My previous Econlib article, "Enron: The Perils of Interventionism," described how capitalism's most trenchant critics turned the rise and fall of this once iconic corporation into "Exhibit A" against laissez-faire. Other critics, though, understanding that America's regulated economy leaves no company completely to its own devices, offered a more sophisticated case against capitalism. They linked Enron's downfall to the free-market side of the mixed economy--and to government's failure to properly control that side. New York Times business reporter David Leonhardt, for example, wrote that beginning with the Reagan administration, "the federal government has given companies fairly free rein, allowing them to operate with less and less regulation. Enron's collapse may well halt that trend." Still other analyses have blamed the company's frauds and fall on an elusive corporate ethos that is alleged to be capitalist in spirit.
Both claims are incorrect. Enron, far from being a creature of the free market, was the quintessential mixed-economy firm, using its crony connections to gain financial backing from government and using its mastery of regulatory minutiae to create the appearance of profitability. Moreover, Enron's employees demonstrated an ethos, not of capitalist creators, but of postmodern Potemkins that capitalism's leading philosophers have warned against for centuries.