“THE SHOCK DOCTRINE”,
Naomi Klein, Penguin, Victoria, 2007
Some years into the Nikkei’s* prolonged doldrums a serious looking man on TV said he was hoping for a major earthquake to hit Japan. As it’s on a fault line Tokyo is sure to get one sooner or later, the suit assured the camera, and sooner would be better. If Tokyo fell over, it would have to be rebuilt. This would provide a powerful stimulus to domestic investment, the lack of which had been holding back Japan’s stock market. *Nikkei is a stock index of the Tokyo Stock Market. Ed.
It sounds like satire, but there was no sense of irony in the remark. That’s because it was a conventional piece of economic analysis, offered in the context of a discussion about global markets. Of all the cliched phrases favoured by financial commentators, the notion of “creative destruction” might be the most popular of all. What better way to boost the Japanese economy, which was becoming deflationary, than by putting the country’s vast savings into something more potent than a tiny bit of bank interest? Capitalist economies need growth and expansion.
Among the money men violent slogans abound, so much so that we tend not to notice them. Naomi Klein thinks we need to. Her starting point is “shock therapy”, the 1990s’ version of the ideology. Had her book detailed the uses of “shock therapy” it would have been valuable, but it would not have been indispensable. Others have told the sorry tale and told it well. Klein makes no claim to having covered new ground or to being an economist. Amid her copious acknowledgements, she admits to having asked for a crash course on the theories of neo-liberalism. She’s too modest. “The Shock Doctrine” offers an original and stimulating synthesis*.
*Klein notes the contributions of writers we’ve discussed in previous issues e.g. John Perkins: “Confessions Of An Economic Hitman”, Antonia Juhasz: “The Bush Agenda” and Stephen Kinzer: “Overthrow”, all reviewed in Watchdog 112, August 2006, online at http://www.converge.org.nz/watchdog/12/08.htm; also Joseph Stiglitz, “Globalization And Its Discontents”, in Watchdog 105, April 2004, online at http://www.converge.org.nz/watchdog/05/10.htm. I’ve previously reviewed other insightful accounts, including those by Noam Chomsky: “Hegemony Or Survival”, Watchdog 106, August 2004, online at http://www.converge.org.nz/watchdog/06/16.htm; John Ralston Saul, “The Collapse Of Globalism”, Watchdog 110, December 2005, online at http://www.converge.org.nz/watchdog/10/05.htm; Bryan Gould: “The Democracy Sham”, Watchdog 114, May 2007, online at http://www.converge.org.nz/watchdog/14/03.htm; Sharon Beder: “Suiting Themselves”, Watchdog 115, August 2007, online at http://www.converge.org.nz/watchdog/15/09.htm.
Neo-Liberalism: Selfishness & Self-Deception
Neo-liberalism touts itself as a new science, yet it is based on a series of very old assumptions. It pretends to rationality, claiming to be giving us a true account of human nature, alternatives being merely false. But the basic premise on which all is based - that our species is selfish, always seeking to maximise personal gain - is as overt a prejudice as any. Self-deception is at the core of neo-liberal theory and its truths are really hopes. It needs human nature to be this way because that would validate the championing of the rich and powerful. Klein is showing us that, rather than the cool technocrats of their own publicity, neo-libs tend to be frenetic propagandists. They have invented an implausible economic actor for whom every social occasion is a market transaction.
Klein gives an extensive account of Milton Friedman, guru of what has come to be known as the Chicago School. Friedman has a cult following for lecturing his disciples that “only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically possible”. This is the origin of shock therapy as an explicitly political phrase. The patient, the moderate welfarist economies of the post-war West, could have been treated in outpatients and sent home, but then he would have continued to live his irrational, unselfish life. So Dr Friedman summoned the orderlies to wheel him into the operating theatre.
“Capitalism And Freedom”, Friedman’s seminal work, came out in 1962, mostly - and fortunately - ignored. The “politically possible” moment arrived in the early 1970s when Chile elected Salvador Allende as President. Being reformist, the new Government might have challenged the US transnationals, and Chile’s tradition of democracy was a threat to the reliable dictatorships in the rest of Latin America. The result is well-known. In the name of “individual freedom” Allende was murdered (in the “first 9/11” i.e. on September 11th, 1973) and fascism was installed in the form of General Pinochet, a fervent admirer of Friedman.
The election of true believers Margaret Thatcher in the UK, in 1979, and, in the next year, of Ronald Reagan in the US, gave legitimacy and influence to neo-liberals. As self-styled revolutionaries, Maoists of the Right, the Friedmanites admitted no deviations from the one true path. That way lay temptation. In Klein’s words: “In order for the ideal to be achieved, it requires a monopoly on ideology; otherwise, according to the central theory, the economic signals become distorted and the entire system is thrown out of balance”. So it works best in a dictatorship like Chile, but, if a parliamentary democracy can be convinced to join the movement, the propaganda value is greater. Enter NZ, which succumbed in 1984. In the heady early days of Rogernomics and Ruthanasia, we contended with Chile as the purest expression of the new order (NZ does not feature in the book, probably because our - as we say - clean, green land has a happy reputation).
