[DEBATE] : (Fwd) Walden reviews Naomi

[pbond at mail.ngo.za]

(From new Focus on Trade e-newsletter)

A VERY CAPITALIST DISASTER: NAOMI KLEIN’S TAKE ON THE NEOLIBERAL SAGA
Walden Bello
http://www.focusweb.org/a-very-capitalist-disaster-naomi-klein-s-take-on-the-neoliberal-saga.html?Itemid=92


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A VERY CAPITALIST DISASTER: NAOMI KLEIN’S TAKE ON THE NEOLIBERAL SAGA
Walden Bello*
http://www.focusweb.org/a-very-capitalist-disaster-naomi-klein-s-take-on-the-neoliberal-saga.html?Itemid=92

NAOMI Klein's The Shock Doctrine: the Rise of Disaster Capitalism (New 
York: Metropolitan Books, 2007) is very impressive indeed. This is, 
however, not immediately evident; a sense that is confirmed by Joseph 
Stiglitz' review of the book. Even before I read it, I was certain that 
the Nobel laureate would highlight Klein's attempt to make a connection 
between the electric shock experiments performed by the notorious McGill 
University psychologist Ewen Cameron who was on contract with the CIA 
and the economic shock approach developed by Milton Friedman at the 
University of Chicago.

And indeed, he does, in the course of writing a typical "New York Times 
Book Review" piece that dares not evince too much enthusiasm for a book 
that comes from left field lest it provoke the ever-alert watchdogs of 
the right to question one’s credentials. 
(http://www.nytimes.com/2007/09/30/books/review/Stiglitz-t.html). 
Stiglitz, in fact, suggests that Klein’s analysis might be infected with 
conspiracy theory with his very first sentence: “[T]here are no 
accidents in the world as seen by Naomi Klein.” The Nobel laureate does 
have some positive things to say about the book, but he neutralizes this 
by dropping the line that Klein “is not an academic and must not be 
judged as one.”  As for Klein’s central concept of “disaster 
capitalism,” it is mentioned once but otherwise ignored.  It all adds up 
to damning with faint praise.

The New York school of publishing says that you win or lose your 
audience in the first few pages, but whatever their reason for bringing 
the Cameron experiments up front and strongly implying a link between 
the genesis of Cameron’s shock treatment and the Chicago School approach 
to economic policymaking, it is bad judgment on the part of Klein and 
her editors.  What is transparently intended mainly as a dramatic device 
risks achieving its opposite.  Conspiracy theory buffs will be elated 
but not the critical, discerning audience the book is aimed at.

TRACKING NEOLIBERALISM
Which is a pity because, despite this early fumble, "The Shock Doctrine" 
recovers to emerge as a towering work, one that brilliantly follows 
neoliberalism’s march from marginal theology to universal  policy. 
Klein combines the journalist’s eye for the arresting detail, the 
analyst’s ability to spot, surface, and dissect deeper trends, and a 
talent for telling a spell-binding story to prove once again that, 
notwithstanding Stiglitz’ put-down,  a masterful journalist can often 
illuminate social realities far better than the best-trained economist 
or political scientist.  With her ability to combine 
no-stones-left-unturned investigative reporting with in-depth social 
analysis, Klein is her generation’s David Halberstam, her "Shock 
Doctrine" and an earlier book "No Logo" being on par with "The Best and 
the Brightest" and "War in a Time of Peace".  There is one difference, 
though: Klein is unashamedly a woman of the left, and this is where her 
analysis derives both its power and its passion.

The Shock Doctrine traces neoliberalism’s rise to dominance to a program 
set up in the mid-fifties to enable Chilean students to imbibe the 
radical free-market doctrine being propagated by Milton Friedman and his 
associates at the University of Chicago, then an oasis of radical 
free-market thinking in a world dominated by Keynesianism in the United 
States and Europe and “developmentalism” or desarrollismo in Latin 
America, with their pragmatic compromises between the state and the 
market, labor and management, trade and development.

