Free-Marketeering

Stephen Holmes

  • BuyThe Shock Doctrine by Naomi Klein
    Penguin, 558 pp, £8.99, June 2008, ISBN 978 0 14 102453 0

The anti-globalisation movement suffered a dizzying setback on 9/11. Symbolic gatecrashing into the well-guarded meeting places of the super-rich suddenly seemed a much more sinister activity than before. Busting up branches of Starbucks and other Seattle-style antics became anathema in an atmosphere of injured and vindictive patriotism. But Naomi Klein, the combative theorist and publicist of anti-globalisation, was not about to accept such guilt by association. Her reply, The Shock Doctrine, deals with the corporate acquisitiveness that she sees as ravaging the planet and reformulates the ideas of the anti-globalisation and anti-corporate movements for a post-9/11 world. Klein believes she has found the answer to a question that has perplexed many on the left: if every modern American government has been a tool of powerful business interests, what, if anything, makes the Bush administration uniquely odious?

Her answer is that the Bush administration draws its political support not from America’s corporate class generally, but rather from a particular part of it: ‘the sprawling disaster capitalism complex’. She has in mind the companies that reap huge profits from catastrophes, both man-made and natural. They include defence contractors, arms dealers, high-tech security firms, the oil and gas sectors, construction companies, private healthcare firms and so on. Not exactly ambulance-chasers, they are driving the ambulances themselves – for a profit. For the most part, they capitalise on emergencies rather than deliberately bringing them about. But the distinction is not always so clear: the stock price of Lockheed Martin, the world’s largest defence contractor, almost tripled between 2003 and 2007 after a former vice president at the firm chaired a committee agitating for war with Iraq. The Iraq war was also ‘the single most profitable event’ in the history of Halliburton, whose former CEO, who still retains stock options, is Dick Cheney.

Klein is outraged by the rapacity of corporations that see ‘exciting market opportunities’, rather than human suffering, in wars, hurricanes, epidemics and other disasters. She draws an extended analogy between Sri Lanka after the tsunami and New Orleans after Katrina. In each case, she claims, the predatory impulses of the disaster capitalism complex won out over sympathy for the victims, as developers took advantage of the evacuation of the poor from areas made temporarily uninhabitable and seized prime real estate. Almost everywhere she looks, Klein sees the privileged becoming wealthier, and the disadvantaged increasingly marginalised and no longer even worth exploiting.

Disasters discriminate because the rich are equipped with shock absorbers that the poor cannot afford. Peace of mind in the face of an unknown but perilous future is one of the most unfairly distributed of fundamental human goods. Today’s super-rich can buy disaster insurance from private security firms that offer to whisk their clients out of any area lashed by a man-made or natural catastrophe. As Klein points out – and it isn’t only a joke – both materialistic businessmen and evangelical end-timers imagine being ‘raptured’ out of apocalypse while the unworthy are left behind to die.

In the developed world, globalisation has unravelled the New Deal’s social compact between rich and poor. Corporations have an easier time than ever squirrelling their wealth abroad, where it will not be taxed. Moving labour-intensive production to countries where unions are illegal or non-existent has swollen corporate profits while lowering the living standards of Western workers. The collapse of Communism has exacerbated these trends: immunising the poor to the Communist virus no longer provides an incentive for employers to make concessions to employees. The social safety net, subsidised healthcare and laws favouring organised labour were originally introduced, Klein claims, because of a ‘fear of popular revolt’. In the globalised world, this fear is greatly diminished. As a result, potentially lethal class conflict is increasingly managed not by redistribution but by coercion and the erection of ‘stark partitions between the included and the excluded, the protected and the damned’. The relation Klein has in mind seems eerily hydraulic: as redistribution goes down, walls go up – notably those surrounding prisons and gated communities.

