2003 and Enron
Lessons of the Enron Collapse
Alex Jones:Jeffrey Madrick’s The End of Affluence was a notable book,and he has a new one coming out titled Why Economies Grow. He is a regular contributor to
The New York Review of Books; a contributing columnist to The New York Times business section; the editor of Challenge, which is a long-standing economics magazine; and the editor of a new quarterly called Indicators, which is a journal of social health.
Jeff has made his reputation in our business by being an economist who looks at the world in a different way than most economists do,a way that challenges the received wisdom. I wouldn’t say he’s a contrarian. He is instead someone who simply starts with the facts and tries to discern where they lead him. He’s going to talk to us today about the lessons for journalism in the Enron collapse.
Jeffrey Madrick: That’s very kind of you, Alex. It’s great to be back here at the
Shorenstein Center. . . .
Everybody is now critical of Enron. The press is very good after the fact. It’s been pretty good after the fact yet again as the disclosures about Enron have stunned the nation. The main point I want to make today is that the press was abysmal before the fact. Not only did the press miss the Enron scandal, it actively helped create the Enron scandal. It not only missed the complications of Enron’s fancy partnerships, which are indeed complicated, but it extolled Enron’s virtues beyond almost any company. Fortune named Enron the most innovative company five or six years in a row,presumably without once checking the books.
The press has been a participant in the misinformation that often accompanies periods of high speculation. There was never a golden age when that didn’t happen.But there was a time when the financial press was on the whole considerably more skeptical. There was a time when it was more intent on giving a variety of
© 2003 by the President and the Fellows of Harvard College
Press/Politics 8(1) Winter 2003
points of view rather than climbing aboard and reinforcing and amplifying the dominating point of view, which the financial media have done a lot in recent years. In speculative times, we’ve always had scandals; the tendency to lie, cheat, and exaggerate always rises, partly because the financial return on lying, cheating, and amplifying and exaggerating rises. But something else has happened in the nearly thirty years I’ve been a journalist. The press has become more market oriented and more profit oriented on average and, as a consequence, is less willing to be the bearer of bad news.
One of the things I do love about America,unquestionably,is its free press.We can easily forget that the free press as an institution is more important in the
United States than it is in most other advanced democracies. In Europe, there was a very different kind of revolution two centuries ago that established democracy. There’s much more class battle and class consciousness and care about a watchdog among the political participants concerning powerful forces. In the
U.S., the press fulfills many of those roles that are institutionally fulfilled overseas. And when the press falls down in its job, that’s a problem for America. There wasn’t a golden age of financial reporting, as I said, but there was once a strong sense of public service, of the press as a watchdog for the people who couldn’t know, for the people who could be taken advantage of, for the people who didn’t have power, and for the people who could be seduced by easy money.
In many respects, that disappeared in the 1990s—mostly, among magazines, weekly and monthly publications, and the TV news. Less so in the daily newspapers. There’s a market reason for that. To sell magazines and to sell yourself on
TV, you have to