Review of
THE SHOCK DOCTRINE: THE RISE OF DISASTER CAPITALISM
Myron R. Chartier, Ph.D.
The author, whom I did not know, is a distinguished, award-winning 38-year-old Canadian journalist, syndicated columnist, and film maker, based in Toronto. Her first book, an international bestseller, was No Logo: Taking Aim at the Brand Bullies. It was published in 2000 and has been translated into 28 languages. She writes a column for The Guardian and The Nation, which is internationally syndicated by the New York Times. She has reported from Iraq for Harper’s magazine, which won her the James Aronson Award for Social Justice Journalism. A collection of her articles was published in 2002 in a work entitled Fences and Windows: Dispatches from the Globalization Debate. In 2004 she released with Avi Lewis a feature documentary about Argentina’s occupied factories entitled The Take. It won the Best Documentary Jury Prize at the American Film Institute’s Film Festival in Los Angeles. Naomi Klein is a former Miliband Fellow at the London School of Economics and holds an honorary Doctor of Civil Laws degree from the University of King’s College, Nova Scotia, Canada.
The Shock Doctrine was published in the fall of 2007, coming out in seven languages simultaneously. Today it appears in 27 languages. This book was four years in the making and involved an international team of researchers and investigative reporters. The author’s indebtedness to the support of others is shared in her seven pages of “Acknowledgments.” The depth of its research is supported by 60 pages of meticulous endnotes, totaling 5,180. This tome blesses the reader with a 24-page, double-column index. The result is a shocking, disturbing tale of how economics has worked in the world for the past 35 years. The tale is laid out in fluid, accessible, intriguing stories. Rachel Maddow, a host and commentator for MSNBC, says, this is “the only book of the last few years in American publishing that I would describe as a mandatory must-read. Literally the only one." It may be the most important book on economics in the 21st century, according to Paul B. Farrell of Dow Jones Business News.
The Shock Doctrine: The Rise of Destructive Capitalism is 568 pages in length and is divided into seven parts plus an introduction and a conclusion. It is a seminal work demonstrating the impact of Milton Friedman’s economic theory upon nations and peoples of the world for the past thirty-five years. Friedman, the leading economist in the Chicago School of Economics at the University of Chicago and a 1976 Nobel Prize winner, approached economics “as rigorous and objective a scientific discipline as physics, chemistry and medicine, . . ..” (p. 117) Klein writes, “Like all fundamentalist faiths, Chicago School economics is, for its true believers, a closed loop. The starting premise is that the free market is a perfect scientific system, one in which individuals, acting on their own self-interested desires, creates the maximum benefits for all.” (p. 51) If something goes wrong within a free-market economy, something like high inflation or soaring unemployment, it only follows that it has to be because the market is not truly free. There has to be some distortion or interference in the economic system.
Friedman died in 2006. At the time obituary writers struggled to summarize the breadth of his legacy. Larry Kudlow of the National Review wrote, “Milton’s mantra of free markets, free prices, consumer choice and economic liberty is responsible for the global prosperity we enjoy today.” (pp. 51-52)
The purpose of The Shock Doctrine is to provide a major challenge to the central, most cherished claim of the “official story,” which is “that the triumph of deregulated capitalism has been born of freedom, that unfettered free markets go hand in hand with democracy.” Instead, Klein seeks to demonstrate that Friedman’s “fundamentalist form of capitalism has consistently been midwifed by the most brutal forms of coercion, inflicted on the collective body politic as well as on countless individual bodies.” (p. 18) She provides a historical tale of the contemporary free market, or better understood as the rise of corporatism being written in shocks.
What is the “shock doctrine? The shock doctrine is about remaking people and countries in the images of the shock doctors. Klein relates Chicago School Economics to electroshock therapy. Psychiatrists using electroshock want the minds of their patients to be clean slates upon which they can write. The master of shock therapy was Dr. Ewen Cameron of McGill University in Montreal, Canada. He received grants from the CIA for his research insights into interrogation tactics, in other words, refined torture. Friedman believed that “only a crisis—actual or perceived—produces real change. When that crisis happens, the actions that are taken depend upon the ideas that are lying around.” (p. 6) Friedman believed his function and that of the Chicago School was to develop alternatives to existing policy, to nurture them until a crisis came and they could be applied. Once a crisis struck, Friedman was convinced that it was critical to act swiftly, to impose rapid and irreversible change before the crisis-racked society back slid into a “tyranny of the status quo.” The “shock doctrine” was the basis of the shock and awe strategy of the Iraq war invasion. Secretary of Defense Rumsfeld was fully schooled in the thinking of Milton Friedman. He expected the massive strategy of an invasion would create such confusion and anxiety that the Iraqis would welcome American occupation and its capitalist ways. Hence, the shock doctrine is rooted in psychiatry, economics, and military strategy.