Most observers assume that the concrete barriers found at airports and encircling government buildings and embassies are meant to protect soft targets from terrorist attack. They would say the same about the blast walls, buffer zones, heavily guarded checkpoints and concertina-wire fences ubiquitous in ‘liberated’ Iraq. Klein, by contrast, views these barriers as a way of protecting the haves from the have-nots. They divide luxury shops from shanty towns, the swimming-pools of the rich from the non-potable water of the poor. This is Klein’s description of Baghdad’s Green Zone in 2004, long before mortars began to pierce its protective perimeter:

It feels, oddly, like a giant fortified Carnival Cruise Ship parked in the middle of a sea of violence and despair, the boiling Red Zone that is Iraq. If you can get on board, there are poolside drinks, bad Hollywood movies and Nautilus machines. If you are not among the chosen, you can get yourself shot just by standing too close to the wall.

In New Orleans in the wake of Katrina, Klein found poor evacuees living in ‘desolate, out-of-the-way trailer camps’ where private security companies ‘treated survivors like criminals’. In stark contrast were

the gated communities built in the wealthy areas of the city, such as Audubon and the Garden District, bubbles of functionality that seemed to have seceded from the state altogether. Within weeks of the storm, residents there had water and powerful emergency generators. Their sick were treated in private hospitals, and their children went to new charter schools. As usual, they had no need for public transit.

Security apartheid is not restricted to the aftermath of great disasters, however. It is becoming the new normal. In the suburbs of Atlanta, far from any natural disaster, wealthy neighbourhoods are incorporating themselves legally in order to prevent their taxes being spent on supporting schools and hospitals in poor areas. Instead, they use their taxes to enhance the security and prosperity of their own ‘armoured suburbs’. That private security firms make their biggest profits from furnishing iron gates, alarm systems, armoured cars and private bodyguards in those cities – Johannesburg, São Paulo, New Delhi – where the gap between rich and poor is greatest, provides powerful if not conclusive evidence for Klein’s claim.

At the US border, new and burdensome visa requirements reflect the increased danger of territorial permeability. (To appreciate the irony of this development, we need only recall Reagan’s famous cry: ‘Mr Gorbachev, tear down this wall!’) In Israel, ‘an entire country has turned itself into a fortified gated community, surrounded by locked-out people living in permanently excluded red zones.’ Far from being exceptional, Klein argues, the Israeli wall embodies the evolution of class relations in the 21st century: ‘The point is to create “security” inside fortress states bolstered by endless low-level conflict outside their walls.’

Klein is an energetic and insatiably curious traveller who seems to have something vivid and illuminating to report about almost every part of the world. Some might feel, however, that she skips lightly over evidence that complicates her narrative of innocence besieged by corruption. It would be unfair to suggest that if she hadn’t believed it, she wouldn’t have seen it with her own eyes. But her high-altitude generalisations seem less fresh than her ground-level observations.

The eccentricity of her approach is most clearly revealed by her discussion of the Iraq war. The decision to invade, she asserts, was ‘a rational policy choice’, driven primarily by a combination of high-minded economic doctrine and sordid business interests. Those who decry a lack of planning in the run-up to the invasion are deluded: there was a perfectly clear postwar plan ‘to build a model country’. Klein even claims to have discovered the blueprint for the remodelled Iraq in the works of Milton Friedman. The plan was not to build a model democracy but, on the contrary, a system violently incompatible with democracy: a model free-market society, with low taxes, minimal regulation, a quiescent labour force, and all productive assets in private hands. ‘Fervent believers in the redemptive powers of shock’, the planners wanted to ‘redeem’ Iraq and to create the kind of ‘truly free market imagined in Chicago classes’. According to Klein, Paul Bremer was dispatched to Iraq precisely ‘to prepare the ground for the introduction of “radical free-market reforms”’. And though he did not manage to create a Tiger on the Tigris, in some perverse way he succeeded: ‘Iraq under Bremer was the logical conclusion of Chicago School theory.’

Her claim here is causal: ‘The “fiasco” of Iraq is one created by a careful and faithful application of unrestrained Chicago School ideology.’ What Klein calls ‘the economic agenda behind the war’ tacitly presupposed an act of demolition. A ‘pure’ market system was best built from scratch. This too was anticipated by the arch-ideologue of free markets: ‘Friedman dreamed of depatterning societies, of returning them to a state of pure capitalism, cleansed of all interruptions.’