Three Essential Elements
Klein points to three essential elements to the neo-liberal revolution: privatisation, government deregulation and big social spending cuts. These enable “huge transfers of public wealth to private hands, often accompanied by exploding debt”. Between Pinochet’s killings and David Lange’s deceptions lies much of the world. Klein tours the trouble spots, showing how crises were created so that the new order could be built amid the rubble of the old. Because none of the world’s societies would choose neo-liberalism, secrecy is always needed *. In Bolivia, which was administered shock therapy in 1985, apparently only five Bolivians knew about the surgery in advance. The five included the head of the army and the head of the police. *The importance of secrecy in a democratic context like NZ is described in my review of “Roderick Deane” by Michael and Judith Bassett in Watchdog 113, December 2006, online at http://www.converge.org.nz/watchdog/13/11.htm.
Bolivia’s prescription was written by the American economist, Jeffrey Sachs, who also operated on Russia and Poland **. And in 2006 it was revealed that the 1400-page report that had ravaged Argentina after its 1992 therapy had been written in secret by the Wall Street financiers, JP Morgan and Citibank. **These operations Sachs now disowns, claiming they didn’t follow his medication. As Klein found when interviewing him, Sachs has realised primitive market mechanisms don’t always work but he finds it hard to admit he was wrong. These days his public statements about Africa are certainly more responsible.
Klein is cogent in putting into context the various experiments. Whatever political circumstances obtain, the therapists have to be adroit opportunists. The best time to strike is when citizens have other things to think about. Some examples: Yugoslavia, after the 1999 NATO attack; China, in 1989 after Tiananmen Square, and Russia, in 1993 after Boris Yeltsin’s tanks fired on Parliament. Thatcher, who had to contend with a notoriously pragmatic and gradualist electorate, could operate only after the Argentine colonels invaded the Falklands in 1982. She seized the moment to pick a fight with the trade union movement by deploying the State against the coal miners. Then she could begin her privatisation.
Restructuring (this more wideranging term does not figure in Kein’s lexicon) needs a cleared building site. Observing the chaos of Yeltsin’s regime, Richard Pipes, a relieved American neo-lib strategist, said he had been hoping “for Russia to keep disintegrating until nothing remains of its institutional structures”. A tactician at investment banker Morgan Stanley told his mates that “what we need now in Asia is more bad news. Bad news is needed to keep stimulating the adjustment process”. A US economist summed up the global need: “Any reform must be disruptive on a historically unprecedented scale. An entire world must be discarded”.
The South African version was uniquely cynical. In 1993, in the course of the negotiations that ended apartheid, the outgoing regime tried unsuccessfully to cling on by proposing constitutional changes - a decentralised federation, reserved ethnic seats - that would have weakened the African National Congress (ANC) Government by dispersing the power of the central government. These were traditional gambits and recognised as diversions by key ANC personnel.
Amid the euphoria over ending apartheid, a few boring financial matters were added to the agenda. The central bank needed total independence. Like the rest of the world it was now joining, South Africa had to prepare for GATT (the former General Agreement on Tariffs and Trade, now the WT0 - World Trade Organisation). Even as the new country was born, the hopes of freedom fighters had been traded away. Private property is protected (so land distribution is illegal) as are “intellectual property rights” (so there are no cheap drugs to combat AIDS). Subsidies are illegal (so factories are closing).
Why can’t the new Government deliver on building houses and providing public health? Because, under GATT/WTO, the Government has had to fritter its resources servicing a debt - incurred by the previous apartheid regime of the Nationalists. So not only has there has been no nationalisation of strategic assets, but remaining resources had to be sold to pay down the debt. The negotiations that have so crippled the country were kept secret from the ANC caucus. Klein interviewed the doubtless well-meaning negotiator who signed on for the ANC. Asked if he appreciated at the time what he had done, he replied: “Frankly, no”.
Shock And Awe
The best of all opportunities was provided by Al Qaeda on 9/11, exploited by the Bush cabal to remake not only Iraq but also the US itself. And the central metaphor of neo-liberal policy in the 21st Century has been Shock and Awe, the tactics of Gulf War 2. With one side having a monopoly of force, deployed from a distance, the technicolour blitzkreig was inevitable. That, however, is not the point. Shock and Awe was more than a military tactic. As characterised by the US Army itself: “Shock and Awe are actions that create fears, dangers, and destruction that are incomprehensible to the people at large”.
This is not like World War 2, when mass bombing was intended to demoralise civilians so that they were unwilling to enlist or to accept ongoing miseries. It was always apparent that Saddam Hussein would not be able to fight on after the first few days. Shock and Awe was not needed to “create fears, dangers, and destruction” so that Iraqi civilians would throw down their weapons. Shock and Awe was designed to bewilder the population so that it would not resist the neo-liberal order that would follow.
A career US diplomat has confided that, because his Government’s stated aims could not have been achieved, he expects to never understand why Iraq was attacked. Bush and his accomplices might well have had several contributing motives - to do with oil or George Junior’s need to prove himself to George Senior etc - but analysis that ignores the doctrines of shock will always flail. More perceptive was a colleague who concluded that there’s little to be understood by pondering the traditional complexities. Bush attacked because he could. Saddam was shocked and awed, Klein shows, to empower US shock therapists and to bring Iraq into the global capitalist camp. War is the most effective of all therapies (for a detailed analysis of US strategies in Iraq, essentially identical to Klein’s discussion, see my review of Antonia Juhasz’s “The Bush Agenda”, in Watchdog 112, August 2006, online at http://www.converge.org.nz/watchdog/12/08.htm).
