-Caveat Lector- -------------------- Enron May Spark Revolt of Professionals --------------------
By James K. Galbraith James K. Galbraith, a professor at the University of Texas at Austin, is the author, most recently, of "Inequality and Industrial Change: A Global View." January 25, 2002 NOWADAYS there are three classes in America: working people at the bottom, professionals above them, a tiny elite at the top. Democrats represent the professionals, Republicans represent the CEOs. No one, much, speaks for working people, who must rely on the sympathy of leading Democrats for most of the little they get. Our politics accordingly mirrors corporate life, with an opposition out of "Dilbert," grumpy but ineffective. Thus, after the 2000 election, Democrats abandoned the black voters of Florida, who were disenfranchised by the tens of thousands. In the tax-bill looting that followed in Congress, there was just enough grease for the upper middle to buy its silence. Meanwhile, raids on job safety, on the public schools, on unions, and the attempt to demolish Social Security fell on the lower orders. In each case, the aim was elite enrichment, amid the indifference of the professional class. Enron could change that. In details complex, the scandal is essentially simple. A handful of rich people, closely tied to the Texas Republican Party led by Gov. George W. Bush and Sen. Phil Gramm, decided to become richer still. Their grand strategy included deregulation of energy, deregulation of derivatives (an arcane financial device), corrupt accounting practices, overseas tax scams, U.S. diplomatic pressure (delivered in 2001 by Dick Cheney himself, on India, where Enron had sold a white elephant power plant). And then, as the game unwound, they sold their own stock while freezing employee pension accounts. In the end, the gang made off with more than a billion dollars, that we know of. Enron's real business was politics. Energy deregulation helped create the web of commodities in which Enron traded. Derivatives deregulation (courtesy of Gramm and Rep. Richard Armey) shielded that market from review. Consulting contracts to the auditors bought complicity; payments from auditors to politicians fended off the Securities and Exchange Commission. Enron paid for favors promptly: $100,000 to the Democrats in 1997 to push the Indians around, $25,000 to Texas Gov. Rick Perry one day after Enron's Mexico chief got to run the Public Utilities Commission in Texas. Wendy Gramm, who chaired Enron's audit committee, got nearly $2 million. We still don't know exactly what Enron contributed, in intellectual terms, to Cheney's energy policy, or to Treasury Secretary Paul O'Neill's defense of overseas tax shelters. But it paid well for it: over time, the big boss George Bush got more than $600,000 in Enron cash. That we know of. Enron reveals, for the first time, just how rot at the top can cut against professional interests. Those were not only small fry, but modest millionaires in some cases, who lost their 401(k)s. A professional's pension can't be replaced. And there is nothing a hardworking middle manager fears more than to end up on Social Security like ordinary folk. Administration officials proudly refused to intervene on Enron's behalf once bankruptcy loomed. But here's the catch: They weren't asked to. By then, their friends had already cashed out. Saving the professionals, or the company, was not on the agenda. White House economist Lawrence Lindsey (who'd gotten $50,000 as an Enron adviser in 2000) reviewed the great bankruptcy's risks to the economy at large. He concluded they were small; he may not be wrong. Most of the direct damage landed on a few thousand people in Houston. But we shouldn't be entirely sure. Corporate America runs on the collaboration of professionals with the elites. In big and small ways, managers, accountants, lawyers and engineers make the system work. In each firm, they have to trust that the big boys are not stealing from them. Through their pension funds, they control vast sums that they must also entrust back to corporate America - through the stock market. Before 1988, the professionals of Japan also felt that by working and saving, borrowing and investing, everyone would get rich. The crash of that year taught otherwise. The Japanese middle classes felt betrayed, because they were betrayed. Their money, what was left of it, went back under the mattress, where it remains. Japan has not recovered in 14 years. Suppose that American professionals come to feel the same way? The economist Thorstein Veblen, back in the days of Teapot Dome, wrote that the revolution here would not be led by workers. Rather, revolution could only come to America in the hands of technicians, "the General Staff of the industrial system," a normally contented class, "harmless and docile," in ordinary times. The technicians however, held the real power. And they might, someday, realize that the absentee landlords, the Vested Interests, as he called them and their political lackeys, serve no productive function. Enron just might start a chain of events that could, in time, prove Veblen right. Copyright (c) 2002, Newsday, Inc. -------------------- This article originally appeared at: http://www.newsday.com/news/opinion/ny-vpgal252564567jan25.story Visit Newsday online at http://www.newsday.com <A HREF="http://www.ctrl.org/";>www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! 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