Power, Passion, and Neoliberalism
Naomi Klein's The Shock Doctrine: The Rise of Disaster Capitalism 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
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. 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.
Which is a pity since 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 a masterful journalist can often illuminate social realities far better than the best-trained economist or political scientist.
With her ability to combine no-stone-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
Los Chicago Boys
The opportunity for neoliberalism to come in from the cold arrived in the early 70s, when General Augusto Pinochet overthrew the revolutionary government of President Salvador Allende in
With a Year Zero mentality akin to the Khmer Rouge, they forced
Some of Klein's most original insights are found in her chapters on
There was no democratic transition in
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
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
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 United States, 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.
This leads us to the question of how the neoliberals 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,
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 by Fidel to destroy
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.
The Construction of Hegemony
This is why to counter Stiglitz's 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 [
In the case of the
The construction of consent was 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."
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 neoliberal values into the 'common sense' of the work force."
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
Crisis of the
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 1970s 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 overaccumulation 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
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% in what is now regarded as the golden age of the post-World War II Bretton Woods system, 1950-73, to 3% in 1973-89, a drop of 39%.
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 toward 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 toward 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, were 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 myriad Byzantine ways to overvalued subprime mortgages. Corrections or crises have become more frequent in the neoliberal era, with one Brookings 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,
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
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.
Contracting Out the War on Terror
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," Klein writes, 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 capital accumulation—that is, it raises capital via taxes, and 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 Katrina or the socially-created kind like
Finally, as in
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 here's 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.
Foreign Policy In Focus columnist and a fellow of the Transnational Institute, Walden Bello is currently a Distinguished Visiting Professor at St. Mary's University in