A History of the Enron Scandal

In reacting to the Enron scandal, many cultural commentators have been quick to recur to a favorite theme: the corrupting power of commerce.

Here is a typical example, from the “Letters Column” of the New York Times: “Enron’s collapse was a product of the culture of greed, dishonesty, ethical blindness, and wishful thinking that has characterized much of corporate America since the advent of the Reagan administration” (John S. Koppel, January 22, 2002). In this view, Enron is simply the representative of corrupt, “free market” capitalism.

And the author’s reaction, like the reactions of many editorialists and commentators, is disgust with “greed” and contempt for the idea that money-making might be moral. The Los Angeles Times’s editorial cartoonist, Jeff Danziger, captured the feeling perfectly by depicting Enron as a house of prostitution, whose parlor is decorated with statues and pictures of naked and scantily clad women holding bags marked with the dollar sign. The message was clear: Dollars are money, money symbolizes capitalism; capitalism is immoral.

Danziger is right that money symbolizes capitalism, but what should we think of this symbol? Ayn Rand’s answer was unequivocal: “Money demands of you the highest virtues,” she wrote in Atlas Shrugged. Yet her view seems incongruous in light of the moral shortcomings of certain businessmen, wealthy heirs, and corporations, of which Enron is a particularly noisome instance. Under the circumstances, it may be useful to re-examine Objectivism’s view that money is a badge of nobility, a view of money that underlies the economic commentaries in this magazine.

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In Atlas Shrugged, one of the heroes, Francisco d’Anconia, gives a speech on the meaning of money. In it, he says: “The words to make money hold the essence of human morality.” His reason is that one makes money through production and trade. And that is the noblest way to live: as a producer who creates value and then gains values from others through voluntary exchange.

That is just what people normally do in a free money market. Money does not itself create anything, but because it is the medium of exchange it makes possible the specialized production and long-distance commerce that are the basis of our advanced and bountiful civilization. This is why, in the abstract, it is a symbol of justice, achievement, and progress.

Objectivists thus defend the moral worth of making money because we admire the productive, rational, independent man or woman. But this does not mean we equate wealth with moral worth, especially not in the mixed economic system we have today. That should be apparent from the various wealthy villain’s Rand portrays in her novels, such as the architect Peter Keating in The Fountainhead and the railroad heir James Taggart in Atlas Shrugged.

Still, the goodness of wealth is only a presumption. An heir whose business skill amounts to hiring a responsible private banker is not necessarily evil, but once we ask how he earned his money, we think far less of him than we would of a brilliant entrepreneur. In general, one person is not worth less morally simply because he has less money than another. (If money did equate to moral worth, this writer for a journal of opinion could hardly feel pride in his career choice! And of course, the money gained dishonestly is morally worthless. When a corporate executive like Enron’s Ken Lay poses as an innovator while building a financial house of cards and deceiving his shareholders and employees, we see the difference between earning money and pretending to earn it. Merely having or getting money is not noble; making money is.

Ayn Rand praised money to fight the ancient hatred of practical wealth and the current widespread moral contempt for the earned wealth of the marketplace. In American culture, we have the healthy sense that there’s nothing wrong in earning a buck, but it is admixed with the moral conviction that money is the root of all evil. Hence, the wealthy heirs, eager to prove their rejection of capitalism and their embrace of a “higher” social ideal. Hence, the common sight of a productive genius who eagerly passes his earnings on to the hands of those enemies of industry and freedom residing in universities, foundations, and churches. America is distinctive for the generosity of its citizens, but it is pitiful that so much of that generosity goes to add to the hatred of commerce and freedom.

At times, Rand’s heroes claim that they seek only to make a profit, which could give a misimpression of Rand’s view. For instance, her heroine Dagny Taggart, at the launching of the “John Galt” rail line she has built, announces to the press: “Miss Taggart says–quote–I expect to make a pile of money on the John Galt Line. I will have earned it” (Atlas Shrugged). Here, Rand (through Dagny) is playing on a caricature of business–the view that most business executives do their work solely for the sake of the cash return. In the novel, this is belied by the zest Dagny takes in the spiritual and personal dimensions of her work. Far from being the root of all evil, money, where it has been earned through production and trade, is the sum of that which is finest in human beings.

Such is the meaning of money. The moral worth of particular wealthy people is a matter of judgment, of applying the general principles of earning money to individual cases. Today, many people have misgivings about the qualities of business executives. Objectivists do too: Is that figure on the cover of Fortune a Hank Rearden–or an Orren Boyle?

rden–or an Orren B executives. Objectivists do todo day, many people ha

To some extent, the widespread distrust of business is a result of the political environment. Businesses are constantly asked to undertake some new government boondoggle that works more harm than good. And in the era of media agitprop, they are bombarded by false or sensationalistic claims from advocacy groups. (Remember Alar? The attack on saccharine? “The China Syndrome”? The annual doomsaying of the Worldwatch Institute?) And it is now commonplace that a mad theory will pass on to the courts and be used to devastate a business, as Dow-Corning was crushed by false assertions about the health effects of silicone breast implants.

Business executives rarely defend themselves morally from these assaults. When they do mount a defense, it is not often one that asserts pride in making money. Rather, like William Clay Ford, they assume that there is nothing moral about building good products that people want and are willing to pay for. They assume that “moral” means “serving the public good” or “caring for the environment.” It has nothing to do with making a profit. Yet making a profit is what they do. Indeed, for corporate officers, it is their duty to the shareholders that hire them. As if they sense the inconsistency of their received, altruistic morality, many business leaders adopt cynicism and hypocrisy as a reflexive stance.

Thus, it is those most involved in making money that most need to appreciate its meaning. Our capitalistic culture can thrive only when we understand that making money demands our best and that no apology is needed for achievement and excellence.