What is disaster capitalism? Obviously, it’s related to the shock doctrine. “Disaster capitalism” is a term Klein uses to describe the “orchestrated raids on the public sphere in the wake of catastrophic events, combined with the treatment of disasters as exciting market opportunities.” (p. 6) Disasters were exploited by disciples of the Chicago School to promote unfettered free market capitalism. The basis of disaster capitalism is a disaster or a crisis such as a coup, a terrorist attack, a market meltdown, a war, a tsunami, a hurricane that places a whole population into a state of collective shock. “The falling bombs, the bursts of terror, the pounding winds serve to soften up whole societies much as the blaring music and blows in the torture cells soften up prisoners. Like the terrorized prisoner who gives up the names of comrades and renounces his faith, shocked societies often give up things they would otherwise fiercely protect.” (p. 17)
Earlier I briefly indicated how the book is organized. Now allow me to provide the outline with some explication. The introduction is entitled “Blank Is Beautiful: Three Decades of Erasing and Remaking the World.” These 20+ pages provide an overview of what is reported in detail in the chapters that follow.
Part 1 is entitled: “Two Doctor Shocks: Research and Development.” Chapter 1 carries the title: “The Torture Lab: Ewen Cameron, the CIA and the Maniacal Quest to Erase and Remake the Human Mind.” Some insights from this chapter have already been shared.
The second chapter is entitled: “The Other Doctor Shock: Milton Friedman and the Search for a Laissez Faire Laboratory.” Friedman sought a pure economic state, which would be free of government regulation and in which the role of government would be quite limited. “For him everything went wrong with the New Deal.” (p. 56) To get governments back on the right track, he recommended three things: 1) “governments must remove all rules and regulations standing in the way of the accumulation of profits”; 2) governments “should sell off any assets they own that corporations could be running at a profit”; 3) governments “should dramatically cut back funding of social programs.” (pp. 56-67) Along with this three-part formula of deregulation, privatization, and cutbacks, Friedman offered plenty of specifics. For example, he promoted the privatization of the post office, health care, education, retirement pensions, and the national parks as well as the eradication of organized labor.
Friedman’s first opportunity to apply his theories was in Latin America. A 500-page-bible detailing an economic program that would guide the junta in Chile from its earliest days was developed by a group who had studied economics at the University of Chicago. The CIA was involved in its preparation. Three forms of shock were utilized in Chile’s coup: the shock of the coup itself immediately followed by economic shock therapy and then the shock of the torture chamber terrorized anyone thinking of standing in the way of the economic shocks.
Part 2 is entitled: “The First Test: Birth Pangs.” Chapter 3 carries the title: “States of Shock: The Bloody Birth of the Counterrevolution.” The “counterrevolution” refers to undoing Keynesian economics; in the US that refers to reversing the New Deal. The first test was Chile, a country that had experienced 160 years of peaceful democratic rule, the past 41 uninterrupted. With the help of the CIA General Augusta Pinochet attacked the presidential palace and killed President Salvador Allende. Following the military’s coup of Pinochet, Friedman’s free-market trinity was put into operation which involved privatization, deregulation, and cuts in social spending. Chile was the genesis of Friedman’s counterrevolution. It was also the genesis of terror for accomplishing it.
Other South American countries to follow this pattern were Brazil, Argentina, and Uruguay. They were all run by U.S. backed military governments and were living laboratories for Chicago School economics.
Chapter 4 is entitled: “Cleaning the Slate: Terror Does It Work.” Anybody or any group who resisted “free market capitalism” was subject to torture or being killed. Persons with ideas not consistent with free market capitalism were seen as a cancer in a diseased body. These conclusions meant torture or death for many in Chile and other South American countries.
