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Capitalism at Work: Business, Government and Energy (Political Capitalism)

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Dr. Bradley does a great job explaining that it is not capitalism that is failing, but political capitalism that is destroying American prosperity.

Bradley's first three chapters (Part 1), under the banner of "heroic capitalism," summarize the work of Adam Smith, Samuel Smiles, and Ayn Rand. If you want to understand the historical roots and philosophical foundations for capitalism, these chapters are excellent.

The second part of the book describes how free-market capitalism and entrepreneurial start-ups are being destroyed by business cartels supported by government intervention. Political capitalism is not capitalism at all; political capitalism is simply corrupt business leaders in bed with corrupt government bureaucarts and politicians.

Part three of the book was surprisingly interesting and educational. My background is in banking and CPA/management consulting. I have had little exposure to the energy industry, so I didn't expect these chapters to be interesting. I was wrong. The business-government corruption found in the energy industry (seen through the stories of Samuel Insull and Kenneth Lay) can be found growing in every industry.

Michael A. Beitler, Ph.D.
Host of "Free Markets With Dr. Mike Beitler"
Author of "Rational Individualism" Rational Individualism: A Moral Argument for Limited Government & Capitalism

Capitalism at Work: Business, Government and Energy by Robert L. Bradley Jr, is a timely read for those wishing to gain a better perspective of the type of business/government "cooperation" America is experiencing at the close of 2008. The book's Epilogue with its focus on Enron is most instructive.

As is the case for today's financial market turmoil and the auto industry struggles, the collapse of once-mighty Enron was blamed on unregulated markets and free-market capitalism. But Bradley, an Enron insider -- and Enron critic as an insider -- explains how the company was the antithesis of the type company that leading capitalist philosophers such as Adam Smith espoused. Enron was a "politically dependent" firm, not a truly "free-market" company.

The list of Enron political initiatives to promote a marketing strategy of "sustainable development" includes: 1) support for the Clinton/Gore 1993 proposal for a Btu tax; 2) aggressive investment in solar power in 1994; 3) the purchase of Zond Corporation in 1996 to start the U.S. wind industry; 4) spearheading of the nation's most strict renewable energy mandate in Texas in 1999 and 5) unsuccessful lobbying of the Bush administration to regulate carbon dioxide emissions.

Capitalism at Work also offers a warning to those who anticipate millions of green jobs resulting from the activities of a new energy/environment Czar or reduction of greenhouse gas emissions from a cap and trade system. Enron Energy Services (EES) ostensibly offered energy outsourcing for large commercial and industrial customers through long-term contracts. Bradley says, "EES, in fact, was one of Enron's fraud-rife divisions, with the estimated savings in energy and customer costs consisting mainly of speculation and accounting tricks. EES's contracts were liabilities parading as assets."

The epilogue's informed and lively account of the rise and fall of Enron offers a vivid case study of the perils of both government intervention and corporate social responsibility theory. Bradley concludes, "Enron lived, thrived, and perished in and through the mixed economy. Enron's artificial boom and decisive bust had more to do with government regulation than free markets."

Kenneth W. Chilton, Ph.D. is Director Emeritus of the Institute for Study of Economics and the Environment at Lindenwood University in St. Charles, Missouri.

Rob Bradley Jr.'s Capitalism at Work offers a fascinating combination of business history, economic theory, business ethics, and moral philosophy. Maybe those topics don't sound fascinating, but by weaving his analysis in with American business history, past and present, readers gain insight into how the US economy really works.

Bradley argues that major corporate flameouts, from Samuel Insull at Chicago Edison to Ken Lay at Enron, involved more than just character flaws, incompetence, malfeasance, and arrogance. Each involved a corrupting network to government favors, subsidies, and protective regulations.

Especially today when another cohort of corrupted businesses, from Fannie Mae and Freddie Mac, to the Wall Street firms and big three automakers that have either been taken over, bailed out, or bankrupted, Bradley's episodes from business history help us put today's crises in historical perspective.

Bradley is an expert on the history of regulation in the energy industry, the author of Oil, Gas and Government: The U.S. Experience, and has lectured and written widely on energy economics and politics. He argues that much of the U.S. economic system is better understood as "political capitalism" rather than market capitalism. Government spending and regulation, at both the state and federal level, are such a key part of many industries, that any entrepreneur or firm thriving in these industries gains success as much by political capital and leverage as by physical capital or financial leverage.

