| The Shock Doctrine tells the story of the world's adoption of Milton Friedman-style "neoliberal" economics. (These policies go by many names, but neoliberalism is the term I'll use here.) You're familiar with neoliberal economics if you live in the U.S. today. It's the idea that the free market should determine everything, with minimal government intervention. It's the call to privatize as many government functions as possible, deregulate industry, and tear down trade barriers. It's the economic policy we are living with now, that calls for giving tax breaks to millionaires and billionaires even though our country can't afford to pay teachers.
When Friedman and his buddies at the University of Chicago first dreamed up their ideas, the world was still solidly Keynesian. New Deal programs were incredibly popular and the U.S. had a thriving middle class. Other countries around the world were also adopting Keynesian policies, trying to reduce poverty and bring more of their citizens into the middle class. Klein writes:
Leftists in the developing world have long argued that genuine democracy, with fair rules preventing corporations from buying elections, would necessarily result in governments committed to the redistribution of wealth. The logic is simple enough: in these countries, there are far more poor people than rich ones. Policies that redistribute land and raise wages, not trickle-down economics, are in the clear self-interest of a poor majority. Give all citizens the vote and a reasonably fair process, and they will elect the politicians who appear more likely to deliver jobs and land, not more free-market promises.
For all these reasons, Friedman had spent a fair bit of time staring down an intellectual paradox: as the heir to Adam Smith's mantle, he believed passionately that humans are governed by self-interest and that society works best when self-interest is allowed to govern almost all activities - except when it comes to a little activity called voting. Since most people in the world are either poor or live below the average income in their countries (including in the U.S.), it is in their short-term self-interest to vote for politicians promising to redistribute wealth from the top of the economy down to them. - p. 134-135
While the U.S. was taxing the top income bracket at rates more than double what they are now, countries in Latin America in particular were busy doing things like redistributing land (i.e. Bolivia in 1953). And U.S. corporations did not like this. I mean, how the hell can foreign corporations make more money than god if countries are doing things like nationalizing their industries and imposing tariffs?
Now, it didn't sound good when corporations argued that they should make more money. But it sounded fine when it came out of the mouths of academics, like the economists trained at University of Chicago. And in particular, the self-interested corporations, their friends in the U.S. government, and neoliberal economists were upset over Chile.
In 1953, two men - Albion Patterson, director of the U.S. International Cooperation Administration in Chile, and Theodore W. Schultz, chairman of the Department of Economics at University of Chicago - came up with a brilliant idea to turn Chile around. They set up an exchange program to educate Chilean economists at University of Chicago. The program was launched in 1956 and eventually expanded to include students from other Latin American countries. It also included the establishment of an economics department at a Chilean university teaching Friedman-style economics. And... after nearly two decades, the program yielded nothing.
Friedman and his followers were basically out in the wilderness, talking to themselves. Chile elected Salvador Allende in 1970, "on a platform promising to into put government hands large sectors of the economy that were being run by foreign and local corporations." (p. 63-64)
In the U.S., Nixon was president. The CIA backed the 1973 coup that killed Chilean president Allende and put General Augusto Pinochet in power. Unlike Allende, Pinochet was perfectly willing to implement neoliberal economic policies. Being a military dictator with an appetite for terrorizing his own people, it wasn't too hard to enact policies that so violently went against the bests interests of his people.
Klein spends quite a bit of time discussing the physical and psychological torture and the economic policies of this regime and others, and how they relate. The economists who advised Pinochet and backed his economic policies largely escaped criticism for their association with him. However, Klein sees a strong connection between the human rights violations and the economic policies under Pinochet. She says:
The widespread abuse of prisoners is a virtually foolproof indication that politicians are trying to impose a system - whether political, religious, or economic - that is rejected by large numbers of the people they are ruling. Just as ecologists define ecosystems by the presence of certain "indicator species" of plants and birds, torture is an indicator species of a regime that is engaged in a deeply anti-democratic project, even if that regime happens to have come to power through elections. - p. 125
And, it is worth noting that the torture techniques used in Latin America were developed by the U.S. government and then taught to the Latin Americans doing the torture. These are many of the same torture techniques we have all heard about from Guantanamo and Abu Ghraib, and, while I think we all understand the discomfort behind sleep deprivation or having loud music blasted at us, Klein does a brilliant job describing the true psychological effect of these tactics. In fact, while I've heard for years now that torture does not produce valid confessions, I only understood our use of it after reading this book. Confessions of terrorism were never the point.
The radical economic policies that took such deep root during dictatorship would prove hardier than the generals who implemented them. Long after the soldiers returned to their barracks, and Latin Americans were permitted to elect their governments once again, the Chicago School logic remained firmly entrenched.
