The Blame Game

What Enron did in California with their manipulation of electricity was no doubt illegal, unethical, and downright terrible; but are they really to blame?  As we have mentioned countless times in class, “hindsight is 20/20” and if we could have seen what Enron was doing, we surely would have stopped it.  Yet, the deregulation laws in California that were passed set the stage for and allowed for Enron’s manipulation over the market.  If we can look past all of the bad things that Enron did, could we possibly put some of the blame on California and those who made and monitored the decision to deregulate?  In a way this idea is similar to my last post about ethical behavior, but I am not suggesting that what Enron did was legal or ethical.  Enron certainly manipulated the grid, but what allowed them to do that and who is REALLY to blame?
"The Grid"

"The Grid"

Enron was a company that was (in many different areas) partaking in illegal and unethical activities.  The environment around the company was elitist, cutthroat, and from the top down operated with a win at all costs attitude.  After it had been discovered that Enron manipulated the power grid in California for its own benefit, a series of tapes came out on which traders were discussing how they were “f–king” California out of $1 or $2 million a day.

“They’re f——g taking all the money back from you guys?” complains an Enron employee on the tapes. “All the money you guys stole from those poor grandmothers in California?”

“Yeah, grandma Millie, man”

“Yeah, now she wants her f——g money back for all the power you’ve charged right up, jammed right up her a—— for f——g $250 a megawatt hour.”

Not only were the traders taped talking about how they were stealing money, but conversations with power plants were also caught on tape and produced as evidence.  Enron was deliberately driving up prices by making secret deals with power plants to have them shut-down for no reason (decreasing supply and increasing prices).
“If you took down the steamer, how long would it take to get it back up?” an Enron worker is heard saying.

“Oh, it’s not something you want to just be turning on and off every hour. Let’s put it that way,” another says.

“Well, why don’t you just go ahead and shut her down.”

Okay, so there is absolutely no doubt that Enron was practicing illegal activities, but now let’s try to play the blame game.  There are several different options at this point.  We can blame Enron (including the traders, Skilling, Lay, etc.), President Bush who refused to accept price controls to keep soaring energy costs down, Gray Davis who inherited the energy deregulation scheme, or the California Energy Commission.  It’s very easy to blame this on Enron as they were no doubt the major players in the scheme, but let’s not forget that it takes more than a quarterback to win a football game.

Playing the blame game with the California energy crisis may be understood a little better if we use a metaphor that many of us (who were 12 years old when the crisis happened) can much better relate to: the current financial crisis.  It is difficult to pick up an issue of the New York Times, or without finding an article blaming some organization or policy for all of our current woes.  Who is at fault?  Let’s look at the possibilities: was it the sub-prime mortgage crisis, the irresponsibility of financial firms such as Lehman Brothers and BearSterns, are we (U.S. citizens) at fault for continuing to live far beyond our means when times were good, or the SEC for doing too little too late?

I’m not proposing that I have the answer to who should take the blame of the California energy crisis, or the current financial crisis.  Nor am I suggesting that Enron was an innocent bystander, they certainly acted illegally and maliciously to cheat and manipulate the people of California.  What I am suggesting is that instead of placing the blame of either crisis on one individual, organization, or policy, take a step back and think about all of the players who had a role in influencing the resulting crisis.  If there was no deregulation of electricity, and if the SEC had better oversight of the financial firms, then energy crisis could have been averted and firms like Lehman and Bear could still be standing.

2 Responses

  1. I agree that while Enron is in a large part to blame for the events of California, but at the same time, look at the legislation and controls placed on the deregulation of the industry before Enron cut corners and after they cut corners. There was no change… Enron got a slap in the hand and was told not to do it again. What else needed to be done for the authorities to enact stricter regulations?

  2. It’s easy to play the blame game, but harder to actually pin down and punish someone. If you argue that indeed most of the fault lay with Enron, was it the entire organization of Enron? Or just a few employees? Blaming Enron the organization is perhaps jumping the gun. As we’ve read and discussed, there were many innocent people in the organization–if ignorance is an excuse. I think in general more questions should have been asked all around–at Enron, in the government, in Cali, etc.

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