It’s true that Friedman was not averse to his anti-Keynesian programme being enforced at the point of a gun. But it is Karl Polanyi, according to Klein, who explains better than Friedman the physical coercion required to establish a market society. Polanyi argues that capitalism can be created only if centrally organised violence is employed without moral scruples, because ordinary people will not adapt to social dislocation and the obsolescence of their skills unless they are bullied or, if necessary, crushed. Klein agrees that Friedman’s ‘radical economic agenda’ can be implemented only by means of ‘ferocious violence’. When the Iraqis began to resist the free-market utopia that Bremer was trying to impose on them, the occupying army had no choice but to respond with savage force. It is no accident that ‘the shock of the torture chamber emerged immediately following Bremer’s most controversial economic shocks.’

Klein’s unconventional economic interpretation of the Iraq war derives in part from her belief that the CIA-backed overthrow of Salvador Allende in 1973 set a gruesome pattern for US foreign policy. After the coup in Chile, she claims, the torture and murder of trade unionists had an economic rationale: namely, to eliminate all organised social forces capable of resisting the reforms that Friedman and other Chicago School economists urged Pinochet to pursue. The junta’s homicidal rampage served ‘the larger plan to impose “pure” capitalism on Latin America’. The Iraq war, as Klein sees it, is a campaign in a ‘crusade to liberate world markets’, a crusade that almost always requires ‘coups, wars and slaughters’. Above all, the establishment of free markets requires torture and terror to silence those who stand to lose from these ‘reforms’.

But the analogy between Chile and Iraq cuts both ways. After arguing that Chile was a laboratory for Friedman’s free-market ideals, Klein has to acknowledge the inconvenient fact that Pinochet refused to reverse Allende’s nationalisation of the copper mines. This suggests that Chile’s military rulers were not the lackeys of foreign companies, did not view nationalisation as a step on the road to Communism and were nationalists before they were neoliberals. At one point, Klein herself admits that Pinochet’s Chile was not a laboratory for Chicago School ideals. But this concession is soon forgotten and she continues to hold up the Chilean analogy as evidence that torture in Abu Ghraib, too, had a primarily economic rationale and, indeed, was part of the same ‘crusade to liberate world markets’.

Klein argues that the invading forces deliberately allowed the National Museum in Baghdad to be looted and the National Library burned. These apparent acts of criminal negligence were in fact a form of cultural lobotomy, a collective shock treatment meant to ‘depattern’ the minds of the Iraqis and reduce their capacity to resist free-market reforms. She never explains why ancient manuscripts stored in a library would have fortified Iraqi resistance to a radical economic agenda. Indeed, this example shows how far Klein is willing to go to deny the decisive role of imbecility and obliviousness in the making of the Iraqi disaster.

The supposed primacy of neoliberal ideology and business interests in the Iraq war is also thrown into doubt by another consideration. Nothing we know about Dick Cheney suggests that he wanted to ‘redeem’ Iraq or make it into a model society of any kind. If he followed any example in his dim plans for post-invasion Iraq, it was not Milton Friedman’s but Ariel Sharon’s. No one would suggest that Sharon aimed to ‘redeem’ the Palestinians or create a model market society in the West Bank and Gaza. What he aimed for, and achieved, was managed anarchy: a weak, internally divided and festering society unable to project power outwards but susceptible to periodic violent intrusions. Free-market orthodoxy was not on Sharon’s mind, or on Cheney’s either.

The Sharon analogy speaks powerfully against Klein’s analysis. Free trade may be ‘an imperial project’, as she argues, but this does not mean that all imperial projects are primarily concerned with ‘seizing new markets directly for Western multinationals on the battlefields of pre-emptive wars’. Other goals, such as destroying political enemies, are often as much or more important. That was true of Sharon’s project in the Occupied Territories. And it was no doubt also true at the end of the Cold War when Washington’s laissez-aller attitude towards Russia’s economic collapse might have been hidden or embellished by, but was certainly not reducible to, an idealistic project aimed at creating a perfect market society.

Klein’s basic argument is curiously difficult to follow. One problem is her conflation of free-market ideology with corporate greed. There are plenty of connections between the two, of course, but it is impossible to understand the relation between the economic ideals of Milton Friedman and the economic aims of Halliburton or Lockheed Martin unless they are kept analytically distinct.

