Crime Wave
Gilder, George
"CRIME WAVE" BY GEORGE GILDER rime may have declined in the streets but, by measure of the news coverage as the new year begins, you'd think there has been a sudden outbreak of criminality in...
...Today, analysts charge Enron with concocting subsidiaries to conceal self-dealing and massive debt...
...Against the errors of politicians and bureaucrats, crime in the suites vanishes as a factor...
...After a decade and a half of favorable policy, from the capital gains tax cut of 1978 to the general tax reductions of the 1980s, from the deregulation of transport and communications to the collapse of inflation to the downfall of global communism, politicians in the 1990s began taking prosperity for granted...
...they disarmed in the face of terrorism...
...Some of these alleged crime lords are familiar...
...they embarked on a chemophobic siege against industries vital in both war and peace...
...That was true of the savings and loan and Mexican crises of the early 1980s, and of the global crisis today, reaching from Japan and Indonesia to Turkey and Argentina...
...Behold these corporate predatorstheir "lies, betrayal, treachery," says Fortune-wrecking vast pension plans, sowing deadly cancers through the froth and the fish of the Hudson, monopolizing the computer market, blighting the steel industry with dumped scrap, wantonly disrupting energy markets, insidiously subverting the global climate...
...Regulating every derail of telecommunications deployment is a sure way to stifle progress in a field where capabilities double every year...
...A trading company such as Enron or long-term infrastructure play such as Exodus or Global Crossing is no stronger than the confidence of customers in its endurance and solvency...
...Under the current Byzantine legal regime, with millions on millions of pages of often conflicting regulations, it's child's play for even a congressman or journalist to finger "crime" in the suites...
...Launching a series of innovations in arenas as diversely regulated and taxed as natural gas and broadband communications, Enron inevitably invented a complex structure of subsidiaries and financial instruments, difficult to explain under SEC rules that require simultaneous disclosure (or more safely, nondisclosure) to all...
...Then Winnick launched Global Crossing's worldwide fiberoptic network with-it is impliedthe intention of bilking investors and crashing global bandwidth prices, in what Fortune calls "perhaps the greatest executive ripoff in the history of enterprise...
...This flood of factitious crimes, this parade of snaffled fat cats and scapegoats, happens every recession...
...Rather than ruing economic reverses as effects of public-policy errors and miscalculations, public officials turn the tables and treat bankruptcy and crash as culpable schemes by white-collar criminals...
...But the proximal cause of these imbroglios is nearly always found in government tax, regulatory and monetary policies...
...They failed to see the transformation of telecommunications rules into regulatory sclerosis...
...Inflicting deflationary dollar values on debtor nations ravages their economies and pulls their neighbors and trading partners down with them...
...Jeffrey Mohammed Skilling, Osama Ken Lay, Mohammed Atta Gates, Ellen Hancock Moussaui, Mad Mullah Welch-the names stream together, the rap sheets blur, but the statistics mount along with the unemployment numbers, the bankruptcies, the cleanup costs...
...They allowed effective tax rates to drift back up toward record levels...
...But the key to this debacle wasand still is-the debacle of money...
...In an environment of SEC-enforced ignorance, mere rumors of default can start a company spiralling downward...
...Gary Winnick was party to a previous Potlatch at Drexel Burnham, where he helped finance the previous communications infrastruc George Gilder is chairman of The American Spectator and editor of the Gilder Technology Report, ture-MCI,TCI,Turner Broadcasting, McCaw Cellular, among others-and allegedly ravaged thousands of savings and loans by inducing them to buy those same companies' high-yield securities...
...A more accurate description: the most efficient network buildout in the history of communications...
...But let's be serious: recessions-the real crime we're talking about here-spring overwhelmingly from policy mistakes...
...CRIME WAVE CBY GEORGE GILDER rime may have declined in the streets but, by measure of the news coverage as the new year begins, you'd think there has been a sudden outbreak of criminality in corporate suites...
...If you believe the news coverage, corporate leaders appear to be racing to despoil, raid, mulct, defraud, poison, pillage and ruin their own businesses, their nation's soils and waters, the world economy...
...they ignored the implications of steady dollar appreciation...
...Buffeting Enron's staple fuels and bandwidth, deflation is afflicting all commodity prices from coffee (at an all time low), cotton and grains (at fifteen-year bottoms) to scrap steel (down 55 percent in four years) and energy...
...Corpocrats from a wide array of businesses, from Global Crossing to Loral, from General Electric to Enron, artfully inflated the worth of their shares through the creation of Potemkin businesses...
...The Internet, communications and stock-market booms of the 1990s, it seems, were based on an unprecedented and pervasive series of felonious acts...
...But company structure is chiefly governed by the mazes of everchanging tax and regulatory law, and by the resultant endless threat of litigation...
...Deflation crashed the stock market, and stifles every company and Third World country that holds dollar JANUARY/FEBRUARY 2002 • THE AMERICAN SPECTATOR 15...
Vol. 35 • January 2002 • No. 1
