this I believe... oh yeah

Notes

Still more about the SOTU. LI stands for very little positive legislation, but we do believe strongly in one law. It should certainly be mandated that before every State of the Union Speech, the opening montage from Seven Beauties should be shown. No commentary from the commentariat, just the montage, those wonderful bombings, the destroyed cities, Hitler and Mussolini shaking hands, the fleeing masses escaping strafing of fighter planes, and that jazzy score, and the Italian chant with the English tag, oh yeah, on the end of every line ("The ones who don't enjoy themselves, even when they laugh. Oh yeah./ The ones who worship the corporate image, not knowing that they work for someone else. Oh yeah. /The ones who should have been shot in the cradle... Pow! Oh yeah. The ones who say 'Follow me to success, but kill me if I fail... so to speak.' Oh yeah.)

It would add a bit of reality to the theatre, blood to the abstract threats of blood. And we would know what it means when a country proclaims itself a force for good.

We hadn’t seen the film in years, and suddenly felt like seeing it again last night. It still has the old death magic, like a joke that gives you a heart attack. Oh yeah.

…

We did not celebrate Blair’s failure to revive the ye olde practice of the Auto de fe in LI the other day. Belated congratulations to the British for lighting that bill with a match and then stuffing it down the front of the odious P.M.’s pants.

Blair is a curious compound of the worst elements of the two ur-P.M.s, Gladstone and D’Israeli. He possesses Gladstone’s moral unctuousness, and D’Israeli’s unhinged adventurism. The morally vain rogue is not a common figure in literature, but Moliere pretty much patented the type with Tartuffe.

Here’s Lytton Strachey on the D’Israeli, Gladstone and Queen Vic:

Mr. Gladstone had been the disciple of her revered Peel, and had won the approval of Albert; Mr. Disraeli had hounded Sir Robert to his fall with hideous virulence, and the Prince had pronounced that he "had not one single element of a gentleman in his composition." Yet she regarded Mr. Gladstone with a distrust and dislike which steadily deepened, while upon his rival she lavished an abundance of confidence, esteem, and affection such as Lord Melbourne himself had hardly known.
Her attitude towards the Tory Minister had suddenly changed when she found that he alone among public men had divined her feelings at Albert's death. Of the others she might have said "they pity me and not my grief;" but Mr. Disraeli had understood; and all his condolences had taken the form of reverential eulogies of the departed. The Queen declared that he was "the only person who appreciated the Prince." She began to show him special favour; gave him and his wife two of the coveted seats in St. George's Chapel at the Prince of Wales's wedding, and invited him to stay a night at Windsor. When the grant for the Albert Memorial came before the House of Commons, Disraeli, as leader of the Opposition, eloquently supported the project. He was rewarded by a copy of the Prince's speeches, bound in white morocco, with an inscription in the royal hand. In his letter of thanks he "ventured to touch upon a sacred theme," and, in a strain which re-echoed with masterly fidelity the sentiments of his correspondent, dwelt at length upon the absolute perfection of Albert. "The Prince," he said, "is the only person whom Mr. Disraeli has ever known who realised the Ideal. None with whom he is acquainted have ever approached it. There was in him a union of the manly grace and sublime simplicity, of chivalry with the intellectual splendour of the Attic Academe. The only character in English history that would, in some respects, draw near to him is Sir Philip Sidney: the same high tone, the same universal accomplishments, the same blended tenderness and vigour, the same rare combination of romantic energy and classic repose." As for his own acquaintance with the Prince, it had been, he said, "one of the most satisfactory incidents of his life: full of refined and beautiful memories, and exercising, as he hopes, over his remaining existence, a soothing and exalting influence." Victoria was much affected by "the depth and delicacy of these touches," and henceforward Disraeli's place in her affections was assured. When, in 1866, the Conservatives came into office, Disraeli's position as Chancellor of the Exchequer and leader of the House necessarily brought him into a closer relation with the Sovereign. Two years later Lord Derby resigned, and Victoria, with intense delight and peculiar graciousness, welcomed Disraeli as her First Minister.”
This is Gladstone’s response upon hearing that the Conservative government had fallen, and Queen had sent for him to form a new government:

“Mr. Gladstone was in his shirt-sleeves at Hawarden, cutting down a tree, when the royal message was brought to him. "Very significant," he remarked, when he had read the letter, and went on cutting down his tree. His secret thoughts on the occasion were more explicit, and were committed to his diary. "The Almighty," he wrote, "seems to sustain and spare me for some purpose of His own, deeply unworthy as I know myself to be. Glory be to His name."

