Thursday, May 25, 2006


Ken Lay and Jeff Skillings earned their convictions. There isn't much doubt of that. While I'm pleased to see that much of justice done it is inadequate. Not that they deserve more punishment than they could get for their crimes, that the charges fell entirely short of producing justice.

They are largely convicted of defrauding investors. While I've got some sympathy for people who lost their pensions or other group investments not in their control, my sympathy for individual investors is not complete. They exercised choice. They chose to use Enron as a means of making money off of other peoples' work and from people who would be paying for energy. They were prepared to take a good chunk of that money for themselves. I don't include the employees of Enron who, no doubt, felt some pressure to invest with their own company.

A large part of what is covered by "economics" isn't science. Though aspiring to science it is more like theology, striving for rational explanations within a given set of beliefs. The basis of the beliefs are supposed to have a foundation in the laws of nature but a lot of the givens in economics are pure faith. Even more so the foundations of business law. They rest on the visions of the prophets of political economics and the pieties of con men.

Investors are the primary beneficiaries of the current economic religion. Their interest is the only one blessed with the full acknowlegement of the dismal science and the law. Someone can buy stock in a company, lending money to the company. They keep the stock and receive returns on the money lent. Even if the money is paid back in full with a reasonable amount of interest, the investor keeps the stock which gives ownership rights over the business. They can sell the stock to another person who then owns the rights over the business. No new investment needs to go into the business in this transaction. The stock can change hands any number of times without new money invested but the ownership rights remain. Marjorie Kelly has fully described this in her book, "The Divine Right of Capital".

Not noticed in this scheme are the employees who may have worked in the business, quite possibly, from the time before the stock mentioned above was first issued. They produce all of the value of the company, minus the original investment. The money would never have been paid back without their labor. But while they may have invested a lifetime with the company, giving it labor worth more than the compensation given to them in wages and benefits, perhaps even sacrificing personally in order to see the business succeed, they have no rights of ownership.

If the 31st generation of investors decides that their jobs could be done more cheaply by slave labor in another country they can vote to send the jobs away. The now unemployed workers could even see their promised pensions and benefits taken away for the benefit of the investors. These things are not extras given out of the good will of the owners and managers, they are compensation due on the basis of a legal agreement. But that doesn't matter. Look around, it's happening every day.

And the rate payers in California. Did they have a choice? Their state was blackmailed, huge amounts extorted from them. They will pay for the massive theft for years to come.

The workers have few, if any, rights in a case like Enron the rate payers had few rights. I have yet to hear an explanation of why they don't have rights at least as valid as those of the investors. Would someone like to explain this to me? Explain it, not just repeat the usual drill in more or less detail. Where is the justice?

Please note: This was a draft posted prematurely. I will be replacing it with a revised version. Since it was already posted I will leave it up until then.

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