Bradley observes that "the scope and scale of Enron's politically dependent profit centers was unprecedented." He further claims: "The story of Enron is one of the most important benchmarks in the history of mixed-economy capitalism." But most books, articles and movies about Enron have so far "only superficially probed into fundamental incentives and motivations..."

To explain and contrast market capitalism with political capitalism, Bradley draws upon the writings of Adam Smith, Samuel Smiles, and Ayn Rand. Few of us are familiar with Samuel Smiles, but his work on personal improvement is fascinating: "In the mid-1840s, Smiles saw a higher calling in empowering each person to improve his or her character. Government policy was important, but the individual was the mainspring of social progress and good government... Smiles's writings inspired thousands to take charge of their own lives, revisit their attitudes, refine their best efforts, and improve in the workplace."

After reviewing these three writers on what he calls "Heroic Capitalism" Bradley explores its shadow "Political Capitalism" in Part II "Business Opportunity, Political Opportunism." I remember meeting in Seattle a businessman who strongly advocated recycling. He spoke with passion and enthusiasm, but I noticed also that his firm had the contract to supply all the plastic recycling bins that would be mandated for city and county residents. It would be hard not to be excited about recycling when holding such a business opportunity. Bradley's overview of the views and theories of industrial organization show the shift from early personal improvement and entrepreneurship to later theories that offered a diminished role for laissez-faire.

Part III of Capitalism at Work drills into debates over Energy and Sustainability, and again, the historical perspective is fascinating. We find that recent debates over "Peak Oil" are similar to debates over a century earlier over "peak coal"--that is, fears that coal reserves would rapidly run out, throwing industrial economies into chaos. Perhaps because the energy industry has for so long been regulated, and because energy is so central to a modern economy, academics have written many books on energy issues--most calling for governments to strengthen regulations and empower academics to shape energy production and policy.

The energy and environmental regulation industry has evolved over the decades, from early Earth Day activities for school children, to today's demands for banishing coal plants and limiting or sequestering carbon dioxide. Readers of Capitalism at Work are given a walk town memory lane with sections on early players like Resources for the Future, E. F. Schumacher, Paul Ehrlich, ZPG, and events like Earth Day, and the publication of The Limits to Growth by the Club of Rome.

Next up is a chapter titled "The Dark Decade" on the disaster of US energy policies from Richard Nixon to Jimmy Carter. We read the views and fears of scholars, writers, and interest groups who shaped US energy policy over these years, and further distorted both the energy industry and the US economy.

It is hard to think of a better way to prepare ourselves for the coming years of political capitalism and further government intervention in energy and environmental policy, than by reading Bradley's "Capitalism at Work: Business, Government and Energy." Highly recommended.

Robert Bradley's new book is a much needed, thoughtful, and extremely readable book on business ethics. Every business student should read and study this book in order to obtain a systematic understanding of the ethical role of the businessman in a capitalist society. The author has a deep understanding of economics and avoids the superficial analysis that pervades much of the literature on corporate responsibility. He explains that our economic well being depends on entrepreneurs earning profits by satisfying consumer wants and not by coercing consumers through fraud or through the use of government influence. Perhaps the most important contribution of the book is to demonstrate that simple fraud (which is well understood by the general public) is a vastly smaller public problem than the use of government influence (which is only dimly understood by the general public). Business school professors would be well advised to assign this book in every class dealing with business ethics.

I worked at the company which was later called ENRON CORP before Ken Lay ande before Mr. Bradley. I worked directly with the senior executives and with the directors and many analysts. I had also worked with the management team that was in place before the Lay regime and there is a stark contrast between the two management styles and their approach to capitalism and business operations. The company that was the ENRON cash cow that made ALL of Ken Lay's escapades and failures possible was Northern Natural Gas the largest natural gas pipeline in North America at the time. If you real the first combined annual report from 1985 and compare it to the one in 2000 just before Enron failed, it is clear what was going on at ENRON during that time. The gas pipeline operations were ALWAYS profitable without cooking the books and remain profitable today under new ownership. NNG took the concept of innovation and opportunity and hard work to develop the gas wells in SW Kansas which had no markets and built a pipeline system to the northern Midwest where the bitter cold was aswaged by coal burning furnaces and coal fired plants. Natural gas was and is clean and efficient and economical and NNG developed the market putting city after city, town after town and plant after plant on the natural gas supply and efficiently maintained and insured a steady and reliable flow.

