Shock Docterine sharply critiqued
Naomi Klein’s Rise of Disaster Capitalism has earned almost universal praise, especially from within the Left. That includes the review by Mel Watkins published in Canadian Dimension (Jan/Feb 2008). Here’s a critical analysis published on the World Socialist Web Site in February.
A superficial Analysis of Global Capitalism The Shock Doctrine: The Rise of Disaster Capitalism by Naomi Klein, Allen Lane: 2007 By Nick Beams
Since its release last September, Naomi Klein’s latest book has been climbing best seller lists around the world. This response is the product, not merely of an undoubtedly well-organised promotional campaign along with significant exposure in the mass media, but of a significant shift to the left in broad sections of the world’s population.
In every country there is widening and deepening hostility to the free market program that has prevailed over the past two decades, and growing opposition to the official political establishment that has promoted it.
According to Klein, her book is a “challenge to the central and most cherished claim in the official story–that the triumph of deregulated capitalism has been born of freedom, that unfettered markets go hand in hand with democracy. Instead, I will show that this fundamental form of capitalism has consistently been midwifed by the most brutal forms of coercion” [p. 18].
This theme has undoubtedly struck a chord. But escalating opposition to the prevailing order inevitably raises the question: What is to be done? How can anger at the depredations of the “free market” be translated into an alternative program?
Herein lies the political significance of Klein’s book. Her central argument is that it is not necessary to overturn the capitalist profit system–indeed that would represent simply another version of the “fundamentalism” that characterises “free market doctrines”. On the contrary, another way can be found, based on returning to the so-called Keynesian measures–government intervention and regulation–that were employed during the post-World War II boom.
“I am not arguing that all forms of market systems are inherently violent,” she writes in the introduction. “It is eminently possible to have a market-based economy that requires no such brutality and demands no such ideological purity. A free market in consumer products can coexist with free public health care, with public schools, with a large segment of the economy–like a national oil company–held in state hands. It is possible to require corporations to pay decent wages, to respect the rights of workers to form unions, and for governments to tax and redistribute wealth so that the sharp inequalities that mark the corporatist state are reduced. Markets need not be fundamentalist.
“Keynes proposed exactly that kind of mixed, regulated economy after the Great Depression, a revolution in public policy that created the New Deal and transformations like it round the world. It was exactly that system of compromises, checks and balances that Friedman’s counterrevolution was launched to methodically dismantle in country after country” [p. 20].
Just as Keynes saw himself as a saviour of capitalism–he famously advised President Roosevelt in 1933 to take up his policies lest “orthodoxy” (the free market) and revolution “fight it out”–so Klein’s critique is not aimed at overturning the capitalist profit system. Like Keynes, she wants to save it from itself, by curbing its worst excesses.
Klein, of course, has the right to adopt any political stand she chooses. But her opposition to Marxism and its method of analysis means that she continually holds back from a deeper analysis of the global economy, lest it raise questions that would challenge her political standpoint, and the social interests it represents.
Klein begins by pointing to what she maintains is contemporary capitalism’s “core tactical nostrum”–what she calls the “shock doctrine”, as articulated by Milton Friedman. Friedman observed 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 politically inevitable” [p. 6].
But Klein can provide no real explanation as to how the “free market” doctrines of Friedman and his Chicago School, regarded as the writings of near-cranks in the 1950s and 1960s, were elevated in the 1970s, leading to Friedman being awarded the Nobel Prize for Economics in 1976.
For Klein, the application of Friedman’s shock doctrines is the outcome of a 50-year campaign for total corporate liberation. “Though always cloaked in the language of math and science, Friedman’s vision coincided precisely with the interests of large multinationals, which by nature hungered for vast new unregulated markets” [p. 57].
In fact, this is far from the case. During the war, and in its immediate aftermath, there was a significant shift by large sections of big business towards supporting government intervention and economic regulation. Not only did they accommodate themselves to regulatory mechanisms, they often played a key role in setting them up.
