaigners of the global north with groups working in the
global south,
especially in the oil producing countries;
* Alternative energy groups (enterprises and political groups)
that have an
interest in developing renewable alternatives to fossil fuels;
* Activists pressuring for change from the outside with progressive
minded
staffers inside the big energy companies.
Conclusion
It took centuries to achieve the separation of church and
state. Now we are challenged to separate corporations and
the state. No one sector of society, no single institution,
should control government. The state is the property of all
the people and should create and enforce policy accordingly.
We will never get mass transit policy while the auto companies
dominate transportation policy. We will never get good housing
policy when the policy makers live in mansions in gated communities.
We will never get good energy policies from a government so
blatantly dominated by the oil companies. Only by building
a constitutional firewall between corporations and our government
will we ever get at the real source of these problems. Yes,
this is a large and long-term project: all the more reason
for us to get started right away and commit ourselves to seeing
this through to its completion.
The elites in Washington and Wall Street—the ones who
created this mess and
profited handsomely in the process—cannot be relied on
to get at the roots
of the problem and create a lasting solution. If we leave
it up to them, we
will get half-baked reforms and lots of spin from politicians
and the
corporate media.
We, the people, must create a grassroots, nonviolent movement
for full
democracy where sovereignty (ultimate political authority)
resides in the
people. We must develop mechanisms for connecting the many
corporate
accountability struggles, efforts for campaign finance reform,
the fight to
end corporate welfare, electoral reform projects, and all
other efforts to
separate corporations and the state. It is an idea whose time
has come!
|