The Ken Lay view of capitalism was far different in that it depended on manipulation of suppliers and customers of all sorts of commodities and Enron became a broker instead of a transporter, supplier source of energy. The Ken Lay method was based on obfuscation and deceit which was early on apparent in the embezzlement case of the ENRON trading operation in Valhalla, NY. The man who exposed that criminal operation was Mike Muckleroy, the ENRON Vice Chairman who told the story to me himself that he confronted Lou Borget about hundreds of millions of embezzled funds. Later Muckleroy discovered communications between Lay and Borget where Lay was encouraging and supporting those crimes. That was in 1987 and was the pattern for the Lay operation there after. Muckleroy took early retirement shortly thereafter to distance himself from those criminal operation at ENRON. With the Reaganite deregulation environment carried over by G.H.W BUSH this was the perfect environment for such activities. Enron was all about misdirection and retribution against it's critics during that time and it shed many good executives who refused to go along. Enron also spread massive amounts of shareholder money around to get people supporting the deregulation views needed for their crimes to be elected to office and powerful offices. One was, of course, the husband of the ENRON director, Wendy Gramm, which was Sen. Phil Gramm who wrote the ENRON LOOPHOLE which allowed criminal corporations to deceive accountants, shareholders and regulators. As more and more business operations at the Lay regime continued to fail then Lay would sell off assets or bring in silent partners into operations like Northern Petrochemical, Northern Liquid Fuels and Enron cogeneration. When Lay ran out of those assets and partnership opportunities, he hired Skilling and Fastow to cook the books which became the well publicized crimes that we know about. But the belief that this only began in the last few years is a myth. It began almost immediately when Lay seized power in 1985.

And that is basically the difference between the old American way of doing business and the Ken Lay way of criminally deceiving employees and shareholders and customers. Time and space do not allow me to give examples of all the Lay deceit but the true story of Ken Lay and Enron and their style of "capitalism" is NOT told in this book. It is a fiction and the writer is trying to build a myth.

I read Chris Thomas' book, The Rockefeller Fraud, and realized that any of us, could end up in a situation like his. Chris Thomas had a dream; he was set-up, and possibly naïve because he wanted something so bad.

Out of his book comes a ray of hope. He had been broken, left for road-kill, but he never gave up. He lost all material possessions, family and friends, but after all this he still stood up on his two feet and got back into the game of life.

Unfortunately, as I can attest, Chris' situation affects him to this day. After trudging through New Yorks streets, sleeping many nights on rocks in Central Park, took a toll, on his physical and mental health.

Chris ultimately had to have surgery on his lower back in 2011. He tried to tough it out for over three months, but walking at a slant got to be even too much for him. As a personal trainer, he thought he could get past his back pain, but it finally wore him out. Surgery was inevitable. The surgery was successful, and he now looks the picture of health.

I have been a health care professional for over 28 years. His story is very inspiring. You can see that although he was conned, he never gave up, even when he went down to bottom.

Luckily Chris is the kind of person who wants to help others. His book is a great read, and everyone can learn from Chris. I can truly say, his book made a difference in me, and made me more aware that any of us facing adversity, can come back.

Sincerely,

Dr. Mark Harris

The supreme virtue of Rob Bradley's work on energy issues is that he has both a command of the theory of free markets (having written his dissertation under Murray Rothbard), while Bradley has also worked in the energy industry (in various capacities) for many years. In particular, Bradley was actually the speechwriter for Ken Lay of Enron, giving him (Bradley) a lot more authority on the true nature of the company. (Hint: Bradley explains that the "farsighted and responsible" energy company was a darling of the Left until it collapsed and then somehow became the poster child of unregulated capitalism.)

The fan of the free market who wants to really delve into the nuts and bolts of energy markets has an excellent guide in Bradley.

I purchased this book based on Gabriel Kolko's endorsement. I was shocked at the lack of depth and anecdotal homilies e.g., reference to Ayne Rand to back up inane arguments. Why did Kolko endorse the book? Maybe he felt obligated since Robert Bradley was a former student. Bradley is not even in the same Universe as Kolko. A big disapointment in terms of Kolk's work e.g., Triumph of Conservatism

Perhaps Bradley, having been a former insider/dupe? for Enron via Kenneth Lay is attempting to salvage his reputation along with few others which were associated with Enron. Look no further than the grant money to fund the book.. Where did it come from?

A big thumbs down for this book. The only useful information I found was about oil price regulations and the concept "daisy chaining" to fix prices.