Andrew Sullivan, Paul Krugman and Enron

I'm worried I might be getting old. My 30th birthday is fast approaching, and I've recently been reminded of that old canard about how if you're not a socialist when you're young you don't have a heart, and if you're still a socialist when you're old you don't have a brain.

I think I'm still as left-wing as I always was, but I have noticed in myself an increased tolerance – even admiration – for right-wing pundits of late. A couple of weeks ago I sent out an email circulating a column by Mark Steyn; and recently I've been finding myself reading andrewsullivan.com more than once a day.

I think I can explain away the Steyn column by saying that it's appealingly contrarian, at least to a lefty like me. We liberals are far more reluctant to question the motives behind statements from NGOs than we are to wonder why the average Republican (or even Democrat) politician is saying something. Jeremy Paxman once said that the question he always had in the front of his mind when interviewing politicians was "why is this liar lying to me?"; and somehow I can't imagine even him thinking the same kind of thing when interviewing the head of the UNHCR.

But charity officials are people too, as anybody who's ever worked in a non-profit will attest. And when you stop to think about it, it's easy to see how UNICEF might exaggerate and spin just as much as any politician: after all, they know they're on the side of the angels. (I'm reminded of that line from William S Burroughs: "If you're doing business with a religious sonofabitch, Get It In Writing.") In general, charities are much less accountable than governments, or even large corporations. And a lack of accountability inevitably leads to a dangerous sense of infallibility.

There are pundits I love, all on the left: Kinsley, Krugman, Hitchens. Whenever I see one of those bylines, I get very excited and drop whatever I'm doing to read whatever it is they've written. Most of the time, I'm extremely impressed, although Kinsley does sometimes give the impression that he's been a little bit short on inspiration that week, and Krugman is a lot less impressive when he's writing about the one subject I know a lot about, Argentina.

Sullivan is in many ways very similar to Kinsley: they share a fondness for carefully-constructed arguments laced with sarcasm. Most of the time I disagree with what he's saying, but his arguments are cogent enough that at least I can see that he has a respectable point of view. (Other right-wing pundits generally just drive me batty with their wrongheadedness.) He also likes to spend a lot of time commenting on other commentators, rather than just on the news. Today, for instance, he's taking a swipe at Paul Krugman.

Sullivan's first posting came at 1:15am, just after Krugman's column hit the web. Finding nothing to argue with in the article itself, Sullivan instead lambastes Krugman for his failure to tell us that he was paid $50,000 by Enron in 1999 to sit on "an advisory panel that had no function that I was aware of," in Krugman's own words elsewhere in the paper. Personally, I would have slapped Krugman for his rather gratuitous swipe at the Bush Administration at the end of his column: if the present Administration "doesn't get it," in Krugman's words, then the Clinton Administration certainly didn't. The worst charge that Krugman can find against the present lot is that the new chairman of the SEC wants auditor independence; that hardly compares to, say, Al D'Amato's abolition of Glass-Steagal just so that Travelers could merge with Citibank.

Fast forward to 12:46pm, and after a good night's sleep, Sullilvan is back, pointing out Krugman's disingenuousness in a column last year when he said that he did serve on the advisory panel, but wasn't really sure why. Now, of course, it's obvious: the small matter of $50,000, which Krugman saw no need to disclose at the time. Sullivan follows this good point up with a piece of disingenuousness of his own, however: he proposes Krugman "follow many others' example," and donate the $50,000 to charities set up for the benefit of employee-shareholders whose pension funds have been wiped out. The examples cited, however, it transpires upon following Sullivan's link, are all donations to politicians or political parties: none of them involve remuneration.

By 2:38pm, Sulllivan's obviously on a roll. He's now found an article Krugman wrote in 1999, in which he lauds the free-wheeling entrepeneurial structure of Enron. Asks Sullivan: "Now tell me if I’m wrong, but isn’t this structure, which enabled Enron to hide all sorts of shenanigans, exactly what Krugman is now bemoaning?"

Actually, Andrew, it isn't. Krugman is bemoaning the shenanigans, and not the structure which enabled Enron to hide them. After all, there are many investment banks out there who make quite a lot of money doing what Enron did: trading energy. The fact that they're out there doing that helps to make the energy market more efficient, and benefits society. What Krugman is bemoaning is the fact that Enron used its political connections to push through various bits of legislation designed to give it an advantage over the banks. Enron, uniquely among energy traders, was pretty much exempt from regulatory oversight. That's what caused the shenanigans, not Enron's "post-corporate free-wheeling e-economy."

Just like charities, companies suffer if they're not held accountable for their actions. Enron hid lots of nasty balance-sheet nuclear waste where Wall Street couldn't see it, and saw its stock soar as a consequence. Give me "hundreds of casually dressed men and women staring at computer screens and barking into telephones" any day: just ensure that I know when they're making money and when they're losing it.

For the ironic thing about Enron was that it wan't the off-balance-sheet losses which brought it down. Those were large, but still relatively small in relation to the size of the company as a whole. What caused the collapse of Enron was that no one would trade with it any more when the losses were made public. No trading entity can make money unless it has rock-solid counterparty risk, and when Enron's secretiveness came to light, no one had any faith in that any more. It wasn't a loss of money which killed Enron, it was a loss of trust.

Posted by Felix at 1:10 EST