The Victorian vernacular, which slid easily between laissez faire and the Almighty’s designs, is easy to make fun of, but at least in Victorian times it was not frivolous. Tony Blair is, however, deeply frivolous, a sort of cuckoo conservative in Labour’s nest, singing a song of Thatcher. We look forward to his further humiliating defeats in Parliament.
….
And now a little self advertisement for our editing, ghostwriting, and translating service. If you or someone you know is looking for a writing service, please tell them about us. Our link is RWG Communications, Thanks.

Fluff and Circumstances

So the president followed his bliss last night. I missed it. I no longer have the stomach to watch Bush go the nine rounds with the English language. The English language has the odds, the weight, and the experience, while the President takes the body blows and collapses at the end. What was once funny is now the kind of thing that some society to prevent cruelty to the animals should surely look into. I imagine he was heavily applauded for making the usual adolescent tough remarks about the rest of the world. I imagine he did not refer to Pioneer Jack Abramoff as a close and important friend. Was it last year, or the year before that the axis of evil shifted to steroids being used by switch hitters? Well, I imagine the steroid references were dropped. At least this year he has laid off proposing doing away with other New Deal and Great Society programs. Although proposing doing away with his own pill company entitlement program would actually garner a blip in the polls.

Instead of watching fluff, I did my liberal duty and went out to see Good Night and Good Luck, finally. Nice film. LI shares Clooney’s nostalgia for a world that did its business in Manichean black and white, a world in which young men tried to look like middle aged men instead of the reverse. As I wrote to my friend, T., the barbering in this movie awed me. Clooney is a sport of political nature – our last remaining Rod Serling liberal. It is a liberalism born of a horror of sci fi totalitarianism, one that dreams Egyptian dreams of huge underground headquarters in which generals fondle the buttons that would send up the missiles. No casting department could have found a better face for the phobic ultima than was borne by McCarthy. The actual footage was pretty amazing – by the end, as we know, McCarthy was simply plastered most of the time, but to listen to the permanent sneer in his voice, and to know that, like the music Josephine sang to the Mouse folk, this sound entranced the millions – this is Twilight Zone America.

Of course, the horror now is Cheney’s face, McCarthy as an android CEO. McCarthy’s most fervid followers, and the ones who supported him financially, were the Texas oil millionaires. The Hunts, the Murchisons. The line between Lincoln and Bush, so often pushed by the Weekly Standard crowd, is faint and almost invisible, but the line between McCarthy and Bush is a living thing, a culture that grew around fear of nationalized oil fields abroad (Buckley’s dad, of course, suffered from the nationalization of his oil fields in Mexico), and the fear, at home, that the oil depletion tax would somehow be attacked provided almost all the money to make conservatism a political force in this country.

PS -- after writing the above, I looked at the NYT coverage of the speech. Surely the Times has never had a worse D.C. bureau. The funniest report was by David Sanger, which contains such ludicrous Timesman's gems as this, from the second graf:

"The Texan who swept onto the national political scene six years ago talking about drilling for new energy supplies and preserving the American way of life vowed on Tuesday night to wean the nation from its reliance on oil." Which, of course, is not at all true -- Bush made some inane remarks about lessening U.S. dependence on Middle Eastern oil, as if petroleum were not a fungible product. And of course Bush has made the hydrogen engine pledge before, and it has gone to that magic place where all the toothfairies deposit all the babyteeth.

Or this: "It was, in short, a speech rooted in some harsh global and political realities, and one unlikely to rank among Mr. Bush's most memorable. Instead of evoking the grand ambitions that have suffused his presidency since the Sept. 11 attacks, Mr. Bush emphasized the familiar and the modest."

I wonder how Sanger ranks the most memorable. No doubt they will be carved in stone on some stelae after Bush retires from office to a job he is actually qualified for: brush-cutting. The NYT decision that Bush will invariably be described as bold, or some synonym, creaks and moans with irreality. Meanwhile, we boldly never actually won the war we started out to win, as Osama bin Laden turns himself into an independent video producer. What a sad and shameful spectacle "swept in" six years ago, and what complete putzes report on it.

PPS h
Just so you know how the D.C. correspondents work, Froomkin’s column is about how the Bush white house chews up the speech and spits it into each little journalistic maw, so it can be re-spit into the pages of the newspaper. I say, cut out the middleman and have the White House press secretary write those analyses of the speech in the NYT:

Journalists are not exactly transparent about how much advance knowledge they have of the president's speech before he gives it.

