Naomi Klein - The Shock Doctrine

josef k.

Dangerous Mystagogue
The main thing which I cannot understand about Klein - and not only Klein - is why she believes it is important and sensible to identify all of the evils in the world with a more-or-less coherent system of evil ideas ("neo-liberalism") which the business of politics is primarily concerned with intellectually exorcising, on a more-or-less moral basis. There are criticisms to be made of Friedman and the Chicago School of economics, certainly, but painting that school as basically malevolent seems to me to detract from this effort, rather than aid it.

I also suspect that the main appeal issued here is to self-regard: if the other is evil, we must be good. A dangerous game to play - as the last eight years have proved.
 

vimothy

yurp
Am I talking to myself here? What about sampling on the dependent variable? If Klein was saying that 'all Muslims are terrorists' and not "the only circumstance in which a population would accept Friedman-style reforms is when it is in a state of shock, following a crisis of some sort—a natural disaster, a terrorist attack, a war", you'd be all over her.

Is this an acceptable methodology?
 
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droid

Guest
Am I talking to myself here? What about sampling on the dependent variable? If Klein was saying that 'all Muslims are terrorists' and not "the only circumstance in which a population would accept Friedman-style reforms is when it is in a state of shock, following a crisis of some sort—a natural disaster, a terrorist attack, a war", you'd be all over her.

Is this an acceptable methodology?

I don't think she does claim that this is the only circumstance (and I can hold my hands up and say that the summary I posted isn't fully accurate). The book focuses on on those nations that have exploited crises to implement harsh, extreme, and unpopular economic reforms. That's obviously not to say she excludes the possibility that market reforms happen without crisis.

Again, why not read the book and make a decision on her methodology yourself?
 

josef k.

Dangerous Mystagogue
Holmes makes the following point on that score:

"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."
 

vimothy

yurp
Well, obviously I am reading it and it does indeed seem flawed.

"The bottom line is that while Friedman's model is capable of being partially imposed under democracy, authoritarian conditions are required for implementation of its true vision." (page 11)
 

vimothy

yurp
And as per Rodrik's (Dani Rodrik is a Keynesian social democrat, BTW, developmentalist, and the scourge of "free market fundamentalism") example we can see that Klein is not opposed to "shock therapy", if the therapy is ideologically aligned.
 

vimothy

yurp
The example of Germany post WWII is a great counter-factual: the German economic miracle was a triumph of native "free-market ideology" over the price fixing, anti-free market ideology of the American occupiers -- despite and not because.
 
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droid

Guest
And as per Rodrik's (Dani Rodrik is a Keynesian social democrat, BTW, developmentalist, and the scourge of "free market fundamentalism") example we can see that Klein is not opposed to "shock therapy", if the therapy is ideologically aligned.

Im sorry, but the Rodrik example is bullshit. Ill repost the response as you seme to have missed it:
I think you have missed the point of her comments.

Klein was celebrating the fact that those people affected by the crisis took direct action to help themselves. They developed popular institutions and developed solidarity and mutual aid in the process.

They started to create something better than the system which caused economic collapse.

Which is her point.

Presumably, what the Argentine people should have done was simply have passively waited until their government acted and meekly accepted whatever costs the ruling elite decided was required to get neo-liberalism going again?

I fail to see that would have been a good thing to do. Perhaps you could explain why it would have been?

So, please, it is obvious that Klein is NOT celebrating the economic crisis. She is celebrating the popular response to that crisis.

Why do you have nothing to say in favour of the book, Droid? Do you find Klein a bit embarrassing?

Interesting you speak off embarrassment when you would think that's an emotion that should be preventing you from posting on this thread at the moment.

Despite the fact that I don't see the point in responding to second hand criticisms - i haven't said anything about the book,as I only posted on this thread to mention the basic principle of criticism should apply (reading the work in question) before dismissing it as 'simplistic and wrong' - I will say this about the book: Its good at documenting the links between free market ideology and authoritarian regimes as well as the anti-democratic method in which extreme market reforms have been thrust on some populations. The shock (torture) and shock (therapy) links are weak and over-dramatised, and towards the end she shoehorns examples in to fit her theses were they don't really go (china for example). She is also far stronger on journalism than economic theory.

