Sept/Oct/Nov 2007

It Takes a Crisis

Naomi Klein looks at free-market fundamentalists and economic turmoil

Eric Klinenberg


Why do so many nations have economic policies more laissezfaire and social programs less generous than their citizens prefer? In her explosive counterhistory of global capitalism, against the glib accounts offered by mainstream economists and celebrity journalists, Naomi Klein argues that the answer lies in a simple two-step strategy, honed over three decades by an international cabal of freemarket fundamentalists: First, exploit crises—whether due to economics, politics, or natural disasters––to advance an agenda that would never survive the democratic process during ordinary times. Next, create a "corporatocracy," in which multinationals and political leaders align to promote their interests at the public's expense.

The idea that crises can produce openings for radical change is ancient, and Karl Marx surely ranks among its most notable proponents. Yet in The Shock Doctrine, Klein asserts that only in the late twentieth century did it become programmatic among a cadre of power brokers—libertarian intellectuals, corporate executives, and political elites— intent on inducing economic transformation on a global scale. Milton Friedman, the late University of Chicago professor who is commonly called the most influential economist of the last fifty years, was the inspiration. Friedman laid out his theory in the 1982 preface to his signature treatise, Capitalism and Freedom, originally published in 1962: "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. . . . Our basic function [is] to develop alternatives to existing policies, to keep them alive and available until the politically impossible"—by which he meant enacting radical deregulation, privatization of national industries and public-sector programs, and deep cuts to the welfare state— "becomes the politically inevitable."

Klein, the author of No Logo (2000), a popular manifesto on the cultural politics of branding and anticorporate activism, calls this species of political opportunism "disaster capitalism." Her new book is a broad survey of its rise as a mode of development imposed on unwilling populations throughout the world. It is also a searing indictment of its practitioners, from the "Chicago School juntas" of Friedman acolytes who collaborated with murderous dictators so long as they professed enthusiasm for free markets, to the international-development organizations that demanded "shock therapy" and showed little regard for the welfare of those who absorbed it, to the corrupt officials who profited from what they benignly labeled "structural adjustment."

Readers who have followed recent debates in developmental economics will be familiar with one strand of Klein's story: neoliberalism's catastrophic failure to improve living conditions of either ordinary workers or the poor. "Everywhere the Chicago School crusade has triumphed," Klein reports, "it has created a permanent underclass of between 25 and 60 percent of the population" and an overclass of well-connected billionaires who build modern fortresses to safeguard their lifestyles while promising that their wealth will soon trickle down. Moreover, she explains, the World Bank and the International Monetary Fund plant "debt bombs" in their assistance packages, so that national governments must blow their modest budgets repaying creditors rather than investing in public health and well-being.

There's nothing revelatory in Klein's critique of the international-development agencies, though she does provide a telling portrait of Jeffrey Sachs, the superstar economist who personifies their imperial arrogance as he jets around the globe promising to revive moribund economies and refusing to acknowledge his failures. What is instructive, particularly for liberals who would like to believe that the shock doctrine was authored solely by the Right, is that the list of its proponents, particularly in the 1990s, included so many Democratic luminaries: Lawrence Summers, Joseph Stiglitz, George Soros, and Bill Clinton, to name just a few. The Washington Consensus, after all, was hardly a partisan term.

The heart of Klein's book is her arresting claim that the shock doctrine not only operates according to the logic of torture but also leads to the enactment of brutal repression— including detention, disappearances, torture, and murder—against its critics. She introduces her case by juxtaposing accounts of two "shock doctors": Ewen Cameron, director of McGill University's Allan Memorial Institute and former president of the American Psychiatric Association, who in the 1950s and '60s received CIA funding to perform experimental research using electroshock therapy on patients suffering from minor psychiatric ailments, "without their knowledge or permission," and Friedman, whose department used State Department and major-foundation funding to train an international team of economists on how to break down developmental states built on Keynesian social policies, such as those in the Southern Cone of Latin America, and replace them with laws more favorable to multinationals. Although their laboratories were strikingly different, with Cameron experimenting on individuals and Friedman on national economies, the social scientists shared faith that their subjects would benefit from heavy doses of "planned misery."

Cameron's research papers convey his confidence that shock treatments, which gained legitimacy in the 1940s and '50s but whose effects were never fully understood, could "break up old pathological patterns," reducing patients to psychological infancy and allowing for dramatic reconditioning. Yet, Klein reports, in his experiments Cameron grew "frustrated that his patients still seemed to be clinging to remnants of their personalities," and so in addition to the six consecutive jolts he routinely administered, the professor "further disoriented them with uppers, downers and hallucinogens." He then attempted to restore their sanity by playing recorded messages—"You are a good mother and wife and people enjoy your company"—for sixteen to twenty hours a day. In one case, we learn, "Cameron played a message continuously for 101 days." What Klein calls "shock and awe" campaigns on the mind were devastating for patients. Still, the CIA integrated many of Cameron's techniques into its 1963 handbook Kubark Counterintelligence Interrogation, used for training agents to extract information from "resistant sources" and ushering in "a new age of precise, refined torture." Alas, these methods have proved as dangerous and ineffectual as the agency's research.

