Book Review: The Shock Doctrine: The Rise of Disaster Capitalism by Naomi Klein

Recall Hurricane Katrina.  It was a disastrous moment that put people into shock.  Everyone was disoriented and confused in that situation.  But now imagine someone having the idea that this is the perfect opportunity to implement a new system.  Now is the time to expand a certain ideology.  This new idea is to get rid of public schools and replace them with charter schools.  It seems like an odd idea to implement.  People are dying of hunger, people have no homes, and people are economically poor.  But the reply is, “yeah, yeah, but as soon as it’s fixed up and back in business, the new society will be better with these new schools.”  This is what Klein is getting at.  The world has become complex and in order to change a segment, one must wait for a disaster to come along and exploit the disaster to expand the capitalist ideology.  Why disasters?  It’s because the people are in such a state that they are willing to try anything new.  This new kind of capitalism takes advantage of the shock that everyone is going through and the best way to expand an extreme free market capitalism is through disasters.  Welcome to. . .

What is their system? How do they do this?  Economist Milton Friedman has taken advantage of disasters around the world (e.g. Hurricane Katrina, the rise of Pinochet in Chile) to implement a free market.  However, (and you can see this on the website above where one of his critics is also Anarco-Capitalist, Murry Rothbard) this is no longer a true free market, according to Klein.  It’s now disaster capitalism.  As she states, “disaster capitalists have no interest in repairing what was.”  Disaster capitalists take out what was already there but replace it with capitalist schemes.  Taking out public schools for charter schools in New Orleans, for example.  Or replacing local fisheries with beach hotels along beaches in Sri Lanka after a tsunami hit.  Klein states:

[T]he idea of exploiting crisis and disaster has been the modus operandi of Milton Friedman’s movement from the very beginning–this fundamentalist form of capitalism has always needed disasters to advance. (p. 11)

You can also see Klien talking about Disaster Capitalism here:

In terms of 9/11, Friedman and his followers went to action by taking advantage of the fear and shock that the world was in by implementing a free market system in the Middle East.  It’s a postmodern approach to economics.  The world calls it “neoliberalism”.  Terms are always different in America, however.  We call it “neoconservativism.”  To me, this sounds like corporatism.  Perhaps Rothbard is right, Friedman is being very authoritative and totalitarian.

Klein challenges the notion that democracy and deregulated capitalism go hand in hand.  Instead, this fundamental form of capitalism is actually anti-democratic.  Many people see Stalin hijacking Communism.  In a twist, Klein is saying that Friedman and the Chicago School of economics (which has been very influential in politics such as neoconservativism and the Bush administration) has hijacked mainstream Capitalism.

Shock Therapy

Where did the idea of shock come from?  Shock Therapy.  Dr. Ewen Cameron, the director of these shock therapies, came up with a theory that if we shock people (meaning electroshock) it would get rid of the original personality and create a “blank slate,” a new person to shape and form.  However, these same methods are being used in Guantanamo.  Obviously, shocking doesn’t erase memories, it just makes the person more fragmented and more unclear.  For Klein, disaster capitalists have this same philosophy: they destroy in order to create, but they don’t realize that the destruction actually makes things worse.

Friedman is taking these ideas and implementing them around the world.  By working off a utopian ideal, the world would be perfect.  Nevermind the pragmatics behind it all, or even on how to approach it, the end justifies the means on getting there.  The goal was unfettered capitalism, capitalism before the New Deal.  It was an economic policy that had no governmental intervention.  Nevermind that having no governmental intervention is what brought forth the Great Depression, it was their ideal.  That is what was most important.  The enemy, therefore, was Keynesian economics.  The answer was for non-governmental interventions, cutting back on social programs, and privatize almost everything.  But they need to test this project somewhere.  They couldn’t do it in the US because the US was pretty much established.  Thus, they set their eyes to Chile.  By setting up the program, more than 100 students from Chile came and got advanced degrees in the Chicago schools to learn about this Friedman economics.  Ironic how their tuition and expenses were paid by the US taxpayer.  However, Chile didn’t want this new economics.  Thus, Friedman encouraged Richard Nixon to implement a strategy to get the current government of Chile out.  There was a military coup, a shock to the country.  If anyone dissented, there would be the shock of the torture chamber, much like what Cameron implemented.  This was the first Chicago School state, and General Pinochet was in charge of it.

