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View Diary: Book Review: Naomi Klein's "The Shock Doctrine" (208 comments)

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  •  Friedman and my economics degree (4+ / 0-)

    We talk about Friedman and free-market economics a lot in my classes as an economics student. The lesson most often can be summarized as a free-market economy isn't the best system, it's the least worst. Ignoring the questionable grammer of that statement, the point is that a free-market economy can increase the total social welfare, or the benefit provided to the entire society.  The problems occur when trying to describe how that social welfare manifests itself.
    Economists are very good at describing how things are and how they could be. Problems start when people talk about how things should be. It's not that we don't care, it's just that those questions are a different branch of study, called normative economics, whereas most economists study descriptive economics.
    What Friedman did well is that he described how a state-controlled economy would fail. And they did, from the ineffiencies of the Soviet state to the poverty of Latin America, a state-run economy will always suffer in the long run because it ignores the true will of the people. What he didn't do is give an instruction manual for how to fix those problems. Shock therapy got the process of making an economy more responsive started, but it could not produces all the changes necessary.
    Today, one of the biggest questions in economics is how to understand many of these problems of transition economies and what could be done to correct them. We're still working on that, if you know how, please tell us. You'll probably get a noble prize if you're right.

    "Its' got to be done and done quickly, so let's get it done." - General Henry 'Hap' Arnold

    by afguy08 on Sun Oct 14, 2007 at 04:25:13 PM PDT

    •  Also, (3+ / 0-)
      Recommended by:
      al Fubar, Spud1, Bush Bites

      Bush doesn't understand the real point of Friedman's economics. Don't blame us economists for Bush, that's a whole lot of stupid we had nothing to do with.

      "Its' got to be done and done quickly, so let's get it done." - General Henry 'Hap' Arnold

      by afguy08 on Sun Oct 14, 2007 at 04:26:50 PM PDT

      [ Parent ]

      •  I think those that impose these measures also (2+ / 0-)
        Recommended by:
        GayHillbilly, PsychoSavannah

        turn(ed) a blind eye to the corruption (often of huge scale) that was common in many fo the countries to which they were applied. That this corruption sometimes benefited those associated with the U.S. government also cannot be overlooked.

        "Americans can always be counted on to do the right thing...after they have exhausted all other possibilities." -- Winston Churchill

        by Spud1 on Sun Oct 14, 2007 at 04:31:32 PM PDT

        [ Parent ]

        •  Thank you! (2+ / 0-)
          Recommended by:
          Spud1, PsychoSavannah

          I was trying to think of what I was forgeting to say and that is that corruption, while a product of self-interest, often prevents the emergence of efficent  markets.

          "Its' got to be done and done quickly, so let's get it done." - General Henry 'Hap' Arnold

          by afguy08 on Sun Oct 14, 2007 at 04:32:46 PM PDT

          [ Parent ]

          •  But Klein and other critics of neoliberalism (8+ / 0-)

            Would point out that free market economics robs societies of the tools to fight back when corruption is produced from "efficient markets."

            One also has to ask when an efficient market has ever been created outside of government. Or for that matter when a market has ever existed outside of government.

            I'm not part of a redneck agenda - Green Day

            by eugene on Sun Oct 14, 2007 at 04:50:51 PM PDT

            [ Parent ]

            •  Or if either has ever been w/o corruption. Like (2+ / 0-)
              Recommended by:
              eugene, PsychoSavannah

              all of this discussion, it is a matter of degree, and what is acceptable. I think this is why some people call the field of economics more of an art than a science.

              "Americans can always be counted on to do the right thing...after they have exhausted all other possibilities." -- Winston Churchill

              by Spud1 on Sun Oct 14, 2007 at 04:53:57 PM PDT

              [ Parent ]

            •  Barter economies (3+ / 0-)

              are, by definition, optimally efficient. And they existed long before government did.

              "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

              by Geenius at Wrok on Sun Oct 14, 2007 at 04:56:43 PM PDT

              [ Parent ]

              •  There is an interesting sci-fi short story (Poul (1+ / 0-)
                Recommended by:
                PsychoSavannah

                Anderson??) in which people, instead of using money to buy things, try to plant obligations ("obs") on others, i.e. to make them beholden.

                It's a fascniating way to look at how labor and wealth con be exchanged, and how different people act when instead of trying to TAKE something from someone, they are trying to GIVE. It is often humorous how characters int he story decline and duck such "offerings".

                "Americans can always be counted on to do the right thing...after they have exhausted all other possibilities." -- Winston Churchill

                by Spud1 on Sun Oct 14, 2007 at 06:21:10 PM PDT

                [ Parent ]

          •  One need only look at Iraq, which was (2+ / 0-)
            Recommended by:
            Halcyon, junta0201

            the blank slate that the Chicago School had long yearned for to see how important a roll large scale corruption can play. It is telling that these academics totally missed it, and for so long.