“Shock and Awe: Achieving Rapid Dominance”, to give the US Army manifesto its full name, continues: “Nature in the form of tornadoes, hurricanes, earthquakes, floods, uncontrolled fires, famine, and disease can engender Shock and Awe”. Here the Dr Strangeloves have had a lucky run. Klein discusses a domestic example, the deliberately lethargic help offered New Orleans in 2005, where Hurricane Katrina ripped up a city with conveniently large numbers of poor black people. It was a city of unrepaired levees, underfunded public transit, and little disaster preparedness. This was malign neglect, government-as-usual. But after the flood, neo-liberal therapy was administered. While no emergency federal money was allowed to retain public planners, new contracts were granted to outside, private consultants (Klein suggests that the 9/11 hijackers were helped by inadequate, privatised air traffic control and airport checks).
The big disaster opportunities were offshore. The tsunami that hit Sri Lanka in 2004 allowed a tourist official to draw a new “brand personality profile” for his country. The President, elected with a mandate to resist privatisation, visited the devastated coast. “Nature itself”, observed the President, had “whacked us from all sides and taught us a lesson to be together”. Four days after the tsunami, she introduced a water privatisation bill. Three days after that, it was announced that a “taskforce” - not Parliament - would design a new economy. The new “togetherness” was motivated by the opportunity that Big Business saw in beaches swept clean of fishing villages. The hotel industry wanted foreign tourists. As a “safety measure”, locals were sent to camps in the interior, where they remain. Klein discerns a similar pattern of creative destruction following hurricanes in Central America, Thailand and the Maldives.
If Klein is right about the shock doctrine, the often bewildering decisions made by global elites begin to make sense. “Yet because the decisive role played by shocks and crises has been so effectively purged from the official record of the rise of the free market, the extreme tactics on display in Iraq and New Orleans are often mistaken for the unique incompetence or cronyism of the Bush White House. In fact, Bush’s exploits merely represent the monstrously violent and creative culmination of a 50 year campaign for total corporate liberation”.
Financial traders have long appreciated that markets and disasters are bullish partners. Klein quotes a staffer from the investment house, Smith Barney. Advising a punt on what he called his “Plutonomy basket” of stocks (by which he might have meant that they were the investments that had the potential to make rich people into super rich plutocrats), he points out that “if income inequality is allowed to persist and widen, the plutonomy basket should continue to do very well”. The fascist mind is partial to metaphors of disease. Hitler set the pattern by imagining the Fatherland as a pure host contaminated by the cancer of inferior races. Klein offers the example of Pinochet, for whom the ideal of democratic solidarity was “gangrene”. A Chicago School economist saw his neo-liberal ideology “as antibodies to combat anti-economic ideas”. Images of cleansing abound in the literature of the shock therapists. When Asian economies went down the gurgler a few years ago Friedmanites prattled about “the Asian Contagion” (they didn’t mind that the contagion was spread by the currency speculation they had demanded).
The “Mistakes” Are Integral
Conventional analysis turns a blind eye. Now that, in the US, the Democrats are ascendant, Bush’s Iraq gambit is routinely dubbed a “miscalculation” or a “blunder”. Previously, looking at Russia, journalists would worry about a “culture of corruption” as evidence that Russians were “not ready for democracy”. Perhaps they were used to dictators. Perhaps the many crimes were an expression of the Russian national character. Domestic American shock therapy is excused as the excesses of a few rotten apples*. There are always vague and irrefutable assertions available which act to deflect a more precise examination. Anything to avoid a diagnosis of systemic intent. * For a discussion of rotten apple ideology, check my review of “Enron: The Smartest Guys In The Room”, Watchdog 111, April 2006, online at http://www.converge.org.nz/watchdog/11/10.htm.
Klein is showing us that “the mistakes” are integral. Far from being unintended, “crisis is built into the Chicago School model. When limitless sums of money are free to travel the globe at great speed, and speculators are able to bet on the value of everything from cocoa to currencies, the result is enormous volatility. And, since free trade policies encourage poor countries to continue to rely on the export of raw resources such as coffee, copper, oil or wheat, they are particularly vulnerable to getting trapped in a vicious circle of continuing crisis. A sudden drop in the price of coffee sends entire economies into depression, which is then deepened by currency traders who, seeing a country’s financial downturn, respond by betting against its currency, causing its value to plummet. When interest rates are added, and national debts balloon overnight, you have a recipe for economic mayhem” (see my review of Raj Patel’s “Stuffed And Starved”, Watchdog 116, December 2007, online at http://www.converge.org.nz/watchdog/16/08.htm, for a discussion of global food production).
Klein calls it “disaster capitalism”. While the Bushite form it takes is a recent thing, the principle is not at all new. 250 years ago, at the start of the modern period, the economist Adam Smith advocated the seizing of “waste lands” for more profitable use. Now, Klein remarks, his ideological descendants employ the same methods to seize public assets: “Under Chicago School economics, the State acts as the colonial frontier, which corporate conquistadors pillage with the same ruthless determination and energy as their predecessors showed when they hauled home the gold and silver of the Andes. Where Adam Smith saw fertile green fields turned into profitable farmlands on the pampas and the prairies, Wall Street saw ‘green field opportunities’ in Chile’s phone system, Argentina’s airline, Russia’s oil fields, Bolivia’s water system, the United States’ public airwaves, Poland’s factories - all of them built with public wealth, then sold for a trifle”.
