Blaming Liberalism for Enron

Conservative pundits rise to the challenge.

With the Bush administration taking heat for its ties to Enron, and pointed questions being raised about whether Enron’s collapse suggests that accountants and pension funds require tighter regulation, conservatives have gone on the counterattack. The main strategy has been to point out that many Democrats and/or liberals also fed at the Enron trough, which is certainly true. (Chatterbox continues to believe that in the “government sleaze” department, the only scandalous nugget so far is that former Treasury Secretary Robert Rubin lobbied Treasury on behalf of Citigroup, a major Enron creditor.) In the long run, though, arguing that Bob Rubin can be bought with corporate lucre just as easily as Larry Lindsey won’t help conservatism’s twilight struggle against liberalism. It’s a liberal argument. If the Republicans push this line too hard, they’ll be heading down the slippery slope toward support for campaign-finance reform.

Rising to this ideological challenge, the more entrepreneurial conservative commentators have begun to argue that liberalism itself created the Frankenstein monster known as Enron. So far, the argument has taken two forms:

1) The 1960s created Enron. Social conservatives have long argued that the Woodstock generation’s If-It-Feels-Good-Do-It ethic destroyed the nation’s moral fiber. It was a useful tack against homosexuality, abortion, and various other Christian-right bugaboos, but not really helpful when the cause was greater latitude for the free market to wreak creative destruction. In a Jan. 21 column, though, the Wall Street Journal’s Robert Bartley attempts a bold synthesis:

The systemic failure is not a matter of economic arrangements, but of the societal collapse of standards and morality over the last three decades or so. As a society we seem increasingly incapable of sitting in judgment of each other—certainly not on the behavior of prominent entertainers, sports figures or presidents. We have a legal profession that tolerates and even promotes abuse of the legal system in class action suits—in the current Microsoft claims settlement enriching lawyers while not even trying to give a cent to supposedly injured plaintiffs. What kind of behavior can an “I’m OK, you’re OK” society expect from its professionals or business leaders?

“Presidents” is of course a sly reference to Bill Clinton, the pre-eminent political poster child for 1960s self-indulgence. A Jan. 18 editorial in the Journal blamed Clinton more explicitly:

We’d say it’s also impossible to understand Enron outside of the moral climate in which it flourished. Those were the roaring ‘90s, when all of America reveled in the economic boom. They were also the Clinton years, when we learned that “everybody does it.” The culture wanted to believe in Enron’s promises, which helps explain why 16 of 17 Wall Street analysts rated Enron a “buy” as recently as last October.

Not only was Clinton bad, but his economic boom was bad, too! The obvious problem here is that railing against prosperity is a liberal thing to do. Worse, it’s a dumb liberal thing to do. Back to the drawing board.

2) Environmentalism created Enron. Blaming environmentalism is more shrewd than blaming the 1960s because while Timothy Leary and Ken Lay never made common cause, Timothy Wirth and Ken Lay did. A Jan. 17 column by Robert Novak made much of the fact that Wirth, a former Clinton point man on global warming who is now president of Ted Turner’s United Nations Foundation, spread the Kyoto Treaty gospel from Ken Lay to Paul O’Neill when the latter was still running Alcoa. That Enron stood to benefit from the Kyoto Treaty’s international limits on carbon emissions is indisputable:

To burn coal, it would be necessary to purchase credits for the emission of CO2. That would create a market for Enron, buying and selling emission credits. Internal memos show that Enron envisioned a profit here as early as 1996. … [A Dec. 1997 Enron memo] asserted that the Kyoto treaty ”will do more to promote Enron’s business” than any other regulatory initiative. It called the treaty’s authority to trade in CO2 credits ”another victory for us,” adding: ”This agreement will be good for Enron stock!!” Enron’s advocacy began years earlier. On Dec. 5, 1995, Lay wrote Environmental Protection Administrator Carol Browner pressing for the trading of emission standards. O’Neill can be accused of being a misguided idealist about global warming, but Lay saw Kyoto’s green as the color of money.

But the mere fact that Enron stood to benefit financially from the Kyoto Treaty, and therefore was pushing energetically for its passage, doesn’t in itself constitute an argument against the Kyoto Treaty. What really worries conservatives like Novak is that other companies might be harmed by the treaty. To the extent that potential harm is real, it needs to be weighed against the potential benefits that would come from reducing carbon emissions. And that has nothing to do with Enron.

A more challenging variation on this theme is the argument by Jerry Taylor, director of natural resource studies at the Cato Institute, that overregulation of the electricity industry created Enron. He makes his case in a Jan. 21 op-ed in the Wall Street Journal:

[W]hile 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).

The problem here is that Taylor doesn’t acknowledge the liberal argument that none of this would have come up had utilities remained fully regulated in the first place. But since Chatterbox suspects the deregulation of electricity will ultimately prove beneficial, he won’t make that argument himself.