A new piece at the Library of Economics and Liberty
written by Robert J. Bradley is a timely reminder that it’s often
government policies that fosters bad corporate behavior—not the “free
market” as the left likes to claim.
Bradley, a sixteen year employee of the now defunct Enron Corporation, demonstrates that the company was actually “a political colossus with a unique range of rent-seeking and subsidy-receiving operations.” Manipulating the tax code, pushing for self-serving government regulations, and grabbing taxpayer handouts were all key components of Enron’s energy empire. It’s not a stretch to suggest that in the absence of government, the Enron story never happens.
In my recent Cato paper on corporate welfare in the federal budget, I discuss the government subsidies that Enron received:
Enron Corporation is a poster child for the harm of business subsidies, particularly with regard to its disastrous foreign investments. Enron lobbied government officials to expand export subsidy programs, and it received billions of dollars in aid for its projects from the Export-Import Bank, the Overseas Private Investment Corporation, the U.S. Trade and Development Agency, the U.S. Maritime Administration, and other agencies. Enron received about $3.7 billion in financing through federal government agencies.
Business subsidies create damaging economic distortions. All those subsidies to Enron induced the firm to make exceptionally risky foreign investments. And the resulting losses were an important factor in the company’s implosion.
A 2010 Bloomberg investigation, which looked at the Ex-Im Bank, found that companies seeking financing aid from this agency had been paying the travel expenses of government employees on visits to projects under consideration. For instance, Exxon Mobil spent almost $100,000 on Ex-Im Bank employees responsible for helping the agency decide whether it should aid Exxon on a major gas project in Papua New Guinea. Eleven months later, the Ex-Im Bank approved $3 billion in financing for the venture.
Read more: http://townhall.com/columnists/taddehaven/2012/09/09/enron_was_enron_because_of_government
Bradley, a sixteen year employee of the now defunct Enron Corporation, demonstrates that the company was actually “a political colossus with a unique range of rent-seeking and subsidy-receiving operations.” Manipulating the tax code, pushing for self-serving government regulations, and grabbing taxpayer handouts were all key components of Enron’s energy empire. It’s not a stretch to suggest that in the absence of government, the Enron story never happens.
In my recent Cato paper on corporate welfare in the federal budget, I discuss the government subsidies that Enron received:
Enron Corporation is a poster child for the harm of business subsidies, particularly with regard to its disastrous foreign investments. Enron lobbied government officials to expand export subsidy programs, and it received billions of dollars in aid for its projects from the Export-Import Bank, the Overseas Private Investment Corporation, the U.S. Trade and Development Agency, the U.S. Maritime Administration, and other agencies. Enron received about $3.7 billion in financing through federal government agencies.
Business subsidies create damaging economic distortions. All those subsidies to Enron induced the firm to make exceptionally risky foreign investments. And the resulting losses were an important factor in the company’s implosion.
A 2010 Bloomberg investigation, which looked at the Ex-Im Bank, found that companies seeking financing aid from this agency had been paying the travel expenses of government employees on visits to projects under consideration. For instance, Exxon Mobil spent almost $100,000 on Ex-Im Bank employees responsible for helping the agency decide whether it should aid Exxon on a major gas project in Papua New Guinea. Eleven months later, the Ex-Im Bank approved $3 billion in financing for the venture.
Read more: http://townhall.com/columnists/taddehaven/2012/09/09/enron_was_enron_because_of_government
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