Chapter 5 carries the title: “‘Entirely Unrelated’: How an Ideology Was Cleansed of Its Crimes.” Klein begins the chapter by writing, “For a brief period, it did seem that the crimes of the Southern Cone might actually stick to the neoliberal movement, discrediting it before it expanded beyond its first laboratory.” (p. 116) In 1975 Anthony Lewis, a columnist for the New York Times raised a simple but inflammatory question: “If the pure Chicago economic theory can be carried out in Chile only at the price of repression should its authors feel some responsibility?” (p. 116) The Chicago School refused to acknowledge any connection between their policies and the use of terror. They put up an intellectual firewall to protect them from such a relationship being drawn. Klein writes, “The Chicago Boys’ first adventure in the seventies should have served as a warning to humanity: theirs are dangerous ideas. By failing to hold the ideology accountable for the crimes committed in its first laboratory, this subculture of unrepentant ideologues was given immunity, freed to scour the world for its next conquest.” (pp. 127-126)
Part 3 is entitled: “Surviving Democracy: Bombs Made of Laws.” Chapter 6 which focuses on Margaret Thatcher is entitled: “Saved by a War: Thatcherism and Its Useful Enemies.” Thatcher was quite taken with what had taken place in Chile, and she was encouraged by the Chicago School to implement their policies in Great Britain. She believed it would be difficult to do in a democratic, constitutional government like hers. However, the Falkland War provided her an opportunity. She became very popular for her effort and used her new stature to implement Friedman’s ideas in Britain.
Chapter 7 is entitled: “The New Doctor Shock: Economic Warfare Replaces Dictatorship.” This chapter focuses on Bolivia in the ‘80's. A democratically elected president implemented a package of laws based upon Friedman’s economic bible. Victor Paz Estenssoro and his government “provided a blueprint for a new, more palatable kind of authoritarianism, a civilian coup d’etat, one carried out by politicians and economists in business suits rather than soldiers in military uniforms–all unfolding within the official shell of a democratic regime.” (p. 154)
Chapter 8 bears the title “Crisis Works: The Packaging of Shock Therapy.” Bolivia had been plagued by hyperinflation. When free market tactics were used to bring it to an end, others took notice of its success. Personnel at the International Monetary Fund (IMF) and the World Bank noted that the shock therapy program functioned as a “big bang” moment, a breakthrough in the campaign to bring the Chicago School doctrine to the entire globe. “Philosophically, Friedman did not believe in the IMF or the World Bank. For him, they were classic examples of big government interfering with the delicate signals of the market.” (p. 161) So it is ironic how many Friedman proteges found work with the two global organizations. These organizations would not lend to countries needing help without using the policies of Friedman. Disaster capitalism on a global scale was taking shape.
Part 4 is entitled: “Lost in Transition: While We Wept, While We Trembled, While We Danced.” Chapter 9 entitled, “Slamming the Door on History: A Crisis in Poland, A Massacre in China,” tells the story of the rise of fundamentalist capitalism in these two countries. Lech Walesa led a labor movement against the Moscow-controlled government in Poland. He had hoped to find a third way of governing between communism and capitalism. He wanted to avoid some of the evils that capitalism creates, especially for workers and the poor. He desired an economic program of worker ownership. Being in need of money Poland’s government sought the help of the IMF which meant they had to submit to economic shock therapy. During this period there developed the “Washington Consensus” which was a clear effort to halt all discussion and debate about any economic ideas outside the free-market lockbox. Francis Fukuyama, a senior advisor in the U.S. State Department, in 1989 had claimed that democratic and free market reforms were in a twin process, impossible to pry apart. However, the government of China had done precisely that, for it was pushing hard to deregulate wages and prices and expand the reach of the market. It was fiercely determined to resist calls for elections and civil liberties. The shock of Tiananmen Square came two months after Fukuyama’s statement. Klein writes, “in Poland, democracy was used as a weapon against ‘free markets’ on the streets and at the polls. Meanwhile in China, where the drive for free-wheeling capitalism rolled over democracy in Tiananmen Square, shock and terror unleashed one of the most lucrative and sustained investor booms in modern history. Another miracle born of a massacre.” (p. 193)
“Democracy Born in Chains: South Africa’s Constricted Freedom” is the title of chapter 10. Nelson Mandela, head of the African National Congress (ANC) in South Africa, sought the economic transformation of South Africa’s apartheid state. This chapter reports how this failed to happen because of the extreme pressure placed upon the ANC leadership by the western powers supporting the Washington Consensus, the IMF, and the World Bank. Mandela and his crew were told that the only economic game in this day was free market capitalism. As the ANC negotiated becoming the new government, they gave away much they needed to accomplish their dream. They were seduced into such a position thinking it was best for the country.