A contrite Jeffrey Sachs has called for a new Marshall Plan to help the poor world. The original Marshall Plan, under which the US government advanced huge loans to rebuild post-war Europe, was an unqualified success. Living standards recovered and then pushed on. This, Sachs seems to think, is reason enough to go back to a proven model. Yes, it might well be, but Klein shows that even an architect of the new model can miss its point. The Marshall Plan was not philanthropic. Strategists needed to counter a Soviet appeal to an ethic of development and equality. In the 1940s, Klein notes, US strategists would rather split Germany than risk losing all of it “either to collapse or to the Left”. She reminds us that President Franklin Roosevelt’s New Deal of the 1930s, with its welfare payments and subsidies, set up the domestic economy recovery. But it was not prompted by a desire to bail out the victims of the Depression so much as by a need to bail out capitalism, the system itself. Tactically, the Marshall Plan was the New Deal extended to Europe. Klein argues that Sachs doesn’t see that “there was never going to be a Marshall Plan for (the new) Russia because there was only ever a Marshall Plan because of (the old) Russia”.
Capitalism’s “Monopoly Period” Only Lasted A Few Years, In 90s
“We know the adversary, we know the threat”, lectured Donald Rumsfeld, Bush’s recent Defense Secretary, not long before he was fired because he made too explicit the tenets of the disaster capitalists. This echoed standard talk about the Soviets, but Rumsfeld was not thinking of the Russkies. No, the threat was Defense Department bureaucracy. To its boss, even the US Army was a relic of the bad old days of social cohesion. “In the 21st Century”, Rumsfeld told his underlings, “we’re going to have to stop thinking about things, numbers of things, and mass, and think also and maybe even first about speed and agility and precision”. The Army was “one of the world’s last bastions of central planning”. His solution, to contract out the fighting, to bring in public-private-partnerships, to wage war in Iraq on a just-in-time model consistent with corporatist theory, was a military failure. We are reminded of this every day when we catch the news and hear how America didn’t “plan” for the occupation. To Rumsfeld, the ideologist, it’s been a political success.
The original, literal, shock therapy was designed by Ewen Cameron, a psychiatrist at McGill University in Montreal. During the McCarthyite post-war, when popular culture was awash with paranoid fantasies about brainwashing Red Chinese and body snatching aliens, Cameron conducted secret experiments for the US Central Intelligence Agency. Electro-convulsive therapy [ECT] was supposed to treat mental disorders by washing memory and personality so that a new brain could be conditioned. “Their minds”, one doctor remarked of his unwitting patients, “seem like clean slates upon which we can write”. A variant on the neo-liberal superstition that humans are rational machines, the therapy left its victims in ruin. The mad doctors had scribbled illegibly.
Klein argues that ECT is significant for more than the naive cruelty of its methodology. Shock therapy was in part a political act, a technology of control and a progenitor of the shock doctrine. Whether its purpose has been the remaking of a malleable personality or the remaking of a malleable government, shock therapy has a reactionary intent. “The introverted schizophrenic or melancholic may be likened to a walled city which has closed its gates and refuses to trade with the rest of the world”. This was a psychiatrist’s use of the illness metaphor, especially distasteful insofar as it was offered in 1940, when Hitler’s stormtroopers would have agreed with the image. Klein cites it as a foreshadowing of Shock and Awe, whose purpose, as the US Army puts it, is to “paralyse or overload an adversary’s perceptions and understandings of events ... rendering the adversary completely impotent... (through the) manipulation of senses and inputs”.
First Cameron’s schizophrenics, then Chile’s public servants, Bolivia’s tin miners, Sri Lanka’s fishermen, the people of Russia, the poor of New Orleans, the shocked-and-awed of Iraq, the newly enfranchised South Africans, the Palestinians... All have been victims of the burgeoning disaster capitalism. It’s not planned in advance, it’s not a vast conspiracy, no one’s in charge, but that doesn’t mean the pattern’s not there. The outstanding feature of Klein’s brilliant survey is to show the essential element that links places which we are accustomed to see in disparate terms, as though each had idiosyncratic problems. Often racial or religious conflict, as in South Africa or Israel, is a symptom, not the disease.
A standard economics text from the 60’s taught that we can have guns or we can have butter, productive consumption or military spending. In the same vein Klein discusses the “guns-to-caviar” index, a measure that showed you can afford either fighter jets or executive jets, but not both. Since 2003 - the year of the invasion of Iraq - both indexes have taken off. This, Klein suggests, is the marker of how deeper global instability and rising profits have become entwined: “The disaster capitalism complex thrives in conditions of low-intensity grinding conflict. That seems to be the end point in all the disaster zones, from New Orleans to Iraq”.
Excess hastens its own demise. The new virulent disorder spread swiftly, but so has its antidote, popular opposition. “The disaster capitalism complex is on a par with the ‘emerging market’ and information technology booms of the 90s”. They’re each spectacular but brief outbursts. So ultimately Klein is optimistic. What she dubs capitalism’s “monopoly period” lasted only from 1991, when the Soviet Union collapsed, to 1999, when WTO talks collapsed. Since then in, for example, Latin America and Europe, we’ve seen healthy signs of “shock resistance”.
