Wednesday 21 May 2008

Neoliberalism and Disaster Capitalism

As part of a nationwide tour to promote the paperback edition of her latest book, The Shock Doctrine, Naomi Klein visited Manchester today for a short talk about the rise of 'disaster capitalism'. Her starting point is the story of how neoliberalism (or corporatism as she preferred to call it) has spread its tentacles across the globe. The received wisdom pumped out by the media and "learned" academics is free peoples and free markets go hand in hand. As totalitarianisms and dictatorships have crumbled, the liberal democracies and deregulated capitalist economies that have sprung up in their wake is the clearest, most perfect expression of freedom to date. Klein's task is to puncture this myth and show the alternate, real history of neoliberalism.

Klein's thesis is simple, but explosive. The neoliberal love-in with democracy is a complete scam. The truth is neoliberalism does not flourish in stable democratic societies; it thrives best when democratic freedoms are curtailed, suspended and suppressed. Her talk began with Hayek, Friedman and the rest of their friends in the Mont Pelerin Society. In the immediate post-war period their doctrines were consigned to the fringes. It had appeared the pursuit of Keynesian-inspired economic policies had done away with mass unemployment and capitalist crisis. But as the system broke down in the 1970s, neoliberalism increasingly came to the fore as a programme that could resolve the crisis in capital's favour.

This was not just conjecture, it was based on neoliberal experiments in Latin America. Up until the 70s, developmental policies across the continent were dominated by 'pink' economics. These were standard mixed-economy fare not dissimilar to the prevailing Keynesian orthodoxy, but were deemed too close to 'communism' in the eyes of some of the US ruling class. The US government part-funded a programme sponsoring cadres of Latin American graduates to study under Friedman in Chicago. In the context of the cold war, it was hoped they would return home and affect a sea-change in economic policy that, in the long run, would benefit capital. However the arguments of these 'Chicago Boys' fell on deaf ears. It took bloody coups in Chile and Argentina before they were given the freedom to restructure their economies according to neoliberal precepts. The results - according to David Harvey's recent book - were a strengthening of the capitalist class at the expense of everyone else by subordinating society to ever greater degrees to the market. These policies were then introduced in a more watered-down form in the USA and Britain.

But returning to Klein, a quarter of a century of neoliberalism in Argentina ended up turning the country into a basket case. Almost overnight in 2001 it went from globalisation's poster child to an embarrassing relative it would rather keep locked up under the stairs. For example, the Chicago Boys pushed through a complete deregulation of the banking sector, opening it to unfettered take over by overseas financial interests. But once the Argentine economy went into meltdown they took their money and ran, wiping out savings and plunging millions into poverty. These same millions took to the streets. Neighbourhood committees sprang up filling the gap left vacant by bankrupt local government, and factories standing idle by capital flight were occupied and reopened. For Klein this massive movement signified the first successful national uprising against neoliberalism, which has no spread to nearly all the continent.

This neoliberal shock therapy - only possible once all forms if democracy had been suppressed - is possible in other crisis situations, such as those that can be found in the aftermath of natural disasters. The Asian tsunami in 2004 is a case in point. While working class people the world over dug deep and donated hundreds of millions to aid agencies, money and resources under the control of our governments came with strings attached. Sri Lanka's east coast infrastructure was destroyed by the sea and tens of thousands were drowned, but philanthropy was the last thing on our rulers' minds. If the Sri Lankan government wanted access to Western 'reconstruction' money they had to pass laws establishing labour market flexibility and privatise water and electricity. This it did four days after the waves. And there was more to come. Within six months the government had forcibly enclosed the affected areas up to 200 metres from the coast denying survivors the right to return. This land instead was turned over to (primarily Western) construction interests for the building of new ports and hotels. Such is the reality of neoliberal "aid".

The Sri Lankan example is symptomatic of what Klein calls 'disaster capitalism' - the privatisation of responses to every situation of crisis and disaster. This has reached its apogee in the US heartland itself. The disaster of September 11th was the catalyst for opening up the security, correctional, surveillance, and intelligence complex to market forces. Insurance companies, risk management agencies, think tanks, glorified private detectives and mercenaries now comprise a $200 billion market that did not exist before 2001. For this sector uncertainty is good for business. The worst things get for us, the better they are for them.