Chapter 11 carries the title: “Bonfire of a Young Democracy: Russia Chooses ‘The Pinochet Option.’” Mikhail Gorbachev through his twin policies of glasnost (openness) and perestroika (restructuring) sought to build a social democracy on the Scandinavian model, a socialist beacon for all humankind. He was moving toward a mixture of a free market and a strong safety net, with key industries under public control. He predicted the process would take 10 to 15 years to complete. When Gorbachev attended the G7 meeting in 1991 his fellow heads of state said that he must embrace radical economic shock therapy immediately, or he would lose their support. Gorbachev received the same marching orders from the IMF and the World Bank. This eventually led to the coup d’etat by Boris Yeltsin who immediately adopted a Pinochet style shock therapy approach to dealing with Russia’s economy. “Before shock therapy, Russia had no millionaires; by 2003, the number of Russian billionaires had risen to seventeen.” (p. 231). The primary lesson learned from the Russian experience was that the faster and more lawless the transfer of wealth, the more profitable it would be. This lesson was applied to the Tequila Crisis in 1994 in Mexico. The result was twenty-three new billionaires, and 80% of their banks being foreign owned. In 1990 only one bank was.
Chapter 12 is entitled “The Capitalist ID: Russia and the New Era of the Boor Market.” Following free market shock therapy in Russia and Mexico, it became dogma for the Chicago School to adopt the idea of actively creating a serious crisis so that shock therapy could be pushed through. In “Washington’s most powerful financial institutions there was a willingness not only to create an appearance of crisis through the media but also to take concrete measures to generate crises that were all too real.” (p. 259)
The focus of chapter 13 is “Let It Burn: The Looting of Asia and ‘The Fall of a Second Berlin Wall.’” The Asian Tigers consisting of Thailand, Indonesia, Malaysia, the Philippines, and South Korea had been booming economies, but by 1997 they were struggling and seeking economic help from the U.S. Treasury and the IMF. The fall of the Tigers was seen by some as the fall of a second Berlin Wall. It was seen as the collapse of the idea that there is a “Third Way” between free-market democratic capitalism and socialist statism. The IMF imposed disaster capitalism upon these nations. It didn’t work according to the IMF’s own internal audit. It warned against crisis opportunism; however, a 2003 report was too late to be of value.
Part 5 is entitled: “Shocking Times: The Rise of the Disaster Capitalism Complex.” Chapter 14 is entitled “Shock Therapy in the U.S.A.: The Homeland Security Bubble.” This chapter tells the story of how the Bush administration sold off many of the functions of government to private enterprise. The result was a hollow government. According to the New York Times, “Without a public debate or formal policy decision, contractors [became] a virtual fourth branch of government.” (p. 299)
Chapter 15 carries the title: “A Corporatist State: Removing the Revolving Door, Putting in an Archway.” When Donald Rumsfeld and Dick Cheney joined the Bush cabinet and refused to choose between their disaster-connected holdings and their public duties, it became clear that a genuine corporatist state had arrived. Government service was used to enhance corporatist interests. When one was done serving the government, one had the credentials to make big bucks in the corporate world by knowing how to fleece the government of its tax dollars.
Part 6 deals with “Iraq, Full Circle: Overshock,” which consists of three chapters, “Erasing Iraq: In Search of a ‘Model’ for the Middle East” (chapter 16), “Ideological Blowback: A Very Capitalist Disaster” (chapter 17), and “Full Circle: From Blank Slate to Scorched Earth” (chapter 18). Klein sees the Iraq War as implementing an economic strategy similar to the one used in Chile in 1973. The neo-conservatives of the Bush administration believed the primary cause as to why the Middle East produced terrorists was the region’s deficit in free-market democracy. Therefore, Iraq with its rich oil resources was chosen as the nation to flatten or erase and create a free-market economy and democracy. Everything was flattened. The U.S. government brought in private enterprise to rebuild Iraq. Even private groups were brought in to defend our ambassadors and the Green Zone. The plan was to bring in American culture, and the Iraqis would love it. It was to be a capitalist transformation. Klein concludes that “Iraq’s current state of disaster cannot be reduced either to the incompetence and cronyism of the Bush White House or to the sectarianism or tribalism of Iraqis. It is a very capitalist disaster, a nightmare of unfettered greed unleashed in the wake of war. The ‘fiasco’ of Iraq is one created by a careful and faithful application of the unrestrained Chicago School ideology.” (p. 351) What made this attempt in free market capitalism come full circle was the use of torture as vividly illustrated by what took place at the Abu Ghraib prison. What was not anticipated was the power of the Islamic culture to resist US efforts.
