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Category — Capitalism at Work (book)

Gabriel Kolko and ‘Political Capitalism’

“Political stabilization … allowed men to relax, to hope that crises might be avoided, to enjoy the bountiful fortunes they had already made.”

- Gabriel Kolko, The Triumph of Conservatism (New York: The Free Press, 1963), p. 285.

“Ironically, contrary to the consensus of historians, it was not the existence of monopoly that caused the federal government to intervene in the economy, but the lack of it.”

- Gabriel Kolko, ibid., p. 5.

Gabriel Kolko, a New Left historian who popularized the term political capitalism, and documented the role of business in initiating and furthering government intervention in the free-market economy, died this week at age 81.

I have mixed feelings about Kolko (1932–2014) as a scholar. (I never personally met him.) I grew up taking his work at face value, following my intellectual mentor Murray Rothbard. Kolko also provided a very nice endorsement of my Capitalism at Work: Business, Government, and Energy (2009): “Fascinating, comprehensive … far surpassing my own history of political capitalism in the 1960s.”

But as I studied Kolko more and more, and prodded by my esteemed colleague Roger Donway, I began to find problems in his black-and-white interpretation of applied political economy in the United States. History is a lot more messy than Kolko’s Marxian framework allowed. It was not “big business” that always resorted to the political means (versus the economic means) to success; it could be (and often was in the oil and gas industries) smaller firms that through their trade associations lobbied for, and received, special government favor.

My three iterations of Kolko go from laudatory (main text of Capitalism at Work, pp. 120–21; 160–66); to mild criticism (CAW appendix, “‘Gabriel Kolko’s Revisionism Reconsidered,” pp. 336-342); to serious reservations in this Independent Review essay, “Reconsidering Gabriel Kolko: A Half-Century Perspective.”

Readers of MasterResource who follow the wind and (on-grid) solar industries will find Kolko’s findings about crony capitalism (not his term) common sense. BUT these two industries are government dependent; consumer-driven industries have a much more complex interaction with political bodies. And it is here that Kolko’s rigid theory-to-history rather than history-to-theory approach leads him astray.

Here are some of my favorite Kolko quotations that I can generally support. Buyer beware on some of his specific examples during the Progressive period. [Read more →]

May 21, 2014   1 Comment

Climategate: Seven Hard Questions from the Case Study of the Fall of Enron (will the AAAS panel consider them?)

In recent years, I have been working on a book trilogy inspired by the rise and fall of Enron, easily a top-ten event in the history of commercial capitalism. I worked at Enron for 16 years and knew Ken Lay (a nice, albeit subtly flawed, man) well. No, I did not know the extent of the company’s problems (very few did), but I should have known more. Still, I was very critical of the company’s political business model and in particular, Enron’s climate alarmism and investments in (uneconomic, unreliable, unprofitable) wind power and solar power.

Book 1 in the trilogy, Capitalism at Work: Business, Government, and Energy (2009), spends several chapters on best business practices and sustainable corporate culture under capitalism proper–and the perils for the same from political capitalism. It was through the wisdom of several books, beginning with Adam Smith’s The Theory of Moral Sentiments and continuing with Charles Koch’s Science of Success (2007) that I found the worldview that explained the why-behind-the-why of Enron’s collapse–the philosophic failure behind the financial failure).

AAAS Panel on Climategate Tomorrow

Today, a friend alerted me about the annual conference of the American Association for the Advancement of Science (AAAS) in San Diego and Friday’s panel on Climategate. One of the panelists is my friend Jerry North, who was part of two global warming debates we had here in Houston last month. (The Rice University debate between Richard Lindzen and North is online here.)

I was incited to write Jerry the email that is reproduced below. Perhaps this communication should have gone to the panel leader Ralph J. Cicerone, president of the National Academy of Sciences. It would certainly apply to the other three panelists in addition to North given their topics:

Francisco J. Ayala, UC Irvine, “The Practice and Conduct of Scientific Research”
Sheila Jasanoff, Harvard, “Science in Society”
Gerald R. North, Texas A&M, “The Data Behind Climate Research”
Phillip A. Sharp, MIT, “Data Use and Access Across Disciplines”

At Climate Audit, Steve McIntyre is critical of both North and the chosen panel for its lack of intellectual diversity. He wrote in part:

Gerry North told the Penn State Inquiry that he hadn’t read the Climategate emails out of “professional respect”. This apparently qualified him as an “expert” on the topic.

Cicerone appears to have been quite careful not to invite any speakers that actually knew anything about the controversy. It sounds like it will be totally uninformative – an ideal Sir Humphrey outcome.

Seven Questions for Climategate Discussants

Here is my email to Dr. North which he kindly responded to by saying that his presentation was narrow and already sent in. Still, there is plenty of discussion to come where these hard questions, in part or whole, can be brought up and debated. [Read more →]

February 18, 2010   11 Comments

Energy Malthusianism in the Sweep of History (and Rockefeller, Insull, and Lay)

[This excerpt from Capitalism at Work: Business, Government, and Energy prefaces a five-chapter review of energy Malthusianism from the time of Thomas Robert Malthus in the late 18th century through the Julian Simon/Paul Ehrlich debate of the late 20th century.]

