ENRON: The Smartest Guys in the Room (DVD)
Directed by Alex Gibney based on the Book by Bethany Mclean and Peter Elkind
11 October 2006
This documentary is about the new form of political economy which is described in the film by Ronald Regan as ‘the magic of the market’. That was of course in the early 1980s when de-regulation and privatisation were articles of a new untested faith. It also happens to be the story of how another actor was able to follow Ronald Regan and become governor of the state of California.
The film opens with the two gleaming ENRON chromium towers reflecting back the sunlight and the passing clouds – very much the idyll that the gurus of capitalist modernisation want us all to believe in. Cut to the interior with its white undulating plaster walls and cavernous space, like an architectural fantasy by Frank Lloyd Wright. But now, in close-up, we see strange insect forms that stand in rows motionless – what are they? They are the frames that once held the monitors and computer screens that reflected back the image that ENRON had of itself to itself.
This was the remains of the ENRON dealing floor – here something happened that went far beyond the largest fraud and the largest bankruptcy in US corporate history. That in itself was of epic portions. The films shows how one company’s excess was an outgrowth of another and how over time, ENRON first began to buy-up assets – most of which were loss making, then took full advantage of the changes that the Regan government made to the accountancy rules. This meant that a company could call projected profit ‘profit’. Which became the formula whereby ENRON simply could not loose – they decided the value of an asset which was of course always high. The business sector watched mesmerized by ENRON’s soaring profits and soar they did for the plain reason that they had bribed their own accountants Andersen & Co.
But Confidence was high and still remained so. If ENRON was influencing the market values of energy assets it was a logical step to simply start being the biggest buyer and seller of energy futures. So ENRON became a dealership, and the film shows what a band of obnoxious pirates the ENRON dealers were, with four screens to a man and all the clients you could chew up and spit out. Here secret recording illustrates how the company systemically created an energy crisis in California by telling its power generating companies to periodically close-down. By doing so they forced the price of energy up, so that the ENRON dealership could sell it on at a much higher price to neighbouring states (all to fund more ENRON losses, this time from their disastrous dot com bubble adventure; video-on-demand).
In California, the air conditioning stopped, the lights went out and people started dying in the soaring temperatures as the air-conditioning failed and, as the land started burning, the dealers of ENRON said ‘burn baby burn!!’
The engineering of the California energy crisis also created the biggest political crisis in Californian history. The Democratic Governor Pete Wilson did not know what hit him and by his appearance in the film – he still doesn’t. Most of those who paid for his ‘recall’ because of the power crisis were contributors with ENRON to the Republican Party and the Bush family election war chest. The campaign to recall Wilson was successful – the first time it had ever been done, which lead to the election of California’s second acting governor.
But we should resist the temptation to see this as an isolated case or a farrago of events. The film initially does suggest that the social disaster and the fraud that was ENRON, was in part due to the emergence in the 1980s of the born again capitalist free market movement, but by the end it actually explains the actions of ENRON as a company in terms of people always ‘wanting to follow authority’ namely the top executives.
Watching Ken Lay and Skelling at the monthly ENRON rally, when they announce each new fantasy initiative such as ‘The World of Energy Powers ENRON Now ENRON Will Power The World’, the applause and hoots of delight they get from the ENRON employees suggest that the ‘following authority’ theory appears to be true. But when Skelling resigned and Lay at the monthly rally to mark his passing also announces the two fraud investigations into the company, Lay’s comment that these investigations will be simply ‘a routine’ draws the written response, ‘are you on crack-cocaine?’ which Lay actually reads out. That was when some started to disbelieve the illusion and the ‘magic of the market’. But by then it was too late for the employees of the acquired companies who would loose their jobs and pensions. The colossal manipulation by ENRON of California and its political consequences are not isolated or unique. It is comparable to what followed the disaster of the massive state de-regulation and privatisation in ex-Yugoslavia in the early 1990s where a lot of ex-communists got very rich and a lot of people died as result of their wars.
Alex Gibney’s DVD does not draw all the political lessons of ENRON, but the story he recounts is so epic and horrific that he hardly needs to.