Thus, his new manager was achieving turnover at the expense of profitability, and when asked why, explained disarmingly that it was in his own self-interest to do so.

That was a small domestic affair, but investors who lost their shirts on the Enron and Worldcom accounting scandals would do well to get it in perspective. For they also were trusting their investments to top executives who might be pursuing a loss-making strategy in their own self-interest.

Bagging some celebrated whizz-kid as your new CEO and satisfying his inflated salary expectations with generous share options on the corporate stock he is supposed to be managing, is an obvious encouragement to fraudulent dealing, especially in an American financial `milieu where the fast buck is King, and Poverty is the last of the seven deadly sins.

For example, if employees are allowed to buy the corporate shares very cheaply, as part of their perks, then it pays them enormously to see this stock rising in value - which it is going to do if they have a high turnover and profitability.

This is because share options are only exciting perks where the stock is rising rapidly in value, and for that it needs cash flow and earnings vibrant enough to compel the analysts' attention.

If this isn't coming easily due to market conditions, all it needs is some pliant accountancy to blur the lines between what is earned and what is borrowed, and it helps if a proportion of the running costs can be kept on the balance sheet as an asset.

For example, if wages, and overheads such as rent and rates are written up as capital assets!

Although in this case, the money in the Enron accounts appears to have been borrowed money which they were able to misrepresent as earnings!

In the fantasy world of instant growth and ever rising stock prices, the figures look good to the smart boys on Wall Street, and suddenly it's time to be cashing in some of these share options.

True, the corporation is rapidly going bust, but who's to blame its executives when they did it in their own self-interest?

NOTHING NEW UNDER THE SUN

There have always been scams and scandals on the markets, right back to that day in 1814 when Rothschild was alleged to have made a fortune selling and buying "consols" - "consolidated loans", government stock, used to finance government expenditure and "consolidated" by the government- after spreading some pessimistic rumours about the outcome of Waterloo.

The story goes that couriers told Rothschild that the Battle of Waterloo had been won. But he deliberately spread the rumour that it had been lost. Consequently, the value of the "consol" stock fell to the floor - everybody sold them believing that the British government was "done for" and would not be able to back up the value of the stock. So, Rothschild promptly bought up the "consols" at bargain basement prices.

When people heard that Britain had actually won, they bought them back from Rothschild, at a great profit for him!

BANKING DEREGULATION TO BLAME

But frauds on the Enron scale would simply not have been possible without the banking de-regulation of the 1980s, under which banks were allowed to spread their activities into many areas which had formerly been barred to them.

They were, for instance, now free to lend unlimited amounts of newly created money on speculative investment, which could be used to finance a run on currency.

What is "speculative investment"? This is the buying of securities, commodities, or currency - or financial instruments called derivatives, whose value is "derived" from them - in the expectation. of selling them later when prices have risen. Often, this kind of trading does not relate to the real economy of goods and services, especially so when it involves trading in currencies.

This speculative investment is able to far surpass the amount that goes on the production of real goods and services - and with mergers, take-overs and other forms of inter-lapping activities, has created labyrinthine financial structures which would defy a government commission to unravel.

Not that anyone's been trying! Particularly on Wall Street, the era of financial corporatism has been hailed with satisfaction.

Linked to the new information and telecommunication technologies, it has brought an age of growth and virtually unlimited opportunity for those with the know-how to take advantage.

Not for them the genius or patience necessary to build a productive enterprise which benefits the whole community. These new elites operate to a variable scale of values.