One of the most tragic and upsetting economic stories in recent history have been the downfall of Enron. It will be many years before we completely understand the direct economic impact of this tragedy, but at this point one thing is abundantly clear: Many small businesses throughout the nation are facing an immediate existential threat. The business economy is no longer shaped by Wall Street. No longer driven by the notion of shareholder wealth accumulation. In fact it is currently being shaped by entrepreneurs starting new businesses with one foot in and one foot out. The story of Enron is an instructive tale to anyone who is considering getting into an online home based business and the current economic climate.
In reviewing the story of Enron many observers not only lost faith in the business economics of the huge energy corporation, they also lost sight of one of its great advantages – the company’s commitment to providing a 100% service to its customers. That was then and this is now. Today Enron is mostly remembered for its disastrous service to its customers. Its stock price has tumbled and its reputation has been sullied by the media coverage of greed and corruption. But to see Enron’s collapse and the subsequent scapegoating of all those who lost money on the exchanges by those greedy energy traders is to watch business economics in action as the clockwork machinery of free enterprise self-destructs.
As a result of Enron and the related scandals and malfeasance it exposed, hundreds of thousands of people lost their jobs and many businesses saw revenues evaporate. Many believe that the widespread chaos was initiated by the powerful interests that were attacking the smaller business managers. They attacked them because they represented the broader business economics community that favored large corporations over the entrepreneurial ones. Smaller business managers were viewed as the main force behind business economies, and their advocacy – for lower taxes, more regulation, and more aggressive marketing – was routinely smeared in the press, in academic journals, in congressional hearings, and in business media. The fact that these same free-market economists now complain about how government regulators are picking companies that are too big to fail, is a clear sign that business economics has been broadly corrupted by the same forces that brought down Enron.
The business economics profession, in its effort to uphold the values of free markets and low government regulation, is often allied with the business sector itself. In other words, business managers often find themselves advisers to nonprofit organizations whose mission is to promote free-markets and low government intervention. For example, there are many prominent business economists who have worked closely with major nonprofits to help them understand and mitigate the effects of climate change. And they serve as economic policy specialists to think tanks and other institutions devoted to free-market capitalism. This group-think has clearly undermined the credibility of professional economists in the eyes of many skeptics of business economics.
The current crisis has been particularly harsh on small businesses. Lately the business economy has suffered badly, even in the online realm. Many small companies have gone out of business or have been forced to lay off their staffs. And large businesses, which were once considered superpowers due to their size and financial might, are being challenged by online competitors that are less financially risk and therefore more able to adapt to changes in the business environment. The result is that many small businesses are being forced to go under.
While the crisis has affected every sector of the economy, it is the small business sector that has suffered the most. Small businesses have been forced to downsize, which has led to a rash of chain store closures. Many retail outlets have been forced to downsize, also. This trend is playing out against a backdrop of falling consumer confidence, which is having an even more detrimental effect on the business community. The number of business closures is expected to rise as consumers become less confident in the ability of businesses to survive.
As the threat of business failure looms over businesspeople, the debate about regulatory reform will no doubt continue to rage in Washington, D.C. But business leaders and economists everywhere must remember that the real solution lies in developing an effective business strategy that can be implemented in the face of the current problems. If the business community doesn’t proactively develop an effective response to the current economic uncertainty, the current turbulence will only continue to make things worse for businesses. However, if businesses and organizations look ahead for the future, they will realize that they need not look to the federal government for assistance when it comes to addressing the business community’s problems.
To do so, businesses must turn to private investors and venture capitalists. Venture capitalists provide seed money for new ventures. They take a very high risk in opening a new business, given the fact that they are not sure of the company’s future profitability. For this reason, they demand a high return on their investment, though they are often willing to take a lower return on their equity in exchange for a higher risk. This is the type of capital that allows new business owners to compete with larger and more established business establishments. And angel financing is a great way for business professionals to tap into this venture capital market.