The Shock Doctrine and the Ongoing Market Turmoil
by chapter1
Tue Jan 22, 2008 at 04:36:49 AM PST
Naomi Klein's The Shock Doctrine makes the casethat
"free market" policies have come to dominate the world-- through the exploitation of disaster-shocked people and countries.
These disasters include Pinochet’s coup in Chile in 1973, the Falklands War in 1982, the Tiananmen Square Massacre in 1989, the collapse of the Soviet Union in 1991, the Asian Financial crisis in 1997 and Hurricane Mitch in 1998.
Today, the financial markets are in turmoil, the housing market is in freefall, the labor market is in trouble. Over the next year, a lot of us will lose years of savings, much of the equity in our houses, or our jobs.
A lot of us are going to be shocked.
History teaches that this is when the free-marketers will strike.
Remember, they may only have one year to take whatever they can.
chapter1's diary :: ::
The Shock Doctrine has been discussed a lot on DailyKos.
Briefly, Klein shows how right-wing corporatist ideology has been imposed on dozens of countries, like Argentina, Indonesia, Poland, Russia, South Africa and others: long-term, corporatist "reforms" are presented as temporary solutions to a sudden crisis or shock.
As SusanG wrote:
Like an individual, a society that suffers a trauma—a natural disaster, an economic meltdown, a political upheaval—is initially so stressed in its wake that if ideologues move quickly enough, they can ram through "reforms" at what amounts to the political speed of light. Ergo, "the Shock Doctrine," with its ruthless privatization of formerly public property, elimination of social programs, busting up of worker groups, and the suspension of minimum wage laws. "Crises are, in a way," Klein writes, "democracy-free zones—gaps in politics as usual when the need for consent and consensus do not seem to apply."
I won't say more about Klein's book, except to very strongly encourage those of you who haven't read it to do so. Or at least read a few reviews or summaries (they don't do it justice, but its something.)
Shocks can be economic. As Klein notes, the Asian Financial Crisis of 1997 paved the way for the sell-off of many state-owned enterprises, and also gave the IMF a beachhead for its free-market policies.
Here's Wikipediaon how that worked out:
They suffered permanent currency devaluations, massive numbers of bankruptcies, collapses of whole sectors of once-booming economies, real estate busts, high unemployment, and social unrest. For most of the countries involved, IMF intervention had been been roundly criticized. The role of the International Monetary Fund was so controversial during the crisis, that many locals called the financial crisis the "IMF crisis".<15> To begin with, many commentators in retrospect criticized the IMF for encouraging the developing economies of Asia down the path of "fast track capitalism", meaning liberalization of the financial sector (elimination of restrictions on capital flows); maintenance of high domestic interest rates in order to suck in portfolio investment and bank capital; and pegging of the national currency to the dollar to reassure foreign investors against currency risk.<14>
We should expect they will try something similar here. The Bushies have one more year left in office, and the next administration may-- may-- be a bit more hostile to this sort of thing.
Its true that we don't exactly live in a social Democracy, but thing can get a lot worse. Klein notes that those countries that have had a full dose of Chicago School capitalism, typically 25% to 60% of the population lives in abject poverty.
Its easy to imagine how events unfold. First, the market turmoil continues or worsens. (Economist Nouriel Roubini says "in a typical US recession the S&P 500 falls by an average of 28% in nominal terms and 21% in real terms." This recession follows a very big bubble and might be worse than most, but the market has fallen only 10 or 15% as of MLK day.)
The housing market continues to implode. the labor market continues to get worse. Perhaps oil and food prices continue to skyrocket.
Then Bush does announces, say, that we must stimulate the economy by raiding Social Security. Or that capital gains taxes should be waived "for the time being" to prop up the markets. Or that the government will give even larger grants to swing-state churches to help the needy. Or that beleaguered American businesses can't fight off greedy trial lawyers, so all damages should be capped at $19.95. Or that we need to bomb the Iranians/Chinese/Russians for causing market turmoil.
These guys know what they're doing. They used 9/11 to start building a police state (wiretaps), pass the Patriot Act, and launch a war in Iraq.
What can we do?
If this happens, the most important thing we can do is to try to remain oriented. Yes, a lot of folks are going to be a lot poorer in a few months than they were a few months ago. But the contents of our wallets do not determine the content of our character, and our financial worth does not measure our true worth. This too shall pass.
Second, we must recognize what is happening, describe it and denounce it-- loudly. We could say:
-To the extent that the market problems are short term (after all, recessions come and go), the solutions must be short term, too. You don't amputate a foot to cure a stubbed toe.
-To the extent that economic problems are long term, they must not be fixed by the same failed economic policies that created them. As Jerome recently wrote
Reagan's legacy
is, altogether, a bad thing for most Americans: stagnant wages, widening inequality, the glorification of greed and debt, narrow-minded "values", impunity for crimes at the top, a massive build up of the militaro-industrial complex and, more worring, the development of the propaganda apparatus that promotes all of the above as good things.
We won't fix our current problems with more Reaganomics.
Klein's book ends on a note of hope. We fight back, we can win-- if we keep our wits about us and try not to be too shocked.
We stopped them from privatizing Social Security. We can stop them from doing whatever it is they are now cooking up.
Again, in countries subjected to a full-scale Chicago School capitalism 25% to 60% of the country lives in abject poverty. So remember, as you watch your investments and income fall and your expenses rise, that things can get a lot worse.
We need to prevent that from happening here.
http://www.dailykos.com/storyonly/2008/1/22/73649/2298