Naomi Klein - The Shock Doctrine

[padraig (u.s.)]

Balkan intervention.

debatable. or mixed I guess. for all the "humanitarian" angle a lot of it (propping up Kosovo agianst traditional Russian ally Serbia, for example) clearly had ulterior motives.

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

"democracy promotion" is kind of a laugh. yeah like Central Asia where we (oh, I'm American mate, no need to refer to "they", the barbarians) gladhanded the same dudes who ran tings the USSR so we could build airbases & get access to pipelines & such. or Russia itself, clearly the democratic 90s were great for foreign investors if not really so many actual Russians. even in the places where democracy was "promoted" there's usually a self-serving interest as well. the Ukraine for example - do you think we "promoted democracy" there cos we believe in Freedom & Democracy or cause a pro-Western Europe Ukraine is much preferrable, in terms of U.S. foreign policy, to a pro-Russia one?

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.

oh yeah human rights. this one yes, to an extent. though that's more the product of American free society (where people can stand up & complain about things like human rights) than any specific "foreign policy".

It all boils down to this - the U.S. is an empire, it does what empires do. Which, I mean, whatever, if Americans supported it cause they wanted their team to kick ass that I could understand. It's this illusion of things like "promoting democracy", of noble ideals & all that tosh, that's really galling. Of course as you allude to the alternatives aren't very appealing either.

 

[padraig (u.s.)]

"Shock therapy" could obviously include anything, it does not need to be "Friedman-esque" policies that are enacted.

yeh but her whole point is that those are the types of policies which are apt to be enacted by people who make those kinds of policy decisions (politicians, economists, generals, executives, etc. etc.), generally to the detriment of the people they're being enacted upon. the point (not yours, one of the ones Josef K quoted) about the Russian Revolution for example - Lenin didn't start WWI, the crisis already existed. isn't it a big part of Klein's argument that the people (& sure a valid criticism is that she does make it all sound like some nefarious conspiracy) who impose austerity or shock policies or whatever deliberately create the crisis in the first place?

again let me be clear that I'm not defending her book, which is a dumbed down verison of complex ideas that lose a lot in the translation.

 

[vimothy]

"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.

So, crisis can be an opportunity to improve on the conditions that gave rise to the crisis. Furthermore, this can be true regardless of partisan alignment. Klein, like the rest of us, wants things to improve. So the idea that shocks provide an opportunity to introduce reform is non-controversial and not particularly conservative/neo-conservative/neo-liberal/neo-classical/"Friedman-esque"/whatevs. It is self-evident that if the policies imposed were not "Friedman-esque", Klein would not object. Indeed -- she does not object. She populates her sample with cases chosen precisely on that basis: only examples where (at least has far as she's concerned -- China, har-har, e.g.) free-market policies are involved are covered. It is the thesis of her book and not, in fact, me "purposefully distorting the point".

If crisis and authoritarian regimes are necessary to enact free-market policies against the wishes of the populace, does it therefore follow that the policies in place previously were either 1, sustainable, or 2, popular? Obviously not. Given the chance at encouraging (or imposing, if you like) reform, and given the fact that these regimes are authoritarian and so by definition not beholden to their citizens, what sort of reforms do you think should have been encouraged? I mean, you have an opinion, right? If so, you, like Klein, are no different to Friedman. You are simply less influential.

 

[padraig (u.s.)]

mean, you have an opinion, right? If so, you, like Klein, are no different to Friedman. You are simply less influential.

please do not conflate my views with those of Naomi Klein. I was very clear that I was explaining her point I as I see it, not championing it.

 

[vimothy]

please do not conflate my views with those of Naomi Klein. I was very clear that I was explaining her point I as I see it, not championing it.

I am not conflating your views with Klein's views. I am not sure where you have gotten that from. A crisis is an opportunity to change the pre-conditions that gave rise to the crisis -- right? And that is not necessarily a bad thing. It can even be good, if it meets certain criterea (not having anything to do with Friedman in Klein's case, something more radical in your own? I don't know, but it's beside the point). We all agree on that.

 

[padraig (u.s.)]

If crisis and authoritarian regimes are necessary to enact free-market policies against the wishes of the populace, does it therefore follow that the policies in place previously were either 1, sustainable, or 2, popular? Obviously not. Given the chance at encouraging (or imposing, if you like) reform, and given the fact that these regimes are authoritarian and so by definition not beholden to their citizens, what sort of reforms do you think should have been encouraged?

it doesn't also follow that the previous policies weren't sustainable and/or popular, "better" if you will. also, plenty (if not all) of the regimes in countries where these have taken place were not authoritarian. in fact imposing an authoritarian regime where previously there wasn't one is often a central tenet of austerity, cos those pesky non-authoritarian regimes (that get all uppity about stuff like social services & protecting their own resources) are ill-equipped to deal with the widespread, intense public hostility that austerity often provokes.