Naomi Klein, Penguin, Victoria, 2007
Some years into the Nikkei’s* prolonged doldrums a serious looking man on TV said he was hoping for a major earthquake to hit Japan. As it’s on a fault line Tokyo is sure to get one sooner or later, the suit assured the camera, and sooner would be better. If Tokyo fell over, it would have to be rebuilt. This would provide a powerful stimulus to domestic investment, the lack of which had been holding back Japan’s stock market. *Nikkei is a stock index of the Tokyo Stock Market. Ed.
It sounds like satire, but there was no sense of irony in the remark. That’s because it was a conventional piece of economic analysis, offered in the context of a discussion about global markets. Of all the cliched phrases favoured by financial commentators, the notion of “creative destruction” might be the most popular of all. What better way to boost the Japanese economy, which was becoming deflationary, than by putting the country’s vast savings into something more potent than a tiny bit of bank interest? Capitalist economies need growth and expansion.
Among the money men violent slogans abound, so much so that we tend not to notice them. Naomi Klein thinks we need to. Her starting point is “shock therapy”, the 1990s’ version of the ideology. Had her book detailed the uses of “shock therapy” it would have been valuable, but it would not have been indispensable. Others have told the sorry tale and told it well. Klein makes no claim to having covered new ground or to being an economist. Amid her copious acknowledgements, she admits to having asked for a crash course on the theories of neo-liberalism. She’s too modest. “The Shock Doctrine” offers an original and stimulating synthesis*.
*Klein notes the contributions of writers we’ve discussed in previous issues e.g. John Perkins: “Confessions Of An Economic Hitman”, Antonia Juhasz: “The Bush Agenda” and Stephen Kinzer: “Overthrow”, all reviewed in Watchdog 112, August 2006, online at http://www.converge.org.nz/watchdog/12/08.htm; also Joseph Stiglitz, “Globalization And Its Discontents”, in Watchdog 105, April 2004, online at http://www.converge.org.nz/watchdog/05/10.htm. I’ve previously reviewed other insightful accounts, including those by Noam Chomsky: “Hegemony Or Survival”, Watchdog 106, August 2004, online at http://www.converge.org.nz/watchdog/06/16.htm; John Ralston Saul, “The Collapse Of Globalism”, Watchdog 110, December 2005, online at http://www.converge.org.nz/watchdog/10/05.htm; Bryan Gould: “The Democracy Sham”, Watchdog 114, May 2007, online at http://www.converge.org.nz/watchdog/14/03.htm; Sharon Beder: “Suiting Themselves”, Watchdog 115, August 2007, online at http://www.converge.org.nz/watchdog/15/09.htm.
Neo-Liberalism: Selfishness & Self-Deception
Neo-liberalism touts itself as a new science, yet it is based on a series of very old assumptions. It pretends to rationality, claiming to be giving us a true account of human nature, alternatives being merely false. But the basic premise on which all is based - that our species is selfish, always seeking to maximise personal gain - is as overt a prejudice as any. Self-deception is at the core of neo-liberal theory and its truths are really hopes. It needs human nature to be this way because that would validate the championing of the rich and powerful. Klein is showing us that, rather than the cool technocrats of their own publicity, neo-libs tend to be frenetic propagandists. They have invented an implausible economic actor for whom every social occasion is a market transaction.
Klein gives an extensive account of Milton Friedman, guru of what has come to be known as the Chicago School. Friedman has a cult following for lecturing his disciples that “only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically possible”. This is the origin of shock therapy as an explicitly political phrase. The patient, the moderate welfarist economies of the post-war West, could have been treated in outpatients and sent home, but then he would have continued to live his irrational, unselfish life. So Dr Friedman summoned the orderlies to wheel him into the operating theatre.
“Capitalism And Freedom”, Friedman’s seminal work, came out in 1962, mostly - and fortunately - ignored. The “politically possible” moment arrived in the early 1970s when Chile elected Salvador Allende as President. Being reformist, the new Government might have challenged the US transnationals, and Chile’s tradition of democracy was a threat to the reliable dictatorships in the rest of Latin America. The result is well-known. In the name of “individual freedom” Allende was murdered (in the “first 9/11” i.e. on September 11th, 1973) and fascism was installed in the form of General Pinochet, a fervent admirer of Friedman.
The election of true believers Margaret Thatcher in the UK, in 1979, and, in the next year, of Ronald Reagan in the US, gave legitimacy and influence to neo-liberals. As self-styled revolutionaries, Maoists of the Right, the Friedmanites admitted no deviations from the one true path. That way lay temptation. In Klein’s words: “In order for the ideal to be achieved, it requires a monopoly on ideology; otherwise, according to the central theory, the economic signals become distorted and the entire system is thrown out of balance”. So it works best in a dictatorship like Chile, but, if a parliamentary democracy can be convinced to join the movement, the propaganda value is greater. Enter NZ, which succumbed in 1984. In the heady early days of Rogernomics and Ruthanasia, we contended with Chile as the purest expression of the new order (NZ does not feature in the book, probably because our - as we say - clean, green land has a happy reputation).