The opportunity for neoliberalism to come in from the cold arrived in 
the early seventies, when General Augusto Pinochet overthrew the 
revolutionary government of President Salvador Allende in Chile and 
invited the “Chicago Boys” that had been waiting in the wings for years 
to manage the economy.  With the population stunned by the coup, the 
“Chicago Boys” went about the task of swiftly dismantling the Keynesian 
and developmentalist compromises that underpinned one of Latin America’s 
most advanced industrial economies.  With a Year Zero mentality akin to 
the Khmer Rouge, they forced Chile’s overnight transformation into the 
free-market paradise prescribed by Friedman, a believer in seeing crisis 
as an opportunity for radical restructuring.  It was, however, a 
paradise that could be created only with massive repression--and an even 
greater dose of repression was necessary to radically liberalize 
neighboring Argentina, where tens of thousands were murdered and over a 
hundred thousand were tortured by a murderous military regime that gave 
a free hand to free-market radicals to restructure the economy.
Some of Klein’s most original insights are found in her chapters on 
Bolivia, Poland, China, and South Africa.  Bolivia, under the tutelage 
of a younger “Doctor Shock”--Harvard economist Jeffrey Sachs -- showed 
that neoliberal measures could be imposed by a democratically elected 
government if it was willing to resort to emergency measures, like 
arresting and isolating labor leaders.  Poland, also advised by Sachs, 
showed how democratic transitions could actually be an opportunity to 
deliver a system-transforming shock that included eliminating price 
controls overnight, slashing subsidies, and rapidly privatizing state 
enterprises to a population that was still dazed by the collapse of 
communism.  There was no democratic transition in China, but Deng 
Xiaoping and his allies used the Tienanmen Square massacre and its 
aftermath, when the population was confused and paralyzed, to decisively 
advance and consolidate the ambitious capitalist reform program they had 
begun in the late seventies.  Neither in Poland nor in China were people 
who were tired of communism clamoring for the free market, Klein 
emphatically points out; they were demanding greater popular, democratic 
control over economic policy.

South Africa provided yet another route to neoliberalism.  Here there 
was an element of stealth, with the Afrikaner elite taking advantage of 
the African National Congress’ (ANC) overwhelming focus on the politics 
of achieving Black majority rule to preserve their property rights and 
install a conservative macroeconomic regime.  But not everything was 
that subtle: the corporations made clear their intention to leave should 
socialist policies be introduced, conveying the prospect of economic 
destabilization.  In these circumstances, the white elite found a 
valuable ally in chief ANC negotiator and future South African President 
Thabo Mbeki, who convinced Nelson Mandela that what was needed to 
stabilize the new regime was “something bold, something shocking that 
would communicate, in the broad, dramatic strokes the market understood, 
that the ANC was ready to embrace the neoliberal Washington Consensus.”

Margaret Thatcher and Ronald Reagan’s contribution was to show that 
neoliberal programs antithetical to the interests of the majority could 
be imposed in a western democracy if one was ruthless enough to exploit 
certain situations.  For Thatcher, the war with Argentina over the 
Falklands in 1982 was a heaven-sent opportunity to enlist jingoism in 
the service of a radical program, one of her tactics being to portray 
the labor unions as the “enemy within.”  Thatcher’s tactics prefigured 
those of George W. Bush in the aftermath of 9/11, when he and his crew 
exploited the hysterical state of the population to declare a “war on 
terror” that was meant to kick-start a new phase of the neoliberal 
enterprise that Klein labels “disaster capitalism.”  But before we go 
into this, let us pause to assess Klein’s analysis so far.

GREAT BUT…
Klein’s account is superb, but it is not without its flaws.  For one, 
Klein has too rosy a view of the Keynesian state that reigned in the US 
and Europe and the developmental state that dominated the Southern Cone 
in the period from late nineteen forties to the mid-seventies.  She 
writes that owing to developmental regimes, “[T]he Southern Cone began 
to look  more like Europe and North America than the rest of Latin 
America or other parts of the Third World.”  Again, “Developmentalism 
was so staggeringly successful for a time that the Southern Cone of 
Latin America became a potent symbol for poor countries around the 
world: here was proof that with smart, practical policies, aggressively 
implemented, the class divide between the First and the Third World 
could actually be closed.”