“Here is a planet, whirling in sunlit space,” reads the opening of Rose Wilder Lane’s The Discovery of Freedom: Man’s Struggle against Authority, penned during the dark days of World War II. “The planet is energy,” she continues. “Every apparent substance composing it is energy. The envelope of gases surrounding it is energy. Energy pours forth from the sun upon this air and earth.”

Energy is pervasive and liberating. It moves people, makes things, and provides incalculable services. It vanquishes darkness, literally and figuratively. “Since early men ignited the first fires in caves,” it has been noted, “the unleashing of energy for light, heat, cooking, and every human need has been the essence and symbol of what it is to be human.” 

In economic terms, energy is the resource of resources, the master resource. Energy transforms mineral and natural resources from their raw form into consumable goods. Energy must be expended to create more energy and to refine energy into more usable forms. Thus, energy can be considered the fourth factor of production, in addition to the textbook triad of land, labor, and capital.

In business terms, energy has been and will likely always be the world’s biggest enterprise. The energy sector has spawned some of history’s great entrepreneurs. John D. Rockefeller shaped the American and world oil industry more than a century ago. Mr. Petroleum was one of the greatest business doers in U.S. and world history, if not the greatest.

Second to Rockefeller in the history of the U.S. energy industry is Mr. Electricity: Samuel Insull. An émigré who teamed with Thomas Edison to build the company that emerged as General Electric, Insull ventured on his own and built America’s largest gas and electricity entity. But his fortunes spectacularly reversed in the early 1930s. The dramatic rise and fall of the father of the modern electricity industry, “the Babe Ruth, the Jack Dempsey, the Red Grange of the business world,” is still the subject of contemporary books and articles.

In the 1980s and 1990s, another figure cut a unique path in the energy sector: Mr. Natural Gas, Kenneth L. Lay. He made a case for methane as the economic and environmental answer to America’s energy challenges and positioned Enron as the world’s first natural gas major. Lay’s star power put him in a league with the biggest names of the industry at the time, such as Lee Raymond of ExxonMobil and John Browne of BP. In early 2001, Paul Portney, president of Resources for the Future, declared, “In his role as chairman of Enron Corp., Ken Lay has almost singlehandedly made the world rethink what it means to be a modern energy company.” [Read more →]

September 12, 2009   7 Comments

The Intellectual Roots of Paul Ehrlich's The Population Bomb (and the pre-prehistory of climate alarmism)

[Editor note: Pierre Desrochers, who guest posts with us for the first time, is Associate Professor of Geography at the University of Toronto.]

Paul Ehrlich’s best-seller The Population Bomb  turned 40 last year. The latest issue of the peer-reviewed (and somewhat iconoclastic) Electronic Journal of Sustainable Development is devoted to the book, its impact, and the validity of its main message. It features contributions by both Paul and Anne Ehrlich, who mostly stand by their original analysis, and some of their critics who challenge their basic premise and supportive evidence.

Despite a now widespread popular perception that The Population Bomb was a pioneering work, it originally drew little attention. In fact, it was just the latest in a long line of books, reports, essays and pamphlets on the population issue published in post-World War II America.

Ehrlich’s success, it turns out, owed more to his alarmist rhetoric and a lucky break on Johnny Carson’s “The Tonight Show “ (on which he would eventually appear several times) than to any original insight or idea.

The real roots of what is sometimes referred to as modern “neo- Malthusian ecology” in the United States long predates the Stanford’s biologist contribution. It can be ultimately traced back, at least in terms of reaching a large popular audience, including a young Paul Ehrlich himself, to two now largely forgotten best-sellers published in 1948: Fairfield Osborn’s Our Plundered Planet and William Vogt’s Road to Survival. [Read more →]

July 14, 2009   6 Comments

Who Was Ken Lay? (The Senate should know the industry father of U.S.-side cap-and-trade)

“If there is one thing I have been impressed with over the last decades, it is that when the environmental community defines a number one priority, something happens. Not always something good—but something.”1

Dr. Kenneth L. Lay, Chairman, Enron Corporation, June 1997 (1)

Who was the late Ken Lay, the architect and chairman of Enron throughout its 16-year history? All parties to the current legislative debate on a CO2 cap-and-trade bill should know. After all, Lay’s tireless efforts to promote CO2 regulation and enact renewable energy quotas make him a father figure for HR 2354, the Waxman-Markey climate bill, what I have called the Enron Revitalization Act of 2009.

In his lifetime, Lay did not win CO2 regulation, but he got a very damaging renewable energy mandate passed in his home state of Texas. I asked:

How has Texas, which consumer choice made the leading oil and gas state, become the second most politicized energy state in the nation (after California)?

The regulatory spiral can be traced back  to Enron, which in 1999 spearheaded a provision in the state electricity restructuring law (Senate Bill 7, signed by governor George W. Bush) establishing a statewide renewable-energy mandate. Enron’s lobbyists had in mind the special interest of Enron Wind Company, which is now part of General Electric.