As usual, the press yesterday got the full text of the speech an hour before delivery. Bush himself hosted an off-the-record lunch for network anchors.
And some six-and-a-half-hours before delivery, White House counselor Dan Bartlett spoke to the press in great detail about the speech for almost an hour.

la vie francaise

"The periodical press has been, as is its nature to be, only an instrument of disorder and sedition. . . . The press has thus disseminated disorder into the most upright minds, shaken the firmest convictions, and produced in the midst of society, a confusion of principles that yields to the most sinister attempts. Thus by anarchy of doctrines, it prepares anarchy in the state." – Report to the King, July 25, 1830, from Spectacular Realities : Early Mass Culture in Fin-de-siècle Paris by Vanessa Schwartz..

The story in Bel Ami is pretty simple. It is another story about a man rising to social success using the instruments of capitalism. This story, in an English novel, would be about the ‘natural’ rise of this man, through either a death (an inheritance) or sex (a marriage). In France, death and sex are wrenched from their natural poles – they are manipulated in one way or another. The English illusion that the peculiar stratifications of class respond to a natural order is, in France, a form of nostalgia for an époque when that was true. This is not to say that the rentier has no place in French literature. However, the great French novelists do not take a ceremonial authorial attitude towards the rentier, as the English novelists do. If I were to go about this in a Hegelian way, I’d probably posit Henry James’ work as the great synthesis of the two attitudes…

But I digress. In Bel Ami, an ex colonial soldier named Georges Duroy rises through the ranks of a newspaper, La Vie Francaise, on the way to becoming the tres rich husband of Suzanne Walter, the boss’ daughter. Duroy’s rise as a journalist is remarkable insofar as Maupassant portrays him as barely literate. But it turns out that, just as today, with its Novaks and Barnes and TV pundits, illiteracy is no bar to the ambitious man who doesn’t mind having his articles ghostwritten for him, and who realizes that the power of the pen is virtual – the menace disguised in the ability to disseminate “news,” - rather than actual, the virtuosity of the exercise. To the right character, a vista of profitable entries unscrolls before the rolling eye. That journalism is related, on the one side, to literature, and on the other side, to blackmail, has been abundantly revealed by the Plame scandal, even as it is unconsciously sensed by your average householder.

It isn’t only Duroy who uses his blackmailing propensities to get ahead: the owner of La Vie Francaise has set himself up in order to tout certain speculations and dowse others. The growth of news gathering around this central premise is a happy accident.

As the quote at the head of this post indicates, the very idea of a free press was a liberal idea in the nineteenth century. Bel-Ami was published in 1885, four years after the press laws were radically liberalized, allowing the “penny press.” The association between liberalism and the press was forged in the same process that brought about the extension of suffrage, the growth of unions, and the basic plan of what we’ve grown used to as the liberal state. This, of course, includes growth in the state’s military. Duroy’s original entry into LVF stems from his having served in Algeria. The imperialist effect appears at this moment, and not by some coincidence. Comically, the account of his adventures in Algeria is put together by Madame Forestier. After the party at which Duroy’sa stories about Algeria had attracted the attention of the proprietor of LVF, “M. Walter, Deputy, Financier, a man of money and affairs, a Jew from Southern France,” Duroy spends days trying to write an account of his experience – all in vain. He takes the task to be the same as the writing of an exposition in high school. It isn’t, of course. As Maupassant realized, the narrative of the news story calls upon the same narrative intelligence that flows into novels.

Duroy’s real talent is the manipulation of his dick. While Maupassant doesn’t go into the apocalyptic bedroom details, Duroy’s travels from the bed of one rich woman to another is carried on at the same time that he is wrestling with the finer points of journalistic ethics. Eventually, the two story lines converge in Duroy’s marriage to the attractive, mysterious Madam Forestier.

Monsieur Forestier is the editor of La Vie Francaise, and Duroy is inducted into the service of the newspaper by the whim of Forestier inviting him to the party at which he met the publisher. This is another modern note – for haven’t we seen editors and publishers lavish their care on some of the more dubious specimens of the newsgathering trade, recently? In Judy Miller’s case, there is even a slight scent of the boudoir that follows her from story to story – much as in the case of Duroy.

