Corporate Scandals

The Smartest Guys in the Tomb

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Joshua Micah Marshall digs up an old ad and writes:

It's an ad for Enron—entitled "Metalman"—that ran not long before the company's implosion—probably some time in 2000. As you'll see, it's a man encased in a confining suit of metal, hobbling his way across tableaus of 90s go-go capitalism, mainly, mostly set in Asia. As pure ad making, it's good stuff. But I always remembered it because it so boldly and expressively captured the ethos of that moment—old, slow, regulation, limits giving way to new, unbounded, deregulated, liberated. 'Metalman' is the old sclerotic, regulated past falling behind in the deregulated, faster, freer, richer, better world.

Knowing, as we soon would, that Enron was a colossal scam adds some zing to the morality tale. But this sort of deregulatory chic wasn't confined to Enron. And it played a sizable role in bringing us where we are today.

Marshall is onto something, but he's missing an important piece of the puzzle: In the real world, as opposed to the ad world, Enron didn't embrace deregulation. It was happy to roll back the regulatory burden when that helped the business's bottom line, but—like many other companies—it was just as quick to lobby for limits when that looked like it would boost profits. As Jerry Taylor pointed out in The Wall Street Journal seven years ago,

Since ending the legally protected franchises that utilities had on those services was a prerequisite for Enron's strategy, the company lobbied aggressively for competition and "consumer choice" for gas and electricity services.

But while donning the garb of Ronald Reagan on the one hand, the company was donning the mantle of Ralph Nader when it came to the transmission and distribution side of the energy business. Enron, you see, was worried that the incumbent utilities would either under-price the non-utility competitors that Enron wanted on their trading floors or, alternatively, would charge such high prices for access to their transmission systems that non-utility gas and electricity providers would be unable to effectively compete for business.

So Enron insisted that electric utilities be forced by law to get out of the generation business, that strict price controls be set for the rates charged for access to the various transmission grids, and that the day-to-day operation of the electricity distribution systems be handed over to state officials who were directed to govern those systems at the behest of the system's "stakeholders" (read: Enron and friends). So Reaganite competition, according to Enron, required new micromanagerial rules about industrial organization and the de-facto nationalization of the transmission systems by officials who'd have to answer to Enron.

Taylor also notes the company's support for energy subsidies, carbon controls, and various taxes, as well as its ability to preach the exact opposite of its usual policy preferences in a few jurisdictions where it managed to buy its own transmission systems. This sort of political capitalism may have "played a sizable role in bringing us where we are today." But if you call it "deregulatory," you're buying too much of what Enron was selling. The ethos was much more complicated than that.

Leftists and liberals have a word for polluters who pose as careful environmental stewards: greenwashing. We need a similar word for times when the eager beneficiaries of the corporate state pose as free-market entrepreneurs. A word, that is, for propaganda like the Enron ad.

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  1. freewashing

  2. Bushwhackers?

  3. Choiceposing?

  4. I don’t know this word game as well as the others here so I will just read.

  5. Republicans?

  6. Deregulationpolitical slang — the re-configuration of the regulatory environment to favor companies that give the most campaign donations to incumbant politicians.

  7. We have a win for the moose.

  8. Wait, wait. What happened to rentseeking? Is that inappropriate here?

  9. We’ve had a name for a long time: bootleggers, as in the pro-Prohibition forces “Baptists and Bootleggers”.

  10. FASCISM

    duh.

  11. High Every Body –
    it needs to imply deception in order to work.

    We have a win for the moose.

    [Pumps fist]

  12. it needs to imply deception in order to work.

    Ah! See, I told you I was not good at this game.

    Congrats and your next green tea is on me.

  13. what’s wrong with green tea? It’s full of antioxidants. Are you in favor of bad skin and free radicals?

  14. Reinmoose,

    It may shock you to know that I am in favor of armed free radicals.

    Now get those sandals off of my workbench, please?

  15. What you got against Birkenstocks?!

  16. What you got against Birkenstocks?!

    THAT’S WHAT THOSE ARE!?!?!? OUT OF MY WORKSHOP HIPPY!

  17. Shouldn’t that be:

    [Enron] was happy to roll back ignore the regulatory burden when that helped the business’s bottom line,

    Problems caused by violating a law are very different from problems caused by repealing a law. Did Enron blow up because of it wanted some markets regulated and some not? Or did it blow up because it was a fraud, and violated the law?

  18. Wait. Flip flops aren’t cool anymore? Oh dear.

  19. Shouldn’t that be: [Enron] was happy to roll back ignore the regulatory burden when that helped the business’s bottom line

    No. I mean, Enron obviously was willing to break the law as well. But I was referring to its lobbying activity.

  20. Naga,

    Sorry man I thought you lost the Nick duel yesterday. Better go tell your chick before she goes ninja!

  21. Nope. I won. I pulled the Melanthus trick on him. He totally fell for it!

  22. Nope. I won. I pulled the Melanthus trick on him. He totally fell for it!

    Dude, you rock! I can’t even spell that trick!

  23. how about “faux marketeers”?

  24. I was there the whole time. Waiting.

    (strikes hard and fast)

    (disappears again…or does he?)

  25. I was there the whole time. Waiting.

    (strikes hard and fast)

    (disappears again…or does he?)

    So does that mean I have to hang out by myself in the Mega Cab again?

  26. HEB,

    It’s the ol’ “Holy shit! What’s that behind you!” trick.

    Story goes like so: Two greek armies march out against each other. One lead by Xanthus, a Boeotion, the other Melanthus, an Athenian. Xanthus challenges Melanthus to single combat at noon the next day. Melanthus accepts and meets Xanthus face to face the next day. Melanthus then says “Your conduct is unfair. Here I have come as agreed to face you man to man, and you bring a companion to slay me while fighting you”. Xanthus turns around to send away whoever had followed him, and when he does Melanthus cuts him down.

