The collapse of Enron is the biggest crash in corporate history. In a matter of months the total share "value" of energy firm Enron, the seventh biggest company in America, went from $80 billion to next to nothing. Thousands of workers are being made redundant. To add insult to injury, their pension plans were locked in to holdings of Enron shares, and are therefore worthless. Meanwhile Enron executives, aware of the coming shipwreck, sold $1 billion of their own holdings to outside suckers and were desperately shredding incriminating documents. At the same time they were siphoning off all the remaining assets through a vermicelli of holding companies fronted by Enron executives.

This could be the beginning of something bigger. The next casualty is likely to be Arthur Andersen. One of the world's big five accounting firms, AA was paid $25 million each year to give Enron accounts a clean bill of health. Last year they received a similar sum for other non-auditing services. Commentators regard this as over the odds - perhaps a bribe to turn a blind eye. In fact Enron's accounts were all fur coat and no knickers. They have overstated their profits by $400 million and built up $40 billion in "off-balance sheet" debts. Arthur Andersen's 85,000 employees have been warned their firm could cease to exist within a year.

"Contagion" could spread further in the world of high finance. Enron owes Barclays Bank $126 million. This is peanuts compared with the $1.9 billion Chase are chasing, the $3 billion Citigroup won't get back or the $2.5 billion Bank of New York can whistle for. Knock-on effects could cause the whole financial world to take a heavy hit.

This is not just an isolated financial scandal. A big finger is pointed at the White House. Criminal investigation into Enron has begun. But Bush's Attorney General has been taken off the case as he has taken the Enron shilling. He is not alone. Thirty-five members of the Bush administration are either on the payroll, or have received campaign backing from the bad guys. It will be interesting to see if they got their money out in time. Enron made donations of $1.7 billion to the Republicans. Then, just to show there are two capitalist parties in the USA, they gave the Democrats $700 million. This money is usually described as a political donation. Enron saw it as an investment, and the best investment they ever made. When the Bush administration hit town, Enron executives were celebrating payback time! In the first part of 2001 they had six meetings with Vice-President Cheney. What were they up to? They were writing the government's energy policy.

In the first months after taking office Bush dobbed out of the Kyoto restrictions on greenhouse gas emissions to prevent global warming. He cut the budget for the Environmental Protection Agency civil enforcement to zero - so they can't take anyone to court. He appointed Pat Wood, the Enron nominee, as Chair of the Federal Energy Regulatory Commission. He proposed to allow drilling in the protected areas of Alaska's National Park, one of nature's last wildernesses and home to the caribou and the arctic fox.

We are not arguing that Bush and Cheney were just on the take from the oil and energy companies. Cheney himself is a big cheese in the corrupt symbiosis with big business that is American politics. Cheney left George Bush senior's administration to become Chief Executive of Halliburton, the biggest maker of oil drilling equipment in the world. Naturally he supports drilling in Alaska. Naturally he uses his post as Veep to advance his own interests. Bush, too, like his father before him, is a major player in the world of Texas oil, and Kenneth Lay, CEO of Enron, was his political fundraiser in chief.

The Enron story allows us to nail a few of the lies they tell us about capitalism. They try to tell us that capitalists are wealth-creators and innovators. Fortune, the US business magazine, was still calling Enron "the most innovative company in America" last year. The Economist last June was hailing Enron's enterprise as "the most successful internet venture of any company in any industry anywhere." (Have you ever wished you were better informed?) They try to tell us that elected politicians get in the way of all this wealth creation with misguided attempts to regulate big business and tell it what to do. They try to tell us that markets are the most natural things in the world. In fact Enron's main asset was political influence. Until twenty years ago, there was no energy market for firms like Enron to play in. As an energy company, they only found a market because it was deliberately "innovated" by corrupt or crazy politicians.

Fact - Enron never innovated. Enron never actually made anything. Enron was basically a middleman. If occasionally the Enron octopus was actually involved in generating electricity, it was usually because they had acquired the plant from someone else as part of their relentless search for money. Enron was a trader. What they traded in was irrelevant to them. Their profits were the fruits of speculation, and last year they started to dry up.

What does Enron know about? Here's the philosophy of former CEO Skilling: "You must cut jobs ruthlessly by 50 or 60 percent. Depopulate. Get rid of people. They gum up the works." This is what presumably passes for management "science" as it taught on expensive courses to create Masters of Business Administration.

The mass generation and transmission of energy, without which big business and mass markets would be impossible, has in every country been the creation of the state. Doesn't that tell you something about capitalism? Think of all the capitalists that make a living by selling you things you have to plug in. None of them would be in business without the best efforts of the state. The grid was set up either by nationalisation or by wholesale regulation. In the USA electricity generation was not publicly owned, but tenders were put out. In other words companies came into existence only because the states or federal government said they were prepared to buy their electricity if the capitalists could build the plant. The electricity generators, in turn, were carefully regulated and not allowed to make big profits from a monopoly position that had been artificially created for them by the state. The generating capacity was knit together by the grid, an example of state planning. Since it is difficult to store energy, it had to be shared to deal with peaks in demand.