LI has, of course, been having some fun playing with parallels. But, more seriously, the existence of both the fictional LVF and the more factual NYT and WAPO both depends, essentially, on a particular act of consumption: being read. So if we take Singh, et al.’s nodes seriously, we should be looking at hierarchies of readership. Singh thinks of these as marketing relationships. I like the idea that these are reading constituencies. Still, what we have with the LVF, as with any newspaper, is:
1. The readership who subscribe to or buy the paper.
2. Institutional agencies that act as "guardians" of the marketplace, or censors.
3. Advertisers and others with financial stake in the paper.
4. And finally, the “noncommercial intermediaries that act as independent gatekeepers” – these are the readers of power, so to speak. The operate both as the subset of the readers (1) and as the readers to whom the papers producers go before the news appears. In terms of court societies, such as D.C., readers 4 become enmeshed in the news in a peculiar way, one which separates the image of the newspaper from its reality more and more as the newspaper becomes more and more powerful.

The ghost of these readers haunts every news story. One of the things Maupassant saw very well is that the act of writing is not, in the newspaper, independent of the readership constituencies. This is not the worry about whether a particular piece would sell or not. That worry is but one of a set. Right at the root of writing is a grand division of the seemingly indivisible writer – the text that eventually appears, with his byline, its production, its processing through the editorial system, its placement on the page, and the feedback it gets are all parts of a system that displaces the writer from the defining act – the writer is the one who writes – and turns it into another act – the writer is the one who ends up with the byline. This radically subverts the image of the writer as the hermit of the highest form of art. Maupassant knew all about that hermit – after all, he was related to Flaubert and an intimate of his circle.

That the news is, actually, an act of belief rather than of fact – “newness” being a judgment rather than an observation – disseminated by writers who aren’t writers makes the press a very strange locus of anxieties about what is and what isn’t authentic in liberal culture. Even odder, though, is the fact that freedom of the press, which emerges as part of the liberal program, so quickly develops tools that are seized by the right. In fact, the radical right in the twentieth century habitually used the media to achieve political goals, while the “liberal” media has been driven, in its quest for authenticity, to deny its essential liberalism.

Notes

At the moment, in the street outside my window actors are strolling around, clothed in what looks like some vintage 70s gear. The trucks showed up Saturday. The dressing truck, I suppose. A truck from which wires extend. A house up the street has black paper tacked up on the front, and cameras in the yard. In the back yard, this morning, there was a picnic atmosphere.

As far as I can tell, there are no name stars – although I might have just missed them or not recognized them in the cruel natural sunlight. Moviemaking seems to consist largely of people wandering up and down with cell phones held to their ears, making self conscious dialogue. The best thing I’ve heard so far was a young woman saying they have to be naked in this scene. Both of them.

I’m not sure what I dislike more: the businessman’s approach to cell phones, which is basically to carry on in public spaces by an astonishing immersion into the mechanics of private conversation – yelling, a lot of “fuck” this and that, and an imperious tone – or the actor’s more self-conscious use of the cell phone as a theatrical prop. I am pretty sure that the cell phone is not my kind of technological advance. In the old days, you could pretty much bet that a man yelling to himself in the street was off his med pac. Now, you can pretty much bet he has one of those hard to spot cell phone gadgets. The pod people aspect of wires coming out of people’s ears also rather scares me. But I am sure that these aren’t pod people…

I’m pretty sure…

If they were pod people, there’d be weird things happening in the land. Cities would flood, and nobody would respond, or they would respond like zombies after valium overdose. Nations would be invaded for reasons nobody could tell. Governments would unilaterally claim the right to eavesdrop on you, spy on your computer use, and pry into your correspondence. All of these would be symptoms of a pod person invasion, right?

Never happen.

…

Anyway, I asked a good looking blonde gaffer (I imagine she was a gaffer, which I’ve always thought was Hollywood for go-fer) what this movie was about. She told me it was about a man who is on the skids. Wow, and they are filming it in my neighborhood. Makes me feel very South Bronxish.

more fun ...

I’m going to do something different …

I planned to pick through the recent controversies at the WAPO over the ombudsman’s remarks about Abramoff, and the response to those remarks by readers and blogs, and the rather astonishing response in turn by various WAPO appartchiks. But then I thought, that’s no fun.

The point is to try to get a half nelson on the growth of media criticism as a form of politics. LI wanted to use the article by Singh, et al, to complicate, complexify, lye and dye the matter of media, where at one time we made our bread and where, even now, we keep the sly hand in – today, for instance, we should have something in the Austin Statesman. Or is that going to be next week? And something in the Raleigh News and Observer.

