Why Enron Always Happens

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New York’s legal establishment also moved to clean things up. In 1870 the city’s leading lawyers formed the Association of the Bar of the City of New York to police the profession, and other cities and states quickly followed suit. The bar association established a committee to look into corrupt judges and called for the impeachment of Barnard and others, who resigned or were convicted. The state’s civil procedure was changed to make it impossible for judges to interfere with one another’s injunctions, and in 1874 a stiff provision against bribing public officials was put into the state constitution, safely beyond the reach of the legislature.

Because of the Erie Wars and the reforms they engendered, American capitalism began to grow up, and the corruption of public officials, historically no more well behaved than corporate managers, began to wane. We have had nothing so spectacular as the Erie Wars in more recent times, but the process they exemplify of excess, scandal, and reform has continued unabated as the American economy has developed, enlarged, and embraced an endless stream of new technology and new opportunities. There is no doubt that it will continue on this path in the future as well.

In the 350 years since Thomas Hobbes described life in a state of nature as “solitary, poor, nasty, brutish, and short,” an economic system unknown in his day, democratic capitalism, has made possible a standard of living—and a longevity—for the average citizen that would have boggled his mind. But the road from Hobbes’s world of poverty for almost all to our world of widespread abundance has been anything but smooth. There have been recessions, scandals, corruption, and chicanery aplenty.

As we enter an era of the most profound economic change since the advent of the steam engine more than 200 years ago, this time driven by the microprocessor, there is no doubt whatever that we will see plenty more chicanery, for the game will always be played by human beings. But whatever its flaws, however messy and sometimes wasteful capitalism is, it has one inestimable advantage over any other means of organizing an economy yet devised: In the long run, it works.