 

[crackerjack]

debatable. or mixed I guess. for all the "humanitarian" angle a lot of it (propping up Kosovo agianst traditional Russian ally Serbia, for example) clearly had ulterior motives.

OK, so there were possibly other motives. None of which alters the fact Milosevic's Serbia instigated three wars in a few years, erected concentration camps, dragged the male townfolk of Srebinica out into the woods and murdered them, turned Sarajevo into a months-long turkey shoot etc etc. given all that, do you
a) support intervention to prevent genocide
b) say "fuck that, intervention is just part of a plot to spread capitalism/NATO/the EU and weaken Russia (already ex-communist and rushing headlong into neoliberalism by this stage, but what the heck?). let the poor bastards burn"
This last comes with an optional extra of claiming the camps didn't really exist (thank you and goodnight, the RCP) or supporting authors who downplay massacres, but later claiming you didn't necessarily support the book (despite signing a ltter describing it as "outstanding"), merely the author's right to publish.

"democracy promotion" is kind of a laugh. yeah like Central Asia where we (oh, I'm American mate, no need to refer to "they", the barbarians) gladhanded the same dudes who ran tings the USSR so we could build airbases & get access to pipelines & such.

My bad, that should've said East Europe

or Russia itself, clearly the democratic 90s were great for foreign investors if not really so many actual Russians.

Agreed, though some 'actual Russians' benefited enormously. A few thousand at least

even in the places where democracy was "promoted" there's usually a self-serving interest as well. the Ukraine for example - do you think we "promoted democracy" there cos we believe in Freedom & Democracy or cause a pro-Western Europe Ukraine is much preferrable, in terms of U.S. foreign policy, to a pro-Russia one?

Well i'd say it's a bit of both. But until 'they' (in this case Russia) adopt liberal democracy, that's yet to be really tested in the post-Cold war world.

oh yeah human rights. this one yes, to an extent. though that's more the product of American free society (where people can stand up & complain about things like human rights) than any specific "foreign policy".

It all boils down to this - the U.S. is an empire, it does what empires do. Which, I mean, whatever, if Americans supported it cause they wanted their team to kick ass that I could understand. It's this illusion of things like "promoting democracy", of noble ideals & all that tosh, that's really galling. Of course as you allude to the alternatives aren't very appealing either.

I accept a lot of this. My point is that by scoffing at the idea that America, or whoever, will ever act as anything other than en empire, by reflexively opposing whatever it does regardless, by sneering, downplaying or outright denying the (occasional) positive consequences of their actions or questioning the motives to such an extent they turn into a negative anyway, you become the sulky teenager of world politics.

At Chomsky's age, that's really not a good look.

 

[padraig (u.s.)]

A crisis is an opportunity to change the pre-conditions that gave rise to the crisis -- right? And that is not necessarily a bad thing. It can even be good, if it meets certain criterea (not having anything to do with Friedman in Klein's case, something more radical in your own? I don't know, but it's beside the point). We all agree on that.

sure. I mainly just wanted to make the distinction that what she means by "shock therapy" is the same interests who impose the therapy also creating the shock, versus there being an already existing crisis that someone then takes advantage of.

and (not that it really matters but just for fun) not "more radical" than Klein, really. at least not on some kind of right-to-left spectrum. just when I was a young wide-eyed anarchopunk I used to run into these boug liberal d-bags all the time, fellow travelers you might say. I find them much, much more aggravating than raving right wing lunatics (or rabid free marketers) who are at least up front about their views.

 

[padraig (u.s.)]

I didn't mean on some ACLU nonsense, just that there's no specific foreign policy of "yeah, let's uphold human rights," that America does it out of a mix of belief in ideals & again self-serving interests (promoting the American brand & all that).

I accept a lot of this. My point is that by scoffing at the idea that America, or whoever, will ever act as anything other than en empire, by reflexively opposing whatever it does regardless, by sneering, downplaying or outright denying the (occasional) positive consequences of their actions or questioning the motives to such an extent they turn into a negative anyway, you become the sulky teenager of world politics.

At Chomsky's age, that's really not a good look.

mostly fair yeah. also I don't think Chomsky's infallible or anything, I just think it's wildly inaccurate to lump a him, a great thinker (agree with him on politics or not) in with 3rd rate liberal claptrap like Klein.

