Tim Wheeler’s ongoing expose of the incestuous relationship between Ken Lay and President George Bush goes far in exposing the greed of Enron officials who were among the main beneficiaries of the stock market boom of recent years. As such they are a contribution to the public debate and allow at least a peek into the corruption that pervades the Bush administration.
But, while it may serve to shield Lay and other Enron officials from a stay in the hoosegow, the Bush-Lay friendship had little impact on Enron’s metamorphosis from a small Texas pipeline company to seventh place on the Fortune 500 list during the decade of the 1990s.
Rather, a study released by Institute for Policy Studies (IPS) on March 22, says Enron’s rise to global prominence “depended absolutely” on close financial relationships with U.S. agencies, the World Bank, and other government institutions.
“Enron would not have scaled such grand heights … without its close relationships with government agencies,” the report’s authors said, adding that the company “marched into risky projects abroad backed by the deep pockets of government financing and the firm and, at times, forceful assistance of U.S. officials.
In the study, aptly titled, “Enron’s Pawns: How Public Institutions Bankrolled Enron’s Globalization Game,” IPS researchers discovered that 21 agencies, including the U.S. Export-Import Bank, the Overseas Private Investment Corporation (OPIC) and the World Bank, helped leverage Enron’s march into developing countries. According to the study, OPIC and the Export-Import Bank backed 25 Enron power projects with $3.7 billion in loans and guarantees.
The World Bank threw in another $760 million, the Inter-American Development Bank added $751 million and the Asian Development Bank laid out $26 million. Altogether Enron received $7.2 billion in public financing or guarantees toward 38 projects in 29 countries between 1992 and 2001.
In addition, agencies like the World Bank pressured developing countries to change their laws, privatize their economies and accept Enron bids, often making future aid contingent on cooperation with the Houston-based firm.
“Enron’s Pawns” is unmerciful in the detail with which it describes Enron’s m.o. “Enron became a global giant as a consequence of the systematic dismantling of regulatory systems at home and abroad,” its authors say. Just as domestic political relationships facilitated Enron’s national grip at home, Enron acquired pipelines, transmission lines and power plants thanks to strong-arm diplomats and the coffers export credit agencies and multilateral development banks.
The report points to the one-two punch that enabled Enron to build its overseas empire: First, the World Bank pried open developing countries’ energy sectors as conditions on further loans, then other agencies stepped in and helped Enron obtain the most lucrative assets and contracts.
“Here’s how it worked,” the study says: “The World Bank would issue loans for the energy or power sector in a developing country or make this a condition of future loans, and Enron would be among the first, and often the most successful bidders to enter the country’s privatized or deregulated energy markets”
Enron’s domestic zeal for the free market dogma of deregulation, privatization of the public sector and access to markets, translated directly into the international realm. Before it collapsed, Enron was one of the most powerful companies pushing for new global trade rules, especially the General Agreement on Tariffs and Trade (GATT).
Naturally these issues were of particular interest to Enron because in order to market its energy and water privatization services, Enron needed GATT rules to promote the deregulation of services in other countries and provide conditions for the privatization of public services.
Enron is not some rogue gone amuck. Nor is it just another Washington scandal. Far from it. At its heyday, Enron provided a textbook example of the present stage of imperialism, where transnational corporations not only influence – but actually determine – global trade rules through international agreements such as Enron’s role in formulating the rules of GATT.
Despite being a hard-nosed free-enterpriser and advocate of privatization and deregulation, Lay knew where to go in search of money to finance Enron’s overseas ventures. As he told a congressional committee in 1995: “Public finance agencies are the only reliable sources of the financing that is essential for private infrastructure projects in developing countries.” As subsequent events were to show, he was very persuasive.
The author can be reached at fgab708@aol.com.
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