One last word, if you want Klein showing how Obama is still implementing the Shock Doctrine, go here.

Shock Therapy Goes into Effect

The expectation in the Chilian government was that the laws of economics would gain equilibrium.  It didn’t.  Inflation reached an all-time high: at 375 percent.  One commented that bringing in the Chicago Boys was “one of the greatest failures of our economic history.”  A major problem with this extreme form of capitalism is that the free market is losing it’s hold: it is no longer a capitalist state but a corporatist one.  The outside world was protesting against Chile, which didn’t help because their economy was now based on doing business with the outside world.  The war became a war of ideas and anyone against the new order was considered “a terrorist.”

Klein goes into details about what happened in other countries that started to use economic shock therapy: places like Bolivia, China (during the Tienanmen Square incident), Poland (after Communism fell), South Africa (when apartheid ended) and Russia (when Communism fell).  Many Russians now accuse this type of capitalism “economic genocide.”  In these countries, none of them started off democratic (as was planned), but Friedman and Sachs suggested that we have to change the economic structure into capitalism as soon as possible.  I really didn’t understand why they needed to rush.

The story about Russia is interesting.  Gorbachev initially wanted a market similar to Sweden.  But many people told him that it should be an extreme version of capitalism, or else he won’t get any help.  Eventually, Boris Yeltsin would be the new Pinochet.  Yeltsin got a team of economists who adored the Chicago-style of economics.  However, hardly anyone in the Russian public wanted this version of capitalism.  The thinking was that if the country would be able to profit, the country would automatically rebuild itself through the revolution.  This same type of thinking would go into Iraq.  It’s odd that rebuilding a country means to demolish it and the profits from it would pay for the war.  Why did this new thinking become popular?  This never would’ve happened in World War II.

With this, Communism fell peacefully, but the new type of capitalism would shed blood.  With these transitions, Communism fell, but a Corporatist state took it’s place.  Indeed, it seems that without regulation, capitalism becomes corporatism.  Eventually, Yeltsin was becoming unpopular, so what do you do to become popular again?  You start a war.  And that’s what Yeltsin did in 1994 against Chechnya.  Yeltsin’s minister said that “in order to have a democracy in society there must be a dictatorship in power.”  Interesting that a democracy entails a dictatorship.

We see the full agenda of the neoliberals: they adopt Adam Smith’s view of capitalism but twist it.  Smith encouraged to go through “savage and barbarous nations” because there’s no laws there.  But because this is impossible in today’s world, the neoliberals go into an existing society and dismantle existing laws and regulations in order to re-create a sense of lawlessness.  It’s a way of starting over.

The thinking was that if the Cold War is going on, let’s keep Keynesianism, but now that Communism is over, the thinking is to open the market even more.  In the Asian market in the early nineties, the citizens couldn’t even vote if they wanted a Chicago School-type of economy.  Thus, no democracy.  “Stabilization” is just code meaning throwing millions of people overboard and they can never climb back on.

Shock Therapy in Iraq

On the home front, Rumsfeld had a plan: let’s privatize and outsource the army.  Cheney went with this with Halliburton.  After 9/11, the US went from moderate capitalism to full-blown corporatism: big business and big government to regulate and control the citizenry.

With this, Saddam Hussein was not a threat to U.S. security, but a threat to U.S. corporations because he signed a contract deal with Russian oil giants and was in negotiations with France, leaving the U.S. and Britain in the dust.  With the invasion of Iraq, Halliburton became the single most profitable event in it’s history.  We need to take heed of Eisenhower’s advice to beware of the military industrial complex because they can profit from the war.  However, the war profiteers aren’t just making deals with the government; they are the government.  Conflicts of interest are abound.

The selling of the War in Iraq could only be implemented on the fear of the WMD.  But why Iraq?  It’s the heart of the Arabian culture and it’s lacking in a free-market democracy.  Keep in mind that the critics of the Bush administration about the war in Iraq is that they didn’t come up with an exit strategy.  In a remarkable move, Klein suggests that the Bush team planned everything out to the end, including not having one.  In other words, they never intended to leave.  They planned to get in and start the shock therapy (with Operation Shock and Awe) and start a free-market democracy there.  Klein shows that Iraq wasn’t their first target: Syria, Egypt and Iran were touted around to see if they were “good enough” to invade.  Iraq was the optimal choice because of location, the fact that Saddam’s in charge, and that we’ve been in there before.  As Thomas Friedman pointed out, “We are not doing nation-building in Iraq.  We are doing nation-creating.”  What they didn’t realize was that there was already a nation there.  However, that’s the idea: you erase nations and put another one in its place.