The attitude of key sections of American business was summed up in a speech by William Benton, founder of a business lobby group, the Committee for Economic Development (CED), delivered in 1949:
“The historic attitude of business has been to use government if it could, and abuse it if it couldn’t. Philosophically, business was committed to the doctrine that, ‘the government is best which governs least.’ The emerging CED attitude has been that ‘government has a positive and permanent role in achieving the common objectives of high employment and production and high and rising standards of living for people in all walks of life.’ … The greatest single achievement of CED … may turn out to be the clarification it has been developing on the role of government in the economy. … This is our present answer to the European brands of socialism. Long may it thrive” [cited in Robert M. Collins, The Business Response to Keynes, 1929-1964, Columbia University Press, 1981, p. 206].
Twenty years later, Nixon summed up the attitude of large sections of the corporate elite with his famous remark that “we’re all Keynesians now.” As far as Friedman was concerned, however, Nixon had carried out “socialist” measures.
Furthermore, even if it were the case that the imposition of Friedmanite measures was the culmination of a 50-year corporate campaign, one would still have to explain why this campaign was successful. One would need to detail the changes in the economic situation that rendered yesterday’s “crank” writings today’s official wisdom.
Klein does not provide such an explanation because it would make all too clear that the rise of “Friedmanism” was associated with objective processes within the capitalist economy, leading to the end of the post-war boom and the world economic crisis of the 1970s–processes that Keynesian measures proved incapable of reversing.
The “free market” and state repression
The economic boom following World War II was not the product of Keynesian measures but of the restructuring of the world economy organised by the United States, especially via the Marshall Plan. This restructuring made possible the extension to the rest of the world of the more productive methods associated with assembly-line production that had been developed in the United States. It engendered an increase in the rate of profit throughout the world capitalist economy, which became the primary factor leading to the boom, making possible the increased wages and social concessions of this period. In other words, Keynesian measures were the product, not the cause, of the post-war boom.
That is why, when profit rates began to turn down by the end of the 1960s and early 1970s, Keynesian measures were unable to restore the previous expansion. In fact, rather than alleviating economic problems, these policies, based on increased public spending, tended to exacerbate them.
Under condition where profits were falling, Keynesian reflationary measures saw major corporations increase their prices to try to counter the trend, rather than increasing output and employment, leading to “stagflation”–the combination of high and persistent unemployment and high levels of price inflation.
As a consequence, the application of Keynesian measures played a not inconsiderable role in providing the social base in sections of the middle class upon which Thatcher and Reagan–two of the chief proponents of the “free market”–based their respective successful election campaigns of 1979 and 1980.
Throughout her book, Klein establishes the connection between the imposition of the “free market” agenda and the use of violent methods of state repression, from Latin America, to China and the shock of the Tiananmen Square massacre, to Boris Yeltsin’s decision to use tanks to fire on the parliament building in 1993, and to the NATO attack on Belgrade in 1999.
In the case of Latin America, where the Freidman agenda was first imposed in the 1970s, Klein emphasises the relationship between state violence and the economic agenda it served by criticising the human rights lobby for its refusal to examine the reasons behind the repression it was denouncing.
Acts of terror in Chile and Argentina were framed narrowly as “human rights abuses” rather than as “tools which served clear political and economic ends”. “y by focusing purely on the crimes and not on the reasons behind them, the human rights movement also helped the Chicago School ideology to escape from the first bloody laboratory virtually unscathed.”
Amnesty International’s report on Argentina, detailing the military junta’s atrocities, was “a breakthrough worthy of its Nobel Prize. Yet for all its thoroughness, the report sheds no light on why the abuses were occurring.” The 92-page report made “no mention of the fact that the junta was in the process of remaking the country along radical capitalist lines. It offered no comment on the deepening poverty or the dramatic reversal of programs to redistribute wealth, though these were the policy centerpieces of junta rule.”
If the junta’s economic project had been examined, she continues, it would have been clear why such extraordinary repression was necessary and why so many of Amnesty’s prisoners of conscience were trade unionists and social workers.