Three Essential Elements
Klein points to three essential elements to the neo-liberal revolution: privatisation, government deregulation and big social spending cuts. These enable “huge transfers of public wealth to private hands, often accompanied by exploding debt”. Between Pinochet’s killings and David Lange’s deceptions lies much of the world. Klein tours the trouble spots, showing how crises were created so that the new order could be built amid the rubble of the old. Because none of the world’s societies would choose neo-liberalism, secrecy is always needed *. In Bolivia, which was administered shock therapy in 1985, apparently only five Bolivians knew about the surgery in advance. The five included the head of the army and the head of the police. *The importance of secrecy in a democratic context like NZ is described in my review of “Roderick Deane” by Michael and Judith Bassett in Watchdog 113, December 2006, online at http://www.converge.org.nz/watchdog/13/11.htm.
Bolivia’s prescription was written by the American economist, Jeffrey Sachs, who also operated on Russia and Poland **. And in 2006 it was revealed that the 1400-page report that had ravaged Argentina after its 1992 therapy had been written in secret by the Wall Street financiers, JP Morgan and Citibank. **These operations Sachs now disowns, claiming they didn’t follow his medication. As Klein found when interviewing him, Sachs has realised primitive market mechanisms don’t always work but he finds it hard to admit he was wrong. These days his public statements about Africa are certainly more responsible.
Klein is cogent in putting into context the various experiments. Whatever political circumstances obtain, the therapists have to be adroit opportunists. The best time to strike is when citizens have other things to think about. Some examples: Yugoslavia, after the 1999 NATO attack; China, in 1989 after Tiananmen Square, and Russia, in 1993 after Boris Yeltsin’s tanks fired on Parliament. Thatcher, who had to contend with a notoriously pragmatic and gradualist electorate, could operate only after the Argentine colonels invaded the Falklands in 1982. She seized the moment to pick a fight with the trade union movement by deploying the State against the coal miners. Then she could begin her privatisation.
Restructuring (this more wideranging term does not figure in Kein’s lexicon) needs a cleared building site. Observing the chaos of Yeltsin’s regime, Richard Pipes, a relieved American neo-lib strategist, said he had been hoping “for Russia to keep disintegrating until nothing remains of its institutional structures”. A tactician at investment banker Morgan Stanley told his mates that “what we need now in Asia is more bad news. Bad news is needed to keep stimulating the adjustment process”. A US economist summed up the global need: “Any reform must be disruptive on a historically unprecedented scale. An entire world must be discarded”.
The South African version was uniquely cynical. In 1993, in the course of the negotiations that ended apartheid, the outgoing regime tried unsuccessfully to cling on by proposing constitutional changes - a decentralised federation, reserved ethnic seats - that would have weakened the African National Congress (ANC) Government by dispersing the power of the central government. These were traditional gambits and recognised as diversions by key ANC personnel.
Amid the euphoria over ending apartheid, a few boring financial matters were added to the agenda. The central bank needed total independence. Like the rest of the world it was now joining, South Africa had to prepare for GATT (the former General Agreement on Tariffs and Trade, now the WT0 - World Trade Organisation). Even as the new country was born, the hopes of freedom fighters had been traded away. Private property is protected (so land distribution is illegal) as are “intellectual property rights” (so there are no cheap drugs to combat AIDS). Subsidies are illegal (so factories are closing).
Why can’t the new Government deliver on building houses and providing public health? Because, under GATT/WTO, the Government has had to fritter its resources servicing a debt - incurred by the previous apartheid regime of the Nationalists. So not only has there has been no nationalisation of strategic assets, but remaining resources had to be sold to pay down the debt. The negotiations that have so crippled the country were kept secret from the ANC caucus. Klein interviewed the doubtless well-meaning negotiator who signed on for the ANC. Asked if he appreciated at the time what he had done, he replied: “Frankly, no”.
Shock And Awe
The best of all opportunities was provided by Al Qaeda on 9/11, exploited by the Bush cabal to remake not only Iraq but also the US itself. And the central metaphor of neo-liberal policy in the 21st Century has been Shock and Awe, the tactics of Gulf War 2. With one side having a monopoly of force, deployed from a distance, the technicolour blitzkreig was inevitable. That, however, is not the point. Shock and Awe was more than a military tactic. As characterised by the US Army itself: “Shock and Awe are actions that create fears, dangers, and destruction that are incomprehensible to the people at large”.
This is not like World War 2, when mass bombing was intended to demoralise civilians so that they were unwilling to enlist or to accept ongoing miseries. It was always apparent that Saddam Hussein would not be able to fight on after the first few days. Shock and Awe was not needed to “create fears, dangers, and destruction” so that Iraqi civilians would throw down their weapons. Shock and Awe was designed to bewilder the population so that it would not resist the neo-liberal order that would follow.
A career US diplomat has confided that, because his Government’s stated aims could not have been achieved, he expects to never understand why Iraq was attacked. Bush and his accomplices might well have had several contributing motives - to do with oil or George Junior’s need to prove himself to George Senior etc - but analysis that ignores the doctrines of shock will always flail. More perceptive was a colleague who concluded that there’s little to be understood by pondering the traditional complexities. Bush attacked because he could. Saddam was shocked and awed, Klein shows, to empower US shock therapists and to bring Iraq into the global capitalist camp. War is the most effective of all therapies (for a detailed analysis of US strategies in Iraq, essentially identical to Klein’s discussion, see my review of Antonia Juhasz’s “The Bush Agenda”, in Watchdog 112, August 2006, online at http://www.converge.org.nz/watchdog/12/08.htm).
