One of our more constructive critical commenters posed a challenge on my short Solyndra post on Tuesday, namely, did you folks get this worked up about Enron’s collapse?
Short answer: Yes we did. Longer answer: Starting before it collapsed in fact, and for much the same reason—its seduction into the politicized world of crony capitalism. Enron’s collapse bears some striking similarities to Solyndra, namely, a business model that increasingly depended on government support for profitability. When that government support didn’t come in time, Enron’s house-of-cards collapsed.
Here’s the salient point: like Solyndra, Enron was a favorite of environmentalists, and Enron was a huge backer of the Kyoto Protocol. A decade ago, people liked to talk about links between Enron’s chairman, Ken Lay, and President George W. Bush. But they leave out that the main thing Lay was urging on Bush was the ratification of the Kyoto Protocol. Enron probably would have fared much better under a Gore administration. Enron thought they’d make money on the trading operations from a cap and trade scheme. After Enron’s collapse, an internal memo from the late 1990s came to light that said Kyoto would “do more to promote Enron’s business than almost any other regulatory initiative outside of restructuring the energy and natural gas industries in Europe and the United States,” and concluded that Kyoto would be “good for Enron stock.”
Paul Georgia of the Competitive Enterprise Institute combed the records way back then and noted how fully Enron had drunk of the green Kool Aid. He noted a December 1997 memo written by John Palmisano, Enron’s senior director for environmental policy and compliance, which boasted that due to his company’s support for the Kyoto Protocol, “Enron now has excellent credentials with many ‘green’ interests including Greenpeace, World Wildlife Fund, Natural Resources Defense Council, German Watch, the U.S. Climate Action Network, the European Climate Action Network, Ozone Action, World Resources Institute, and Worldwatch.” That’s about a complete a rogue’s galley of extremist greens as you can get.
In 1997, the Natural Resources Defense Council’s (NRDC) Ralph Cavanagh credited Enron with helping to defeat the Republican 104th Congress’s attempt to reform the nation’s draconian environmental laws:
When the infant 104th Congress went to town on the nation’s environmental laws, we appealed for help from corporate community. Many former friends were conspicuously silent. Ken Lay was [an] extraordinarily honorable — and initially lonely — exception, and he is part of the reason why the bad guys ultimately failed at most of what they attempted….On environmental stewardship, our experience is that you can trust Enron.”
In April 2000, NRDC listed Enron as one of several “progressive companies” that “support responsible global warming policy. Jim Marston with the Environmental Defense Fund also praised Enron, saying, “They are smart. They think that being pro-environment is a good business and political strategy.” And in his 2001 book Eco-Economy, the antediluvian Lester Brown praised Enron for being “keenly aware of the part it can play in the transition to the new energy economy.”
Columnist Robert Novak noted all of this in a column in 2002:
Lay has been painted as a heartless advocate of free market economics when he was actually working behind the scenes for control of energy emissions, establishing alliances with the most radical environmental pressure groups. Enron was not about ideology and certainly not partisanship, but was using governmental contacts to maximize profits.
And then there’s this squib about Enron’s $150 million foray into–wait for it–solar power: “Federal officials, aware that solar power breakthroughs have shined and faded almost as often as the sun, say the Enron project could introduce commercially competitive technology without expensive Government aid.” That’s from the New York Times . . . in 1994. Yet we keep falling for this same siren song.
Oh, and for icing on the cake, don’t forget that Enron paid something like $50,000 to Paul Krugman to be an adviser. No wonder they went broke.
The best account of the wider phenomenon of “political capitalism”—or what we’re now calling “crony capitalism”—behind Enron’s collapse is Robert Bradley’s book Capitalism at Work: Business, Government, and Energy. Bradley worked briefly at Enron in the late 1990s, and saw a lot of it from the inside.