 

[crackerjack]

mostly fair yeah. also I don't think Chomsky's infallible or anything, I just think it's wildly inaccurate to lump a him, a great thinker (agree with him on politics or not) in with 3rd rate liberal claptrap like Klein.

OK, I promise I won't do that again.

if you think Klein's 3rd rate, wait til you get to Seymour

 

[josef k.]

Seymour's no liberal - he's a big, bad Trot!

 

[vimothy]

Klein's hypothesis is this: "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." (The Shock Doctrine, page 11)

Of course it does not follow that policies previously in place in those cases were "free-market" reform were enacted were unsustainable, if we look to the relevant population. However, insofar as we are talking about those states in Klein's sample in which economic crisis was followed by economic reform -- policies previously in place obviously were unsustainable. As to whether they were popular, given the lack of a mandate by necessity, there is no way of knowing, although being poor and oppressed doesn't sound like a hell of a lot of fun to me, and certainly in China, South East Asia and India, pro-market reform seems to be reasonably well received by all concerned. It comes down to examining the evidence to decide which economic policies are better, and then recommending them to regimes. I'm sure Klein has some half-formed notions of efficacious policy (yet to come across any in the book though!) -- would she deliberately avoid mentioining them if she had any influence? Surely not.

In any case it is Klein's job to prove that the policies preceding the imposition of free-market reform were both popular and sustainable, not mine to prove the reverse.

To take the example of Chile:

Implicit in Letelier's (and Klein's) models of economic growth are the assumption that the disruptions caused during transition are a function of neoliberal policies specifically and that prosperity--or at least stasis--would continue unabated in the absence of capitalist intervention. This isn't true. Friedman's criticism of the monetary policies pursued by the Allende regime (and by the junta during the brief period between Allende's fall and the Chicago Boys' influence) recognized that an increasing rate of monetary expansion was unsustainable. Throughout his research, the Austrian economist Ludwig von Mises referred to the "crack-up boom" as the inevitable response to such monetary policies.

They also espouse a naive model in which Allende's reforms would have worked if only everyone had played along. Unsurprisingly, Chilean elites were less than enthusiastic about "bargaining" with a government at gunpoint, and the price controls enacted by the Allende regime took no account of the law of demand (when price falls, quantity demanded rises) or the law of supply (when price falls, quantity supplied falls). Letelier (and Klein) seem similarly oblivious. The predictable responses to the changing incentives under Allende--the development of black markets and reductions in goods available for sale--were attacked by Letelier as "illegal hoarding of goods by the rich" and "attempts to disrupt the entire economy in such a way as to create the conditions needed to justify the military coup" as part of the "broad and systematic campaign of sabotage and terror" waged against the democratically-elected Allende (Letelier 1976:138).

Letelier argues that high inflation in 1975 was a result of the Chicago program (Letelier 1976:140-141), but the Chicago Boys were an effect of this inflation rather than a cause. As Friedman and others well understood, it takes time to commit to a low-inflation regime. He then contradicts himself: "The inflationary process, which the junta's policies stimulated immediately after the coup, was slightly reduced in 1975 as compared to the unbelievable rate of 375.9% in 1974" (Letelier 1976:141).

Stopping an inflationary spiral necessarily causes a recession because mal-invested resources have to be liquidated. Ludwig von Mises and F.A. Hayek argued that resources would be "malinvested" because monetary injections alter relative prices and therefore lead people to invest in wasteful lines of production. This can be masked in the short run by a government printing money, but accelerating inflation creates what Mises called a "crack-up boom." This is precisely what happened in Chile during the 1970s just as it happened in the United States in 1981 and 1982 (Friedman and Friedman 1998:405). The key is that the monetary authority has to establish a credible commitment to fighting inflation. The "shock treatment" in Chile led to a massive depression in 1975, but inflation fell and GDP growth proceeded at 7.5% per annum for the next half-decade (Friedman and Friedman 1998:405). In 1982, Chilean inflation had fallen from a 700 percent annual rate during the middle of 1974 to an annual rate of under ten percent (Friedman and Friedman 1998:407).

 

[crackerjack]

Seymour's no liberal - he's a big, bad Trot!

Oh yes, I know that (a paid-up Swup, yes?)

Is Klein really a liberal? I assumed she was sorta ultra-left, though, as we've established, I HAVEN'T READ any of her books.

 

[padraig (u.s.)]