That certainly was not what it felt like at the time.  Indeed, if the 
neoliberals walked in from the wilderness, it was because they were 
perceived as presenting an alternative, albeit untested, to economic 
systems in crisis.  In the US, the period of rapid economic growth 
fuelled partly by the reconstruction of Japan and Europe gave way to a 
state of stagnation cum inflation that was a symptom of a deeper crisis, 
the growing gap between enormous productive capacity and limited 
consumption, leading to erosion of profitability that Marxists have 
called the crisis of overproduction.  In Latin America, the leading 
critics of the developmental state were found on the left, who charged 
that the process of industrial import substitution presided over by the 
state was “agotado,” or exhausted, owing to a domestic market limited by 
a very unequal distribution of income.
In the US and Britain, the experience of seeing their salaries and 
savings eroded by double digit inflation made the middle strata 
receptive to the Friedmanite message.  In Chile, they were initially 
receptive to the left’s critique of the developmental state. But when 
the left came to power with a socialist project in 1970, the middle 
classes -- fearing the rise of the poor, whom they called rotos, or 
“lowlifes”-- turned on the left with a vengeance, with the 
middle-class-based Christian Democrats joining the right on an 
anti-communist platform that shrilly proclaimed a defense of private 
property, capitalism, and “liberty.”

THE CONSTRUCTION OF HEGEMONY
This leads us to the question of how the neo-liberals came to power. 
This was not simply a matter of the elite using the military or 
manipulating democracy to impose a neoliberal program on a recalcitrant 
but stunned population, which is the image that Klein’s account-- 
wittingly or unwittingly -- projects.  This was not the case even in 
Klein’s paradigmatic example, Chile.  Neoliberalism’s coming to 
ascendancy there involved the elite and the military acting in concert 
with a counterrevolutionary middle-class mass base that controlled the 
streets, with Christian Democratic youth joining their more fascist 
brethren, Fatherland and Liberty, in intimidating and beating up 
partisans of the left.  I know, since as a PhD student doing a 
dissertation on the rise of the counterrevolution, I was nearly beaten 
up a couple of times by angry anti-Allende middle class youths who 
insisted I was a Cuban agent sent to destroy Chile by Fidel.  Sure, the 
CIA played a critical role, but it was in support of an already heated 
counterrevolution with a middle-class base, a process that was 
reminiscent of Italy and Germany in the post-World War I period.

In other words, in practically every instance, neoliberalism found a 
middle class that was disenchanted with the Keynesian or developmental 
state or felt threatened by the left, or both.  This is why to counter 
Stiglitz’ suggestion that she operates with a conspiracy paradigm, 
Klein’s instrumentalist account must be supplemented with David Harvey’s 
notion of the “construction of hegemony,” a process by which the elite 
creates a consensus among the subordinate classes in support of a 
neoliberal project that principally serves its interests. (David Harvey, 
"A Brief History of Neoliberalism" [Oxford: Oxford University Press, 
2005])  In the case of the Britain, it was not so much the jingoistic 
atmosphere of the Falklands War as the ideological captivation of the 
middle class by a conservative leader adept at evoking the themes of 
freedom, the individual, and property that was the tipping point towards 
neoliberal reform.  Thatcher was an expert at promoting what Harvey 
calls a “seductive possessive individualism” and she “forged consent 
through the cultivation of a middle class that relished the joys of 
homeownership, private property, individualism, and the liberation of 
entrepreneurial opportunities.”

The construction of consent was also the main avenue to hegemony in the 
United States, where neoliberals deftly connected their free market 
program to the agenda of a middle class-based coalition that was 
propelled by resentment against minorities that were allegedly coddled 
by liberal democrats and by an inflamed attachment to religious values 
that were seen as being under attack from the left.  “Not for the first 
time,” says Harvey, speaking of the ascendancy of the Republicans under 
Reagan, “nor, it is feared, for the last time in history has a social 
group voted against its material, economic, and class interests for 
cultural, nationalist, and religious reasons.” Indeed, even some 
blue-collar workers were in danger of being co-opted: “Greater freedom 
and liberty of action in the labor market could be touted as a virtue 
for capital and labor alike, and here, too, it was not hard to integrate 
neo-liberal values into the ‘common sense’ of the work force.”
An fascinating account insight into how this process of Thatcherite 
neoliberal doctrine became “common sense” among some sectors of the 
working class is recounted by the noted economic sociologist Mark Blyth 
(Mark Blyth, "Great Transformations: Economic Ideas and Institutional 
Change in the 20th Century" [Cambridge: Cambridge University Press, 
2002]), who was struck by how his father, a butcher, who would have been 
expected to vote Labor, went over to the Conservatives instead.  The 
reason he would not vote Labor he told Blyth was that:

“[O]nce they get elected, Labor will spend all this money creating jobs, 
which is fair enough, but it never works.  It just means prices will go 
up.  They’ll try it again and again and there will be none left for the 
schools and the hospitals, so they will have to borrow, which means 
there will be less money for everyone else. This means we will all have 
to pay more on loans and such things, so people will have less money to 
spend.  The less people spend, the more the economy slows down, and so 
there are fewer people in work. If the Tories get in, they’ll cut taxes, 
people will spend more, and there will be more jobs.”