Klein asserts time after time that Bremer went to Iraq to prepare the ground for an ideal free-market system; but, just as often, she writes that Bremer went to Iraq to prepare the ground for American corporations to loot the country. (A more general example of the second thesis is: ‘Bush’s exploits merely represent the monstrously violent and creative culmination of a fifty-year campaign for total corporate liberation.’) Admittedly, these projects may on occasion give rise to the same behaviour. Klein argues that the Americans and their allies invaded Iraq ‘because they could not crack open the closed economies of the Middle East by peaceful means’. Cracking open a closed economy is a good example of aggressive action that would serve the interests of multinational corporations while simultaneously appealing to Friedmanite economists; crushing unions is another. But it’s a mistake to confuse acting from principle with acting for gain, the utopian search for a perfect market with opportunistic resource-grabbing. Klein tries to paper over the difference between blaming corrupt corporations and blaming the ideology of free markets by saying that the ideology honours greed and that Friedman had a ‘knack for thinking highly profitable thoughts’. But this crudely instrumental interpretation of neoliberal theorists as hired propagandists for corporate masters does not do justice to the independent role of Friedman’s ideology as Klein herself explains it. Although Friedman’s ‘vision’ and ‘the interests of large multinationals’ sometimes coincided, overlap of interests is not the same as identity of outlook. The centrepiece of ‘free-market orthodoxy’ is the positive role of competition; and corporations do not like competition.

In New Orleans, a firm called Kenyon was awarded the exclusive right to retrieve the bodies of the drowned. After that, according to Klein, ‘emergency workers and local volunteer morticians were forbidden to step in to help because handling the bodies impinged on Kenyon’s commercial territory.’ This is an important and disturbing story, but the existence of government-enforced monopolies hardly constitutes decisive evidence for the triumph of a doctrine that celebrates unfettered competition.

Some of the most memorable passages in Klein’s book describe stunning examples of influence peddling, sweetheart deals, kickbacks, corporate scams, nepotism, fraudulent overcharging, cronyism, asset seizures and electoral corruption. In New Orleans, she writes, ‘Katrina relief morphed into unregulated corporate handouts, providing neither decent jobs nor functional public services.’ Klein also presents a rogues’ gallery of statesmen-lobbyists (such as Richard Perle and Bruce Jackson) who made a strong public case for the invasion of Iraq and went on to make millions of dollars from the war and occupation. Cheney and Rumsfeld, who were capable of unleashing disasters, maintained their financial interests in corporations that would earn windfall profits from disasters. In such cases, ordinary conflict-of-interest problems are compounded. It is simply not true that what is good for Halliburton – for instance, a disaster zone needing to be reconstructed at a profit – is good for the country. These immoral and dangerous alignments are intensely troubling; but they are not logical extensions of free-market ideology. What Klein’s reporting proves is that, in the fog of emergencies, salvage and reconstruction contracts are frequently awarded on the basis of personal, sometimes even criminal, links. But we cannot blame the allocation, with ‘no open bidding’, of emergency relief funds to firms that have made significant campaign contributions to political incumbents on ‘the dream of a global free market’.

A stronger connection between ideology and acquisitiveness can be found in ‘Rumsfeld’s privatisation obsession’. Downsizing government and outsourcing functions previously performed by it can be justified on the basis of the allegedly superior efficiency of private businesses. But it’s not hard to see how it can enable politicians, acting in the shadows, to funnel taxpayers’ dollars to companies run by friends and acquaintances. Such self-dealing is especially likely in times of crisis, when it can be claimed that secrecy is necessary on the grounds of national security and competitive bidding rules are laxly enforced. But, once again, it makes little sense to blame such gross abuses of privatisation on the idea of privatisation itself.

It is more useful to separate ‘free-market orthodoxy’ from predatory corporate behaviour and to criticise each on its own terms. Klein herself comes close to accusing Friedman of genocidal impulses, but not because he advocated mass murder as a way to get rich quick or because, like a mad scientist, he welcomed genocidal catastrophes as lucky opportunities to experiment with economic reform. Her more sober point is that the Chicago School’s economic programme was in some ways as radical as anything advocated by Lenin or Mao. It, too, aimed at the root-and-branch destruction of traditional society and the building of a new order on a ‘blank slate’. This is her way of turning Burke’s classical criticism of revolutionary change against the new Bolsheviks of the right. Their sin was not the worship of greed but rather dogmatism and arrogance and even a ‘desire for godlike powers’.