But that seems all so boring. Instead, why not segregate out that stuff from Singh et al (and yes, we do like writing Singh et al – it’s a Here Comes Everybody moment) about the constituencies and then apply it to a paper we know more about than WAPO – La vie francaise, the fictional paper in Maupassant’s Bel-Ami. While Maupassant, who worked for Gil Blas and a number of papers, backed away from claiming that La vie francaise represented any particular paper – it was, instead, he wrote, an “agency for political cheats and stock market skimmers” – we think that the paper, with its portraits, its strong editorial positions creating the framework in which stories appear, its lazy, crooked, arrogant journalists paying off concierge to get tips about celebrities – we think that it is exactly the type of thing that is hidden under the ultramodern Teflon sheathing of contemporary journalism, with – in WAPO’s case – the role of Madame Forestier, the wife of the editor of the VF, being played by Sally Quinn, the wife of the former editor of WAPO, Ben Bradlee. And just as Madame Forestier is smart enough to ghostwrite the articles glorifying the French colonial effort, Quinn was smart enough and slimy enough to glorify Chalabi and thereby put him into play as our kind of crook, our kind of ruthless subaltern that would steal his nation blind and send the proceeds to the US, in the corridors of D.C. power.

Next post … or the next after that – will continue this theme.

Enron, the Washington Post, Oprah

“On August 27, 2002, the LAUSD board voted unanimously to ban the sale of soft drinks on its campuses, which included 677 schools with 748,000 students.” Which is the center of a case study on trust done by Jagdip Singh, Jean E. Kilgore, Rama Jayanti, Kokil Agarwal and Ramadesikan Gandarvakottai and published in the Journal of Public Policy and Marketing.

Actually, there are two case studies described in “What Goes Around Comes Around: Understanding Trust--Value Dilemmas of Market Relationships,” but the Coke case is more fascinating to me, simply because Coke’s struggle to retain its “pouring rights” in schools was a sorta typical 'we want to own your soul" corporate ploy. As the authors put it:

“Although Coke attracts a wide variety of consumer segments, our focus is the youth segment, especially school-going children. Children ages 5-14 spend $35 billion each year and influence the spending of approximately $200 billion annually (Harvey 2000; Rosenberg 2001). In an aggressive effort to reach school-going children, Coke entered into exclusive 5-10 year contracts that involved large, up-front, and distributed payments to school districts over the contract period. In return, the schools stocked their vending machines exclusively with the company's products and guaranteed exposure to the company's advertising in schools. Referred to as "pouring rights," these contracts include a comprehensive strategy to attract children with logos on school equipment, Channel One, and the Internet, as well as advertising, contests, free samples, and coupons (Nestle 2002, p. 202). As Coke's spokesperson noted, "Our strategy is to put soft drinks within arm's reach of desire and schools are one channel we want to make them available in" (Pear 1994, p. A15).”

In order that the arm’s reach of desire would be just in dollar distance of the third grade math class, Coke would grant school districts money – and in fact set up very cute programs to get the school districts (who were, in the nineties, busy putting up signs that read “drug free zone”) to actually push the stuff on the kiddies.

“A particularly troublesome aspect of pouring-rights contracts for parents and consumer advocates was the bonus incentives tied to soda sales (Kaufmann 2001). For example, Coke offered the schools a commission of 30% for each soft drink can sold compared with 15% for each noncarbonated drink sold (Day 2003). Higher commissions for soft drink sales coupled with bonus incentives for exceeding quotas resulted in many schools' initiating their own aggressive efforts to boost soft drink consumption on school premises. For example, in 1999, a widely publicized memo from a Colorado school administrator who signed himself "The Coke Dude" admonished the school district for not doing its fair share to attract more funds and offered prizes of $3,000, $15,000, and $25,000, respectively, to his elementary, middle, and high school principals. His memo read:
We must sell 70,000 cases of product … at least once during the first three years of the contract. If we reach this goal, your school allotments will be guaranteed for the next seven years…. If 35,439 staff and students buy one Coke product every other day for a school year, we will double the required quota. Here is how we can do it…. Allow students to purchase and consume vended products throughout the day…. I know this is "just one more thing from downtown," but the long-term benefits are worth it. (Bushey 1999, p. 1)”

Well, with Coke dudes in various districts, everything seemed to be working when the Gov'mint, and parents looking down at their children growing fat as pigs and insulin deficient, started coming around. What Singh, et al. were trying to trace is the network of trust nodes, as they call them, that activated as Coke was shoved out of the neighborhood of some lucrative little desiring units.

