Why The Right Loves A Disaster
Moody’s, the credit-rating agency, claims the key to solving the
But of all the cynical scrambles to package pro-business cash grabs as “economic stimulus,” the prize has to go to Lawrence B. Lindsey, formerly President Bush’s assistant for economic policy and his advisor during the 2001 recession. Lindsey’s plan is to solve a crisis set off by bad lending by extending lots more questionable credit. “One of the easiest things to do would be to allow manufacturers and retailers” — notably Wal-Mart — “to open their own financial institutions, through which they could borrow and lend money,” he wrote recently in the Wall Street Journal.
Never mind that that an increasing number of Americans are defaulting on their credit card payments, raiding their 401(k) accounts and losing their homes. If Lindsey had his way, Wal-Mart, rather than lose sales, could just loan out money to keep its customers shopping, effectively turning the big-box chain into an old-style company store to which Americans can owe their souls.
If this kind of crisis opportunism feels familiar, it’s because it is. Over the last four years, I have been researching a little-explored area of economic history: the way that crises have paved the way for the march of the right-wing economic revolution across the globe. A crisis hits, panic spreads and the ideologues fill the breach, rapidly reengineering societies in the interests of large corporate players. It’s a maneuver I call “disaster capitalism.”
Sometimes the enabling national disasters have been physical blows to countries: wars, terrorist attacks, natural disasters. More often they have been economic crises: debt spirals, hyperinflation, currency shocks, recessions.
More than a decade ago, economist Dani Rodrik, then at
To be sure, desperate countries will generally do what it takes to get a bailout. An atmosphere of panic also frees the hands of politicians to quickly push through radical changes that would otherwise be too unpopular, such as privatization of essential services, weakening of worker protections and free-trade deals. In a crisis, debate and democratic process can be handily dismissed as unaffordable luxuries.
Do the free-market policies packaged as emergency cures actually fix the crises at hand? For the ideologues involved, that has mattered little. What matters is that, as a political tactic, disaster capitalism works. It was the late free-market economist Milton Friedman, writing in the preface to the 1982 reissue of his manifesto, “Capitalism and Freedom,” who articulated the strategy most succinctly. “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.”
A decade later, John Williamson, a key advisor to the International Monetary Fund and the World Bank (and who coined the phrase “the
Again and again, the Bush administration has seized on crises to break logjams blocking the more radical pieces of its economic agenda. First, a recession provided the excuse for sweeping tax cuts. Next, the “war on terror” ushered in an era of unprecedented military and homeland security privatization. After Hurricane Katrina, the administration handed out tax holidays, rolled back labor standards, closed public housing projects and helped turn
Given this track record,
Yet while managing (barely) to hold the line, the House Democrats appear to have given up on extending unemployment benefits and increasing funding for food stamps and Medicaid as part of the stimulus package. More important, they are failing utterly to use the crisis to propose alternative solutions to a status quo marked by serial crises, whether environmental, social or economic.
The problem is not a lack of ideas “alive and available” — to borrow Friedman’s phrase. There are plenty available, from single-payer healthcare to legislating a living wage. Hundreds of thousands of jobs can be created by rebuilding the ailing public infrastructure and making it more friendly to public transit and renewable energy. Need start-up funds? Close the loophole that lets billionaire hedge fund managers pay 15% capital gains instead of 35% income tax, and adopt a long-proposed tax on international currency trading. The bonus? A less volatile, crisis-prone market.
The way we respond to crises is always highly political, a lesson progressives appear to have forgotten. There’s a historical irony to that: Crises have ushered in some of
Every crisis is an opportunity; someone will exploit it. The question we face is this: Will the current turmoil become an excuse to transfer yet more public wealth into private hands, to wipe out the last vestiges of the welfare state, all in the name of economic growth? Or will this latest failure of unfettered markets be the catalyst that is needed to revive a spirit of public interest, to get serious about the pressing crises of our time, from gaping inequality to global warming to failing infrastructure?
The disaster capitalists have held the reins for three decades. The time has come, once again, for disaster populism.
Naomi Klein is the author of many books, including her most recent, The Shock Doctrine: The Rise of Disaster Capitalism, which will be published in September.Visit Naomi’s website at www.naomiklein.org , or to learn more about her new book, visit www.shockdoctrine.com .