November 19, 2008

Arm Yourself

I work in the private sector, I have an MBA, and I believe in the power of the market. I believe that, left to its own devices, it will seek equilibrium naturally over time, and that eventually, all bubbles will burst, all recessions will end, and the most competitive companies will survive and thrive.

I also have an undergraduate degree in Government, I have worked on Capitol Hill and in the not-for-profit sector, and I have been a member of the working poor, albeit with hope of advancement. I have toiled 4o hours a week waiting tables and tending bar - without health insurance or a car or a savings account, or, in one 10-month stretch, a single day off - so I could work another 40 hours a week someplace else, often for free, to get my foot in the door. I believe that the degree to which markets can swing, and the length of time it often takes corrections to occur, are only acceptable if we don't care about the human costs - poverty, unemployment, social upheaval and the like - of that volatilty.

Academically, I have always believed to one degree or another that government has a crucial role in regulating markets, but it is probably my own personal history that has made me sure of it. For me, if regulations mean that every last possible dollar cannot be wrung from a given company or industry or sector, so be it; if - by blunting some of the peaks - we keep the troughs shallow enough to avoid wreaking economic disaster on wide swaths of the population, it is a sacrifice well worth making if we believe we are all in this together. It is with this Keynsian worldview, therefore, that I recently read Naomi Klein's The Shock Doctrine: The Rise of Disaster Capitalism. Having finished it last week, I recommend it in the strongest possible terms.

The Shock Doctrine is a groundbreaking and eye-opening account of the manner in which the brand of free-market capitalism we see today - manifested in the housing crisis and the current economic meltdown - has propagated throughout the world. It details extensively that - contrary to popular mythology - laissez-faire doctrine did not spread because it has triumphed fairly in the marketplace of ideas and demonstrated that it is good for the many. Rather, it has too often been imposed through stealth, extortion and exploitation, and more often than not, for the benefit of the few.

Based on extensive historical research and years of firsthand reporting from war and disaster zones, The Shock Doctrine vividly demonstrates that what Ms. Klein terms "disaster capitalism" – the rapid, corporate-backed re-engineering of societies still reeling from massive, systemic shock – traces its roots back more than five decades, to both CIA-sponsored psychological experiments and the economics department at the University of Chicago under Nobel laureate Milton Friedman. These policies were based on the same premise underpinning the mental health treatments of the day - that dysfunctional societies (or those perceived to be), like the mentally ill, could be "wiped clean" and re-started from scratch. When economic or political crises hit, the "Chicago Boys," as they came to be known, were ready to take advantage of societal shock. As Dr. Friedman put it:
Only a crisis, real 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.
It was this foundational concept that was behind the exploitation of post-catastrophe disorientation, and which was used to ram through radical free-market policies that would never have been enacted democratically. Chile, Argentina, Bolivia, Brazil and Indonesia in the fifties and sixties; Poland and China in the eighties; Russia and South Africa in the nineties; the United States in the wake of 9/11; the Iraq War; the aftermaths of Hurricane Katrina in New Orleans and the tsunami that devastated Sri Lanka, Indonesia and Thailand in 2004 - all of these bear the mark of the Chicago School ideologues.

The result - in literally every case - has been widespread disenfranchisement, massive increases in poverty and unemployment, the destruction of shared wealth, and the tremendous enrichment of a very few. It is a legacy of shame, coercion and hypocrisy that provides a telling insight into the tension between developed and developing nations, and one with which every American who doesn't understand why the rest of the world doesn't love us unconditionally needs to become intimately familiar.

Today, we see the result of uncompromising free market ideology and corporatism in the housing collapse, the financial sector crisis, the privatization of the war in Iraq, and what appears to be the imminent failure of the American automobile industry . The gap between the wealthiest and the poorest grows ever larger, and even today, as we face the crumbling foundations of our entire economy, that very crisis is being used to provide cover - yet again - for unpopular and dangerous policy changes.

The Shock Doctrine is an important, well-researched book that brings to light a perspective vital to understanding the world we live in today. It exposes a "multifaceted ideological trend that has successfully served the most powerful corporate interests in society for half a century," and it is giving those same interests fits. Critics of Ms. Klein's book were notably silent until recently - apparently hoping she would go away - but they have now resorted to a barrage of straw man arguments and a campaign of blatant dishonesty in an effort to protect the myth that democracy and free markets are inexorably intertwined. It is a credit to Ms. Klein's thoroughness and rigor that those attacks have failed to scratch the armor plate on her highly documented and compellingly cohesive work. If you read only one "serious" book this year, this one should top your list.

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