Serving the GW Community since 1904

The GW Hatchet


The GW Hatchet

Serving the GW Community since 1904

The GW Hatchet

Forum:Blame Enron, not free market

The collapse of Enron, the nation’s seventh largest corporation, has left many of us stunned. Say what you will about the implications for business professionals already out in the world, but Enron’s demise also matters to those of us about to enter the workforce.

We must ask ourselves if we will fall prey to the same sort of illicit behavior that leads to the loss of billions of dollars in wealth. Some of us will jump right into the corporate arena, while others still may have intermittent encounters with these complex business entities. Some may even avoid them entirely.

Whether it’s Enron or Arthur Andersen, many business-minded GW graduates find working for these large companies attractive. It hasn’t been long since business school students, including GW’s, were singing the praises of Enron for its unique, innovative business model we thought was going to turn it into a blue-chip mainstay. And there were similar commendations surrounding Arthur Andersen as well.

The moral and ethical violations arising from the Enron debacle present clear evidence reminding us all of the tough decisions we will face in our future careers. I’d like to think we would, when presented with a tough decision, take the high road. The reality is we are all going to make mistakes because of the fallible qualities in human nature, and we will likely bend rules to serve our own best interests and bottom lines. Government legislation and regulations will fail, and fail miserably, because of one simple truth: legislating morality is unfeasible.

The two cornerstones of any free market system – self-interest and competition – often drive us to accomplish great things. Unfortunately, the same two cornerstones, some would contend, are to blame for failures that destroy careers and dreams. When forced to choose between our economic system and one where more government restrictions inhibit the entrepreneurial spirit, I choose the former because it champions freedom rather than bureaucracy.

The fallout is nothing new to the nation’s corporations. Firms go out of business all the time – especially during a recession. The news of this corporate collapse is only exacerbated because of its sheer size. But make no mistake, smaller firms also collapse for similar reasons, largely slipping through the media gauntlet because smaller companies are privately held or categorized as small-time players.

When anyone buys the initial offering of a stock, they own a small piece of a corporation. In return for issuing securities, corporate officers manage to raise the money necessary for growth. When corporations do well, the value of the shares issued increases. And voila! You have instant wealth creation. It is therefore in the interest of corporate managers to keep doing well so they can continue to increase the value of their company, thereby making its stakeholders and shareholders wealthier.

Without this wealth creating mechanism, our economy would be more reminiscent of a second-rate country struggling to manage consistent growth and wealth creation. Does Russia ring a bell?

Although partnerships and sole proprietorships heavily outnumber corporations, corporations dominate business activity in this country. Demonizing corporate America accomplishes nothing but to engender an ungrateful attitude for the unprecedented prosperity we all enjoy.

Investing in anything carries with it some form of risk. That’s not to say investors should come to consider risk on the scale of Enron as commonplace. Any reasonably intelligent person would agree that there was foul play on a grand scale in Enron. A full, thorough investigation has been initiated by Congress, as it should, in the hope of bringing those culpable of criminal acts to justice.

Let’s not forget our political and economic system is what led us to become the world’s only superpower of the 21st century, a title we have maintained since we won the Cold War.

-The writer, a senior majoring in business economics and public policy, is Hatchet opinions editor.

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