Sunday, October 21, 2007

'Milton Friedman wants you to be his bitch'

When the Hubble Space Telescope was first launched there was a flaw in the big mirror in the telescope and so for a few years all the photos came back blurry. So NASA sent a repair mission and they corrected the mirror and suddenly the pictures came back crystal clear.

That's how I felt reading Naomi Klein's new book Shock Doctrine: The Rise of Disaster Capitalism. For decades the mainstream media (and academia too) have presented us with a blurry picture about what is happening in the world. I'll give you an example: in 1973 Augusto Pinochet, with backing from the CIA, launched a military coup in Chile. Next thing you know Milton Friedman flew down to meet with Pinochet and Chile implemented a massive privatization plan. The New York Times, Washington Post and other traditional media reported on these two events (bloody coup and new economic program) as if they were unrelated events--as if we were all just supposed to scratch our heads and say, 'oh what a coinkydink.'

Naomi Klein's book fixes the flawed mirror presented by corporatist media and presents a picture that is crystal clear. Her argument goes something like this:

In the 1930s, 40s, and 50s, United States economic policy was guided by the theories of John Maynard Keynes (as implemented by Franklin Delano Roosevelt). Keynes believed in a mixed economy--namely that some form of regulation and public services were required to mitigate the adverse effects of capitalism. Keynesianism led to the creation of the American middle class, the end of the Great Depression, victory in World War II, the GI bill, the Marshall Plan (that rebuilt Europe after the war), and the largest sustained economic expansion in history.

But in the 1950s, Milton Friedman, building on the theories of Adam Smith, became influential in the economics department at the University of Chicago. Friedman and his followers distrusted Keynesianism and advocated a new form of laissez-faire capitalism with no government regulation, no environmental regulation, privatization of all government services (including social security), and unfettered free trade (no protection for domestic industries).

The Ford Foundation and the CIA were so enamored of Friedman's theories that they started a program to bring leading economists from Latin America to study with Friedman at the University of Chicago. At one point 1/3 of all the students in the University of Chicago economics department were there as a result of this program.

The problem was, Friedman's economic theories were (and are) incredibly unpopular. Any time democratic societies got a say in whether or not they wanted to implement Friedman style privatization programs, they invariably voted them down (because, in general, people don't like losing their jobs and starving to death in the name of some macroeconomic theory).

That would ordinarily be the end of the story--bad theory, unpopular, consistently voted down in democratic societies, the end.

But unfortunately, that's not the way the world (or the U.S. government) works. Instead, the CIA figured out that Friedman's economic program could be implemented, under the cover of darkness, if a shock to the system could be introduce first. So in 1973 the CIA backed a coup against the democratically elected government of Salvador Allende. As everyone from union leaders to folk singers were being tortured and executed in the former soccer stadium, Pinochet and his University of Chicago-trained economic advisers, implemented Friedman's economic theories in Chile. Similar shocks followed in Bolivia, Argentina, Brazil, Ecuador, and Uruguay.

Then the CIA figured out that it wasn't just military coups that could apply the literal and figurative shocks to a country--hyperinflation, natural disasters (hurricanes, tsunamis, earthquakes), and foreign debt would also do. Furthermore, the Internal Monetary Fund and the World Bank were used to implement these shocks--by tying any loans to the requirement that governments privatize their industries and completely open their borders to multinational corporations. So over the next several decades Milton Friedman-designed economic programs were implemented (without democratic consent) in Poland, South Africa, Russia, Thailand, Indonesia, Sri Lanka, China, Iraq, and New Orleans. The architects of the Iraq War (Cheney, Rumsfeld, and Bremer) were all followers of Milton Friedman. (I imagine Bush would have been too if he had ever opened a book or gone to class.)

For some time now, I've been curious to figure out what the relationship is between violence and wealth. Apparently, Naomi Klein was curious about that too. She writes,

"Is neoliberalism [aka Milton Friedman University of Chicago style economics] an inherently violent ideology, and is there something about its goals that demands this cycle of brutal political cleansing, followed by human rights cleanup operations?" (p. 126)

Klein's 466-page, meticulously-researched answer is, YES IT IS.

