WASHINGTON, July 3 (UPI) -- To paraphrase Oscar Wilde, "To lose one Enron is unfortunate. To lose two smacks of carelessness."
With the collapse of WorldCom the Bush administration has lost two of the miracle corporate giants that sprang up as if from nowhere over the past decade. Losing Enron, in December and January could plausibly, if superficially, be presented as a one-off occurrence.
Losing WorldCom only half a year later hammers home to U.S. voters and international investors alike the profound structural flaws in the U.S. economic system and ways of doing business that were common to both disasters. The implications are frightening.
U.S. prosperity over the past 20 years was based on two complementary and interlocking propositions. First, that the United States was the safest nation in the world for international investors to place their wealth. Second, that they could get a higher return on their wealth from the soaring Wall Street stock markets than they could anywhere else in the world.
Because of that vast flood of international investment during the Reagan and Clinton boom eras, both presidents were able to preside benignly over the greatest balance of payments deficit of any nation in the recorded history of the world, one that continues to this day.
During those 20 years, the industrial base of the United States, the greatest in the world over the previous century and more, was allowed to catastrophically erode. China now looks set to replace the United States as the largest industrial base and source of capital in the world.
Republican and Democratic presidents alike over the past 20 years looked upon these ominous developments with cheerful and carefree abandon. Only current House Minority Leader Richard Gephardt, D-Mo., and three-time presidential candidate Pat Buchanan took these issues seriously enough to make them the centerpiece of their political campaigns. And they both got pulverized as a result and derided as extinct dodos.
At the Democratic National Convention at Los Angeles two years ago, United Press International asked Laura Tyson, the exceptionally bright head of the Council of Economic Advisers in the first Clinton administration, whether these imbalances were a serious cause of concern. Tyson dismissed the possibility with the reply that they were not "as long as the fundamentals of the economy are sound."
By "fundamentals," Tyson was referring to the Clinton team's success -- in unlikely collaboration with a Republican-controlled House of Representatives -- in finally balancing the U.S. federal budget and even producing two years of remarkably healthy surpluses. She was also referring to the continued onward-and-upward rise of the U.S. economy.
But as we have repeatedly warned in UPI Analysis over the past three years, the old corny and cautious bromides still hold true and the economic and business equivalents of the law of gravity still hold as well. What goes up must come down. And nothing goes up forever.
Our colleagues, UPI Business Editor Martin Hutchinson and our Mexico-based correspondent Ian Campbell have also repeatedly warned in their columns over the past two years that U.S. stocks remained wildly over-valued even after the spring 2000 bursting of the Internet bubble.
They have also repeatedly warned UPI readers that widely accepted methods of assessing the net worth, real profitability and future earnings prospects of many major U.S. corporations were wildly over-optimistic and unrealistic at best. Now the fall of WorldCom confirms the prescience and wisdom of their unfashionable warnings.
The WorldCom fiasco is also now raising far more serious concerns both among U.S. investors and around the world of the viability and very integrity of U.S. big business -- especially the new generation of high-tech wonder corporations that powered the Nasdaq high-tech composite index over the past two decades.
Back in January, we warned in UPI Analysis that the fall of Enron already called these truly fundamental issues into question. We wrote:
"Enron was more than the biggest bankruptcy in more than two centuries of U.S. history. It was more than the seventh wealthiest corporation in the United States. It was the living, corporate embodiment of all the political and economic policies and philosophies with which the Reaganite Republicans have dominated American life over the past two decades.
"Enron was an energy trading company, and the entire political and economic success of the 1980s Reagan Revolution was above all based on easy access to cheap energy. Enron was based in Houston, it was as Texan as George W. Bush. And like him, it reflected and embodied the national dominance of the Southwest in general and Texas in particular over the past 20, or even 30 years."
All those conclusions are true in equally devastating detail about WorldCom. It was based in Mississippi. And the Old, Deep South has been along with the Southwest and the West Coast the other great economic beneficiary of the high tech and communications revolutions of the past 20 years. Mississippi, like Texas, has become a true Republican bastion. And WorldCom also flourished and grew so quickly thanks to the new business gospels of deregulation and the encouragement of trading in a free, no-holds-barred, deregulated national and global economy.
What we wrote of Enron in January was also true of WorldCom in July. "Its wealth and prestige were not based on material achievements such as actually drilling oil wells or oil pipelines or even making existing ones run more smoothly. They were based on the apparently magical workings of the new Information Technology economy, where communications were more important than content and speed of response more important than physical construction or achievement."
And also like Enron, World Com "was uncritically proclaimed as a proof of the triumph of deregulated capitalism. It was the crowning achievement of the long campaign that Reaganite Republicans have waged for more than three decades to roll back the social democratic regulatory machinery that was installed by President Franklin Delano Roosevelt during the 1930s New Deal, not to destroy capitalism, but to save it."
We also noted in January that the Reaganites had argued, with a great deal of evidence to support them, that by the late 1970s, that machinery had become so immense, so and bureaucratically over-reaching that it was strangling genuine free market innovation and transformation and generating stagnation and poverty rather than security and wealth. And in the 1980s and '90s, as the American economy roared ahead through the longest sustained bull market booms in its history, their analysis appeared fully confirmed.
But, as we noted in January, " now it appears that this particular pendulum swing of history may have reached its apogee, and started swinging back in the other direction." For like the collapse of Enron, the fall of WorldCom is an eerie echo of the kind of insider-trading scandal that was revealed after the October 1929 Wall Street stock market crash and during the first and worst years of the Great Depression.
In the past 20 years, the Reaganite Republicans happily ran many teams of coaches and horses through the old SEC controls and during the boom years, the results seemed to entirely justify their confidence. But the collapse of WorldCom, coming soon after what Edgar Allan Poe would have no doubt called The Fall of the House of Enron, and the ruin to thousands that it has brought in its wake suggests that the old cautions were not so stupid and the new enthusiasms far from wise.
That is why the fall of WorldCom, coming after the collapse of Enron, is so ominous for President George W. Bush and the current Republican leaders in Congress. It is the most dramatic repudiation imaginable of the fundamental political and economic philosophies by which they live.
Last September, al Qaida terrorists flew two hijacked airliners into the twin, gleaming, 1,400-foot-high towers of the World Trade Center in New York City and destroyed them both, killing 2,800 people. This year, two of the highest shining towers of the Reagan and Clinton boom eras have already collapsed. Enron and WorldCom have vanished amid the fiscal debris of their own ground zeros. Although thankfully, no one was killed, scores of thousands of lives were ruined or impoverished as a result.
Now, the safety and survival of dozens of other fiscal skyscrapers on the Wall Street stock market skyline have been thrown into doubt as a result. And there is no al Qaida to blame. Speculators, boosters, and dangerously naïve political idealists and ideologues did it all themselves.