Noting that his father had “in less than one minute” deployed “Buchanan, 
Friedman, Laffer, Nordhaus, and even Pigou…to diagnose the state of the 
British economy quicker than many a graduate student,” Blyth asked why 
his father thought that the money he spent that came from a tax cut 
would create jobs while the money a Labor government spent would create 
inflation.  He got the following answer:  “Because it does. Governments 
shouldn’t do that kind of thing.”

Reflecting on the incident that led to his work on the impact of ideas 
on politics, Blyth commented noted that “From every conceivable 
materialist position imaginable, my father should have been a Labor 
voter, but he was not.  He bought into a series of ideas that not only 
shaped his interests, but did so irrespective of their truth content. 
This led me to the idea that so long as something about the economy is 
believed by a large enough group of people, then because they believe 
it, it becomes true.  So if being believed is functionally equivalent to 
being true, the belief itself becomes politically and economically 
efficacious.  Ideas therefore do not “really” need to correspond to the 
“real” world in order to be important in that world.”

Neoliberalism, in fact, became so “commonsensical” that even where 
social democratic parties have come to power, displacing the traditional 
conservative parties of neoliberalism, as they have in Britain, Chile, 
and the United States, they have not dared to reassemble the 
interventionist liberal state and have made it a point to pay homage to 
the “magic of the market.”  Indeed, it has not been conservatives but 
social democrats such as the Blairites in Britain, the Clintonites in 
the US, and the Socialist-led Concertacion government in Chile, with 
their rhetoric about “market-oriented social policies,” that have 
consolidated the neoliberal economic regime.

ROOTS OF NEOLIBERAL HEGEMONY
The book’s most important contribution is its theory of “disaster 
capitalism.”  But to fully appreciate Klein’s insight, it is important 
to go back to the roots of the crisis of the Keynesian state and the 
developmental state in the 1970’s that she glosses over.  This crisis, 
which paved the way for the neoliberal ascendancy, had its origins in 
what economists have called the crisis of over-accumulation or 
overproduction.
The golden period of postwar growth globally that skirted major crises 
for nearly 25 years was due to the massive creation of effective demand 
via rising wages for labor in the North, the reconstruction of Europe 
and Japan, and the import-substituting industrialization in Latin 
America and other parts of the South.  This dynamic period came to a 
close in the mid-seventies, with stagnation setting in, owing to global 
productive capacity outrunning global demand, which was constrained by 
continuing deep inequalities in income distribution.  According to the 
calculations of Angus Maddison, the premier expert on historical 
statistical trends, the annual rate of growth of global gross domestic 
product (GDP) fell from 4.9 per cent in what is now regarded as the 
golden age of the post-World War II Bretton Woods system, 1950-73, to 3 
per cent in 1973-89, a drop of 39 per cent.

These figures reflected the wrenching combination of stagnation and 
inflation in the North, the crisis of import substitution 
industrialization in the South, and erosion of profit margins all 
around.  For global capital, neoliberal policies, which included 
redistribution of income towards the top via tax cuts for the rich, 
deregulation, and an assault on organized labor, were one escape route 
from the crisis of overproduction. Another was corporate-driven 
globalization, which opened up markets in the developing world and moved 
capital from high-wage to low-wage areas.   A third was what Robert 
Brenner and others have called “financialization,” or the channeling of 
investment towards financial speculation, where much greater returns 
were to be derived than in industry, where profits were largely stagnant.