“In another major omission, Amnesty presented the conflict as one restricted to the local military and left-wing extremists. No other players are mentioned–not the US government or the CIA; not local landowners; not multinational corporations. Without an examination of the larger plan to impose ‘pure’ capitalism on Latin America, and the powerful interests behind that project, the acts of sadism documented in the report made no sense at all–they were just random, free-floating bad events, drifting in the political ether, to be condemned by all people of conscience but impossible to understand” [pp.118-120].
These points are well made. But they can be extended to Klein herself. She goes further than Amnesty, but like the human rights organisation calls a halt right at the point where further investigation should begin. If the acts of violence were not random events but were bound up with a definite economic agenda, then the question immediately arises: why then, in the mid 1970s? Why not earlier?
Klein does not choose to even pose the question, let alone probe the connection between the crisis of the world capitalist economy that erupted in the 1970s, the end of the post-war boom and the breakdown of the Keynesian program of economic reforms. And yet the connection is clearly visible. In September 1976, as the junta’s repression was being unleashed in Argentina and Milton Friedman was receiving the Nobel Prize, British Prime Minister James Callaghan was explaining to the Labour Party that the days of Keynesian spending to boost the economy were over.
According to Klein, the refusal of the human rights lobby to “connect the apparatus of state terror to the ideological project it served” can be seen, in the case of Amnesty, as an attempt to “remain impartial amid Cold War tensions”. In the case of many other groups it was a question of money, given the significance of the Ford Foundation in providing funds for human rights organisations.
One is obliged, however, to pose the same question in relation to Klein: why does she refuse to examine the underlying processes of the capitalist economy that give rise to the state terror and violence she condemns?
Klein continues to insist that the program of Milton Friedman’s Chicago School is simply a set of “dangerous ideas”. To do otherwise, to establish the connection of this program with objective tendencies of development within the global capitalist economy, would cut across her political agenda of returning to the Keynesian policies of the past.
Powerful ideological and material factors are at work here. The financial crises now sweeping the world economy, and the deepening hostility to the “neo-con” free market agenda of the Bush regime, have undoubtedly created a “market” for a “left” critique of the present order–and a consequent willingness by publishing houses to devote resources to its promotion. But there are limits to this support, of which Klein is well aware.
This is why she is very careful to insist that she is not a “fundamentalist” and to peddle, at the same time, the old canard that there is some kind of ideological convergence between the Marxist movement and the far right.
Elaborating on the Friedman thesis that only a crisis can produce real change, she writes: “The idea that market crashes can act as catalysts for revolutionary change has a long history on the far left, most notably in the Bolshevik theory that hyperinflation, by destroying the value of money, takes the masses one step closer to the destruction of capitalism itself. This theory explains why a certain breed of sectarian leftist is forever calculating the exact conditions under which capitalism will reach ‘the crisis’, much as evangelical Christians calibrate signs of the coming Rapture. In the mid-eighties, this Communist idea began to experience a powerful revival, picked up by Chicago School economists who argued that just as market crashes could precipitate left-wing revolutions, so too they could be used to spark right-wing counter-revolutions, a theory that became known as ‘the crisis hypothesis’” [pp. 140-141].
This amalgam is not the product of ignorance. Klein chooses her words carefully. She wants to make clear to the general public, as well as to the promoters of her writings, that she is not associated with any kind of Marxist agenda aimed at ending the capitalist system.
This is the theme of Klein’s conclusion, where she points to a “rise of people’s reconstruction” as the effects of the “shocks” administered to the body politic begin to wear off. In Latin America, people are returning to the social democratic project that was so brutally interrupted in the 1970s. The policies are familiar: nationalisation of key sectors of the economy, land reform, investments in education, not revolutionary in nature but based on an “unapologetic vision of a government that helps reach for equality” [p. 453].
It is possible, Klein maintains, to return to the system of regulated capitalism of the past, if not at a national level, then on a continental scale. “Surrounded by turbulent financial waters, Latin America is creating a zone of relative economic calm and predictability, a feat presumed impossible in the globalization era” [p. 456].