A couple other things become clear to me as a result of reading Shock Doctrine:

1.) There is no such thing as "U.S. foreign policy" or the "U.S. military." Rather, U.S. foreign policy is designed and written by multinational corporations and the U.S. military is just a private army working at the behest of multinational corporations. Furthermore, the CIA is simply a private paramilitary army/death squad working at the behest of multinational corporations.

2.) In many ways, progressives of the world have been focused on the wrong enemy for 50 years. We've focused on racism and war and the environment. But these are all products of bad economics. It all starts and ends with the economics. Fix the economic system, and lots of the other problems start to dissolve too. For Klein, a simple return to Keynesian economics would probably bring stability, democracy, and the revitalization of the middle class.

I'll leave you with another couple quotes from the book:

"Despite the mystique that surrounds it, and the understandable impulse to treat it as aberrant behavior beyond politics, torture is not particularly complicated or mysterious. A tool of the crudest kind of coercion, it crops up with great predictability whenever a local despot or a foreign occupier lacks the consent needed to rule: Marcos in the Philippines, the shah in Iran, Saddam in Iraq, the French in Algeria, the Israelis in the occupied territories, the U.S. in Iraq and Afghanistan. The list could stretch on and on. The widespread abuse of prisoners is a virtually foolproof indication that politicians are trying to impose a system--whether political, religious or economic--that is rejected by large numbers of the people they are ruling. Just as ecologists define ecosystems by the presence of certain 'indicator species' of plants and birds, torture is an indicator species of a regime that is engaged in a deeply anti-democratic project, even if that regime happens to have come to power through elections." (p. 125)

"Everywhere the Chicago School crusade has triumphed, it has created a permanent underclass of between 25 and 60 percent of the population. It is always a form of war." (p. 405)

Shock Doctrine is a revelation.

You can see a short film by Alfonso Cuaron about Shock Doctrine (here).


jfernst said...

Can't we sue the private owners of the Federal Reserve Bank for $50 Trillion+ for high crimes and misdemeanors related to purposely initiating the dot-com and real estate bubble costing Americans at least that much? It's estimated that one of the owners, Rothschild, is worth $500 Trillion.

Ultimately, the goal would be to put them out of business.

Please advise.

Rick Ernst

Toby Rogers said...

Hi Rick:

Thanks for the comment. Interesting thought. I need to do more research on the Federal Reserve to understand what the heck is going on there (the fact that they could engineer the theft of an entire investment bank, Bear Stearns, on a Sunday night suggests that they're playing on an entirely different game than the rest of us). Thanks again for your thoughtful comment.


jest said...

i have SERIOUS misgivings with this post.

the biggest is that both this author, and the friedman-ites, have this very frustrating, black & white, unitary vision of the world.

the concept that only keynesianism is the solution is just as frightening as the solely libertarian/neo-con model. especially since keynesianism was proven intellectually bankrupt over 30 years ago.

i honestly think the real problem is that no one admits the truth: nobody really understands economics simply because it is too complex.

the posturing of "scientists" who claim to understand this stuff, when it's painfully obvious that they do not, is what is killing us because they don't understand the symptoms, let alone the cures.

RFK Action Front said...

Hi Jest:

First off, thanks for taking the time to write. I'm always interested to hear how people experience a post.

I'm intrigued that you find both Friedmanism and Keynesiansism lacking. That's fine, I'm open to that. I lean towards Keynesianism because, in general, I prefer demand-side solutions to economic problems and because Keynesianism was largely responsible for building the largest middle class in the history of the world. I dislike Friedmanism and that whole University of Chicago supply side approach because it seemed to benefit the rich at the expense of the poor (often costing them their lives) and often required authoritarian (bordering on fascist) governments in order to implement it.

But okay, you see a different path perhaps, a different model? That's great. What is it? Because at the end of the day, policy makers (preferably with the consent of the governed) will make some choice -- supply side, demand side, a mix, do nothing... This is one of those cases where ideas have consequences. So I'd be interested to learn more about what path you might see as the best route for our country and the world moving forward. If as you say it's too complex and most folks don't understand it (couldn't understand it?) that's cool too -- where should people go to start learning about it?

Again thanks for your comment.

RFK Action Front