So I agree, her thesis is flawed, but not disastrously so and its still a book very much worth reading, despite what the Cato institute says.
 

vimothy

yurp
Eucken was the leader of a school of economic thought, called the Soziale Marktwirtschaft, or “social free market,” based at Germany’s University of Freiburg. Members of this school hated totalitarianism and had propounded their views at some risk during Hitler’s regime. “During the Nazi period,” wrote Henry Wallich, “the school represented a kind of intellectual resistance movement, requiring great personal courage as well as independence of mind” (p. 114). The school’s members believed in free markets, along with some slight degree of progression in the income tax system and government action to limit monopoly. (Cartels in Germany had been explicitly legal before the war.) The Soziale Marktwirtschaft was very much like the Chicago school, whose budding members Milton Friedman and George Stigler also believed in a heavy dose of free markets, slight government redistribution through the tax system, and antitrust laws to prevent monopoly.

Among the members of the German school were Wilhelm Röpke and Ludwig Erhard. To clean up the postwar mess, Röpke advocated currency reform, so that the amount of currency could be in line with the amount of goods, and the abolition of price controls. Both were necessary, he thought, to end repressed inflation. The currency reform would end inflation; price decontrol would end repression....

Ludwig Erhard won the debate. Because the Allies wanted non-Nazis in the new German government, Erhard, whose anti-Nazi views were clear (he had refused to join the Nazi Association of University Teachers), was appointed Bavarian minister of finance in 1945. In 1947 he became the director of the bizonal Office of Economic Opportunity and, in that capacity, advised U.S. General Lucius D. Clay, military governor of the U.S. zone. After the Soviets withdrew from the Allied Control Authority, Clay, along with his French and British counterparts, undertook a currency reform on Sunday, June 20, 1948. The basic idea was to substitute a much smaller number of deutsche marks (DM), the new legal currency, for reichsmarks. The money supply would thus contract substantially so that even at the controlled prices, now stated in deutsche marks, there would be fewer shortages. The currency reform was highly complex, with many people taking a substantial reduction in their net wealth. The net result was about a 93 percent contraction in the money supply.

On that same Sunday the German Bizonal Economic Council adopted, at the urging of Ludwig Erhard and against the opposition of its Social Democratic members, a price decontrol ordinance that allowed and encouraged Erhard to eliminate price controls.

Erhard spent the summer de-Nazifying the West German economy. From June through August 1948, wrote Fred Klopstock, an economist at the Federal Reserve Bank of New York, “directive followed directive removing price, allocation, and rationing regulations” (p. 283). Vegetables, fruit, eggs, and almost all manufactured goods were freed of controls. Ceiling prices on many other goods were raised substantially, and many remaining controls were no longer enforced. Erhard’s motto could have been: “Don’t just sit there; undo something.”

Journalist Edwin Hartrich tells the following story about Erhard and Clay. In July 1948, after Erhard, on his own initiative, abolished rationing of food and ended all price controls, Clay confronted him:

Clay:“Herr Erhard, my advisers tell me what you have done is a terrible mistake. What do you say to that?”

Erhard:“Herr General, pay no attention to them! My advisers tell me the same thing.”2

Hartrich also tells of Erhard’s confrontation with a U.S. Army colonel the same month:

Colonel:“How dare you relax our rationing system, when there is a widespread food shortage?”

Erhard:“But, Herr Oberst. I have not relaxed rationing; I have abolished it! Henceforth, the only rationing ticket the people will need will be the deutschemark. And they will work hard to get these deutschemarks, just wait and see.”3

Of course, Erhard’s prediction was on target. Decontrol of prices allowed buyers to transmit their demands to sellers, without a rationing system getting in the way, and the higher prices gave sellers an incentive to supply more.

