I went to the theatre twice over the weekend..the first time to see "Enron" and the second to see a brilliant youth theatre production of "The Grapes of Wrath". Both were very different in style: the first a high-tech, energetic, glitzy view of the rise and fall of the world's most notorious energy trading company and the second a low-budget telling of the systematic dispossession and brutalisation of tenant farmers in America's dustbowl of the 1930's.
I came away from both thinking, quite apart from the qualities of the two productions and the performances in them, that theatre often reminds us far more powerfully and directly than can a thousand newspaper articles or pieces of academic research what some of the most important principles are on which society and business have to be organised:
- Too much power concentrated in too few hands rarely produces desirable social or economic outcomes: the landowners, fruit producers and county sheriffs that systematically dispossessed, exploited and terrorised tens of thousands of migrants workers from Oklahoma to California were NOT doing the American economy any favours. (They directly contributed to the degradation of huge tracts of arable land and to the waste of tons of produce in an attempt to artificially keep prices high). Nor were Jeffrey Skilling and his colleagues at Enron - the company lobbied for the deregulation of energy supplies in the US and then exploited loopholes in the legislation to leave California beset by power shortages that imposed real economic costs.
- Human beings are always likely to be swept along by irrational manias : whether it is stock analysts falling over themselves to talk up Enron shares or desperate farmers embarking on a harzardous journey of 2,000 miles with their families in search of a "promised land" despite plenty of evidence that conditions in California were actually appallingly harsh, people do like the sense of excitement and hope that they can experience in the midst of a collective mania. Cynical people will always seek to exploit this (Enron's management encouraging their staff to sink their life savings into buying company stock options that were ultimately worthless); and governments and regulators and shareholders would do well always to remember it and act accordingly.
- Manias can nevertheless lead to the creation of important economic and social assets: at the end of "Enron", Jeffrey Skilling is given a speech in which he makes the point that many of the most important technological advances in recent human history (eg the canals, the railways and the internet) have been associated with major boom and bust cycles in the stock market. His point is that without the huge wave of energy, enthusiasm, financial investment and euphoria that these events created, the technological advances may not have occurred or would have occurred far more slowly.