We can see a clear line of descent. Neoliberalism began as a response to the general crisis of Keynesian/mixed capitalism. It has been imposed during situations of crisis as shock therapy. And now it is the received wisdom informing all responses to all crises - even those caused by previous neoliberal policies.

Asked if Russia and China offer alternative authoritarian models to neoliberalism, she suggested they were both examples of how neoliberalism happily co-exists with autocracy and undermines democracy. In the Chinese city of Shenzen, a city originally built 30 years ago as part of China's 'special economic zones', a new experiment with free market economics is going on. The repressive functions of the Stalinist police state are up for tender. Plans exist to increase the current 200,000 CCTV cameras by a factor of 10. This will require building an infrastructure capable of transmitting and recording millions of hours of footage and software speeding up the process of analysis. And who are stepping up to this market opportunity? IBM, General Electric, etc. A clearer case of markets facilitating the repression of democracy and freedom is seldom found.

On the Katrina disaster, we saw a rolling out of the same programme that befell Sri Lanka. Klein suggested (in my opinion wrongly) the left failed to make much of a case in the US about the scandal of the levys because it was 'indecent'. Unfortunately the right had no such scruples. Haliburton turned up sniffing for construction contracts and Blackwater sensed an opportunity for deploying some of its mercenaries. In all between them they came up with 32-point programme that basically amounted to the privatisation of the entire public infrastructure in New Orleans, from the drains to the schools. The tragedy is an alternative was possible, it just wasn't profitable. Public money was available and could have been used to bring the people themselves into the reconstruction effort. Disaster victims are agents too and rebuilding is the best form of therapy. They are the experts, they know what they want their city to be. But disaster capitalism is the opposite. It has dispersed and disempowered the city's working class and hired cheap migrant labour for the reconstruction. In short, New Orleans has become capital's playground.

One recurring problem with Klein's work has been the question of agency and alternatives. In answer to the perennial 'what is to be done?' she has previously looked to the anti-capitalist/global justice movement encompassing the varied and various social movements that opposing capital piecemeal or in their entirety. Again today she did not move beyond that position, except to say we need to draw lines in the sand and assert key principles. Unfortunately this is not much to be going on with, seeing as capital has been freely burying the hard-won gains of previous decades. What is missing from Klein is the need to build a clear political alternative to neoliberalism, which immediately brings socialism and Marxism back into the political picture. As a former Ralph Miliband fellow at LSE she cannot be unaware of this.

But there is no doubting she can pull a crowd. The audience for her talk was a new one on me. It was the first time I had been to something you could broadly call a left event where the majority of the 200 or so present were younger than my tender 31 years. And it's not difficult to see why. Klein's work is uncompromising in its hostility to capitalism. However neoliberals try to prettify their system, it is fundamentally exploitative and unjust. We all deserve something better, and given the chance, we can build it.


Leftwing Criminologist said...

One of the books I had read before I got politically active was klein's previous book. i was wondering have you read the shock doctrine - is it worth reading?

Phil said...

No, I haven't read it though it does sound like a worthwhile read. I did review her previous book, Fences and Windows, many, many moons ago. You can read it here

steven rix said...

I read her book. Her historical research on electroshock is kind of weak though. She talks more about the canadian side with the Mc Gill's University and she omits (consciously or not) the american experiments with Hitler's scientists. There is no doubt in my mind that Americans were in shock with traumatic effects after 911, and they were used and abused by the Bush administration. I've always compared 911 to the little pill we had to swallow so that the Bush administration can do everything it wants inside the US and abroad. It's a good book though and it's worth reading it and you might learn something.

PS: we always hear about the blackwater firm and we always forget about the existence of an irish firm that also works for the US in Iraq. They are more like into security for contractors and a few years ago 3 english troops perished on a roadside bomb in Basra. I knew the guy who was in charge of their protection.

Anonymous said...

The Shock Doctrine is pretty good, though the shock analogy itself is possibly somewhat superfluous to the argument. The book is a very nice antidote to the 'capitalism = freedom' tropes that get splattered around various parts of the press.

donpaskini said...

I enjoyed the Shock Doctrine very much - it's a great piece of polemic, well written and thought-provoking. Better than No Logo.

Some of the examples she gives of 'disaster capitalism' work better than others, and it doesn't quite work as the grand unified theory explaining the last 35 years, but it's easy enough to spot those bits.