Part 7 is entitled: “The Movable Green Zone: Buffer Zones and Blast Walls.” Its three chapters focus on disaster capitalism at work in the tsunami that took place in Southeast Asia December 26, 2004, Hurricane Katrina that hit the gulf coast of our country in late August of 2005, and the disconnect between endless war and economic growth. The chapter titles are: “Blanking the Beach: The Second Tsunami” (chapter 19), “Disaster Apartheid: A World of Green Zones and Red Zones” (chapter 20), and “Losing the Peace Incentive: Israel as Warning” (chapter 21).
The world was stunned by the tsunami that hit Southeast Asia following Christmas day in 2004. The tsunami pushed the fishing village people into the hills with their fishing huts and boats being totally destroyed. This presented the local governments and hotel owners an opportunity to make the blank beaches into strictly a resort area for foreign tourists. For the fishing boat people, this was a second tsunami as corporate globalization took the beaches away from them for development purposes. “All the tsunami-struck countries imposed ‘buffer zones’ preventing villagers from rebuilding on the coasts, freeing up land for increased development.” (p. 399)
The disaster of Hurricane Katrina provided free market capitalists with an opportunity to maximize their profit interests at the expense of the poor. Writing in the Wall Street Journal, December 5, 2005, Milton Friedman observed, “Most New Orleans schools are in ruins as are the homes of the children who have attended them. The children are now scattered all over the country. This is a tragedy. It is also an opportunity to radically reform the education system.” (p. 5) His radical idea was to provide families with vouchers which they could use at private, for profit institutions that would be subsidized by the state rather than rebuilding and improving New Orleans public schools. The Bush administration spent $1,000,000 on a private firm, Innovative Emergency Management, to come up with a catastrophic hurricane disaster plan for Southeast Louisiana and the city New Orleans. When the report was submitted, no action was taken. According to Michael Brown, head of FEMA at the time, there was no money available. When it came to paying private contractors, the sky was the limit, but when it came to financing the basic functions of the state, the coffers were empty. The rich are cared for, but the poor are forgotten and left behind. The result: disaster apartheid.
For years the conventional wisdom was that peace and stability were needed to grow the global economy. Then at the 2007 World Economic Forum in Davos, Switzerland, the Davos Dilemma was identified. It was noted after the market crash of 2000, terrorist strikes in the U.S. and elsewhere, the wars in Afghanistan and Iraq, etc. that there was general economic growth. It was like the world was going to hell, there was no stability in sight and the global economy was roaring its approval. Why this “near complete disconnect” between politics and the markets? The markets have learned to thrive on disaster. Klein reports, “Like the global economy in general, Israel’s political situation is, most agree, disastrous, but its economy has never been stronger, with 2007 growth rates rivaling those of China and India.” (p. 428) Given the violence in the Middle East “Israel has crafted an economy that expands markedly in direct response to escalating violence.” (p. 428)
Klein entitles her Conclusion–“Shock Wears Off: The Rise of People’s Reconstruction.” As I indicated at the beginning of this book review, it is a shocking, disturbing story of the rise of disaster capitalism around the globe. This chapter provides hope for those who have been exploited by this movement. Senator Jim Webb of Virginia has described one of the outcomes of free market capitalism as a drift “toward a class-based system, the likes of which we have not seen since the 19th century.” (p. 444) Trickle down economics simply did not happen. By 2006 key players in disaster capitalism around the world were either in jail or up on charges. At the turn of the century the shock was wearing off in Argentina, Chile, Bolivia, China, Lebanon. The people who were exploited are demanding more democracy and more control over markets, which challenges Friedman’s thesis that capitalism and freedom are part of the same indivisible project. Those who have experienced shock were becoming shock resistant. They value memory, both individual and collective, in their battle against the shock doctors, for memory is the greatest shock absorber of all. Memory gives people the tools to fight the exploiters in the midst of new crises and disasters. Working in community to help others rebuild, taking what’s there and fixing it, reinforcing it, making it better and more equal is essential. Most of all, they are building in resilience–for when the next shock or crisis strikes.
In conclusion, Naomi Klein has written a wonderfully controversial book that has to be reckoned with. It is in the muckraker tradition of Upton Sinclair, author of The Jungle, and I. F. Stone, editor of I. F. Stone’s Weekly.
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