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Sep 5 2022
By Roger Donway, Sep 5 2022
That melancholy reflection is prompted by the twentieth anniversary of Enron’s historic collapse into bankruptcy: December 2, 2001. In its day, Enron’s bankruptcy was the largest in U.S. history, and, given Enron’s enormous prestige (voted “most innovative” of the Fortune 500 for its final six years), the bankruptcy of Enron remains perhaps the most shocking. Inevitably, some of the reporters and newspapers who broke the story twenty years ago returned last year to exult in their scoops. That is human nature.
Personally, I return every year to read those reporters’ annual remembrances out of curiosity: I want to see whether any of the major Enron journalists have been able to move beyond their “first rough draft” of the story. I want to see if any of them have come to realize that they got the Enron narrative fundamentally wrong, and thus got wrong one of the central symbolic stories of modern capitalism. The short answer is no, every year. Reading journalists’ annual retelling of the Enron story, one has the sense of walking down a familiar street but seeing it reflected in a fun-house mirror.
As the researcher for Robert Bradley Jr.’s ongoing Enron tetralogy, I had to read many hundreds of those original Enron stories that appeared in the leading newspapers as the story was developing. I then had to read dozens of books that the journalists involved wrote in the years following the bankruptcy and the trials. What I found was what one could have predicted: The top national journalists, products of their elite education, cast blame on capitalist greed, free-market ideology, and a lack of strict bureaucratic supervision. It was the stock story that their Progressivist professors had predisposed them to write about every American business failure.
But, in the case of Enron, that whole Progressivist perspective on the story was basically wrong. It was made up from three myths that Bradley, who was at Enron during virtually its entire existence, began to expose in his third volume (Enron Ascending: The Forgotten Years, 1984-1996) and that we will thoroughly rebut in his final volume, Contra-capitalism: Enron and Beyond.
Those myths are: (1) The Ethical Myth: Enron’s corporate culture was characterized by money-grubbing, greed, avarice. (2) The Political Myth: Enron’s corporate culture was ardently libertarian or classical liberal. (3) The Economic Myth: Enron’s lobbying helped drive a free-market deregulation movement that swept America during and after the Reagan administration.
Thesis: “Skilling believed that greed was the greatest motivator, and he was only too happy to feed it. ‘I’ve thought about this a lot, and all that matters is money,’ Terry Thorn, a managing director, recalls Skilling telling him. ‘You buy loyalty with money. This touchy-feely stuff isn’t as important as cash. That’s what drives performance.’”1 Such was the management philosophy of Enron’s COO (and later CEO), according to the most famous journalistic Enron book, The Smartest Guys in the Room, by Fortune reporters Bethany McLean and Peter Elkind. This is the master myth governing journalistic interpretations of Enron: Its corporate culture was dominated by an avaricious spirit of money-grubbing.
In 2002, six months after Enron’s fall, Lawrence E. Mitchell of George Washington Law School wrote an essay called “Learning the Lessons of Enron (Before It’s Too Late).”2 In it, he traced the origins of Enron to “the election of Ronald Reagan in 1980, who gave voice to the basest human instinct captured by the contemporaneous film Wall Street: ‘Greed is good.’”
The very first crop of books about Enron played up that theme. For example, also in 2002, Enroner Robert Cruver published: Anatomy of Greed: The Unshredded Truth from an Enron Insider. And again in 2002, Robert Bryce published Pipe Dreams: Greed, Ego and the Death of Enron. In 2003 came Infectious Greed: How Deceit and Risk Corrupted the Financial Markets, by law professor Frank Partnoy. (His 50-page chapter 10, “The World’s Greatest Company,” is about Enron).
After the Enron trials, the popular financial website “Investopedia” published its “Enron” article (written in 2011 by Chris Seabury). It concluded simply: “Enron will remain in our minds for years to come as a classic example of greed gone wrong.”3 The dictum that “the love of money is the root of all evil” is so deeply embedded in the Western mind that few analysts of white-collar crime ever go beyond it, and only the rarest analyst omits it as a partial explanation.
