It starts with a violent coup by dictatorAugusto Pinochet September 11, 1973. The Chicago Boys, a gang of Chilean economists trained by free market guru Milton Friedman, are uncannily prepared with a manifesto of economic policy, "The Brick." It lands heavy on the left-leaning populace, inducing a state of shock. The Chicago Boys have somehow chosen the nation's weakest moment---one of massive state violence, chaos and hyperinflation---to force through radical and unpopular economic reforms.
This is the first of almost 600 pages of examples, spanning the globe, that Naomi Klein gives of what she has named "The Shock Doctrine" in her 2007 book of the same name, just released in paperback. "I chose case studies not for their locations but for the variety of shocks they showed," she says on the phone from a New York taxi.
The premise of the book is that right-wing, free-market ideology ("the three-part formula of deregulation, privatization and cutbacks") has been packaged as policy in times of crisis, when people are too shocked to resist plans that would otherwise incite revolt. She writes: "I call these orchestrated raids on the public sphere in the wake of catastrophic events, combined with the treatment of disasters as exciting market opportunities, 'disaster capitalism.'"
Milton Friedman, the originator of economic shock doctrine, wrote: "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."
Klein shows us that free markets and free people are different things. Take 1989 China. "Friedman's definition of freedom," Klein writes, "in which political freedoms were incidental, even unnecessary, compared with the freedom of unrestricted commerce, conformed nicely with the vision taking shape in the Chinese Politburo."
The communist government inflicted the shock of a Tiananmen Square massacre on pro-democracy protestors and the rest of its people. In the aftermath, it made further pushes to tie its economy to global capitalist markets. Two decades later the Olympics would land there with democracy nowhere in sight.
Friedman's disciples in countries the world over have become adept at taking advantage of crisis when it strikes. "Some people stockpile canned goods and water in preparation for major disasters," Klein writes. "Friedmanites stockpile free-market ideas."
The Shock Doctrine links the theme of corporatization, which Klein dissected in 2000's No Logo, to four decades of US foreign policy-aided coups and wars around the globe. It's the perfect marriage of convenience between the richest and the most powerful. "The reason free market ideology has triumphed is not because economists wanted it but because it is a very effective way to run the world for the top one percent," Klein says.
"The role ideology has played is as an enabler of a counter-revolution, a counter-attack by the elite, creating policies that cost people in wages and jobs. The ideology is a greed enabler. Yet it goes out the window when it fails the rich." Consider the recent Wall Street bailout. Two million homeowners are at risk of foreclosure while the companies that cost them their homes get a nearly trillion-dollar welfare cheque for their failure.
After Chile, shock therapy was given in the wake of coups in formerly leftist economies across South America, propping up right-wing dictators and making multinational corporations rich in countries like Argentina, Brazil and Uruguay. British prime minister Margaret Thatcher used patriotic fervour surrounding the Falklands war to gut the public sector, creating what she called "the ownership society" for the rich.
In other cases, outright violence was unnecessary. When Poland elected a pro-union but non-communist government in 1988, it inherited communist hyperinflation. In exchange for a financial bailout, the Solidarity Party was forced into shock therapy---privatization, cutbacks and mass layoffs.
Then there are the bait-and-switch, or "voodoo politic" shocks, where a government is elected on left-wing ideology and governs on the right, like in post-Apartheid South Africa. In other cases, disaster capitalists just can't wait for the next crisis, so they create their own. Klein reviews how Canadian right-wing think-tank economists devalued our international credit rating in the early '90s. The newly elected Liberals replaced promises of job creation with drastic cuts tosocial spending.
The mothershock was 9-11. In its wake, the US government gave itself new powers and privatized everything, including the never-ending war on terror. "Now wars and disasters are so fully privatized that they are themselves the new market," Klein writes. Conveniently, the terrorist attacks of 9-11 provided all the rationale the Bush administration needed to wage new wars, creating new shocks and newly opened, fully privatized markets---especially oil markets---for multinational corporations.
In the confusion of varied manifestations of the shock doctrine, Klein says there is a common mythology describing an ideological victory of free-market capitalism. In reality this was a violent military victory. "The ideology does advance incrementally as well," she acknowledges, "but I believe my version is a hell of a lot truer and fuller than the dominant story."
In a world where people serve economic theories instead of the other way around, Klein feels "Progressives need to be ready with ideas and express them with certainty and confidence in a time of crisis." In other words, replacing disaster capitalism with "disaster populism or disaster collectivism"---paying attention to the needs, wants and opinions of the masses in times of crisis. That is, in fact, how Canada got universal healthcare: In response to severe post-depression doctor shortages, a series of progressive governments offered increasing subsidies to doctors so that more Canadians could access the care they needed.
Klein longs to see that kind of response to modern crises like oil shocks and severe weather storms. "I'm in the states right now watching how the oil shock is being used to push for more oil drilling offshore," she says. "Democrats fail to respond to the calls of 'Drill, baby, drill!'"
If that's going to happen, progressives need to get over their timidity, take a page from Friedman's playbook and be prepared with policies that address fundamental issues like climate change. "Times of crisis do sometimes require decisive action," Klein says. "The question is not one of political ideology but whether you are using the crisis to close or open democratic space."