“… we approach a firm's diverse market relationships through a lens of simultaneity and interactivity. Specifically, we draw on the work of Drumwright (1996), Hutt, Mokwa, and Shapiro (1986), Menon and Menon (1997), and Wilkie and Moore (1999) and focus on four nodes of a firm's key market relationships: (1) consumers who are, have been, or will be end users and/or buyers of a firm's products/services; (2) regulatory and institutional agencies that are entrusted by society to act as "guardians" of the marketplace; (3) commercial intermediaries that participate in vertical arrangements with the firm to create time and place value for the latter's products/services; and (4) noncommercial intermediaries that act as independent gatekeepers and/or activists and thus influence access (e.g., parents of schoolchildren, media, scientific community) and/or provide value through information (e.g., consumerist agencies, activist organizations) to end users and buyers. A distinctive aspect of our study is that we extend previous research by examining explicitly how a firm's market relationships across the preceding four nodes intersect and interact.”

I like the authors’ model, even if it does lead to pretty complex mappings of the ‘diverse market relationships…” They trace the various factors that went into the LA school districts decision using the lens of trust, and in particular the way the sugar lobbyists and their allies in the food industry tried to filibuster legislation that would ban or regulate Coke and other sweets from being sold in schools. Coke, in 2001, began to realize it had a huge problem on its hands, and so was backpedaling from exclusive pouring rights contracts – but its bottlers were angry in turn, since they made a lot from those school venues in a market that had long reached saturation.

….
All of which brings us to the issue of media trust. LI has long maintained that the media fallout from the great media depression of 2001-2004 has concentrated way too much on a simple quantitative explanation: it was all an advertising shortfall, the result of the Net crash. We think that is bs. In fact, the pumping strategies that had fed the market in the late nineties was assiduously abetted by the media. I was looking back to newspaper and magazine articles about Enron, thinking of putting up a couple of where are they now posts for the likes of Rebecca Marks, and I was amazed, again, to be reminded about what was being published back in the nineties. For instance, I found something called Success Magazine – I haven’t checked to see if it is still around – and it published an article in Success magazine 1998 extolling “Visionaries. (profiles of five innovative business leaders) (includes related article on eight visionary entrepreneurs)” Of the five visionaries Stephen Rebello was awestruck by, one has now gone to jail and one, Bernie Ebbers, is almost certainly going to jail. And of course, where would visionaries be in the 90s without Ken Lay and Jeff S?

“Kenneth Lay CEO, Enron Corp. Houston, Tex. Number of employees: 14,000 worldwide Revenue: More than $13 billion yearly Lesson: One good idea can break the stranglehold of a monopoly
Most of us grew up with this impression: Flick on a light switch or fire up the furnace, and you're trafficking with a friendly monopoly -- the local utilities company, regulated by the fed. After all, what were our alternatives? A battery pack and a cache of firewood?
Kenneth Lay wanted to rearrange all that. In 1985 the former deputy undersecretary for energy of the U.S. Department of Interior helped forge Enron Corp. from two gas-pipeline firms. In short order, Lay pushed Enron to became something bigger -- a gas-marketing company that, by the '90s, was servicing Argentina, India, and the Philippines. With deregulation fervor brewing, Lay envisaged expanding to exploit an even bigger potential gold mine: freemarket electricity.
Open to competition the nation's $215 billion retail-electricity market? Sell electricity directly to homeowners, businesses, and industrial users? Sounds like a great idea -- unless, of course, you're a deeply entrenched utilities supplier.
"We simply made a commitment to providing consumer choice and competition for retail natural gas and electricity, much like what we've seen in the telecommunications industry," asserts Lay, who manages to sound like an underdog David tackling a monopolistic Goliath despite his power company's output's recently having jumped by 286 percent in one quarter alone.
What took him, md others, so long? "The electricity utilities, which, by the nature of their business, are very skilled at working the political regulatory process," he fires back, like a born zealot. "Few of the larger electricity facilities are pushing for consumer choice and competition."
Okay, so the gloves are off for a fight to die finish, but once the dust settles, how will die services provided by Lay and other free-market suppliers be any different?
The differences between a market and a monopoly will finally mean innovation," he explains, with contagious enthusiasm. "Consumers are going to save $60 million to $80 billion a year, more than $200 million a day. We won't use antiquated analog meters, and there'll be no more guys jumping over fences and fighting dogs to read meters. Digital meters and instantaneous readings will mean that consumers can start making choices as to when to turn on the washing machine or die dishwasher, taking advantage of lower rates that can save them 40, 50 percent."
I’m sure the people of California appreciated that.
But it wasn’t just fly by nights like Success. Fortune, in 1996, published perhaps one of the unintentionally funniest tongue baths of all Lay’s pleasure centers. It begins with that hoary but always good profile grabber, the CRISIS. In this one, our intrepid Lay is on the ski slopes when disaster seems to threaten:
“Kenneth Lay skied down Ajax Mountain in Aspen, Colorado, on a cold dark afternoon last December, blissfully unaware that the stock of his Houston-based energy conglomerate was taking an even steeper plunge. The Enron chairman returned to his vacation home on Roaring Fork River to find an urgent message from President and Chief Operating Officer Richard Kinder: "We've got a major problem, and we've got to talk."
That afternoon, Enron's stock had lost 2 7/8 points, or roughly $750 million in market capital, amid rumors that the company's natural gas marketing arm, Enron Capital & Trade Resources, was shorting the market even as the January futures contracts expired and a pre-Christmas cold snap was sending prices up the chimney. The crisis of confidence was compounded by rumors that Jeffrey Skilling, the 42-year-old wunderkind chairman of Enron Capital & Trade, had been led off the company trading floor in handcuffs.”

