Enron's dramatic financial collapse in late 2001, along with the fraud scandals that the firm's bankruptcy brought to light, prompted many narrative accounts in the subsequent half decade. Some Enron insiders, such as Brian Culver and whistleblower Sherron Watkins, penned memoirs. A pair of investment advisers produced a lengthy guide to Enron's bankruptcy. Journalists who had covered the company wrote books about the episode. Two separate playwrights offered theatrical renditions, while filmmaker Alex Gibney, drawing on the work of journalists Bethany McLean and Peter Elkind, put out a highly successful documentary, The Smartest Guys in the Room.
Almost twenty years on, Gavin Benke has now published the first historical monograph on Enron, which he frames in contrast to all these nonscholarly first drafts of history. Those works, Benke argues, emphasized the choices, actions, and experiences of individuals. They looked to condemn (or sometimes humanize) Enron's hard-charging executives like Ken Lay, Jeff Skilling, Rebecca Marks, and Andy Fastow; to celebrate those employees who resisted the descent into creative accounting and outright malfeasance; or to document the suffering of the thousands of employees who lost their jobs and retirement savings.
Instead, Benke directs attention to the structural causes of Enron's shift in business strategy, which remade a 1980s natural gas company into a developer of massive renewable energy projects and, even more so, the key trailblazer in the financialization of the American energy sector. He situates Enron within the postwar transformation of Houston and its environs, a process highly dependent on federal investments in infrastructure and the military-industrial complex, international geopolitics that dramatically increased the price of fossil fuels during the 1970s, and processes of deindustrialization that encouraged the movement of capital to the Sunbelt. Deregulation of the natural gas industry stands out for Benke as another crucial impetus for Enron's reinvention and rapid growth after a merger of two pipeline companies created the new firm in the mid-1980s. So too do the intellectual currents coursing through American politics and business culture then and in the following two decades. The book shows how Enron's leaders were shaped by the era's lionization of intrepid entrepreneurship that disrupted long-standing modes of doing business, as well as the financial innovations unleashed by banking deregulation.
Risk and Ruin depends mostly on public sources: internal company newsletters, annual reports and filings with the U.S. Securities and Exchange Commission, press coverage, postbankruptcy government inquiries, court records, and a series of business school case studies. This corpus of materials gives Benke a great deal to work with, though the dearth of oral history interviews seems like a missed opportunity.
The monograph also tends to presume that readers already have a significant degree of familiarity with Enron's rise and fall. Benke further emphasizes the significance of opacity and complexity in Enron's business dealings as he recounts key phases of this narrative arc: the pursuit of development schemes in emerging economies like India; the efforts to construct intermediary markets in natural gas and electricity; the now infamous manipulations in the partially deregulated California energy market; the accelerating embrace of “special purpose entities” (SPEs) as a way to finance company investments; the dependence of those SPEs on an appreciating Enron stock price to retain their value; and the company's eventual downward spiral. But his descriptions of how Enron structured its financial arrangements will likely leave the uninitiated with many questions about exactly how financialization at the company worked.
As Benke shows, through much of the 1990s, Enron embraced the mantra of energy sustainability almost as much as it did the vision of reconstructing fossil fuel–based energy markets. In many ways the firm and its well-connected Republican executives followed the course of establishment Republican Party politics. When the George H. W. Bush administration looked to address environmental problems through market mechanisms, Enron staked out analogous ground, even with regard to the problem of climate change. But once the Republican center of gravity shifted rightward, and once some renewable energy projects abroad foundered, the company placed greater focus on reimagining energy markets and developing profitable strategies for operating within them.
Many of those strategies, Benke notes, boiled down to a type of hedging—Enron offered counterparties long-term contracts with guaranteed prices for a growing array of energy products. But the corporation then had to find sufficient capital to underpin its capacity to deliver that energy as needed, a challenge that led executives to dream up ever more dangerous (and deceptive) modes of financing, especially once it embraced highly questionable mark-to-market accounting techniques. Here Benke largely tracks the analysis offered by previous accounts.
The book particularly shines in its discussion of business culture. In addition to situating Enron's twists and turns within the wider embrace of shareholder value, flatter organizational structures, and managerial celebrity, Benke demonstrates how Enron executives obsessively sought to shape the corporation's own culture, as well as its place in the American imagination. These efforts operated through both internal channels (how executives portrayed the company to its managers, traders, and employees) and external ones (Lay's roles in Houston philanthropy and Republican politics; Skilling's chasing after status as a national guru of organization reinvention and a high priest of deregulated markets and highly abstract financial mechanisms). In his conclusion, Benke appropriately stresses that Enron foreshadowed the global financial crisis of 2007–2008—a similar if far larger house of cards built on hypercomplex financial instruments and rampant deception—and also that Enron's failure prompted far more outrage over the company's specific corruptions than any rethinking of capitalist political economy. Tellingly, the policy responses to Enron tended to focus on new obligations and sanctions for corporate executives.
Historians of energy transitions, financial capitalism, American political economy, and corporate law will all find Risk and Ruin worth the read, as will other social scientists interested in these topics. I am less convinced that the book will work well in undergraduate courses.