    Oh and I wanna get in on some of this word game.

    “Corporate faux”?

  27. DHEX!!!!!!!!!!!!!! ARRRRRRRRRRRRRGGGGGGGGGGGGHHHHHHHH!!!!

    *shakes fist at Dhex*

  28. Naga, the trick is on you. The Nick you slayed was that turd pimping his website the last couple days like a douche. (evil grin as he gives Naga a wet willy on his way back into the shadows)

    Douchebaggery would be the word I use, specifically Enronian Douchebaggery.

  29. One Nick is as good as another.

  30. Ninja Nick, I shall run ye through for deceptively relieving me of me rum. Arrgh.

    RAmen.

  31. Truce. Let’s grill some cheddar burgers and drink some of that pirate bitch’s beer!

  32. Hostage situation in Binghamton, NY.

    http://www.cnn.com/

  33. Truce. Let’s grill some cheddar burgers and drink some of that pirate bitch’s beer!

    I’m in.

  34. Hornswoggling?

  35. Hostage situation in Binghamton, NY.

    Ahh.. Binghamton…

  36. So Enron insisted that electric utilities be forced by law to get out of the generation business, that strict price controls be set for the rates charged for access to the various transmission grids, and that the day-to-day operation of the electricity distribution systems be handed over to state officials who were directed to govern those systems at the behest of the system’s “stakeholders” (read: Enron and friends). So Reaganite competition, according to Enron, required new micromanagerial rules about industrial organization and the de-facto nationalization of the transmission systems by officials who’d have to answer to Enron.

    This is an excellent point, and one that I believe Reason warned about well before California’s energy crisis. (IIRC)

    California’s energy privatization scheme was nothing of the sort. The most crucial factor though was that they explicitly barred utilities from signing long-term contracts with generators, forcing them to trade for electricity in a day-to-day stock-market like exchange.

    The fact that the price-inelasticity of electricity made long-term contracting the natural and logical choice for purchasers didn’t enter into their considerations.

    They effectively tied the hands of the buyers – the utilities. Because they could only buy electricity at the last minute it enabled the sellers (Enron and others) to jack up the price. Moreover, the sellers eventually figured out that by selling less energy they could could jack up the price even higher to compensate. That’s what caused the brownouts. It’s like if I cornered the market on widgets – say if there was a million widgets out there, and then sold one widget for a billion dollars. There’d be a shortage of widgets, but I’d be richer than if I sold my entire stock for 50 cents each.

    That’s what Enron and others were doing in California. But the reason they were able to do it, was because the state prohibited long-term contracting.

    The utilities were literally begging the state electricity commission for permission to enter into long-term agreements directly with generators, but the assholes in the Grey Davis government refused to let them until they had already gone bankrupt. At which point the state did exactly that – entered long-term contracts and at much higher prices than the utilities would have gotten if they had been allowed to in the first place.

    The whole thing, really is illustrative of the economic illiteracy of the Democratic party. They don’t understand how markets function, so when they try to set one up, it’s jury-rigged and infested with perverse incentives.

  37. Hostage situation?

    A suicide bomber at the local IRS office, I hope.

  38. they explicitly barred utilities from signing long-term contracts with generators, forcing them to trade for electricity in a day-to-day stock-market like exchange.

    I remember seeing an awesome quote at the time (possibly from an ENRON employee): “It’s not my job to teach the State of California how the market works.”

    I also remember the reports that aluminum companies were shutting down their smelters and reselling the electricity to California, because it was more profitable to do so.

    I love the smell of unintended consequences in the morning.

  39. Let’s just co-opt the already-despised term and call it “enroning.”

  40. Mad Scientist,

    Interesting. Like how Ponzi scheme came about . . . hmmmmmm . . . this requires much thought.

  41. “It’s not my job to teach the State of California how the market works.”

    Oh, they gave them some teaching, all right. The real question is if anyone actually learned anything.

  42. “DHEX!!!!!!!!!!!!!! ARRRRRRRRRRRRRGGGGGGGGGGGGHHHHHHHH!!!!

    *shakes fist at Dhex*”

    aw c’mon man, it’s not THAT bad.

    try saying it in a dismissive coastal elite latte drinking kinda voice. it works.

  43. It IS that bad. I come up with a guinenely good phrase and you beat me to it! Damn your quick thinking and fast typing! Damn them straight to hell!!!

  44. Damn you as well, Joe’s Law!

  45. don’t hate me because i’m beautiful inside and out.

  46. how about “faux marketeers”?

    Perfect.
    best part is it’s convertible to “faux market” and “faux marketeering”.

  47. HM,

    There are five of those little swordswallowerssmen now?

  48. I don’t crony capitalists declaring themselves to be free marketeers is half the problem as pinkos pointing to rent seekers and saying “There’s the free market for ya”.

  49. The whole thing, really is illustrative of the economic illiteracy of the Democratic party. They don’t understand how markets function, so when they try to set one up, it’s jury-rigged and infested with perverse incentives.

    Wait and see what they do with cap-and-trade for Co2…

  50. Here is a word for the eager beneficiaries of the corporate state who pose as free-market entrepreneurs: capitalists. Or corporatists.

    It’s taken me a while to realize that capitalism and a free market are not the same thing at all. I think that “capitalism” now means a system where the state serves to protect established business interests. But because the terms are conflated so much, by capitalists espousing free market principles while using the state to suppress competition through regulation, I think the word “capitalist” should probably be abandoned and the terms “free market” or “corporatist” substituted, depending on what you’re trying to say.

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