Shock Doctrine | ukwatch.net

The end of capitalism, and other questions

JamieSW — Fri, 26 Sep 2008 09:40:12 +0000

“So, we should be really, really wary of this claim that we’re hearing that free market ideology is dead, that this marks the end of, you know, of capitalism. You know, I’m sorry, that is not the case. It may be going dormant for a little while to rationalize these massive bailouts, but it will come roaring back, and the crisis that is being deepened right now through these bailouts will be invoked for even more radical deregulation, privatization, tax cuts and so on. ” – Naomi Klein

As the Anglo-American banking system goes into meltdown, all sorts of unlikely people are beginning to ask, ‘is this the end of capitalism?’ A couple of weeks ago it would have been ideological treason to so much as think such a beastly thing. Now, with ancient financial institutions keeling over everywhere you look, the question is cropping up all over the corporate media.

So what’s the answer? Well the answer’s ‘no’. Or if you want me to flesh that out a bit, the answer’s ‘no, now get a grip’. But really, the problem lies with the question. There are other questions we should be asking, but I’ll come on to that later. For now, lets look at what’s wrong with asking ‘is this the end of capitalism?’

What do we mean, or what do most people understand, by the term ‘capitalism’? Practically every economy you can think of is one where commercial activity occurs, where there are goods and resources which are privately owned and that are bought and sold for profit. Alongside this private sector sits a public sector where, in democratic countries, resources are owned by the public as a whole and distributed according to decisions made by their elected government. Pure capitalism, and pure socialism, remain purely theoretical.

Across the world, what you invariably have are mixed public-private economies where the debate is about which sector of the economy is responsible for the distribution of which resources, and how those responsibilities will be discharged (e.g, to what extent should the private sector play a role in the provision of education and healthcare?). That’s by no means an insignificant debate, but we should be clear on what that debate is about. It is not about whether or not we have the buying and selling of private property or whether or not we have capitalism. The debate is about what kind of capitalism we have in a democracy: which version of capitalism and what mixture of public and private economic activity will produce the end results valued and desired by a society organised on democratic principles.

Different countries strike the balance in different ways. As I’ve noted previously, the Nordic model has been far more successful than the Anglo-American neoliberal model in maximising the well-being of the population. The crisis of the last few weeks was born of the deregulated financial markets characteristic of neoliberal economies, wherein unrestrained greed drove debt to be managed in an increasingly reckless way – one which was proven conclusively to be unsustainable as the last of the pure investment banks on Wall St disappeared.

This is a serious malfunction of one version, not any and all versions, of capitalism. The collapse of institutions like Lehmann Brothers and the dangers of sub-prime mortgage lending don’t necessarily say very much about the forms of capitalism practiced in other countries. Neoliberals like to talk about their version of economics as though it is synonymous with capitalism itself, hence the talk of capitalism failing, but pretending there are no alternatives is just a neat way of sidestepping debates about what kind of capitalism societies should opt for.

Not only is the end of capitalism itself not occurring, it is not even being called for, at least not in any meaningful way. Only an infinitesimal minority on the left advocate the total abolition of all private property and commercial transactions. I hesitate to use the word ‘advocate’ because advocacy involves setting out serious proposals, and I’ve yet to see any serious proposal that explains how a non-capitalist society is going to be brought about. By that I mean a plan that describes in all the necessary fine detail how we get from here to there, dealing effectively with all the obstacles in the way. A plan that explains how we persuade the public to accept our proposed non-capitalist society, bring to power a government willing to effect the plan, and then enact the massive transformative program needed to entirely eradicate commercial activity and introduce a vast array of new social structures, habits and forms of interaction. Even if a workable plan of this kind, with a desirable end product, was formulated (I don’t completely rule that out) it would take many, many decades to implement. Such a plan does not exist, as far as I’m aware, even amongst those whose opposition to capitalism is the strongest.

No one, therefore, is proposing the end of capitalism itself in any serious way. For the most part, what’s called ‘socialism’ is just a take on how mixed public-private economies should be organised, rather than a total rejection of capitalism itself. Even the Venezuelan government, as it proclaims its mission to pioneer “21st Century Socialism”, allowed the private sector of the economy to grow relative to the public sector during its first decade in office.

Similarly, even the most swivel-eyed free-market extremists don’t advocate, in any serious way, the total abolition of the public sector and its replacement with pure capitalism. In fact, even in the neo-liberal citadels of Britain and America, the rigours of the free market are often quietly avoided and the state called upon for assistance. Think no-bid contracts for Halliburton in Iraq. Think of the UK arms industry’s incestuous links with government, where ministers on overseas trips (including the Prime Minister) practically act as salesmen for the likes of British Aerospace. Think of how the US economy boomed in the post war era, in no small part due to government defence budgets socialising research costs for technologies that were subsequently turned over to the private sector for profit; like aeronautics, computers and even the internet. Those who say they advocate the free market have very little to say about the nanny state when its nursemaiding the rich. Only when it attends to the needs of the public are objections raised.