More substantial arguments against free-market orthodoxy as a system of thought are woven into the book. To begin with, Friedman helped popularise the claim that there is no such thing as too much economic inequality. It follows that there is never any need to manage politically the potential every society has for class conflict. This is wildly impractical and reckless, principally because it vastly underestimates the human proclivity to savage violence. And when programmes attempting to manage class conflict by redistribution are dismantled, they are usually replaced by attempts to manage class conflict by coercion and physical separation. Security apartheid is not an aim of free-market orthodoxy; but it is an inevitable consequence of it.

Some of the planners of the Iraq war were schooled in free-market orthodoxy. Rumsfeld, for example, viewed Friedman as an intellectual mentor. But the damage done by Chicago School thinking had less to do with the unleashing of acquisitiveness than with the stupefaction of thought. People indoctrinated in a ‘radical anti-state agenda’ would obviously not be well prepared for the challenge of restoring order in post-Saddam Iraq. Many of the half-educated young conservative activists who arrived in the first wave had spent their youth drinking neoliberal Kool-Aid, imbibing the illusion that freedom depends on ‘the near complete dismantling of government’. Such historically illiterate ideologues weren’t about to throw themselves into the daunting task of setting up a government in Iraq. Nor were the mental blinkers restricted to the field operatives. On 10 September 2001, Donald Rumsfeld announced to a Pentagon audience: ‘Today we declare war on bureaucracy.’ This ‘war on bureaucracy’, inspired in part by Friedman, meant that virtually no effort was made to rebuild the shattered administrative and regulatory machinery in Iraq. It was not the utopian project of creating an ideal market that was the original sin of the war planners, as Klein argues, but the failure to appreciate the difficulty of building even a minimal state capable of monopolising violence. Without such a state, needless to say, nothing resembling a free market could survive.

The ‘ideology of radical privatisation’ assumes that whatever the public sector does is bad and whatever the private sector does is good. This perspective not only provides an inadequate basis for state building, but fails to register the dangers of a power vacuum, especially the way in which tit-for-tat revenge attacks among armed factions can spiral out of control in the absence of a coherent central state. By disbanding the Iraqi army, Bremer managed to reduce the size of the public sector. But he simultaneously increased the size of the private sector, generating massive unemployment and driving militarily trained, angry young men into the insurgency. Unexpectedly, at least from Friedman’s perspective, the expansion of the private sector did not create a climate favourable to investment.

Free-market orthodoxy also seems to assume that, when the state stops providing social services, individuals will learn to shift for themselves. Chicago School ideology neglects the possibility that paramilitary groups, such as Hamas and Hizbullah, might instead gain loyalty and support by assuming the role of social provider themselves. According to Klein, this is exactly what happened in Iraq, where Muqtada al-Sadr stepped into the vacuum. He ‘dispatched electricians to fix power and phone lines, organised local garbage collection, set up emergency generators, ran blood drives and directed traffic’. Weak-state liberalism is not a formula for individual freedom but a green light for the hawks to devour the sparrows. That is why it makes sense to blame the violent factionalism in Iraq not only on the corporate fraud which has allowed reconstruction funds to be stolen although reconstruction has not taken place, but also on the Friedmanite orthodoxy of the minimal state.

Another problem with Klein’s basic argument stems from her artificial distillation of a coherent ‘doctrine’ from three morally dubious processes that share a common word – ‘shock’ – but have only tenuous and indirect relations to each other: electroshock used to break down subjects of interrogation; economic shock therapy, meaning the introduction of privatisation and deregulation at lightning speed; and shock and awe, the use of overwhelming military firepower to cow civilians in a country about to be militarily attacked. Here again, we can identify many connections between these three kinds of shock. But discovering a ‘shock doctrine’ common to them all distracts rather than clarifies.