Rejecting Marxism as another form of “fundamentalism”, Klein emerges at the end of more than 400 pages as little more than a promoter of various Latin American leaders–Kirchner in Argentina, Morales in Bolivia, the Lula government in Brazil and, of course, the government of Venezuela where, despite the “cult of personality surrounding Hugo Chavez, and his moves to centralize power” there is a system of decentralised progressive networks.
Such networks, in Klein’s view, are the model for the future. They do not have a program to end the profit system. Rather, they are “inherently improvisational making do with whatever is left behind and whatever rusty tools have not been swept away, broken or stolen. Unlike the fantasy of the Rapture, the apocalyptic erasure that allows the ethereal escape of true believers [by this she means the Marxists and all those who fight for the socialist reconstruction of society], local people’s renewal movements begin from the premise that there is no escape from the substantial messes we have created and that there has already been enough erasure–of history, of culture, of memory. These are movements that do not seek to start from scratch but rather from scrap, from the rubble that is all around. As the corporatist crusade continues its violent decline, turning up the shock dial to blast through the mounting resistance it encounters, these projects point a way forward between fundamentalisms” [p. 466].
In other words, such initiatives represent a third way that is necessary lest “orthodoxy and revolution” are left to fight it out.
What a bankrupt alternative! Hostile to the political struggle waged by the Marxist movement to mobilise the working class–the overwhelming mass of humanity–to take conscious control of the vast productive forces, science and technology, which it has created, and to utilise them for the advancement of civilisation, Klein’s perspective resembles the conclusion of a science fiction global disaster movie, in which the remaining inhabitants, battered and bewildered, try to make do with what remains of the wreckage.
No analysis of political tendencies
Klein’s superficial method in her approach to economics is replicated in the sphere of politics. To her credit, given the widespread promotion of Nelson Mandela, she does point to the impact of the neo-liberal program of the African National Congress (ANC) government in South Africa. But her refusal to make any kind of political analysis means that no one is any the wiser for her criticisms.
According to Klein, the South African economy has remained under the domination of global finance capital–with disastrous consequences for the mass of the population–because the ANC was blindsided in its discussions with the apartheid rulers that led to the transfer of power. The leader of the ruling National Party, F. W. de Klerk, had a plan to maintain economic power in the hands of global capital, even as apartheid rule ended, and to ensure that the ANC’s Freedom Charter remained essentially a dead letter.
“This plan was successfully executed under the noses of ANC leaders, who were naturally preoccupied with winning the battle to control Parliament. In the process, the ANC failed to protect itself against a far more insidious strategy–in essence, an elaborate insurance plan against the economic clauses in the Freedom Charter ever becoming law in South Africa. ‘The people shall govern!’ would soon become a reality, but the sphere over which they would govern was shrinking fast.”
Thus, according to Klein, the ANC leaders were simply hoodwinked and “outmaneuvered on a series of issues that seemed less crucial at the time–but turned out to hold South Africa’s lasting liberation in the balance.” In the end the ANC negotiators really had no idea of what they were bargaining away. [pp. 200-202]
In fact, had Klein chosen to penetrate a little more deeply, it would have become apparent that the agreements reached by the ANC were in line with the essential planks of the Freedom Charter and the political perspectives of the South African Communist Party that drafted it.
As long ago as 1956, Mandela had made clear that the ANC’s aim was not to overthrow capitalism in South Africa, but to open the way for the emergence of an African bourgeoisie by breaking the hold of some of the major corporations. “The breaking up and democratisation of these monopolies,” he wrote, “will open up fresh fields for the development of a prosperous non-European bourgeois class. For the first time in the history of this country, the non-European bourgeoisie will have the right to own in their own name and right mills and factories and trade and private enterprise will boom and flourish as never before” (see Anne Talbot, “Biography falls short of penetrating myth surrounding ANC leader”).
To develop a real understanding of the politics of the transfer of power and the neo-liberal program implemented by the ANC would require examining the role of the South African Communist Party and its program of two-stage revolution. Under this program, power had to be first transferred to the hands of the African bourgeoisie, leaving the carrying out of socialist measures to the distant future.