The debate that occurs between left and right on economics is not between absolute socialism or absolute capitalism but between democracy and private power. The left does not oppose globalisation [.pdf], or even capitalism for the most part. What it takes issue with is a particular form of global economic integration that privileges the demands of private power and undermines the role of the democratic public sphere. The right does not object (aside from in rhetoric) to a role for the state within the economy, provided that role is to serve the needs of elites rather than those of the population.

So the real question, in the midst of the Anglo-American banking crisis of 2007-2008, is how our version of capitalism is now going to be reformed, and specifically where the power will lie. We need not expect, as Naomi Klein points out here, that neoliberalism will automatically be replaced by some benevolent form of social democracy. On the contrary, state-corporate elites are already moving to exploit the political conditions created by the crisis to extend the same neoliberal model that caused the financial collapse.

In her recent book “The Shock Doctrine”, Klein describes how the neoliberalisation of economies (privatisation, deregulation, stripping away of public programmes etc) has often been rammed through the legislative process in times of crisis. This is because while the public often opposes these measures, crisis situations offer policymakers brief moments when democracy can be suspended or circumvented while people are disorientated by shock and briefly willing to acquiesce to “firm leadership”.

Klein points out that this is exactly what is happening now in the US, in respect of the emergency economic measures formulated by the Bush administration. What is being not so much proposed as demanded is a 0.7 trillion dollar buy-up, by the US taxpayer, of all the toxic and often worthless securities that have caused the current financial meltdown. It is demanded that no democratic, administrative or judicial oversight be applied to this process. It is demanded that legislators approach this in a “bipartisan” fashion and pass the measures quickly (that’s political language for not arguing and doing what the President tells you – now). The measures are being drawn up and will be enacted by people like Treasury Secretary Hank Paulson who, as head of Goldman Sachs, did so much to promote the reckless practices that caused the ‘Nightmare on Wall St’. In summary, the same people who wrecked the US economy are now demanding that the traumatised and fearful taxpayer gives them 0.7 trillion dollars to clean up the mess they made and hold them harmless from the consequences of their actions, no arguments and no questions asked.

You could call it crawling to the nanny state and begging for a hand-out. Klein, with perhaps a little more accuracy, calls it a “stick-up”. Either way, its not the free market, but it is very neoliberal.

Klein also warns that this is just the first stage. The US is already deeply in debt, and this bailout will make matters much worse if passed in its proposed form. The usual corporate lobbyists, think tanks and Friedmanite academics will then take that opportunity to demand that the books be balanced. This might involve chipping away at unnecessary public programmes like healthcare, education, public housing etc etc, while the essentials, like Washington’s gargantuan military (which costs more than the rest of the planet’s military spending combined) go entirely untouched. It might involve tax cuts for corporations and the wealthy. It will certainly involve exploiting the situation to push measures that serve the interests of the most powerful sections of society which, rather than theoretical “free markets”, is what neoliberalism is really about.

The scenario in the UK is only slightly different. Social democratic instincts still flicker in some corners of the political class. But despite Gordon Brown’s recent rhetorical tilt towards the left, New Labour remains a classic party of neoliberalism, and the Conservative party likely to succeed them in government by 2010 is even more so. In spite of current events, neoliberals could well dominate the policy debate on how to deal with the economic crisis on this side of the Atlantic.

Klein quotes neoliberal don Milton Friedman describing in candid terms how his disciples should use the Shock Doctrine to push forward their policies. “Only a crisis, actual or perceived,” he says, ”produces real change. And when the crisis occurs, the change depends on the ideas that are lying around. That, I believe, is our basic function: to keep the ideas ready until the politically impossible becomes politically inevitable”. An example is Chile in the 1970s, where Friedman had to wait until after a military coup had taken place to find a government willing to enact his policy prescriptions, which had been overwhelmingly rejected in earlier democratic elections.

The collapse of Western financial markets, whose devastating effects are only beginning to be felt, does not mark the end of capitalism, and may perversely only mark the acceleration of neoliberism out from the ashes of its own bonfire of the vanities into new and yet more dangerous territory. That depends entirely on who wins the current debate on what emergency measures should be taken and how the system should be reformed long-term. The neoliberals, led by Secretary Paulson, are keen to avoid that debate. Those who oppose them should note this, because it betrays the neoliberals’ fear, even expectation, that this is an argument they would lose. Our task is to ensure that the shock of the past few weeks is not exploited by its authors, but instead that its lessons are learnt and that failed economic models are replaced by something more just and sustainable. In formulating our own proposals, for the immediate and the longer term, we can begin by pointing to the more successful capitalist systems in place in other countries, and take things from there.