Imagine that. And of course the crisis, here, is all about stock prices. Which it might have behoved the author of the article to ponder.

These and a zillion other articles not only got things wrong – they actually got in the way of getting things right. They obstructed rationality and made skepticism into a “contrarian” stance – when of course skepticism is just the way one should approach a narrative involving a lot of money and people with an interest in skewing your perception of the narrative in a certain way.

The business press articles percolated through the four nodes of Singh, et al.'s article in peculiar and depressing ways…

About which, more tomorrow.

the pre-game report

On the eve of the Enron trial, LI watched the Smartest Guys in the Room yesterday. And we scanned the Economist tout sheet of the prosecuted and the let off. Of course, as we know, corporate law is designed, basically, to allow the governing class to rob people without the expense and fuss that comes from having to buy pistols and wave them in various strangers faces. That the prosecution has to prove an epistemological point to the jury – viz, that Skilling and Lay knew they were committing a crime by signing off on various deals to conceal Enron’s debt while pumping its stock, thus making it a crime – is funny in itself, like one of Zeno’s paradoxes – how can you prove someone knowingly committed a crime when the crime depends on knowingly committing it?

If I decide to knock somebody down, steal their credit cards, and use them, the police don’t have to bother convincing the jury that I knew I was committing a crime. But the more money one has, the more murky the line between the criminal and the legal becomes. Law is where class issues can no longer be latent. If they could, the governing class would simply have two sets of laws, one for them and one for the rest of us. That has practically been achieved by Congress and your state legislature, anyway, but they put both those laws together in one lawbook.

Of course, far be it from LI to discourage entrepreneurship. We surely don’t want to do that.

In LI’s opinion, Lay’s defense, here, should be watched carefully by the employee and investors he ripped off, since the defense is basically that he collected his total what, 400 million from his time at the company by doing one of the most pisspoor jobs ever concocted by a timeserving CEO supermensch. Useful info to have at the civil trial – although it is funny, corporate shills complain all of the time of useless due diligence laws and corporate greenmail by greedy lawyers, but outrageous fraud never seems to fall under these laws.

This, of course, was one of the things Enron, the movie, chose not to concentrate on, which is too bad, although understandable. They made the decision to be serious and not to juice up their account with the effects of unearned wealth on Enron’s bright lights. But … iIt wasn’t that the sex and money story line was peripheral to what happened at Enron – it was central. Rich Kinder, whose resignation moved Skilling into the top spot at Enron, resigned because he was having an affair with Ken Lay’s secretary – and Lay didn’t like it, although of course his second wife was his previous secretary, with whom he’d had an affair until he divorced his first and married her. They actually interviewed Amanda Martin for much of the Smartest Guys in the Room without ever explaining that she had a pretty well publicized affair with Ken Rice, one of the great looters at Enron – a dealmaker whose time as the head of the Enron Broadband division was one of the great jokes of the company. He spent more time, by all accounts, worrying about getting ever new motorcycles on Enron expense accounts “for” the division than he did about anything so mundane as the business itself, and what did he carry away from those grueling, three hour days? 53 million, more or less. It is very hard making decisions about which motorcycle your divison will use as its motorcycle symbol, as we all know. That is why we have to pay our upper management so well. They are so, well, smart.