Claudia Acuna, an Argentine journalist and educator, told me how difficult it had been in the seventies and eighties to fully grasp that violence was not the goal of the junta but only the means. "Their human rights violations were so outrageous, so incredible, that stopping them of course became the priority. But while we were able to destroy the secret torture centers, what we couldn't destroy was the economic program that the military started and continues to this day." - p. 125
The name of the book "the shock doctrine" refers to the theory that evolves through history that neoliberal economic policies can only be imposed after a major shock, whether due to a military coup and violent repression of a people, a war, a natural disaster, or an economic meltdown. She says:
It was in 1982 that Milton Friedman wrote the highly influential passage that best summarizes the shock doctrine: "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.140
The first countries that fell to neoliberal economics were similar to Chile under Pinochet. A violent dictator can impose unpopular policies quite easily. But then, in 1985, came Bolivia.
Bolivia didn't have a coup in 1985. They had a democratically elected president. And they also had a horrible problem of hyperinflation. A 1984 attack on their coca farms (courtesy of the U.S. under Reagan) threw their economy into a tailspin. Shortly after the 1985 Bolivian election, 30-year-old "Harvard whiz kid" Jeffrey Sachs showed up to save the day.
The election was a close one, and the victorious candidate was Victor Paz Estenssoro. He did NOT run on a platform of neoliberal economics. But that's what he imposed after he took office. He put future Bolivian president Goni in charge of the economic team, and in a highly secretive process, Goni and friends planned to implement Sachs' neoliberal recommendations.
After seventeen days, Bedregal, the planning minister, had the draft of a textbook shock therapy program. It called for the elimination of food subsidies, the canceling of almost all price controls and a 300 percent hike in the price of oil. Despite the fact that life was about to get a lot more expensive in an already desperately poor country, the plan froze government wages at their already low levels for a year. It also called for deep cuts to government spending, flung open Bolivia's borders to unrestricted imports and called for a downsizing of state companies, the precursor to privatization. - p. 147
Once written, this plan was imposed by Paz. It ended the hyperinflation (much like amputating your leg would get rid of an ingrown toenail). Bolivians, of course, did not take these "reforms" well. When the protests started, Paz answered with repression.
The 1980's was the decade in which neoliberals dabbled in passing their policies in democracies (the U.S. under Reagan and the U.K. under Thatcher in addition to Bolivia). It was also the decade when they perfected their use of the World Bank and the IMF to impose their policies. Even though very often a country in distress needed aid money and not free trade and privatization, the IMF would only give them as a package. Want some aid? Good, then you need to privatize your national oil company/water company/mines and throw open your borders to cheap imports too. Klein says:
Having finally escaped the darkness of dictatorship, few elected politicians were willing to risk inviting another round of U.S.-supported coup d'etat by pushing the very policies that had provoked the coups of the seventies - especially when the military officials who had staged them were, for the most part, not in prison but, having negotiated immunity, in their barracks, watching.
Understandably unwilling to go to war with the Washington institutions that owned their debts, crisis-struck new democracies had little choice but to play by Washington's rules. And then, in the early eighties, Washington's rules got a great deal stricter. That's because the debt shock coincided precisely, and not coincidentally, with a new era in North-South relations, one that would make military dictatorships largely unnecessary. It was the dawn of the era of "structural adjustment" - otherwise known as the dictatorship of debt. - p. 141
The IMF and World Bank, now chock full of neoliberal economists, implemented their first "structural adjustment" (i.e. forcing a country to put in place neoliberal economic policies) in 1983. They perfected their system in 1989 with "the Washington Consensus:"
The colonization of the World Bank and the IMF by the Chicago School was a largely unspoken process, but it became official in 1989 when John Williamson unveiled what he called "the Washington Consensus." It was a list of economic policies that he said both institutions now considered the bare minimum for economic health - "the common core of wisdom embraced by all serious economists." These policies, masquerading as technical and uncontentious, included such bald ideological claims as all "state enterprises should be privatized" and "barriers impeding the entry of foreign firms should be abolished." - p. 163
Now, instead of getting a dictator to impose neoliberal policies, all they had to do was wait until a country fell into an economic crisis and then show up with aid - and strings attached. They did it in Poland and in Russia. And they grew more sophisticated, learning that they could actually CAUSE a crisis and then show up with the solution, which is more or less what happened in the Asian Financial Crisis of the late 1990's. (Arguably, this also happened in the 1980's, when the U.S. suddenly increased interest rates, making the debt of foreign countries suddenly balloon out of control.)
Klein mentions Africa as home to many more victims of neoliberal "shock therapy," but only goes into detail about South Africa, which is unique as its neoliberal program began as the country ended apartheid. She ends the book with chapters about the latest frontiers in neoliberalism: Iraq, Sri Lanka, and the good ole U.S. of A. Fortunately, she also ends the book with hope. Some of the first victims of these policies, the "Bolivarian" South American countries (Bolivia, Venezuela, Ecuador, etc.), have had enough, and they are now resisting U.S. influence and neoliberal economics. |