Feverish speculation triggered the proliferation of novel sophisticated 
speculative instruments like derivatives that escaped monitoring and 
regulation.  Finance capital also forced the elimination of capital 
controls, the result being the rapid globalization of speculative 
capital to take advantage of differentials in interest and foreign 
exchange rates in different capital markets. These volatile movements, 
the result of capital’s liberation from the fetters of the post-war 
Bretton Woods financial system, was one source of instability.  What was 
fundamentally problematic with speculative finance, however, was that it 
boiled down to an effort to squeeze more “value” out of already created 
value instead of creating new value since the latter option was 
precluded by the problem of overproduction in the real economy.  But the 
divergence between momentary financial indicators like stock prices and 
real values can only proceed to a point before reality bites back and 
enforces a “correction,” like the recent collapse of stocks tied up in a 
myriad Byzantine ways to overvalued subprime mortgages.  Corrections or 
crises have become more frequent in the neoliberal era, with one 
Brookings Institution study counting about 100 over the last 30 years.

At any rate, neoliberal policies, globalization, and financialization, 
while restoring and strengthening elite power by redistributing income 
from the bottom to the top, have not been effective in reinvigorating 
global capital accumulation. Its actual record, Harvey points out, 
“turns out to be nothing short of dismal.” Aggregate annual global 
growth rates came to 1.4 per cent in the 1980s and 1.1 per cent in the 
1990s, compared to 3.5 per cent in the 1960s and 2.4 per cent in the 1970s.

DISASTER CAPITALISM
It is this fundamental failure of finance-driven capitalism to reignite 
vigorous capital accumulation that allows us to fully appreciate Klein’s 
theory of disaster capitalism and David Harvey’s closely related notion 
of “accumulation by dispossession.”  Both may be seen as the latest 
desperate effort of an increasingly sputtering capitalist machine’s 
effort to surmount the persistent and deepening crisis of 
overproduction.  In the last few years, stagnation or weak growth has 
marked most areas of the world economy, with the exception of China and 
India.  US growth has been higher than that of sclerotic Europe, but it 
has been largely illusory, being mostly the result of middle-class 
spending fuelled by massive credit from China and East Asia. China has 
to lend to the US to keep up demand for its cheap-labor based 
export-industrial sector, but the expansion of its production has itself 
contributed mightily to the overcapacity, overproduction, and shrinking 
profitability plaguing the whole global system. Even the International 
Monetary Fund (IMF) has recognized that the world is skating on thin 
ice, which could break should American consumers rein in their 
debt-driven spending, as they now seem to be doing.

In its efforts to surmount the crisis, capitalism has increasingly 
supplemented, if not supplanted accumulation through production with 
accumulation through dispossession, or the expropriation of already 
created wealth or sources of wealth akin to the process of primitive 
accumulation that marked early capitalism in the 14th to the 17th 
centuries. Accumulation by dispossession involves an acceleration of the 
privatization and commodification of the commons, which includes not 
only land but also the environment and knowledge.  Millions of peasants 
and indigenous peoples are displaced from the soil as private property 
supplants common property or communal regimes, often with the active 
support of institutions like the World Bank and the Asian Development 
Bank. Seeds, the end-result of eons of interaction between nature and 
human communities, are now privatized through mechanisms such as the 
Trade Related Intellectual Property Rights Agreement (TRIPs), which has 
also dampened technological development in the South owing to fear of 
infringing on the patents of northern corporations.

A key mechanism for accumulation by dispossession is the accelerated 
privatization of hitherto public or state assets, which is what disaster 
capitalism is all about.  Disaster capitalism is the Bush 
administration’s central contribution to neoliberalism.  Its key feature 
is the parceling out to the private sector of the “core” functions of 
security, defense, and infrastructure that Adam Smith himself thought 
had to be left to the state.  Through the war on terror, the Bush 
administration brought about
“the creation of the disaster capitalism complex -- a full-fledged new 
economy in homeland security, privatized war and disaster reconstruction 
tasked with nothing less than building and running a privatized security 
state, both at home and abroad. The economic stimulus of this sweeping 
initiative proved enough to pick up the slack where globalization and 
the dot-com booms had left off.  Just as the Internet launched the 
dot-com bubble, 9/11 launched the disaster capitalism bubble… It was the 
pinnacle of the counter-revolution launched by Friedman.  For decades, 
the market had been feeding off the appendages of the state; now it 
would devour the core.”

