THE ENRON CORPORATION

Perhaps there is no better example of a business organization that attempted to implement the principles of unfettered self-interest and competition than the Enron Corporation in the latter part of the past century. Enron was an energy and commodities service company that was named as the most innovative firm by Fortune magazine for six straight years in the 1990s. It was a colossal success, until it wasn’t. The company collapsed in the largest bankruptcy in American history in 2001. Its success was built on innovative financial service offerings and accounting practices. Its corporate philosophy initiated a Darwinian system in which the lowest-rated 15% of employees were automatically fired each year, rather than advancing the principles of loyalty necessary to make a large hierarchical organization effective. A consequence of this intense competition among very smart people turned out to be incredibly effective methods of covering up the fact that the company was losing an enormous amount of money. This continued for many years before the truth became known and the company failed in a firestorm leaving many lifetime employees with nothing in their retirement accounts.

However, this catastrophic business failure was not the result of a company adhering to the assumptions of the neoclassical economic system. Instead, their success was perpetrated on fraud and deception. Their behavior was greedy as defined herein; the company’s behavior was not a case of enlightened self-interest. It was a case of a company NOT following the rules of capitalism.

Steven Suranovic, December 1, 2019

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