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The Angry Economist

Conventional Wisdom And What Actually Happened: The Case Of ENRON
Posted by William P. McGowan, Ph. D. on Jun 11, 2006 - 7:07:00 PM

UNITED STATES—A funny thing happened on the way to federal prison the other day: two guys who were seriously white and seriously rich got convicted by a Republican-appointed prosecutor for ripping off their employees and the public.  The only problem with the conviction of ENRON's Ken Lay and Jeff Skilling is that it defies all of the conventions we've been brought up to believe.

The conventional wisdom is that strain of thought that seems to permeate the national mainstream media and becomes an unquestioned lifting-off point for social and political commentary.  No one questions the conventional wisdom because, well, it's conventional.  Everyone knows it. Or do they?

In 2001, with the election of a supposedly "business friendly" Republican administration, most of our society's self-described "intellectuals" denounced America's sellout to the party of big business. There'd be oil rigs off Santa Barbara by Tuesday, we were told, and big business would be able to rape the little guy and get away with it.  All of the misdeeds of the 1990s, purveyors of the conventional wisdom argued, would get a pass simply because a pro-business oilman from Texas was in the White House. 

The problem with this "wisdom" is that it looks like this "business friendly" administration will go down as one of the most vigilant prosecutors of corporate crime in history.  Under Attorney General Alberto Gonzales, the United States has sought and gained convictions for literally hundreds of corporate executives who used the boardroom and accounting tricks to enrich themselves while deceiving the public and their shareholders. Before the ENRON verdicts, Gonzales and his prosecutors had put 82 chief executives and over 150 other corporate officers in jail. 

That's about triple the previous administration's conviction rate.

And those who got nailed aren't going off to "Club Fed" for a couple months of rest and relaxation, either.  They are doing hard time. Tyco's L. Dennis Kozlowski received what is effectively a life sentence for a man in his mid-fifties, 25 years. He may be eligible for parole in eight years, but WorldCom CEO Bernie Ebbers will probably die in prison because of his 25-to-life sentence.  This is not exactly preferential treatment from the party of big business.

My point is, that rather than being "business friendly," this Republican administration has been a rather fierce defender of the kind of things for which Democrats typically take credit.  The same is true for the so-called "conservative" Republicans in Congress.  In response to the collapse of ENRON and WorldCom, the GOP passed the most sweeping piece of business legislation since the creation of the Securities and Exchange Commission, the Sarbanes-Oxley Act of 2002.Though companies large and small are already complaining about these new rules, the very pro-business former Orange County Congressman who is now running the SEC will not delay their implementation. As a politician, Chris Cox now understands that the public perception of his administration's business friendliness prevents him from acting in a way that would make the law less onerous and more effective.

One of the great ironies here is that in spite of an impressive prosecutorial track record, Republicans are still perceived as being too friendly to big business, allowing Democrats to get off Scot free.  This, in spite of the fact that the people running the executive branch (and thus, the Attorney General's office) during the 1990s, when most of these criminal acts were perpetrated against the American people, were Democrats. 

Funny how things work that way.

You can reach William P. McGowan at


Cliffside Malibu




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