In the disaster capitalism paradigm, the state serves as the engine of 
capita accumulation -- that is, it raises capital via taxes, then 
transfers it to private contractors that take over its core functions, 
from defense to incarceration to the provision of infrastructure. 
Security provision becomes the new growth industry, incorporating but 
going beyond the old military-industrial complex.  Disaster, either of 
the natural kind like Hurricane Katrina or the socially created kind 
like Iraq, is seen as opportunity in several ways.  It creates demand 
for a commodity, that is, for security or reconstruction.  By taking 
advantage of natural disasters, it provides the opportunity to alter the 
physical landscape and “add value” to it, by sweeping away 
“value-deprived” poor communities and converting the land to upscale 
commercial or residential real estate, as in post-Katrina New Orleans. 
Finally, as in Iraq, war becomes the instrument to erase the old 
interventionist state and create from scratch the ideal neoliberal 
government whose key function is to delegate its own functions to 
private contractors, like the engineering firm Bechtel or the notorious 
private security firm Blackwater.  “In Iraq,” Klein writes, “there was 
not a single governmental function that was considered so “core” that it 
could not be handed to a contractor, preferably one who provided the 
Republican Party with financial contributions or Christian footsoldiers 
during elections campaigns.  The usual Bush motto governed all aspects 
of the foreign forces’ involvement in Iraq: if a task could be performed 
by a private entity, it must be.”

The problem, of course, is that disaster capitalism is so brazenly 
anti-people that even dressed up in the rhetoric of freedom, 
entrepreneurship, and efficiency, it cannot win over people in the way 
early neoliberal ideology was able to captivate the middle classes in 
the era of Reagan and Thatcher.  Reading Klein’s chilling account, one 
wonders how Paul Bremer, the head of the Coalition Provisional 
Authority, could not have realized that the decrees he made which had 
the effect of making Iraqi youth a surplus population in a society where 
the state functioned mainly to enrich foreign contractors would turn 
them into insurgents.  Disaster capitalism and accumulation by 
dispossession represent a capitalist order that no longer seeks 
ideological hegemony but seeks to impose itself through pure force. 
This is not sustainable.  Klein’s last chapter, which looks at the vast 
and varied global movement that has risen against what French thinkers 
call “savage capitalism” shows that, as Gramsci noted, nothing can 
remain hegemonic for long without legitimacy.  People have become both 
more hopeful and more savvy: they will not be easily subjected to 
another neoliberal shock.

KLEIN PAST VERSUS KLEIN PRESENT
So, the inevitable question: which is the better book, No Logo or The 
Shock Doctrine? This is not an easy choice, but I would land on the side 
of No Logo.

Let me explain.  The critical edge, analytical sharpness, and passion of 
No Logo are to be found in "The Shock Doctrine" as well.  But there is 
something different about the writing.  In a review I did for Yes! In 
2001, I wrote: “No Logo is compelling, but it’s not an easy read. 
Reading Klein is like serving alongside a skilled commander who 
relentlessly probes the enemy’s many defenses to locate the principal 
point of vulnerability. And just when the reader thinks Klein has 
identified the key to the defense, she reveals that this is only one 
episode in unraveling the dynamics of contemporary capitalism. This is 
deconstructive writing at its best, the product of a first-rate, 
restless mind that is not satisfied with drawing a solitary insight or 
two from her material.”
Reading "The Shock Doctrine" is a different experience.  You don’t need 
to work. You’re like a tourist being guided on a well-lit path where 
there are few surprises.

I much prefer the discourse of "No Logo", and I certainly do not relish 
being subjected at the very beginning to a literary shock treatment that 
has no other purpose but to prod me to read further.  That flaw -- and 
the change in style -- I prefer to attribute not so much to the 
Toronto-based Klein but to the New York School of publishing, which, 
like Hollywood, much prefers an in-your-face approach to a more 
allusive, more indirect, less predictable but ultimately more 
enlightening discourse.

*Currently a Distinguished Visiting Professor at St. Mary’s University 
in Halifax, Canada, Walden Bello is a senior analyst at the 
Bangkok-based institute Focus on the Global South and professor of 
sociology at the University of the Philippines at Diliman. He is the 
author of "Walden Bello Introduces Ho Chi Minh" (London: Verso, 2007), 
"Dilemmas of Domination" (New York: Metropolitan Books, 2005) and 
Deglobalization (London: Zed, 2002).