Counter-Thesis: This is the myth closest to the truth, because capitalism is indeed wealth-seeking. The spirit of Bourgeois Capitalism (epitomized by the works of Samuel Smiles) is precisely money-grubbing. It entails producing genuine human values (however intangible or abstract) to earn money from counterparties. And that is hard work; it is grub work.
But Enron embodied a different spirit. The Enron spirit might be described as the spirit of Bohemian Capitalism, to borrow from David Brooks’s book BoBos in Paradise. It might be called Rock ‘n’ Roll Capitalism: the comparison of Enron and Elvis was elaborated in a famous Fortune article.4 Or it might be called Sixties Capitalism, by those who remember the Go-Go markets.
Whatever term is used, the philosophic essence of this anti-bourgeois capitalism is the belief that one cannot speak intelligibly of “the earned” in a market economy. Friedrich Hayek and Milton Friedman and Robert Nozick and John Rawls would all have agreed with that proposition. In this view, there is only money-winning. If you follow the rules, no further questions can be asked about how your money was won.
Jeffrey Skilling frankly admitted that that was indeed Enron’s viewpoint, in his Frontline interview on PBS, which took place in March 2001, immediately after he had become CEO. His questioner said: “Once you see what the rules are, you guys push those rules to the edge in an effort to make a buck.” Skilling responded: “That’s probably fair, yes…. If they set up rules, we adhere to them.”5 A Bourgeois Capitalist would ask: “But are you committed to earning your money?” A postmodernist would reply: “The question makes no sense. Is a tax deduction earned? It’s just rules all the way down.”
The central insight of Bradley’s Enron tetralogy is that Enron’s employees, from top to bottom, seized upon the company’s postmodern rejection of “the earned” and applied it both externally and internally. Exploiting “infrastructure socialism” in the gas pipeline industry? Great. Promoting vaporware at the annual stock-analysts meeting? Go, stock price, go! Rent-seeking for Ex-Im Bank subsidies at taxpayer expense? Fine. Booking profits from 30-year deals based on hypothetical projections? Give that kid a million-dollar bonus.
The result was a syndrome of ethically interconnected corporate behavior that inspired Bradley’s term, “contra-capitalism” (the title of his fourth volume). As his yardstick for bourgeois capitalism’s ethical baseline, Bradley takes its 200-year moral tradition, from 1760 to 1960 (from Adam Smith to Ayn Rand), and he finds that its essence was: the concept of the earned. By that standard, Enron and its employees were thoroughly imbued with the spirit of contra-capitalism. They no longer believed in “the earned,” certainly not as a moral imperative. Probably, they no longer even understood the idea. And that, fundamentally, was the cause of Enron’s fall.
Thesis: “I believe in God, and I believe in free markets.” Yes, Enron founder and longtime CEO Ken Lay did couple together those two aspects of his creed. It was in a February 2001 interview with Sandi Dobie, religion and ethics reporter for the San Diego Union-Tribune. (“Prophet or Profit? Energy Chief, Religious Leaders Dispute God’s Role in Utility Price Spiral.”6) A year later, after the fall of Enron, Lay’s one-time big booster, New York Times columnist Paul Krugman, quoted the phrase and then mocked his former associate for exhibiting blind “faith” in laissez-faire.
McLean and Elkind allege that Skilling was also a libertarian. At Harvard Business School (1977-79), the two authors write, Skilling stood out “in part because of his harshly libertarian view of business and markets. The markets, he believed, were the ultimate judge of right and wrong.”7 (p. 31).
In 2011, Progressivist economist and historian Thomas Frank (What’s Wrong with Kansas?) wrote “The Age of Enron” for Harper’s magazine as a tenth anniversary piece. In 2014, he reprinted the essay in Salon, but retitled it “Ayn Rand’s Libertarian ‘Groundhog Day.’” His thesis was that Enron and other white-collar-crime scandals were and forever would be simply an endlessly repeated phenomenon (like the plot of the movie Groundhog Day) that derived from an ultra-libertarian political philosophy, exemplified by philosopher-novelist Ayn Rand’s Objectivism. “We deregulate… because the John Galts who rule us won’t have it any other way. If we want them to create jobs, we must do as they instruct.”8
In 2016, writing in the Huffington Post, Tom Koechlin, director of Vassar College’s International Studies Program, stated as though it were an obvious fact: “Libertarianism is rooted in a philosophy that aggrandizes capitalism’s winners…. That’s why Kenneth Lay, the late, repugnant CEO of Enron, was a libertarian.”9
In 2018, Gavin Benke wrote in Risk and Ruin: Enron and the Culture of American Capitalism: “Lay, Skilling, and others inside Enron, of course, had long held the view that free and open markets were, universally, the best systems for running industries… Executives like Lay and Skilling saw their ideal world as one that was united through a free market that operated identically in all parts of the world.”10 They sought a utopia of global libertarianism.