It comes down to examining the evidence to decide which economic policies are better, and then recommending them to regimes.

sure, with the corollary that as you say it matters (going both ways) what evidence you examine, how you examine it, what ideological prism you filter it through, etc. all of which you perhaps meant to include implicitly in "examine" but just tbc. & buying into the regime(s) you're recommending things to though I suppose that's not a prerequisite.

insofar as we are talking about those states in...which economic crisis was followed by economic reform -- policies previously in place obviously were unsustainable. As to whether they were popular, given the lack of a mandate by necessity, there is no way of knowing, although being poor and oppressed doesn't sound like a hell of a lot of fun to me, and certainly in China, South East Asia and India, pro-market reform seems to be reasonably well received by all concerned.

Ignoring the "Klein's sample" bit (sure, it's biased) - there is the question of whether those policies were unsustainable on their own merit or whether potential sustainability was impaired by external influences (likewise for the conditions leading to any "mandate of necessity") - not that I'm saying they were one or the other, merely that's it not as cut & dried as you make it out to be. one of those matters to "examine" as a policy advisor I guess.

look you think that free markets generally "improve things", right (if not please correct)? I wouldn't say that I disagree so much as I'm skeptical, albeit sometimes very much so, of your view.

and pro-market reforms are indeed reasonably well received by every who benefits from them, which is a damn sight short of "all concerned".

 

[padraig (u.s.)]

Is Klein really a liberal? I assumed she was sorta ultra-left, though, as we've established, I HAVEN'T READ any of her books.

it depends on how you define terms like "liberal" & "ultraleft". to me the latter is , you know, like the Autonomen or something. or on an intellectual tip, like Antonio Negri. on the other hand Naomi Klein is well left of anyone who gets elected to any public office higher than mayor in this country. but I mean, the center of debate in the U.S. is very conservative compared to Western Europe.

 

[vimothy]

I will confess to not being entirely sure what "free markets" actually means. I think that competitive markets are generally a good thing.

The first theorem of welfare economics states that "competitive equilibrium or Walrasian equilibrium leads to a Pareto efficient allocation of resources". There is a mathematical proof on the wikipedia page I link to. The mathematical proof is the work of Harold Hotelling, Oskar Lange, Maurice Allais, Kenneth Arrow and Gerard Debreu -- hardly free-market fundamentalists. In any case, and as per pretty orthodox economic theory, most real-world markets do not meet the precondition of perfect competition.

Nevertheless, there is a broad consensus amongst economists about what works. The issue in terms development economics is rather how to go from the status quo to what works. Development policy to date has hardly been an unalloyed success, though equally, it has hardly been an abject failure or the vast, un-differentiated right-wing conspiracy that Klein describes.

 

[vimothy]

padraig -- please have a look at the data in the Carden paper I linked to. If you don't have the pretentious () fortuitousness of institutional access to SSRN's archive, PM me your email address and I'll send you a copy.

 

[padraig (u.s.)]

I will confess to not being entirely sure what "free markets" actually means. I think that competitive markets are generally a good thing.

The first theorem of welfare economics states that "competitive equilibrium or Walrasian equilibrium leads to a Pareto efficient allocation of resources". There is a mathematical proof on the wikipedia page I link to. The mathematical proof is the work of Harold Hotelling, Oskar Lange, Maurice Allais, Kenneth Arrow and Gerard Debreu -- hardly free-market fundamentalists. In any case, and as per pretty orthodox economic theory, most real-world markets do not meet the precondition of perfect competition.

Nevertheless, there is a broad consensus amongst economists about what works. The issue in terms development economics is rather how to go from the status quo to what works. Development policy to date has hardly been an unalloyed success, though equally, it has hardly been an abject failure or the vast, un-differentiated right-wing conspiracy that Klein describes.

fair on "free markets" it seems like a pretty nebulous term. competitive markets it is then.

Clearly I'm not an economist, though once these kinds of discussions get into more abstract, theory-based realsm, I dunno whether agree/disagree even makes sense.

what I do agree with you about is that Klein's reductionist view of the world as a vast conspiracy of the rich conspiring to screw the poor is pretty ludicrous. it's much too disorganized to be a conspiracy, it's just self-interest. one thing that's always bugged me about bourgeois anti-WTO types is that they tend to view capitalism as a single monolithic nefarious force. which is, in addition to being laughably naive, actually a harmful view to take if one is struggling against capitalism.

 

[vimothy]

What the first theorem of welfare economics states (and what Lange et al prove mathematically) is that a perfectly competitive market will lead to a Pareto optimal allocation of resources, i.e., an allocation of resources in which no one can be made better-off without someone else being made worse-off.

But most real-world markets do not satisfy this pre-condition.

one thing that's always bugged me about bourgeois anti-WTO types is that they tend to view capitalism as a single monolithic nefarious force. which is, in addition to being laughably naive, actually a harmful view to take if one is struggling against capitalism.

Agreed.

 

[josef k.]

This force is often called "Kapitalism"