Klein claims that Friedman's version of the shock doctrine was inspired by the dream "of de-patterning societies" so that they could be remade from scratch. In Chile, for instance, a team of "Chicago Boys" led by Sergio de Castro collaborated with General Augusto Pinochet's military allies as they planned their bloody coup, assuring them that privatizing state-owned industries, reducing trade barriers, and eliminating price controls would boost the economy. When, instead, inflation skyrocketed to 375 percent, a leading bank urged Friedman to visit Santiago and help stop the free fall. Rather than advise the government to introduce immediate social protections or distribute essential goods, Friedman called for "shock treatment." In a personal meeting with the dictator, he emboldened Pinochet "to embrace the free market with greater abandon." The result: "Chile's economy contracted by 15 percent, and unemployment— only 3 percent under [deposed Socialist president Salvador] Allende— reached 20 percent."

Click to enlarge

Chilean president Augusto Pinochet greets US secretary of state Henry Kissinger on his arrival at Pinochet’s office, June 8, 1976.

Today, many regard Chile as an economic success story and credit Friedman's policies with making it so. Klein offers a useful corrective, noting that the nation's growth started only after the economy crashed in 1982, when Pinochet reversed course, firing the most influential Chicago Boys and nationalizing companies whose revenues would reduce debt. Moreover, she explains, the Chilean turnaround excluded nearly half of Chile: By 1988, 45 percent of the population lived in poverty, and in 2007 Chile ranks eighth on the United Nations' list of the world's most unequal countries.

The Shock Doctrine provides a sprawling global tour of neoliberalism's conquests. Klein assesses "the Chicago School crusade death toll" during three decades of upheaval, from the 1970s to today. She also illustrates the strategic shift from crisis exploitation to disaster provocation. By 1993, leading US economists were suggesting that policy makers, as scholar John Williamson put it, "think of deliberately provoking a crisis so as to remove the political logjam to reform," and corporate-funded think tanks begin encouraging national governments to manufacture "pseudo-crises," such as the '93 debt scare in Canada, that would lead to dramatic retrenchment of social programs.

The Shock Doctrine is a massive, courageous undertaking, and Klein's impassioned critique of the violence that accompanies American economic imperialism is not merely necessary but urgent. At times, however, she overreaches, and her analysis falls short of her ambitions. The least developed idea is her boldest claim: that the practice of economic shock therapy not only partakes of the logic of physical torture but is also its moral equivalent. Klein persuasively shows that both Cameron and Friedman fantasized about their capacities to rebuild from clean slates and that neither adequately considered the human damage wrought by their shock therapies. But the two shock docs made scientific and political interventions that are strikingly dissimilar, and Klein's argument would have been more compelling had she established a deeper connection between them.

Klein generally portrays the proponents of economic liberalization, including leading scholars, as either puppets of or handmaidens to the multinationals, and the Chicago School as the sponsor of "juntas" that used "disappearances" as their "primary enforcement tool." The economists play a purely nefarious and extraordinarily influential role in Klein's account of recent world history, and it would be useful to learn more about them, their ideas, and their internal debates. When they come across as caricatures, so, too, does Klein's message, even when it carries insight. Klein says little about the economic and social problems that predated shock therapy and the triumph of neoliberalism, which makes it diffi cult to evaluate her claim that the Chicago School "created" an underclass ranging from 25 to 60 percent of its victims' populations or even to measure how much damage it produced. And her enthusiasm for the rise of a more "shock resistant" Left in Latin America is unchecked by a more somber account of why voters in parts of Europe—most recently France—are turning in the opposite direction.

The Shock Doctrine is most effective when Klein's travels take her to the depths of the "disaster capitalism complex." In Iraq, she shows how Paul Bremer created an "anti– Marshall Plan," rewriting the constitution to privatize national industries and allow foreign firms to own 100 percent of Iraqi assets. In Sri Lanka, she documents a politically driven land grab following the great tsunami of 2004, when an official task force—half of whose members came from the tourist sector— granted large hotel developers the right to build luxury resorts on coastal properties and prohibited the poor fishermen who had lived there before from rebuilding.

In New Orleans, she observes, the abandoned population no longer trusts any level of government—federal, state, or local. One community leader tells her that the pressing question has become, "What can we do right now to start to bring our neighborhoods back in spite of the government, not because of it?" Herein we find the source of a political problem that begins where Klein's narrative stops. Once citizens recognize that state-supported disaster capitalism and the neoliberal policies it advances have failed them, will they also lose faith in the very idea that the government—even a social-democratic one—can help?

Eric Klinenberg is the author, most recently, of Fighting for Air: The Battle to Control America's Media (Metropolitan Books, 2007).

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