Paul Krugman called our economy the Madoff economy back in December. With all due respect to Mr. Krugman, I would tweak his description and call what we are experiencing the Enron economy.
60 Minutes ran an investigation into the price of oil. It is not a coincidence that banks going south the same time the price of oil dropped.
Oil has been the prime factor in the economy taking a turn for the worse. Living in the suburbs, or exburbs became unaffordable because of transportation costs, rising food prices, and the rising prices of other basic necessities. The root of all of these problems were oil prices. Prices that were artificially inflated to feed speculative traders, and it was the productive economy that took the hit. The direct parallel to this is what Enron was able to do to the California electricity market, not the Ponzi scheme Madoff set up.
The potential political ramifications were nearly as concerning. Enron, whose former CEO and figurehead of the company had intimate ties with the Bush family, played a key part in getting Democratic governor Gray Davis recalled. This resulted in the election of Republican governor Arnold Schwarzenegger. The parallel between this and “drill, baby, drill” is left for the reader.
Enron was not just the story of one company, it was the canary in the coal-mine. The first one to go. Enron did not just implode on its own, it took the law firms, accounting firms, government regulators and investment banks to look the other way. However, in reality, the facts are so much more damning than that. It isn’t that these institutions merely looked the other way, they were actively complicit in the fraud. No, they didn’t know everything, but that doesn’t mean they didn’t know anything.
When history looks back on the first decade of this new century, I think they will label it the age of fraud and negligence. The defining characteristic will be incompetence, a contempt for the rule of law, and the failure of institutions to properly check and balance other centers of power. It is all born out of a ideology that abhors rules, and the very notion of democratic governance. Now, we are all experiencing its benefits.