“Shock and Awe: Achieving Rapid Dominance”, to give the US Army manifesto its full name, continues: “Nature in the form of tornadoes, hurricanes, earthquakes, floods, uncontrolled fires, famine, and disease can engender Shock and Awe”. Here the Dr Strangeloves have had a lucky run. Klein discusses a domestic example, the deliberately lethargic help offered New Orleans in 2005, where Hurricane Katrina ripped up a city with conveniently large numbers of poor black people. It was a city of unrepaired levees, underfunded public transit, and little disaster preparedness. This was malign neglect, government-as-usual. But after the flood, neo-liberal therapy was administered. While no emergency federal money was allowed to retain public planners, new contracts were granted to outside, private consultants (Klein suggests that the 9/11 hijackers were helped by inadequate, privatised air traffic control and airport checks).
The big disaster opportunities were offshore. The tsunami that hit Sri Lanka in 2004 allowed a tourist official to draw a new “brand personality profile” for his country. The President, elected with a mandate to resist privatisation, visited the devastated coast. “Nature itself”, observed the President, had “whacked us from all sides and taught us a lesson to be together”. Four days after the tsunami, she introduced a water privatisation bill. Three days after that, it was announced that a “taskforce” - not Parliament - would design a new economy. The new “togetherness” was motivated by the opportunity that Big Business saw in beaches swept clean of fishing villages. The hotel industry wanted foreign tourists. As a “safety measure”, locals were sent to camps in the interior, where they remain. Klein discerns a similar pattern of creative destruction following hurricanes in Central America, Thailand and the Maldives.
If Klein is right about the shock doctrine, the often bewildering decisions made by global elites begin to make sense. “Yet because the decisive role played by shocks and crises has been so effectively purged from the official record of the rise of the free market, the extreme tactics on display in Iraq and New Orleans are often mistaken for the unique incompetence or cronyism of the Bush White House. In fact, Bush’s exploits merely represent the monstrously violent and creative culmination of a 50 year campaign for total corporate liberation”.
Financial traders have long appreciated that markets and disasters are bullish partners. Klein quotes a staffer from the investment house, Smith Barney. Advising a punt on what he called his “Plutonomy basket” of stocks (by which he might have meant that they were the investments that had the potential to make rich people into super rich plutocrats), he points out that “if income inequality is allowed to persist and widen, the plutonomy basket should continue to do very well”. The fascist mind is partial to metaphors of disease. Hitler set the pattern by imagining the Fatherland as a pure host contaminated by the cancer of inferior races. Klein offers the example of Pinochet, for whom the ideal of democratic solidarity was “gangrene”. A Chicago School economist saw his neo-liberal ideology “as antibodies to combat anti-economic ideas”. Images of cleansing abound in the literature of the shock therapists. When Asian economies went down the gurgler a few years ago Friedmanites prattled about “the Asian Contagion” (they didn’t mind that the contagion was spread by the currency speculation they had demanded).
The “Mistakes” Are Integral
Conventional analysis turns a blind eye. Now that, in the US, the Democrats are ascendant, Bush’s Iraq gambit is routinely dubbed a “miscalculation” or a “blunder”. Previously, looking at Russia, journalists would worry about a “culture of corruption” as evidence that Russians were “not ready for democracy”. Perhaps they were used to dictators. Perhaps the many crimes were an expression of the Russian national character. Domestic American shock therapy is excused as the excesses of a few rotten apples*. There are always vague and irrefutable assertions available which act to deflect a more precise examination. Anything to avoid a diagnosis of systemic intent. * For a discussion of rotten apple ideology, check my review of “Enron: The Smartest Guys In The Room”, Watchdog 111, April 2006, online at http://www.converge.org.nz/watchdog/11/10.htm.
Klein is showing us that “the mistakes” are integral. Far from being unintended, “crisis is built into the Chicago School model. When limitless sums of money are free to travel the globe at great speed, and speculators are able to bet on the value of everything from cocoa to currencies, the result is enormous volatility. And, since free trade policies encourage poor countries to continue to rely on the export of raw resources such as coffee, copper, oil or wheat, they are particularly vulnerable to getting trapped in a vicious circle of continuing crisis. A sudden drop in the price of coffee sends entire economies into depression, which is then deepened by currency traders who, seeing a country’s financial downturn, respond by betting against its currency, causing its value to plummet. When interest rates are added, and national debts balloon overnight, you have a recipe for economic mayhem” (see my review of Raj Patel’s “Stuffed And Starved”, Watchdog 116, December 2007, online at http://www.converge.org.nz/watchdog/16/08.htm, for a discussion of global food production).
Klein calls it “disaster capitalism”. While the Bushite form it takes is a recent thing, the principle is not at all new. 250 years ago, at the start of the modern period, the economist Adam Smith advocated the seizing of “waste lands” for more profitable use. Now, Klein remarks, his ideological descendants employ the same methods to seize public assets: “Under Chicago School economics, the State acts as the colonial frontier, which corporate conquistadors pillage with the same ruthless determination and energy as their predecessors showed when they hauled home the gold and silver of the Andes. Where Adam Smith saw fertile green fields turned into profitable farmlands on the pampas and the prairies, Wall Street saw ‘green field opportunities’ in Chile’s phone system, Argentina’s airline, Russia’s oil fields, Bolivia’s water system, the United States’ public airwaves, Poland’s factories - all of them built with public wealth, then sold for a trifle”.