Counter-Thesis: This is the myth furthest from the truth. “Libertarianism,” or classical liberalism, is the political-economic philosophy based on private property rights and voluntary contract. Enron’s corporate culture, by contrast, might be described as market-friendly Progressivism. It was “progressivist” in its ideals: pro-consumer, pro-environment, pro-uplift for less developed countries and hard-pressed Americans.
As for Lay’s statement about God and free markets: He was not saying, as Krugman implied, that God and free markets were the two unchallengeable pillars of his creed. He was simply saying that it was possible to believe in both things. He was saying: We at Enron are caring and Christian in our ends (we are Progressives), but we are market-friendly in our means. He phrased it as he did because he was being interviewed by a religion-and-ethics reporter and because he anticipated (rightly, as it turned out) that the clergymen Dolbee was going to interview for her piece would say that there was a contradiction between those ends and those means. The very next person quoted in the piece, Protestant clergyman Glenn Allison, said: “The marketplace is not the best way to mediate the claims of those who have and those [who] have not.”11
Skilling was saying the same thing as Lay when he told Frontline viewers: “We are the good guys.”12 He meant: We are the good guys by the standards of your Progressivist PBS viewers. We are working to help those who suffer economically under the current system of regulatory capture at home and state-run industries abroad; we are just exploiting quasi-market structures to do it.
As for Tom Koechlin’s blunt statement “Ken Lay… was a libertarian,” it happens to have a very easy refutation. Enron historian Bradley was Lay’s speechwriter and worked closely with him. Bradley also happens to be a lifelong classical liberal, and he has testified to his first-hand knowledge that Lay was very far from being a libertarian in ideology. Lay saw himself as a business-statesman and never dreamt of walling off the pursuits of his business life from the pursuits of his life as a citizen. What was good for Enron, he believed, was good for America, and Texas, and Houston—and vice versa.
As for the description of Skilling by McLean and Elkind: It illustrates perfectly why we need historians rather than journalists to tell the Enron story. McLean and Elkind say: Skilling, as a libertarian, believed markets were “the ultimate judge of right and wrong.” An intellectual historian would know that libertarians for a century have famously insisted that market judgments are not to be confused with judgments of ethics or morality, with rankings of a good’s or service’s objective usefulness or aesthetic value, with estimates of a counterparty’s personal worth, or with any other non-market evaluation. The distinction between markets and morals is a central tenet of libertarianism, known to everyone who has the slightest familiarity with the philosophy. It is the whole basis of classical liberalism’s attack on the concept of “social justice.”
Thesis: The third myth follows from the Political Myth: Libertarian Enron advocated for, lobbied for, and then profited from a vast movement of free-market deregulation that swept through Ronald Reagan’s America and continued thereafter.