It was a double win for the politically connected company. First, as the leading power marketer, and with its eyes on becoming the leading electricity retailer as well, Enron coveted mandatory open-access of electricity in the state. Secondly, it needed a big market for its money-losing Enron Wind. Cloaking both corporate-welfare goals in the guise of a renewable mandate got media-worshipped environmental groups on board to help push SB 7 across the finish line.

Whether it was hiring John Palmisano, writing op-ed’s, working with Clinton/Gore, contributing $1 million to Resources for the Future in appreciation of their cap-and-trade work, or a myriad other things, Ken Lay worked a mile a minute to promote CO2 legislation, all to help a variety of Enron profit centers (see below). [Read more →]

July 7, 2009   4 Comments

Cap-and-Trade: The Temple of Enron (James Hansen makes an important political point)

“Since 1976, Enron [and predecessor company] employees have been at the forefront of developing air credit trading policies for governments and businesses…. Enron today is the largest and most sophisticated air emissions credit and allowance trading organization in the United States. Since 1990, Enron has participated in over 80 SOx allowance transactions and has also been active in establishing policies for trading NOx in the United States and carbon [dioxide] world-wide.”

- “Enron Corp.’s Participation in Air Trading,” Enron Capital & Trade Resources, November 4, 1996 (copy in files).

“If implemented, [the Kyoto Protocol] will do more to promote Enron’s business than will almost any other regulatory initiative…. The endorsement of [CO2] emissions trading was another victory for us…. This agreement will be good for Enron stock!”

- John Palmisano (December 12, 1997) from Kyoto, Japan. Quoted in Bradley, Capitalism at Work, p. 307

“If anyone has environmental credit needs, that’s what we do. We want to be to be the clearing house to monetize available credits or to manage risk.”

- Kevin McGowan, director of coal and emissions trading, Enron Corp., (Enron Biz, November 29, 2000, copy in files)

“We are a green company, but the green stands for money.”

- Jeff Skilling, CEO, Enron Corp., quoted in Capitalism at Work, p. 310.

Enron is Exhibit A against Waxman/Markey’s cap-and-trade proposal. Enron was poised to make money coming and going by being the nation’s and the world’s largest market-maker in CO2 permits, and the “smartest guys in the room” were ready to game and game for incremental dollars (remember California?). Enron’s business model, in retrospect, had to do with regulatory complexity, [Read more →]

May 14, 2009   14 Comments

Joseph Romm and Enron: For the Record

[Editor note: Also see "Joseph Romm and Enron: More for the Record" (May 8, 2009) and "Enron and Waxman-Markey: Response to Joe Romm" (July 2, 2009)]

The headline at Climate Progress, the blog site of Joseph Romm, senior fellow at the Center for American Progress, read:


And here is what Romm specifically says about me:

Who is the [American Energy Alliance]?  Good question.  The AEA says on its website:

“AEA is an independent affiliate of the Institute for Energy Research (IER)….”Aside from the cryptic nature of the oxymoronic phrase “independent affiliate,” it is worth noting that the Institute for Energy Research “has received $307,000 from ExxonMobil since 1998.” The President of IER is one Robert Bradley “who previously served as Director of Public Policy Analysis at Enron, where he was a speechwriter for CEO Kenneth Lay,” who was “convicted on fraud and conspiracy charges on May 25, 2006.”

And here is what Romm said about me in March at Climate Progress:

So it is only fair to note that the myth articles were “produced with support from the Institute for Energy Research …. The President of IER is Robert Bradley ‘who previously served as Director of Public Policy Analysis at Enron, where he was a speechwriter for CEO Kenneth Lay,’ who was “convicted on fraud and conspiracy charges on May 25, 2006.”

’Nuff said on that.

His implication is that I am somewhere between a dunce and a fraud because of my association with Enron and Ken Lay. But Romm should know better. He and I had email wars when I was at Enron, and Joe was Enron’s cheerleader, even complaining to his “friends” there about me.

Here is the background, as told in my book Capitalism at Work (p. 311): [Read more →]

May 5, 2009   19 Comments

The Politicization of Business Prudence

My recent editorial in Investor’s Business Daily, “What Happened to Business Prudence?”, offers examples of politically correct and politically derived business practices in order to show how such “profit” opportunities can be bad for both shareholders and the broader economy. [Read more →]

February 8, 2009   2 Comments

At World Economic Forum: "New Model" Sought

The Wall Street Journal reports today that the world’s elite, gathering in Davos this week, are amazed at how little they know about the economy. There is even talk about how capitalism itself is a failing business model. One participant, who is giving a business leadership seminar there, is quoted as saying:

The capitalist myth is lovely and youthful. It kicked off the industrial revolution, but maybe we need a new one.

Instead of looking for new government quick-fixes, business and government leaders need to discover (I wish I could say, rediscover) what is real capitalism–free-market capitalism–in theory and practice.

Today’s problems can be traced to the government side of the mixed economy, as well as a perverted capitalist ethic in the boardroom. [Read more →]

January 26, 2009   4 Comments