Along with currency reform and decontrol of prices, the government also cut tax rates. A young economist named Walter Heller, who was then with the U.S. Office of Military Government in Germany and was later to be the chairman of President John F. Kennedy’s Council of Economic Advisers, described the reforms in a 1949 article. To “remove the repressive effect of extremely high rates,” wrote Heller, “Military Government Law No. 64 cut a wide swath across the [West] German tax system at the time of the currency reform” (p. 218). The corporate income tax rate, which had ranged from 35 percent to 65 percent, was made a flat 50 percent. Although the top rate on individual income remained at 95 percent, it applied only to income above the level of DM250,000 annually. In 1946, by contrast, the Allies had taxed all income above 60,000 reichsmarks (which translated into about DM6,000) at 95 percent. For the median-income German in 1950, with an annual income of a little less than DM2,400, the marginal tax rate was 18 percent. That same person, had he earned the reichsmark equivalent in 1948, would have been in an 85 percent tax bracket.

http://www.econlib.org/library/Enc/GermanEconomicMiracle.html
 

vimothy

yurp
Im sorry, but the Rodrik example is bullshit. Ill repost the response as you seme to have missed it:

I didn't miss it; it proves my point: Klein is not opposed to shock therapy when the therapy is right, i.e. Klein was very happy with upheaval when it looked like it would result in something better -- no?
 

padraig (u.s.)

a monkey that will go ape
If i'm so grossly distorting Chomsky's views (but not the others?), can you give me an example of an area of US foreign policy in the last 30-odd years that he has supported?

what area of US foreign policy in the last 30-odd years has been worth supporting? it's a cop-out anyway to claim that someone's views are invalid b/c they're "too inflexible". it means nothing, it's not a critique of any actual position.

also there is an enormous gulf of difference between criticizing Chomsky & comparing him to Naomi Klein.

*EDIT* - "lumping him in with Klein" is probably more accurate than "comparing to"
 
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droid

Guest
I didn't miss it; it proves my point: Klein is not opposed to shock therapy when the therapy is right, i.e. Klein was very happy with upheaval when it looked like it would result in something better -- no?

She is not opposed to people at the bottom of the heap attempting to ameliorate the effects of crises created by elites by setting up grassroots democratic movements based on solidarity and taking control of their own economic destiny.

This is a million miles away from elites manufacturing, exacerbating or exploiting crises by undemocratically imposing economic policies that they would otherwise not have been able to impose.
 

crackerjack

Well-known member
what area of US foreign policy in the last 30-odd years has been worth supporting?

Balkan intervention.

Democracy promotion in the former soviet empire (partially successful, but better than nothing)

They'll do for starters. Their record on human rights has been badly blemished, particularly of late. But it does at least exist as an objective, which is more than can be said for other superpowers, past & present.
 

padraig (u.s.)

a monkey that will go ape
I didn't miss it; it proves my point: Klein is not opposed to shock therapy when the therapy is right, i.e. Klein was very happy with upheaval when it looked like it would result in something better -- no?

I'm not a huge Naomi Klein fan - in she makes the rest of us look dumb by association yunno - but you're still missing the or rather, I suspect, purposefully distorting the point.

"shock therapy" is the way Klein means it is imposed from the top down by people onto other people deliberately (perhaps, & here's where she often goes wrong, with "good' intentions) as part of a program. I dunno how this is even controversial - austerity programs & all that - anyway that stuff about Argentina was a from the bottom up reaction to an unplanned economics crisis.

sure I think she 1) reads the situation in a yeah simplistic fashion, suited to fit her own views & 2) offers no good solutions cos people like her (1st world liberal lefty but not too lefty types) have no solutions - too left to buy into centrist comprosmise, not wishy washy liberal to promote anythig too radical, but essentially accusing her of gloating over misery is unfair...
 

vimothy

yurp
Information asymmetry

I'm not accusing her of gloating over misery, but having a symmetrical view to Friedman's, namely, that crisis brings about change.

"Shock therapy" could obviously include anything, it does not need to be "Friedman-esque" policies that are enacted. What if, for instance, following a crisis, Keyenesian or anti-free-market (not that the two are synonymous necesssarily) reforms were pushed through by elites? She'd definitely be opposed to that -- amirite????
 
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