Enron’s collapse

After the general enthusiasm during the eighties and the nineties, the first hints dysfunction from 2002’s summer. Enron’s failure was the most conclusive example that the American model of capitalism – considered up till now as infallible, may present weaknesses.

Trying to understand what happened reveals a murky and unclear system, used by the bibbest American firms.

1. From Number One to the shame of American businesses

During the 1990s Enron became the largest trader of electricity. The technique adopted by Enron was to create series of off-the-books partnerships which, on the one hand, hid its financial problems and, the other hand, allowed a number of its executives to increase their profits.

Moreover, Enron had influence in the federal government: over fifty high members of the Bush administration had meaningful ties with the energy company. An other point underlined by the Enron bankrupcy is a fear work climate on the employees: it was not good to express their criticism.

2. Impact : loss of credibility of the American model of capitalism

Not only the employees lost their jobs, but they also lost their money and their pension. Indeed, with the aim to ensure the sucess of the company, their had entrusted their savings with Enron. The whole medias grabbed the scandal. It had become a shame to have been involved in the Enron company. During the many litigations, an other scandal (in the scandal) occured: Enron and the auditor were not independant at all. Enron’s collapse revealed too the nature of the relation between the corporation and the politics: a corruption like in the Third-World states. The difference consists in the legality of these methods in the US, even if they remain distressing and shameful.

Enron’s fiasco was the first sign of a flaw in the system; nevertheless it did not represent the end of it, but the beginning of a new challenge: to succeed in reconciling business and integrity.