------------------------- Via Workers World News Service Reprinted from the Feb. 7, 2002 issue of Workers World newspaper -------------------------
ENRON & MONOPOLY CAPITALISM: WHAT WALL ST. KEPT FROM THE WORKERS By Fred Goldstein As the World Economic Forum convenes in New York and bankers from the U.S. have to circulate among the financiers and capitalists of the world, they will suffer a certain discomfort. After all, the powers behind Enron--J.P. Morgan Chase, Citicorp, Bank of America, brokerage houses like Merrill Lynch, investment banks like Morgan Stanley, and other titans of U.S. capitalism--will have to slide delicately past the subject of the tidal wave of corruption that has surfaced and engulfed their entire political establishment, both parties, as well as the White House and the Securities Exchange Commission. These bankers are the financial powers behind the engines of globalization. They have preached the free market, financial transparency, monetary discipline, the rule of law, and every other pious and hypocritical phrase they could think of to mask their brutal takeover of economies all over the world. They have caused untold mass poverty and suffering, cultural genocide and the destruction of the environment. Now, because of the Enron collapse and all its fallout, they have been caught with their hands in the till--investing in phony partnerships, financing tax cheats, shredding documents and callously gambling with the life savings of thousands of workers. High-paid corporate executives lied for profit, their accountants swore to it and their lawyers declared it all legal. This cast of characters is not new on the stage of history. Only the names have changed. In 1916, V.I. Lenin, the leader of the Bolshevik Revolution, wrote a ground-breaking book entitled "Imperialism, the Highest Stage of Capitalism." In it he showed that imperialism was not a policy but a form of society. The early, competitive stage of capitalism inexorably developed into monopoly capitalism. This happened in all the major capitalist countries of that time. Each one was dominated by a financial oligarchy that exerted control over all economic life at home and was feverishly engaged in the export of capital abroad--where it could carry out the super- exploitation of hundreds of millions of colonial people. The book was written in the midst of World War I, the first great imperialist war. It described the motive force of the war: to re-divide the globe, which had already been divided up among all the imperialist powers. Even a cursory look at the Enron scandal confirms Lenin's writings on imperialism. A GLOBAL INDUSTRIALIST AND FINANCIER Enron had 25,000 miles of natural gas pipeline in the United States, 8,000 more miles in South America, water treatment plants in Britain, power plants in Italy, Poland, Turkey, Guatemala, Nicaragua, Puerto Rico and the Philippines, a 65- percent stake in a major Indian power plant--and that's just for starters. Enron tried to rise above being just an industrial corporation to become a broker and a trader. Thus it was both industrial and financial. It has been supported and controlled in this endeavor by the biggest banks in the U.S. It recruited Brig. Gen. Thomas White to be the head of Enron Energy Services, then a decade later sent him into the present Bush administration as Secretary of the Army. It dictated its energy policy to now-Vice President Dick Cheney, a militarist who was Secretary of Defense during the first Bush administration. It had dozens of Pentagon contracts. Enron is the epitome of an aspiring, new-on-the-scene imperialist corporation. Its demise has shown to the whole world how a corporation, backed by the banks and tied to the military machine of U.S. imperialism, can control the regulatory process and use its financial power to direct the policy of the capitalist state. On the domestic front, the sudden collapse of a corporation the size of Enron, which claimed $100 billion in revenue in the year 2000 and had $66 billion in stock outstanding at its peak, raises numerous questions and issues for both the ruling class and the working class. But the real issues are buried beneath a mountain of hypocrisy and deceit. The ruling class pundits are trying to frame the issue as corrupt corporate practices versus playing by the rules. They point to Enron's use of partnerships to hide its losses. They seem to be truly indignant that Arthur Andersen, one of the holy Big Five accounting firms, actually signed off on these schemes as within accounting guidelines. They excoriate the prestigious Houston law firm of Vinson & Elkins for dubbing the whole thing as legal. Now everyone is suitably outraged. But the real issue is not one of playing by the rules. The real issue is that even though they broke the rules, they lost the game. They cost the rich billions of dollars, discredited the stock market and the 401(k) Wall Street pension scheme and, in the process, aroused the ire of the masses, who saw 15,000 workers lose $1.3 billion of their life savings while the executives walked away with more than $1 billion in stock sales. THEY ALL KNEW The truth is that every one on Wall Street knew that Enron was not playing by the rules. As early as 1999 the German energy giant Veba was contemplating a merger with Enron. But, according to the New York Times of Jan. 27, Veba backed away from the deal after the firm "became concerned about the levels of debt Enron had and with what a senior executive said were Enron's 'aggressive accounting practices.' Consultants from PricewaterhouseCoopers told Veba that Enron, through complex accounting and deal making, had swept tens of millions in debt off its books, making the company's balance sheet look stronger than it really was." The second of the Big Five accounting firms, PricewaterhouseCoopers was only "one of several banks and consulting firms that worked on the Veba-Enron deal. Other advisers included Goldman, Sachs, Credit Suisse First Boston and McKinsey & Company, brokers and consultants said." "In the wake of Enron's collapse," added the Times, "it has become apparent that many financial firms-from Enron's lenders to Wall Street bankers who underwrote the company's partnership, to investment houses that bought into them, to the accountants who reviewed their books-knew more about Enron's condition than the