Klein is well aware of these issues. She chooses not to discuss them, because that would involve explaining the role and doctrines of Stalinism, thereby running the risk that her work could be tarred with the fundamentalist brush. Much better, therefore, to maintain that the ANC leaders did not really know what was going on.
There is a wider issue here. The theme of Klein’s book is that the neo-liberal economic agenda has been able to be imposed because of a series of shocks delivered to the body politic. But the so-called shock doctrine is discussed completely outside the role of parties and political tendencies.
The Chilean coup of September 1973, which saw the overthrow of the Socialist Party President Salvador Allende by armed forces led by General Augusto Pinochet, is characterised by Klein as the “bloody birth of the counter-revolution.”
But the coup came as no surprise. It had been anticipated for months, leading to demands that Allende arm his supporters. Klein does not explain why he did not, because such an explanation would require analysing the role of those political tendencies that operated in the Chilean workers’ movement–the Communist Party, the Socialist Party and the radical groups such as MIR (Revolutionary Left Movement)–and would upset her essential thesis that the imposition of the neo-liberal agenda was simply the outcome of a successful “shock and awe” campaign.
Promoting Keynesianism
In a series of interviews to promote the book, Klein has made even clearer the political arguments that lie at its heart. Losing no opportunity to make an amalgam between the right-wing proponents of the “shock doctrine” and Marxist “fundamentalism”, she has insisted that the “mixed economy” of Keynes and the New Deal represents a real alternative.
In a discussion with Greg Grandin of the North American Congress on Latin America (NACLA) in which he declared: “The right has been very good at emulating the style and strategy of the left. Better than the left ever did, the right has combined the discipline and crisis provocation of the Leninists with the Gramscian patience to work through institutions, fueled by Trotskyist passion”, Klein replied: “They also have a lot more money than [the] left ever does!”
In an interview with Kenneth Whyte of the Canadian current affairs magazine Maclean’s, she attributed common characteristics to “religious fundamentalists” and “Marxist fundamentalists”.
Asked whether she was a Keynesian advocate of a mixed economy, Klein replied: “I think I’m a realist.” But her claim to realism is not based on any historical or economic analysis. Rather it is motivated by what she thinks is acceptable within the current political climate–a certain move to the left, but not too far.
Klein’s assertion, during the course of one interview, that social democratic alternatives did not fail because they were not even tried, is false. The Keynesian measures of the New Deal failed to bring America out of the Depression–the downturn of 1938 was as severe as anything that had gone before. Only with the increase in war expenditure did the American economy begin to revive, and it was only able to sustain that expansion because of the post-war reconstruction of the world capitalist economy, which the military victory of the US had made possible.
If Keynesian measures were a viable third way, then they should have been able to sustain the post-war boom. In fact, they had the opposite effect.
And even if such a program were to be adopted, how would it be implemented? As Klein acknowledges, Keynesianism was only embraced in the United States because of the “militant demands of trade unionists and socialists whose growing strength turned a more radical solution into a credible threat, which in turn made the New Deal look like an acceptable compromise” [p. 252].
Roosevelt implemented the New Deal as a means of heading off social revolution in the United States. It was necessary, he insisted, to save capitalism from itself. In the final analysis, the political success of the New Deal lay not in the manoeuvres of Roosevelt–and there is no doubt he was a brilliant capitalist politician–but in the fact that America was still a rising power. As the period following World War II demonstrated, it had the strength to reconstruct the world capitalist order, and was able to make the necessary economic concessions to achieve this goal.
Today the situation has changed dramatically. American capitalism, for the first time in its history, is undergoing a decline. It is being challenged by old powers and fast rising new ones. To imagine that in this situation a twenty-first century equivalent of Roosevelt will emerge to chart a “third way” is the most unrealistic perspective of all.
What then is the role and significance of Klein’s book? Whether or not she cares to recognise it, she is the ideological representative of a section of the ruling elites that recognises a shift to the left in broad layers of the population, and that it must be diverted before it assumes more threatening forms. Above all, the changed situation requires the cultivation of “leftist” writers, who can be utilised to try to promote an alternative to a genuine socialist and Marxist perspective.