Skilling actually is going to face the hottest time about the Broadband scam, which was a more than usually egregious goldbricking effort – a scheme that depended the synergy between Enron’s pipes and optical fiber, don’tcha know, and how all those easements and that infrastructure put Enron in the primo position to wire every household in America and pump in the videos.

And we are also all going to OZ on my balloon…

According to Elkind and Bethany McClean's must-read (if you care about Enron, you have to accept that tired cliché in the case of two reporters who became central to the Enron unwinding) in this week’s Fortune, Rice and Causey are going to lighten the prosecutorial task as they have made deals to keep them from spening too much time away from the various millions that were left over from the fines. In the case of white collar law, unlike, say, bank robbery, you get to keep a considerable portion of your loot. We will see, although the preliminaries don't look good -- the government should combat completely the idea that this case is too complicated. Any housewife or bowling alley attendent knows how earmarked money works. The prosecutors should look to seed the jury with the divorced, because what Enron did is, on a grand scale, what many a husband seeks to do in divorce cases -- hide assets. In this case, negative assets. Lay, unlike HealthSouth’s Scrushy, is not a personable man – he is an arrogant prick, and is seemingly even unaware that he is an arrogant prick. He is the same man who used the Enron corporate jet to shuttle his kids to the French Riviera like it was a taxi-cab, all of course on the company ticket. Well, you have to do things like that, as any economist can tell you, to align the interests of the truly brilliant management with the company. Economists in the middle ages made the same kind of arguments for droit de seigneur. Economists exist to excuse the inexcusable – theologians of the pathomarkets.

ps – there are couple of warnings to take to Smartest Guys in the Room One is that there is a gaping hole in the political story told in the movie. The hole is the hand in glove relationship of Enron and the Clinton administration. The Hollywood affection for the Elvis president makes this kind of thing, apparently, hard to see. Simply put, the waiver by Wendy Gramm that allowed Enron to operate in the energy market largely without regulation was continued in the Clinton years even as it became obvious that that Enron was operating as a bank. The India deal became an issue between the U.S and India, as Clinton’s Commerce department, under Ron Brown, put pressure on India to cooperate with Enron, even as it became apparent that Enron had built the equivalent, in energy terms, of the Spruce Goose in India. The neo-liberals at Treasury and Commerce made it very hard for Latin American governments to resist privatizing water, for instance, which was another large Enron project – under Rebecca Mark, Enron ended up owning Buenos Aires Water. And to treat Gray Davis as the martyr of the brownouts is to understand nothing of the (legally) peculating Dem administration which put through the deregulatory program. Alas, in a discourse in which the only sides allowable are Clinton and Bush, how a company like Enron operates is essentially hidden. Maybe that is the reason for the pseudo-division? That energy should have been privatized in the first place, or deregulated, was unquestioned, even though the reasons for it were clearly either untrue or unproven. Almost all energy deregulation feathered in large, sometimes absurdly large, provisions for energy companies that had crippled themselves building unnecessary, expensive nuclear power plants – another boondoggle that went by the name of synergy and that energy execs love to foist off on gullible populations, and not only Iranian ones.

The second is more puzzling. While the film explains mark to market accounting, it doesn't really explain why it didn't work at Enron. While it is true that the way Enron used it was not good, mark to market accounting does have some good effects in theory -- for instance, it smooths out turbulence markets in goods, like natural gas, in which turbulence can act as a bar to use. The problems that can come with mark to market accounting -- massaging the numbers -- were aggravated not by the accounting itself, but by the parallel set up of the "incentive" structure. Dealers at Enron gained bonuses not on real profits, but on book profits. Enron basically screwed itself out of the advantage it could take from mark to market accounting by distributing benefits, asymmetrically, to the management. This is why Rebecca Mark, who, conservatively, cost the company 1 to 2 billion dollars with the massive losses in India and from the water purchases, could cash out with 84 million dollars, and Ken Rice could run the broadband division, that lost 30 million, and gain options worth 30 million. In essence, the company set up an incentive structure in which the incentive was to cheat the company.

And of course the dealers proceeded to bleed Enron. Something like 1.3 billion was taken out of it by execs in the last two or three years, according to Robert Bryce.