company publicly disclosed." In fact, when Veba backed out, it had concluded that the company's total debt load amounted to 70 to 75 percent of its value. In short, it was a debt-inflated bubble waiting to burst. "Enron executives enticed wealthy individuals and institutions to invest in one of the partnerships that helped wreck the company by dangling the prospect that inside knowledge could potentially help them double their money in a matter of months," reported the Times on Jan. 25. The records show Enron executives offered "Wall Street firms and wealthy investors inside knowledge about Enron and its off-the-books holdings-information they denied company shareholders." Some of the biggest corporations in the world were involved, including Citicorp, Travelers Insurance, Morgan Stanley and American Home Assurance. "Three or four of the largest investments in LJM2 [one of the partnerships--F.G.] brought in returns of more than 100 percent. The lowest return from an investment in another Enron entity called Raptor I was 58 percent over four months; the highest, in Raptor II, was 212 percent in just over three months. In the first quarter of last year the partnership distributed about $75 million to investors," continued the Times. While perhaps not all the intimate details of the Enron scams were clear, the general picture was known all over Wall Street long ago. If Goldman, Sachs, Credit Suisse First Boston, PricewaterhouseCoopers and other giant Wall Street firms knew, then Robert Rubin, Clinton's Secretary of the Treasury and former head of Goldman, Sachs, knew. The Securities and Exchange Commission members must have known. The Public Oversight Board that is supposed to oversee the accounting profession must have known. Mutual fund managers, brokerage houses, stock analysts, all knew that the Veba merger had fallen through because of phony accounting. The word must have gotten to the heads of the Senate and House banking committees, who hob-knob with bankers. It is highly probable that word of all this wafted its way up to the Olympian heights from which Alan Greenspan, head of the Federal Reserve Board, periodically descends to utter his ambiguous, carefully hedged truisms about the capitalist economy. NOW THAT THE HORSE IS GONE ... Now everyone is screaming about regulation, oversight, standards, etc. But no one rushed to demand regulation of "aggressive accounting" and questionable partnerships BEFORE Enron crashed-when the parasitic bankers, brokers and other coupon-clipping parasites were making 212 percent on their investments in three months. No one wanted to blow the whistle when Enron stock was rising and all the investors' portfolios were increasing in value, making them rich on paper. But now they are all crying foul, lining up to get their money back from the bankruptcy proceedings--Citigroup, J.P. Morgan Chase, Bank of America, and others that either participated in the schemes or kept quiet. Lawsuits are flying back and forth. This is a classic demonstration of the anarchy of capitalism carried into the financial sphere. The bankers and bosses want some minimal regulation to keep from getting fleeced by each other and to keep the system from going haywire and collapsing. But no specific capitalist grouping of investors wants to enforce any particular regulation at any given moment if it stands in the way of their making a super- profit--come what may. They will ruin sections of their own class and, of course, trample all over the working class in pursuit of super-profits. Karl Marx once wrote that for a really high profit, a capitalist would commit murder, but for one even higher, he would risk death. V.I. Lenin, the leader of the first socialist revolution in 1917 in Russia, agreed with that, saying that for a profit, the capitalist would sell the rope used to hang him. These two great leaders of the working class understood the ruling class and what profound contradictions are inherent in capitalism. But they did not stop at analysis. They organized and mobilized the workers to fight back so as to eventually liberate themselves from capitalism altogether. Today the working class has to learn the lessons of the Enron scandal. It has to separate its problems from those of the bankers and financiers. CAPITALIST ACCOUNTING DOESN'T PREVENT FRAUD The issue for both classes is one of accounting and control. The capitalist class has minimal central control over the conduct of the giant monopolies, the banking houses, the industrialists. The monitoring of the ruling class has been largely allocated to the accounting profession. The capitalist state has little or no responsibility except after the fact, when a violation is uncovered. On a day-to- day basis, it is up to the accountants. But the accounting profession is part of the ruling-class establishment. They are a profit-gouging group of exploiters, just like the capitalists they are supposed to monitor. Thus, at the end of the day, the capitalist class has no reliable way of preventing wholesale fraud, because they are all engaged in it. It is part of capitalism. For the Enron workers, who had their life savings tied up in company stock, and for the millions of other workers whose pension funds also held millions in Enron stock, there was no one in this entire affair to stick up for them during all these backroom dealings. This is what the working class must concern itself with. There was an unholy capitalist alliance between Enron, its accountants, its lawyers, the commercial bankers, the brokers, the investment bankers, congressional oversight committees and the regulators--all either trying to make a killing or covering up for Enron. It's a microcosm of what exists generally throughout capitalism. No one raised one word about the workers and their life savings. All this took place for years behind the backs of the working class, in a conspiracy of the rich to protect themselves. Now 10 congressional committees, the SEC, the Justice Department and others are trying to get into the act, talking about reform and oversight. But the lesson of the Enron scandal is that the workers have to have an independent position and defend their own class interests. VANISHED MONEY BELONGED TO THE WORKERS The first thing to declare is that all this money belonged to the workers. All the money in those 401(k) plans was wages that had