New York Times business reporter David Leonhardt stated the thesis almost immediately after Enron’s bankruptcy “Let the reforms begin. For more than 20 years, the federal government has given companies fairly free rein, allowing them to operate with less and less regulation. Enron’s collapse may well halt that trend” 13
Robert Kuttner, writing in Businessweek, put the matter stridently: “The deepening Enron Corp. scandal should hose away an entire world view about how capitalism is supposed to work…. For three decades now, the dominant strain of economics from the University of Chicago has been teaching gullible undergraduates and journalists that there is no such thing as the public interest. Efficient outcomes are just the aggregation of selfish private interests, and government’s main job is to get out of the way. Well, after Enron, these theorists should learn some other useful trade.”14
The allegation has been made endlessly. The Smartest Guys in the Room said immediately, on page 2: “Lay believed powerfully in the dogma of deregulation.”15 Partnoy’s Infectious Greed said of Lay and Skilling: “Both men were zealots for deregulation and free markers.”16
The legend continued with Sharon Beder’s book Power Play. ‘The disaster in California could have been foreseen had it not been for the blinkers imposed by free-market ideology promoted by think tanks and front groups and funded by corporate interests…. It was these self-interest companies that largely drove and shaped the new rules for the electric industry. Enron is a prime example.”17
A decade later, Thomas Frank wrote, in the Harper’s/Salon piece cited above: “Enron was not merely a business—it was also an ideological endeavor. ‘We believe in the inherent wisdom of open markets,’ read the first sentence of their vision-and-values Web page. The second sentence read: ‘We are convinced that consumer choice and competition lead to lower prices and innovation.’ In pursuit of that vision and those values, Enron pushed deregulation across the land.”18
Counter-Thesis: First, the so-called “de-regulation movement” that took place in late-twentieth-century America had nothing to do with creating policies based on some free-market philosophy—libertarianism or classical liberalism. It was in fact a “re-regulation movement.” The old New Deal bureaucracies were supposed to be a form of anti-business Interventionism, whereby bureaucratic experts controlled largely private property to serve the public interest. But those bureaucracies had been captured (quite rationally and in self-defense) by the businesses they were regulating. The result was Political Capitalism, whereby business exploited Progressivist Interventionism for its own benefit. The so-called “de-regulation movement” was simply an attempt to liberate the bureaucracies from capture by giving business a degree of self-control.
Second, as Democratic Party websites correctly insist, this re-regulation movement reached Category Five under President Jimmy Carter (assisted by Progressivist Senator Edward Kennedy), well before Reagan took office. Third, the focus of the re-regulatory movement—and this was a Chicago School element—was consumer satisfaction, especially low prices, achieved by competition. There was zero concern for private property and voluntary contract, the twin pillars of classical liberalism.
Carter’s re-regulation focused mostly on the area of transportation. Apparently, he also wanted to re-regulate the energy industry, but he could not bear the thought that oil and gas producers might thereby benefit from their property. 1n 1984, FERC (Federal Energy Regulatory Commission) did bring the re-regulation movement into the natural gas industry. Under FERC’s arrangement, the federal government turned gas pipelines into a common resource (mandatory open access) but allowed companies to meet the market demand for gas with relative discretion. Enron embraced the scheme, and it became both the key and the model for much that happened at Enron during the next 17 years.
So, if 1970s and 1980s re-regulation was not free-market, what political-economic philosophy did the policies represent? The libertarian Cato Institute called FERC’s arrangement “infrastructure socialism.”19 That phrasing certainly captured the collectivist nature of the arrangement, but it did so in an unfortunate American way: by labeling as “socialism” anything (e.g., welfarism) that is contrary to the free market.
Considered theoretically, “infrastructure socialism” is a misclassification of mandatory open access. Under genuine socialism, government bureaucrats would not only tell pipeline owners what they must do; bureaucrats would operate the system. Under FERC’s regime, the government was ultimately in charge, determining the fundamental arrangements but farming out to private citizens the tasks of construction and operation, production and distribution. Looked at historically, the “mandatory open access system” of energy infrastructure, ardently embraced by Enron, was a new form of feudalism.
In theory, under feudalism, the nation (the king, the people) owns everything and sets the terms for the economy. But the production and distribution of economic goods is farmed out to people on the scene. Feudalism devolves immediate economic decision-making to certain of its private citizens, rather than to government employees. Feudalist re-regulation is not socialism, but it is a collectivist political-economic system completely distinct from free-market capitalism and de-regulation.20
For more on these topics, see
“News is the first rough draft of history,” so journalists like to say, perhaps because it simultaneously elevates them to the rank of historian and yet offers an excuse for their errors. Anyone who has worked in a newsroom can cite a more honest saying of the craft: “Never believe the first reports.” Which also means: Never believe the first rough draft.