Was there a Marshall plan?  No.  Bush actually launched an anti-Marshall plan.  The Green Zone was basically a Halliburton-run city-state that was in charge of everything in Iraq.  In other words, a corporation was governing a country.  The Iraqis, of course, started to see this as liberation, but with the shock therapy and the anti-Marshall plan, this started to look like 19th century imperialism all over again.  By privatizing Iraq, where none of the citizens had any say, they started to go against the Americans.  As Klein put it:

if the reconstruction had provided jobs, security and services to Iraqis, al-Sadr [leader of the Mahdi Army, a sectarian group fighting the US] would have been deprived of both his mission and many of his newfound followers.  As it was , corporate America’s failures laid the groundwork for al-Sadr’s successes.

The Bush team was hoping to bank of off shock, but they underestimated that the Iraqis would fight back the shock.  Thus, the Bush team put more shock and suppressed democracy and administered torture of whomever got in the way.  Democracy in Iraq never really happened.  The leaders were never elected, but appointed.  If Iraq had a true democracy, the US would never have military bases and US multinational corporations would never have power in Iraq.  Many Iraqis consider Bremer, the leader of reconstructing Iraq, just Saddam Hussein.  In fact, many people openly compared Bremer with Saddam Hussein.  Bremer’s job was to create a capitalistic utopia, but it failed.  They administered more shocks until they could reach a blank slate.  But as we’ve seen, it just creates more broken people and countries.

Disaster Capitalism in Disaster Areas

Remember the Tsunami in 2004?  It was a disaster.  But he response was another form of shock therapy.  The beaches were littered with natives and fishing businesses.  However, the government has been trying to find a way to get rid of these people, but to no avail.  Finally, the tsunami came and it was a perfect “plan to drive the fishing people from the beach.”  Thus, reconstruction was just another way of changing this quaint beach into a high-end “boutique tourism destination.”  Basically, it’s a place where only the rich can enjoy.

The same has happened after Hurricane Katrina in New Orleans.  The neoliberal agenda took advantage of this system and paid contractors to “reconstruct” the city.  Paying the contractors was not a problem; but when it came to financing the basic stuff, the money was conveniently gone.  The contractors gained their own economic boom while the citizens watched themselves getting poorer.  This is because these citizens (and us too) subsidized the contractors.  This is a totally unregulated free-market.

The Green Zone in Iraq is the safe place in Iraq.  But the concept of a Green Zone is also in New Orleans as well.  People inside the Green Zone are safe from the “outside people” (read: poor people).  With disaster capitalism, safety and survival can now be bought and sold.  Blackwater, a privatized mercenary group, moved from Iraq to New Orleans to take care of business.  But this group has an agenda.  Remember, they don’t work for the government.  Indeed, they think that the government should be extremely limited.  Thus, if they rebuild something, their products are very weak and it creates a market for alternative security forces.  But a right-wing journal called Blackwater an “al Qaeda for the good guys.”

With the market being unregulated in disaster places, the government cannot sponsor nor help the citizens, and so these corporate states take charge.  Thus, if you want to be rescued, it’s going to cost you.  Survival is given to those who can afford to pay to escape.  The next thinking model is if the military can be privatized, why not the police or the fire department?  The thinking is that health care is something allocated to where you live and whom you work for.  Why can’t security be the same thing?  For those that can’t afford to live in the Green Zone, “they will have to make do with the remains of the national system.”  In the Red Zone, murder rates went higher.  The worry is if neoliberalism becomes the dominant force in the nation, we will all be living in Green or Red Zones.  And that all depends on if you can afford it.  Those are the options: a failed state, or a hyperserviced one.  Not only is governmental services outsourced, but so is the functions of government.