A contrite Jeffrey Sachs has called for a new Marshall Plan to help the poor world. The original Marshall Plan, under which the US government advanced huge loans to rebuild post-war Europe, was an unqualified success. Living standards recovered and then pushed on. This, Sachs seems to think, is reason enough to go back to a proven model. Yes, it might well be, but Klein shows that even an architect of the new model can miss its point. The Marshall Plan was not philanthropic. Strategists needed to counter a Soviet appeal to an ethic of development and equality. In the 1940s, Klein notes, US strategists would rather split Germany than risk losing all of it “either to collapse or to the Left”. She reminds us that President Franklin Roosevelt’s New Deal of the 1930s, with its welfare payments and subsidies, set up the domestic economy recovery. But it was not prompted by a desire to bail out the victims of the Depression so much as by a need to bail out capitalism, the system itself. Tactically, the Marshall Plan was the New Deal extended to Europe. Klein argues that Sachs doesn’t see that “there was never going to be a Marshall Plan for (the new) Russia because there was only ever a Marshall Plan because of (the old) Russia”.
Capitalism’s “Monopoly Period” Only Lasted A Few Years, In 90s
“We know the adversary, we know the threat”, lectured Donald Rumsfeld, Bush’s recent Defense Secretary, not long before he was fired because he made too explicit the tenets of the disaster capitalists. This echoed standard talk about the Soviets, but Rumsfeld was not thinking of the Russkies. No, the threat was Defense Department bureaucracy. To its boss, even the US Army was a relic of the bad old days of social cohesion. “In the 21st Century”, Rumsfeld told his underlings, “we’re going to have to stop thinking about things, numbers of things, and mass, and think also and maybe even first about speed and agility and precision”. The Army was “one of the world’s last bastions of central planning”. His solution, to contract out the fighting, to bring in public-private-partnerships, to wage war in Iraq on a just-in-time model consistent with corporatist theory, was a military failure. We are reminded of this every day when we catch the news and hear how America didn’t “plan” for the occupation. To Rumsfeld, the ideologist, it’s been a political success.
The original, literal, shock therapy was designed by Ewen Cameron, a psychiatrist at McGill University in Montreal. During the McCarthyite post-war, when popular culture was awash with paranoid fantasies about brainwashing Red Chinese and body snatching aliens, Cameron conducted secret experiments for the US Central Intelligence Agency. Electro-convulsive therapy [ECT] was supposed to treat mental disorders by washing memory and personality so that a new brain could be conditioned. “Their minds”, one doctor remarked of his unwitting patients, “seem like clean slates upon which we can write”. A variant on the neo-liberal superstition that humans are rational machines, the therapy left its victims in ruin. The mad doctors had scribbled illegibly.
Klein argues that ECT is significant for more than the naive cruelty of its methodology. Shock therapy was in part a political act, a technology of control and a progenitor of the shock doctrine. Whether its purpose has been the remaking of a malleable personality or the remaking of a malleable government, shock therapy has a reactionary intent. “The introverted schizophrenic or melancholic may be likened to a walled city which has closed its gates and refuses to trade with the rest of the world”. This was a psychiatrist’s use of the illness metaphor, especially distasteful insofar as it was offered in 1940, when Hitler’s stormtroopers would have agreed with the image. Klein cites it as a foreshadowing of Shock and Awe, whose purpose, as the US Army puts it, is to “paralyse or overload an adversary’s perceptions and understandings of events ... rendering the adversary completely impotent... (through the) manipulation of senses and inputs”.
First Cameron’s schizophrenics, then Chile’s public servants, Bolivia’s tin miners, Sri Lanka’s fishermen, the people of Russia, the poor of New Orleans, the shocked-and-awed of Iraq, the newly enfranchised South Africans, the Palestinians... All have been victims of the burgeoning disaster capitalism. It’s not planned in advance, it’s not a vast conspiracy, no one’s in charge, but that doesn’t mean the pattern’s not there. The outstanding feature of Klein’s brilliant survey is to show the essential element that links places which we are accustomed to see in disparate terms, as though each had idiosyncratic problems. Often racial or religious conflict, as in South Africa or Israel, is a symptom, not the disease.
A standard economics text from the 60’s taught that we can have guns or we can have butter, productive consumption or military spending. In the same vein Klein discusses the “guns-to-caviar” index, a measure that showed you can afford either fighter jets or executive jets, but not both. Since 2003 - the year of the invasion of Iraq - both indexes have taken off. This, Klein suggests, is the marker of how deeper global instability and rising profits have become entwined: “The disaster capitalism complex thrives in conditions of low-intensity grinding conflict. That seems to be the end point in all the disaster zones, from New Orleans to Iraq”.
Excess hastens its own demise. The new virulent disorder spread swiftly, but so has its antidote, popular opposition. “The disaster capitalism complex is on a par with the ‘emerging market’ and information technology booms of the 90s”. They’re each spectacular but brief outbursts. So ultimately Klein is optimistic. What she dubs capitalism’s “monopoly period” lasted only from 1991, when the Soviet Union collapsed, to 1999, when WTO talks collapsed. Since then in, for example, Latin America and Europe, we’ve seen healthy signs of “shock resistance”.
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