CORPORATE POWER AND THE GLOBAL ECONOMY

Corporate Power and the Global Economy

Corporate Power and the Global Economy

Enron's Collapse

The Enron scandal occurred at the end of an era of economic and financial enthusiasm often referred to as the “new economy.” Enron's corporate culture exemplified the youthful, mold-breaking headiness of the era—its stock soaring to seventy times earnings, whereas twenty times earnings had been considered exceptional. It was an era when even the most traditional industries could plausibly claim to have become the most “innovative.” Not surprisingly, many U.S. citizens saw Enron's collapse as the fitting consequence of an era of excess. Enron was neither the first nor the last in the wave of major corporate scandals at the turn of the twenty-first century. However, it played a large role in defining—indeed, gave its name to—a tumultuous and unforgettable period in U.S. business history.

According to the authors, Enron's transgressions and failure proved to be one of several similar corporate debacles at the turn of the twenty-first century. Among other provisions, it created a public oversight accounting board and compelled corporate CEOs to personally vouch for the accuracy of their firms' financial reports. For its part, the accounting profession launched a wave of reforms to restore confidence in its legitimacy as objective auditors. In addition to the major corporate collapses of the era, serious questions were raised about the reporting practices of a wide range of otherwise conservative, blue chip firms. Some experts saw the wave of investigations and reforms as healthy steps toward restoring public and investor confidence in corporate United States over the long run but feared that the greater scrutiny over corporate governance would constrain executive decision making too much in the short run.

U.S. Banks and Money Empire

The authors have emphasised the fact that money laundering can hamper economic growth, particularly in the developing world where many illegal arms and drug dealers operate. It causes large amounts of cash to flow into and out of local economies, causing volatility in interest and exchange rates and contributing to inflation. In addition, money laundering activities in poor countries siphon billions of dollars per year away from legitimate projects that promote long-term development. This undermines political stability, which can create foreign security problems for the United States.

According to the authors of the article, money-laundering is a frequently used criminal scheme in which illicit cash is introduced into financial systems by usurping bank-reporting requirements. The U.S. Treasury Department views money-laundering as the cornerstone of financial operations among international organized crime groups.

Improved technology has benefited criminals attempting to defraud banks through money-laundering. Because most criminal income is in the form of cash, these profits are unusable in a contemporary, cashless banking system. Criminal organizations move their cash profits through financial institutions to legitimize the money and provide them access to the funds. Money-laundering is classified as a type of banking fraud because launderers not only avoid bank reporting regulations but, by using deceit, also fraudulently convert illicit cash profits into legitimate ...