            "Americans can always be counted on to do the right thing...after they have exhausted all other possibilities." -- Winston Churchill

            by Spud1 on Sun Oct 14, 2007 at 04:56:11 PM PDT

            [ Parent ]

            •  Naomi Klein on C-Span (7+ / 0-)

              observes that "shock & awe" was the necessary precursor of "shock therapy" that Paul Bremer administered.

              http://www.booktv.org/...

              Notice that twice in this interview Foers tries to force Klein to say "Wolfowitz = Jeffrey Sachs and both have hearts of gold."  Klein resisted. (nb. can't hold it in: Foer is a disgusting person.)

              Notice also that Klein points out this doctrine is not new:  Keynes warned in 1920 essay, "The Consequences of the Peace," that to deprive people of self-determination is dangerous; they will become enraged and that rage will take form:  WWII was the form Keynes predicted; chaos in Iraq is the form Iraqi rage took following Bremer's shock therapy.

              I have written elsewhere on kos that Ed Royce has explained HR 1400 and the ongoing economic strangulation of Iran.  If what he describes is not Shock Doctrine, nothing is.  Sanctions on Iran are the first phases of shock doctrine. Royce said:  "sanctions will cause hyperinflation; we will block the people's access to natural gas, the people will riot; if the internal conflict becomes sufficiently intense, they will topple the regime."

              Royce's prescription is, of course, not only madness as in sociopathological, it will interfere with the ongoing attempts of the Iranian people to reform their own society.  Maybe that's what Bush/Cheney have in mind.  see www.niacouncil.org

              The "what can we do" part of this discussion is talk about it everywhere you go, every blog you write.  Write to your congressman, explain Shock Doctrine to him.  Write a letter to the editor.  Post an article in your coffee shop. Don't wait for the library book, save up your latte money and buy your own copy.
              Do NOT give Bush & the Congress the opportunity to say, "We didn't know" or "the intelligence was mistaken."  We know; Kossaks know; the dots are connected, there is no excuse.

              When a coward sees a man he thinks he can beat he becomes hungry for a fight. -Chinhua Achebe, Things Fall Apart.

              by BughouseWW on Sun Oct 14, 2007 at 06:01:14 PM PDT

              [ Parent ]

              •  It feels like the shock doctrine is (3+ / 0-)
                Recommended by:
                sarahnity, KiaRioGrl79, junta0201

                beginning to accelerate here in the US as well., most recently with the subprime crisis, dollar devaluation, sharp increases in cost of energy and food. Polls are already showing growing awareness of the fact that the current generation cannot make ends meet or live a better life than their parents, by 2/3 of respondents. Considering the distracting efforts of the media, the fact that there is already so much awareness of economic downturn points to how much progress has already been made towards hollowing out the US economy and resources already. And this is not to mention the raping of the public lands by the extraction industries. It may turn out that North America is in fact the 'final frontier' as the neoliberal IMF/WB structural adjustment chickens come home to roost. Or, I suppose Antarctica will soon be up for grabs.

          •  but Greenspan (0+ / 0-)

            has said that oh well, there is always some corruption. Thanks for clearing that up, Al....

        •  The excuse of corruption (1+ / 0-)
          Recommended by:
          PsychoSavannah

          well she talked about that in her book.  But it's what the policies were designed to do.

          The IMF never used to act as it did, before it was filled with Chicago Boys in the 1980s.

          In fact, Joseph Stiglitz (Nobel prize winner in 2001, reviewed Shock Doctrine in the NYTimes) wrote his winning thesis on how the markets and capital themselves are inefficient.  For example, unequal access to information.

      •  "Capitalism" & "Democracy" have been bastardized. (1+ / 0-)
        Recommended by:
        PsychoSavannah

        by Bush.

        He's bastardized "Christianity" as well.

        Just because Bush uses a word doesn't mean he had the vaguest idea about its meaning.

    •  It would be nice (2+ / 0-)
      Recommended by:
      paul2port, junta0201

      If free market economics made some room for democracy.

      Or if it saw inequality as something negative, something to be worked against, instead of as either a side effect or a worthy goal.

      I'm not part of a redneck agenda - Green Day

      by eugene on Sun Oct 14, 2007 at 04:46:17 PM PDT

      [ Parent ]

      •  Democracy is not the enemy of the free market (10+ / 0-)

        and neither is equality. If the market is truly free, it tends to promote equality. Paradoxically, however, the market can only remain optimally free if it's well-regulated, because the "friction" inherent in reality allows certain market participants to become so powerful that they can distort the market to serve themselves, making it less free for others. Regulation is necessary to compensate for the friction.

        That's my theory, anyway. Perhaps someone smarter has thought of it first.

        "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

        by Geenius at Wrok on Sun Oct 14, 2007 at 04:51:05 PM PDT

        [ Parent ]

        •  Precisely (7+ / 0-)

          But, with neoliberalism, such as that espoused by Friedman, democracy IS the enemy of free markets. That is why every time neoliberalism has been imposed on a society it has wound up undermining democracy. Every. Single. Time.