War profiteering is on the rise.  The economic rule was that if fighter jets went up, luxury jets went down.  But since 2003, spending has gone up on both.  It suggests that as the world becomes less peaceful it’s also more profitable.  The War on Terror is the best way to take advantage of this agenda because this war will never end; it’s a full-on scale war against peace.  In Israel, for example, providing “security” is also responsible for their economic growth.  The War on Terror has also saved their economy.  Klein gives a list on pages 553-5 which I won’t provide here.  But more than that, Israel’s corporations didn’t just support the war, they sponsored it.  It helps raise profits.  We finally learn the point behind the War on Terror: it can’t be won, but that’s the point.  The point is to create security by creating Green Zones and Red Zones.  Israel is really good at this since the whole country is basically a Green Zone.  Quoting Klein:

An entire country has turned itself into a fortified gated community, surrounded by locked-out people living in permanently excluded red zones.  This is what society looks like when it has lost its economic incentive for peace and is heavily invested in fighting and profiting from an endless and unwinnable War on Terror.  One part looks like Israel; the other part looks like Gaza. (p. 558)

Israel has created a system where its own citizens could be “surplus humanity.”  Israel goes further than the other countries mentioned previously: instead of the rich building walls around themselves, Israel has built walls around the dangerous poor.

But there is hope.  People are starting to resist the shock.  People are starting to see that a dictatorship’s “free market” are making the already wealthy into the superrich and the working class into a poorer class.  Trickle-down economics didn’t happen.  Argentina protested against the IMF, the rest of Latin America followed suit.  It’s a challenge to Friedman’s philosophy (and to neoliberalism itself): capitalism and freedom are the same thing.  People around the world who are against neoliberalism were starting to win elections.  People are starting to see that corporations cannot use the US taxpayer as their personal ATM.  World Bank managers are now being laughed at.  Paul Wolfowitz, who was president of the World Bank, had to resign.  More and more countries are starting to wise up and, as Klein puts it, starting to get out of shock.  People are tired of having their taxes raised just to have peace.  We are not in a Hobbesian government, nor should we be.  In Italy, the citzens hated being taken advantage of and they when their president announced to continue the War on Terror, the citizens firmly said, “no.”  People in disaster areas aren’t relying on corporate-ran government; the citizens themselves are taking a direct-action reconstruction.  The message is that people can learn when their government is taking advantage of them in a time of crisis and we can learn that, even in the midst of a crisis, we don’t need to go through shock therapy for a solution.

But Klein seems to insist that terror and torture were tools to transform the economy into an extreme free-market society.  Indeed, terror and free-market ideology go together.  But this is the weakest part–and if this the weakest, the rest of the book is sure to fall apart–if terror is a tool to transform the economy into a free-market based system, then I don’t see a connection between terror and free-trade.  After all, she admits that they seem to be tools.  But tools are just that–tools.  Tools can be for good or evil.  Sure, there was what she calls a “monopoly of ideology” and terror and torture were used to get people into thinking that ideology, and I’ll even buy that killing people because of their political beliefs a “crime of genocide.”  But surely we cannot expect that terror and neoliberalism go together.  I don’t see the connection.  Klein gives examples from South America but these are just isolated examples where someone took advantage of the system.  By claiming that terror is a tool only weakens her argument.  She asks a question on page 157: “Is neoliberalism an inherently violent ideology, and is there something about its goals that demands this cycle of brutal police cleansing, followed by human rights cleanup operations?”  I don’t see it.  I see terror as an instrument of bringing about a new ideology, but inherent?  Klein has not shown that.

Her argument seems specious, but I may be missing the point.  Here’s her argument as I see it:

1. If anyone implements shock therapy, they are morally blameworthy.
2. The Chicago Boys implemented shock therapy.
3. Therefore, the Chicago Boys are morally blameworthy. (Modes Ponens; 2,3)

But her next argument doesn’t seem to work:

• The Chicago Boys impliemtned an extreme view of the free-market (neoliberalism).
• Therefore, neoliberalism is morally blameworthy.

It doesn’t follow.  I don’t see a connection between shock therapy and neoliberalism.  Now, I’m not a fan of neoliberalism.  But reason leads one to the conclusion that shock therapy and neoliberalism don’t have a tight connection.

Yet, there is something here that’s implicit in Klein’s work.

First of all, it shows that ethical egoism is flawed.  Many people took advantage of capitalism in the extreme sense and it has not helped.

Secondly, there is no necessary connection between democracy and capitalism.  A free, unregulated market does not entail a free society as Klein has shown triumphantly.

This is a book that needs to be read, not only for the political ambitions and to see how the governments around the world have taken advantage of the citizens when there was a disaster, but also so that you can realize that the government is implementing shock therapy to its citizens, and for you to be ready to fight back.