The system worked. California, since electricity deregulation, is not working. The state is blighted by "brownouts" and cursed by escalating energy bills. Instead of a co-operative grid, a "pool" of spare electricity which functions as a market (actually a pseudo-market), was set up. This lets in the middlemen such as Enron. The profit-gougers have certainly learned how to manipulate prices in the pool. As peak demand leads to price "spikes", the cost of electricity in California leaps from $30 to $1,000 per megawatt-hour. Energy analyst Jerry Oppenheim explains: "Deregulation created volatility, which is what the energy traders want." Cheney says California's problem is insufficient generating capacity. He suggests they build more nuclear power plants. Apart from the fraud of nuclear energy costing (whatever happened to "electricity too cheap to meter" that we were promised?), hasn't the Vice President heard that much of California lies on an earthquake fault line? So there is capitalist "progress" for you. Who was daft enough to dream up energy deregulation?

The idea was made in Britain. Economists have tried to argue it was about efficiency, but actually it was about smashing the miners, and it cost us taxpayers and energy consumers billions. Usually economists talk about the importance of marginal cost calculation - working out the cost of producing an extra unit of energy. The rationale is that, even if it could be proved that gas-fired power was cheaper from a standing start, it wasn't if you had to scrap functioning coal-fired generators and buy expensive new plant to burn gas. But, under energy deregulation, that was what happened. To Cecil Parkinson, the Energy Secretary of the time, marginal cost was as alien a concept as marital fidelity. All his speeches were about Arthur Scargill. The Tories were prepared to spend as much of our money as it took to smash the mining communities.

The energy distribution companies for their part were not interested in enhancing "efficiency". They felt the generating companies had them by the short and curlies. They built gas-fired generators at our expense in order to improve their bargaining power vis-à-vis the big generating firms. And coal burning went into decline.

Enron had global reach. They were responsible for about a quarter of all Europe's power supply. All these markets were opened up to them by political lobbying from Washington.

Take the case of the Dabhol plant in Maharashtra state in India. This monstrosity is likely to cost local people $2.9 billion. It will generate electricity at three times the usual cost. The company explains this is because the plant is "state of the art". This is an unusual claim. We would not expect a "state of the art" racing car to travel three times as slowly as an ordinary family saloon, but that is what we are being asked to swallow. The Clinton government lobbied hard for Enron to get the contract.

Enron is the only corporation that has been the subject of reports into human rights abuses by both Amnesty International and the US-based Human Rights Watch. To build the Dabhol plant, villagers had to be expelled from their homelands. In 1997 they peacefully demonstrated against their eviction, and were met with a police riot. Maharshtra police ran amok, beating up pregnant women and wrecking villagers' huts. They were aided by Enron placing its helicopter at the disposal of the cops to spy on the protesters and footing the bill for the police rioters' wages. Things are no different under the Republicans. Last year President Bush was scheduled to visit India. Top of his list of things to do was to lobby Indian politicians to pay a $64 million debt allegedly owed to Enron. The most powerful man in the world moonlights as a debt collector!

It doesn't just happen in India. A few years ago Bush's father (president during the Gulf War) went to Kuwait with his former secretary of state James Baker. They were there to bat for Enron to get a big energy contract. Enron offered to deliver at 11¢ per kilowatt hour. Deutsche Babcox could do 6¢ per kilowatt hour. The existing state subsidised rate was 0.5¢. Obviously Enron got the job. If any reader can suggest a reason for this success apart from bribery and corruption, they can contact us to receive a small prize. In the Philippines, Argentina, Panama and throughout the "third world" Enron has made waves through bullying and pressure from the White House.

Another banana republic Enron operated in was Blair's Britain. When Labour was elected in 1997, the government maintained the last shreds of the coal mining industry in existence by imposing a moratorium on the further building of gas-fired electricity generators. They stopped the "dash for gas" in its tracks and, as we explained earlier, there was complete economic justification for the policy. But Enron now had its foot in the door, and they wanted to build new gas-fired capacity at Teesside. Documents discovered in the United States under the Freedom of Information Act reveal that the US government placed unremitting pressure on the Cabinet to reverse the moratorium - all for Enron. The documents show that White House officials were aware of when the crucial Cabinet meetings would be - in other words that they were spying electronically on the British government. Of course Blair gave in and the last hopes of the mining industry were snuffed out. Guess what? Enron sponsored the Labour Party Conference.

Now Enron has collapsed. "How are the mighty fallen!" (2 Samuel 1:19) Bush will no doubt swear that he "didn't have improper relations with that company." One of the disgruntled sacked workers commented: "It wasn't a couple of rogue trades. It was systemic." The system is called capitalism.