          I'm not part of a redneck agenda - Green Day

          by eugene on Sun Oct 14, 2007 at 04:52:33 PM PDT

          [ Parent ]

          •  One thing Susan doesn't mention (1+ / 0-)
            Recommended by:
            junta0201

            in her eloquent review is the torture that invariably accompanies the shock policies. This is not just theoretical economics. The Chicago Boys were out there, intimately involved.

            •  Did you read the blockquotes from (4+ / 0-)
              Recommended by:
              sarahnity, KiaRioGrl79, artisan, junta0201

              the book? Here's part of one of the quotes from Klein's book that Susan posted in her review:

              Torture is sickening, but it is often a highly rational way to achieve a specific goal; indeed, it may be the only way to achieve those goals. Which raises the deeper question, one that so many were incapable of asking at the time in Latin America. Is neoliberalism 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?

            •  Iraq and torture (2+ / 0-)
              Recommended by:
              KiaRioGrl79, artisan

              an interesting part of the book was on Iraq and the Abu Ghraib scandal.

              Iraq had many state-owned industries that the US sold off.  The Iraqis were not happy about that and demonstrated against it.

              She talked about how emails in Abu Ghraib, when they sent in that new General to implement torture policies, were simply following what the Chicago school had done in South America: shock.  They wanted to implement, the "Salvadoran option", aka torture and 'disappearances'.  And they did.

              Iraqis also began holding elections right after they were 'liberated'.  But Paul Bremer had to fulfill his neoliberal/neoconservative policies (independent central bank, flat corporate tax rate, immunity, etc..) which the Iraqis would have never stood for, so he stopped and disregarded the elections, which led the Iraqis to violence.

              It's a very, very compelling narrative that's scary as hell.

    •  But (5+ / 0-)
      Recommended by:
      eugene, KiaRioGrl79, fhcec, cadejo4, junta0201

      the poverty in Latin America, to my knowledge, has less to do with "state-run" economies than with the concentration of wealth in oligarchies.  Land reform was always one of the big demands of the FMLN in El Salvador, for example.  And certainly the U.S. government has done a lot to undermine state-run socialist/revolutionary experiments.  The Contra War in Nicaragua, for example.

      •  I don't understand either (1+ / 0-)
        Recommended by:
        dirkster42

        I can't think of any "state-run" economies in Latin America except Cuba. A fair number had state-owned monopolies (telecommunications, for example) that were privatized under neoliberalism. I can't speak for other countries, but have seen the effect in Guatemala and it was negligible. Before anyone would even bid on the phone company, the Guatemalan Congress had to give it even greater monopolistic power, to control all Internet traffic, for example. So the sale did nothing to open the market, except turn the company over to TelMex in a deal riddled with corruption. Service is, if anything, even more deplorable. Hell, I had to stand in line at the phone company for two hours a few months ago to turn my cable TV service OFF, and the woman at the computer took 20 minutes to process all the forms.

    •  Latin America followed neo-liberalism, (1+ / 0-)
      Recommended by:
      KiaRioGrl79

      were forced to follow it in fact, for the past 30 years.  Like the coup against Allende in Chile and the torture and disappearances that followed to implement the agenda and annihilate the left wing.  Or Russia's free market system.  That did not turn out well with Yeltsin forced to destroy his own Parliament and constitutional government in order to implement the free market (Klein includes statistics that show Russia is now worse off, and I've read the GDP is slow)

      Also, I think there's a difference between Russia's economy under the Czar, Trotsky Russia, and then Stalin Russia.  Czar Russia was a country of slavery.  Trotsky Russia did electrify Russia efficiently in those times.


      What Friedman did well is that he described how a state-controlled economy would fail. And they did, from the ineffiencies of the Soviet state to the poverty of Latin America, a state-run economy will always suffer in the long run because it ignores the true will of the people. What he didn't do is give an instruction manual for how to fix those problems. Shock therapy got the process of making an economy more responsive started, but it could not produces all the changes necessary.

      Latin America implemented Friedman's theories.  Milton Friedman was intimately involved in their economies.

      Venezuela now vs Venezuela pre-Chavez:

      Venezuela's and Canada's Very Different Approaches to Oil

      Venezuela's oil industry was very similar to Alberta's in the early- to mid-1990s, when US-promoted neo-liberalism—"free trade" and the privatization and deregulation of the oil industry—was implemented. But when the controversial yet popular Hugo Chávez was elected in 1998, Venezuela embarked on a transformative experiment, "re-nationalizing" the state oil company. With the country’s oil-based income increasing exponentially, Venezuela has invested heavily in social programs. According to the Venezuelan National Statistics Institute, poverty rates have declined from 49 to 37 per cent since Chávez assumed office. The Chávez administration has presented a serious challenge to neo-liberalism in Latin America by developing a social-democratic model with a sharp revolutionary edge. This process was made possible by Chávez's successful mobilization of poor Venezuelans into a mass movement.

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