been deferred. This was compensation for labor performed. If the managers made it disappear because of fraud, then all that labor, in the millions of dollars, was performed for nothing. The capitalist government, which was supposed to protect the workers against this fraud, and the investors who got rich from it--including not only Enron executives but the Citigroup investors, the Travellers Insurance investors, the Morgan Stanley investors and any other parasites who invested in schemes that ultimately devalued the workers' holdings--should make good on every single penny. The workers should be first on line as the primary creditors in the bankruptcy proceeding, of course. But they should not wait in agony during a prolonged judicial process to get relief. The Bush administration--or should we say the Enron administration--should immediately set aside funds, not only for the Enron workers, but for all the pension plans that held Enron's watered stock. It could start by diverting money from the huge $48 billion increase Bush is proposing for the Pentagon and its aggression around the world. The labor movement should get behind a massive counterattack to protect all the workers who have been cajoled and swindled out of their pensions, which have wound up in the hands of Wall Street speculators. The workers should fight back against being tied to stock options and demand guaranteed, fixed pensions instead of having their wages turned over to a gang of financial gamblers. The government should be putting extra money into Social Security, not figuring out ways to rob it and gamble with it. The working class should find ways to intervene in the Washington struggle over reform and oversight to protect its interests and not get involved in fixing things for the capitalists. But in addition to opening up an immediate struggle, a longer-term evaluation of this collapse and the revelations surrounding it must be made. WORKERS' CONTROL AND ACCOUNTING The accounting for the production and distribution of the trillions of dollars of wealth created by the working class cannot be left to the capitalists and their accountants. Those who created it, the working class, should be the overseers. This scandal shows that the bosses have no responsibility whatever to the workers or society in general. What is obvious from this scandal is that the working class needs to get control of society by setting up its own state. Only then will the fraud and deception inherent in the capitalist profit system be eradicated. In fact, in the early days of the Bolshevik revolution Lenin argued that after the seizure of power by the workers and the peasants, the beginning steps toward socialism would involve the workers taking over accounting and control of production and distribution. In early 1918, in "How to Organize Competition?" Lenin wrote: "Accounting and control- this is the main economic task of every Soviet of Workers, Soldiers and Peasants' Deputies, of every consumers' society, of every union or committee of supplies, of every factory committee or organ of workers' control in general. ..." "[W]idespread, general, universal accounting and control, the accounting and control of the amount of labor performed and the distribution of products-is the essence of socialist transformation, once the political rule of the proletariat has been established and secured. "Only the voluntary and conscientious cooperation of the mass of the workers and peasants in accounting and controlling the rich, the rogues, the idlers ... can conquer these survivals of the accursed capitalist society." As regards legislative oversight, Marx and Lenin had much to say on this question that is highly relevant to the working class today. Both of these leaders took their inspiration on this question from the Paris Commune of 1871, the first successful seizure of power by the working class. In his famous work "State and Revolution," written in 1917, Lenin quoted Marx's analysis of the Commune in "The Civil War in France." Wrote Marx, "The Commune was formed of the municipal councilors, chosen by universal suffrage in the various wards of the town, responsible and revocable at short terms. The majority of its members were naturally workers or acknowledged representatives of the working class. ... From the members of the Commune on downwards, the public service had to be done at workers' wages. The vested interests ... of the high dignitaries of the state disappeared along with the high dignitaries themselves." In other words, if you claim to represent the workers and the people, you are responsible for what happens to them and you share their economic condition. All the office holders in all the congressional subcommittees are high paid and live like the bosses they are supposed to be regulating. They take bribes called "donations" from Enron and all the Fortune 500. But suddenly they are going to rush into the breach to "correct" the situation. >From the point of view of the working class, they are all guilty of collusion and negligence. The time to protect the people is before they suffer an attack. They were all sitting on their hands collecting their fat paychecks while the Enron corruption was going on under their noses. The only way to put an end to economic swindling, oppression, racism, sexual oppression and imperialist war is to organize a mass movement to take the economy and the state out of the hands of the Fortune 500, the bankers and financiers. Lenin talked about the need for workers' control and accounting "once the political rule of the proletariat has been established and is secured." There is no way to do this other than to build a party whose objective is to establish the rule of the workers and the oppressed. - END - (Copyright Workers World Service: Everyone is permitted to copy and distribute verbatim copies of this document, but changing it is not allowed. For more information contact Workers World, 55 W. 17 St., NY, NY 10011; via e-mail: [EMAIL PROTECTED] For subscription info send message to: [EMAIL PROTECTED] Web: http://www.workers.org) ------------------ This message is sent to you by Workers World News Service. To subscribe, E-mail to: <[EMAIL PROTECTED]> To unsubscribe, E-mail to: <[EMAIL PROTECTED]> To switch to the DIGEST mode, E-mail to <[EMAIL PROTECTED]> Send administrative queries to <[EMAIL PROTECTED]>