She begins her book with a discussion of experimental electroshock treatment, performed, against all standards of medical ethics, by a professor at McGill University in the 1950s. Funded in part by the CIA, which was interested in the dynamics of brainwashing, these experiments allegedly aimed at remaking chronically depressed personalities, but managed only to scramble the minds of the human guinea pigs. They were, however, successful in another sense. They helped the CIA refine the use of sensory deprivation and other mind-garbling techniques, applied with unknown results in interrogations conducted during the Cold War and now the War on Terror.

Klein, weirdly, presents this important story as if it were a key to understanding economic shock therapy, especially in Eastern Europe and the former Soviet Union in the 1990s. And then she rolls together electroshock and economic shock therapy and declares them to be intimately related, on some metaphysical or anecdotal level, to the shock-and-awe invasion and planned reorganisation of Iraq. Klein next uses all of these to explain the predatory exploits of disaster capitalists in New Orleans and Sri Lanka. Experimental electroshock, free-market reforms, racially motivated negligence and opportunism in the responses to natural disaster, and the invasion of Iraq all display ‘the same terrifying logic’. Klein’s eye for far-fetched analogies is certainly entertaining. It’s doubtful, however, whether they bear the explanatory weight she places on them. Her own interviews show that the victims of Katrina, while too poorly organised to fight the wealthy forces arrayed against them, did not have their minds ‘depatterned’ by the storm, but understood from the first exactly what was being done to them.

So dedicated is she to chasing the money-lenders from the temple, moreover, that she fails to think through the many interesting permutations of her own theme. Nowhere do we read that Lenin exploited the shock of the First World War to create an anti-market revolution, though that would seem the mirror-image of the pattern she wants us to recognise. Nor does she mention that the Allies exploited the shock of the Second World War to integrate a chastened Germany into a peaceful postwar Europe. Crises can break logjams, with good or bad results. This is an important subject, even though it doesn’t necessarily lend itself to sermonising. Of course, Klein is right that sometimes a shock can make people act irrationally, although she has no patience for anyone who suggests that something of the sort may be partly responsible for the addled and self-defeating reaction of the Bush administration to 9/11. In Klein’s world, the rich and powerful can shock others but can never be shocked themselves.

Klein combines her critical analyses of the corporate economy with a naive celebration of ‘joyous’ populism, democracy and mass movements. The cynical abuse of democratic slogans by the Bush administration gives her no pause. She defends her idealised picture of democratic movements from critical scrutiny, in the time-tested way, by making sure we cannot see them in action. Anti-immigrant xenophobia, hostile as it is to the free-market model that she, too, opposes, is never mentioned as a genuine expression of democratic populism. Wasn’t there majority white support for the dispossession of New Orleans’ black community after Katrina? And wasn’t there majority Russian support for Putin’s wars in Chechnya? Isn’t the ordinary citizen’s fear and hatred of otherness as malicious a force as the corporate profiteer’s insatiable greed?

She claims that economic ‘reform’ in 1990s Russia was ‘one of the greatest crimes committed against a democracy in modern history’, thwarting an ‘authentic democratic revolution’. Here she is making the same mistake of which she rightly accuses Friedman. She is confusing the absence of obstacles with the presence of preconditions. Authentic democracy will not spontaneously emerge simply because tyranny has been knocked down and all the ‘distortions’ have been removed. Klein might defend herself by saying that the ‘democracy’ she apotheosises is exclusively a democracy of protest, never a democracy of governance, and therefore invulnerable to criticism for unfairness, stupidity or abuse of power. But this response would not sit well with her understandable but unrealistic hope that ordinary citizens around the world will soon ‘become the authors of their national destinies, at last’.

This hope that ordinary people will ‘at last’ take control of large historical processes may explain, by backward reasoning, why Klein assumes that such processes are now tightly controlled by a predatory elite adhering to a sinister doctrine. If that were the case, then refuting ‘the shock doctrine’ would be a first step towards wresting control of world history from the corporate masters. Unfortunately, the developments she so tellingly describes, such as the proliferation of barricades and other techniques for managing class conflict, have deeper and more impersonal roots than greed and ideology. Current trends may be stymied or reversed, but, if this happens, Klein’s admirable aspirations for democracy and justice are not very likely to play much of a role.