Krugman: Crony Capitalism, U.S.A.

Vikash Yadav vikash1 at ssc.upenn.edu
Tue Jan 15 23:52:52 PST 2002


There is also an important international dimension to the Enron scandal. Krugman fails to mention how Enron used its influence with "cronies" in the Clinton and Bush administrations to bully the Government of India in the Dabhol Power Company (Enron was the parent company of this 2,000 megawatt power plant) scheme that went sour.

First, Enron reportedly spent millions of dollars to "educate" Indian politicians of the need to privatize public utilities and purchase new power plants to meet projected demand (even though the real problem in India is power theft not power generation). The deal was called off after Indian officials realized that the cost of the electricity that would be generated by the Dabhol plant would be completely unreasonable for average citizens.

Then, Enron tried to use US diplomatic pressure to force an Indian public corporation (NTPC) to buy out Enron's $1.2 billion (i.e., full value) share of Dabhol. Enron also attempted to activate counter-guarantee provisions against the state of Maharashtra and the Government of India that were clearly unconstitutional (as the Indian government is not allowed, by its own constitution, to enter into contracts that exceed a set amount... total annual revenue... I think). If these counter-guarantee provisions had worked, Enron would have made more money by allowing the Dabhol Power Plant to fail, then it would have by running the power plant. There should be an investigation about what types of pressure the US government applied against India in the name of Enron, and whether the Enron knowingly pulled out of the Dabhol project to make a quick buck through its counter-guarantee provisions.

Hopefully, some of the US media will pick up the scent and follow the trail overseas where Enron's corruption is now coming to light. The sad point of all this is that Enron is only the tip of the iceberg, as Arundhati Roy's new book Power Politics shows, US power companies are fully entangled in questionable development schemes throughout the developing countries.

Vikash Yadav Philadelphia, PA



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