As the chaotic destruction of Enron continues to drop new fallout on the business and political scene, new questions are arising as to the relationship that should exist between energy companies and the government. The United States isn't the only country to feel the blow of Enron's fall; the United Kingdom's recently deregulated energy market is reeling from the blow amid similar accusations of government collaboration.
In the long run, the Enron scandal may erode confidence in market deregulation. Governments that now retain control over utilities may be reluctant to open up to competition, fearing they will become the next victims of an Enron-style collapse. Countries such as the United States and United Kingdom that are already deregulated may start to feel pressure to return utilities to government control.
Deregulation has been a hotly debated issue in itself. On the one hand, allowing competition in something as essential to everyone as their light and heating removes the guarantee of service. The opposite view, that of market competition, points out that competition will lead to lower prices and better service.
Today we are living in a world that is turning its back on statism. No longer are people looking for all-powerful governments to solve their problems. The totalitarian horror of Orwell's "1984" has been avoided by the realization that authoritarian governments can't provide for people's needs as well as market economics can.
It's not just dictatorships that are feeling this change. The effect is most pronounced in western democracies like the United States and the European Union,where private enterprise is stepping up to fulfill public demands more efficiently than the governments of the past have. The modern ability for companies to escape stagnation by moving their operations into less restrictive countries is starting to erode the foundation of bureaucratic governments.
These changes are not without pitfalls, as the Enron debacle shows. Deregulation makes it possible for savvy businesspeople to take advantage of their newfound freedom for disreputable profits. Add to that the allegations that Enron's executives were in contact with the Bush Administration in an effort to affect energy policy for their own benefit, and it would seem that free market economics has taken a sore blow.
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If we cannot trust private corporations to act ethically, is it time to begin returning utilities to government control?
Despite the trouble that Enron's unethical business practices have caused, there are some things they did right that should not be forgotten. Enron pioneered the market trading of energy, a very positive development for a deregulated market because it allows energy to be traded between companies like any other commodity. With Enron's collapse as the dominating force in energy trading, other companies may be able to develop this concept to be able to bring energy to consumers cheaply and efficiently with no need for government intervention.
Also, a large share of the blame for Enron's financial deceptions must be laid at the feet of Arthur Andersen, the "Big Five" accounting firm that is accused of helping Enron conceal its debts and lie about its profits. The backlash from the Enron case may bring Andersen to its knees and has already prompted other accounting firms to take a hard look at their practices. Reputation is of paramount importance to accounting firms; their clients must be able to place full confidence in the people that do their books. Since it is in the best interest of accounting firms not to allow these kinds of transgressions to happen, corporations will now find it even more difficult to get away with lying on their income statements.
The fall of Enron is just a growing pain of the emerging privatized energy market. If we can get through this catastrophe without reverting to state-controlled utilities, energy companies will have learned a valuable lesson. The vast majority of Enron's employees had no control over what happened, those few executives who conspired to rip off their stockholders will be nailed to the wall and rightly so. Let them be a warning to executives of the future, not an excuse to reverse deregulation.
by Craig A. Butler
Daily Lobo Columnist