The trouble for the rest of us is that, on the twentieth anniversary of Enron’s fall, the journalists who broke the story and now return to it periodically are still stuck in the world of their scoops—the world of false first reports, based on the reporters’ Progressivist educations. It is time for those Enron journalists to take their last bows and leave the stage.
If we are going to dispel the myths of Enron, we must send in the historians, perhaps in time for the twenty-fifth anniversary, in 2026.

[1] Bethany McClean and Peter Elkind, The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (New York: Portfolio, 2002), p. 58.
[2] Lawrence E. Mitchell, “Learning the Lessons of Enron (Before It’s Too Late),” University of Pittsburgh Law School’s “Jurist” website, June 13, 2002. Available at: https://web.archive.org/web/20020613041506/http:/jurist.law.pitt.edu/forum/forumnew55.php, Wayback Machine WebArchive.org.
[3] Chris Seabury, “Enron: The Fall Of A Wall Street Darling,” Investopedia, December 5, 2011. Available at: https://web.archive.org/web/20111220155744/http:/investopedia.com/articles/stocks/09/enron-collapse.asp, Wayback Machine WebArchive.org.
[4] Brian O’Reilly, “The Power Merchant,” Fortune, April 17, 2000. Available at: https://money.cnn.com/magazines/fortune/fortune_archive/2000/04/17/278071/index.htm
[5] “Interview with Jeff Skilling,” “Blackout,” Frontline, PBS, March 28, 2001. Available at: https://www.pbs.org/wgbh/pages/frontline/shows/blackout/interviews/skilling.html
[6] Sandi Dolbee, “Prophet or Profit?—Energy Chief, Religious Leaders Dispute God’s Role in Utility Price Spiral,” San Diego Union-Tribune, February 2, 2001.
[7] McLean and Elkind, p. 31.
[8] Thomas Frank, “Ayn Rand’s Libertarian ‘Groundhog Day,’: Billionaire Greed, Deregulation, and the Myth That Markets Aren’t Free Enough,” Salon, August 3, 2014. Available at: http://salon.com/2014/08/03/ayn_rands_libertarian_groundhog_day_billionaire_greed_deregulation_and_the_myth_that_markets_arent_free_enough/
[9] Tim Koechlin, “Free to Plunder: The Case against Gary Johnson and Libertarianism,” Huffington Post, October 24, 2016. Available at: https://www.huffpost.com/entry/free-to-plunder-the-case_b_12614342
[10] Gavin Benke, Risk and Ruin: Enron and the Culture of American Capitalism (Philadelphia, PA: University of Pennsylvania Press, 2018), pp. 90-91.
[11] Dolbee.
[12] “Interview with Jeff Skilling.”
[13] David Leonhardt, “How Will Washington Read the Signs? New York Times, February 10, 2002). Available at: https://www.nytimes.com/2002/02/10/business/how-will-washington-read-the-signs-revived-debate-on-stock-options.html?searchResultPosition=4
[14] Robert Kuttner, “Enron: A Powerful Blow to Markets Fundamentalists,” BloombergBusinessweek Magazine, February 3, 2002. Available at: http://www.businessweek.com/stories/2002-02-03/enron-a-powerful-blow-to-market-fundamentalists
[15] McLean and Elkind, p. 2.
[16] Frank Partnoy, Infectious Greed: How Deceit and Risk Corrupted the Financial Markets (New York: Henry Holt and Company, 2003), p. 299.
[17] Sharon Beder, Power Play: The Fight to Control the World’s Electricity (New York: The New Press, 2003), p. 85.
[18] Thomas Frank, “Ayn Rand’s Libertarian ‘Groundhog Day.’”
[19] Adam Thierer and Clyde Wayne Crews Jr., What’s Yours Is Mine: Open Access and the Rise of Infrastructure Socialism (Washington, DC: Cato Institute, 2003).
[20] Robert L. Bradley Jr. and Roger Donway, “Capitalism, Socialism, and ‘the Middle Way,’” Independent Review 15, no. 1 (Summer 2010), p. 78. Available at: https://www.independent.org/publications/tir/article.asp?id=789

*Roger Donway is a research assistant at the Institute for Energy Research and freelance editor and writer.

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