Naomi Klein's The Shock Doctrine

Ellie Keen — Thu, 01 May 2008 21:42:31 +0000

Naomi Klein is at her best in explaining the relentless onslaught of neoliberal policies all over the world, and their genesis in academic circles in the USA, particularly surrounding the economist Milton Friedman. Her basic thesis is that the doctrine of neoliberalism has come to dominate the world by using periods of massive public disorientation following collective shock – wars, terrorist attacks, natural disasters – to push through unpopular neoliberal reforms. However, this thesis is not without its flaws.

Klein’s strongest insight is the analogy between psychological damage through torture, and physical damage through neoliberalism. She quotes CIA manuals on torture practices and draws illuminative parallels with neoliberalism: ‘Like the terrrorized prisoner who gives up the names of comrades and renounces his faith, shocked societies often give up things they would otherwise fiercely protect.’ This is a novel and instructive analogy – and goes some way to highlighting the close connections between psychological and physical damage that are neglected by so many other commentators. However, this analogy could be usefully applied much further. For Klein the ‘disaster capitalists’ lie in wait, ready to jump onto ‘disasters’ when they emerge. While this is no doubt the case for ‘natural’ disasters, most disasters are not natural, but are an intrinsic parts of the economic, political and social system we live in, and are increasingly frequent as neoliberalism extends its reach across the world. I would argue for a greater degree of culpability of neoliberalism and its advocates for creating the shocks in the first place – a culpability akin to that of the torturer. Yet Klein shies away taking her own analogy to its logical conclusion. For torture is not merely about the creation of sudden terror, but the normalisation and generalisation of states of fear amongst all who would resist. Similarly neo-liberal ‘shocks’ are merely particular moments in a much longer-term and more generalised attempt to control populations, by normalising fear and insecurity so much that they become part of our everyday experience. This seems to betray an overly narrow framework behind Klein’s analysis; she does not seem to take into account the wider dimensions of how power as a whole operates within a political, social and economic system, wider than just neoliberalism or corporations. This makes the book, despite its 466 pages, feel disappointingly partial, and limited in its analytical and historical scope.

For Klein, neoliberalism is basically the rule of the market and corporations over the state, and therefore over the people. In this scenario, corporations and the state are in direct competition with each other, which leads her to neglect the role of states and state power in facilitating elite power using the market, and more recently, using neoliberalism. This makes her explanation of neoliberalism’s dominance seem incomplete; arguing, as she does, that it is based on the power of opportunistic shock, rather than other, more historically embedded mechanisms. Not everyone has been ‘shocked’ into submission to neoliberalism. There have also been a host of other, often more hidden and insidious attempts to make people give up what it is in their interests to hold onto. These include ideological apparatuses such as education, control of the media, knowledge and information, think-tanks, the co-option of civil society, and repressive apparatuses such the police, the courts, governments, prisons etc. The power of corporations is enabled by a host of power mechanisms, stemming from a relationship of mutual benefit between elites, but this isn’t evident in Klein’s analysis.

Her oversight ensures that she does not analyse the wider context of the shock doctrine she dissects. For Klein, the use of shock is a sign of strength of the neoliberal project. However, it can also be argued to be a sign of weakness. Liberalism is no longer enough to keep populations in check and keep economic growth rising, so a more extreme form has emerged, one which it is increasingly difficult to secure consent for.

Iraq is a case in point: a country which had to be deliberately ‘shocked and awed’ into submission, making the companies and states behind it extremely unpopular, and unleashing a powerful Iraqi resistance, which puts the entire mission in jeopardy. Klein sees this as a shock operation, deliberately manufactured by neoliberal (and neo-conservative) architects, but she does not see this as a contradiction of her thesis, more a ‘notable exception’. However, it seems more plausible to see the destruction and ‘reconstruction’ of Iraq as proof that neoliberalism is being pushed to its limit – forced to reveal itself as a force that creates the disasters required to shock subjects into releasing to corporations their resources, their wealth and their labour.

Capitalism needs to constantly expand: exploiting and creating ‘disasters’ with neoliberal shock treatment is the latest weapon to do this. But it is a weapon which weakens the enterprise by exposing its in-built violence, and risks the effectiveness of the other ‘softer’ weapons. Just as torture is an extreme form of repression, so neoliberal shock treatment is an extreme form of liberal capitalism. But Klein fails to locate ‘disaster capitalism’ more broadly in the historical continuities and systemic features of contemporary capitalism. In doing so, she downplays both the everyday violence and the weaknesses of the current world order.