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Review of Naomi Klein’s "The Shock Doctrine"

I hate to resort to clichés, but this is a ‘must read’ book – the kind that only gets published once in a hundred years.

The theory Klein develops is that the main reason for the rise of democracy and social-welfare with its old age pensions, public hospitals, public housing, and universal education after the Great Depression of the 1930s was that the beneficiaries of the robber-baron culture which had dominated until then were aware that if people were kept sufficiently miserable, they would turn to communism and socialism.

Reading of the desecration and live dismemberment of Iraq and seeing the name KPMG, I could not help but think of how our recent Premier, Steven Bracks, who was so fond of public-private partnerships, and whose government gave away 20 ha of public land in Royal Park to private 52% owned Singapore developer, Australand. In a move which even the departing Queensland Premier criticised, Bracks recently began to work for KPMG Peat Marwick, which, incidentally, is involved in reconstruction efforts in East Timor.

Also published on Web Diary. See also: "Shock Doctrine's Shocking Short Shrift" of 8 Nov 07 by Carolyn Baker.

A review of Naomi Klein’s The Shock Doctrine ( Penguin Australia, 2007)
By Sheila Newman. Also published on Web Diary. (2233 words)

Klein is a Canadian political scientist. She put this book together over a four year period, employing different teams of researchers for each chapter. The documentation is awesomely solid, making her assertions difficult to tear down, and thus supporting a theory which would otherwise seem almost fantastic, were it not also supported by more and more freestanding works.

The theory Klein develops is that the main reason for the rise of democracy and social-welfare with its old age pensions, public hospitals, public housing, and universal education after the Great Depression of the 1930s was that the beneficiaries of the robber-baron culture which had dominated until then were aware that if people were kept sufficiently miserable, they would turn to communism and socialism.

But the robber-barons, land-sharks and bankers were only waiting for an opportunity to break down any political system which would stop them from having anything they wanted. Their method was tried and true: a religion embracing trickle-down economics, endless growth and total deregulation. I have wondered for some time how so many dim-witted, narrowly educated people going by the tag of ‘economist’ came to inhabit the corridors of power in our society. This has been somewhat explained to me by Klein, who identifies the genesis of a theoretical basis, defence and propaganda effort for corporatist free-market replacing real government. She places the rise of the shock doctrine of economic rationalism at Chicago University in the Chicago School of Economics, led by economist Milton Friedman, the author of Capitalism and Freedom.

She describes how this school set about training people in its atrocious doctrine all over the world. Its practitioners sought to break down all examples of egalitarian, community oriented democratic states, speciously linking ‘democracy’ to the imposition of ‘free-market’ economics.

Although Klein does not make this connection, their program began in 1973 which was the time of the first oil-shock. She describes a course of corporatised looting, torture, slavery and repression which begins with Pinochet’s rise in Chile, with Milton Friedman as his advisor, and passes through similar horrors in Bolivia, Argentina, Uruguay, Poland, South Africa, Russia, and Irak. She finishes this incredible expose by describing the nauseating excesses of developers masquerading as foreign AID in Sri Lanka and Thailand after the tsunamis which so many Australians and others contributed their money to help.

Within 24 hours of the tsunami in Sri Lanka, where land had been 80% publicly owned, processes demanded by the World Bank, US AID, and the Asian Development Bank began to change the laws to transfer public land to private ownership, and to privatise public utilities and resources. Indeed those seem to be the signs that the shock doctrine is operating in a country – privatisation of public land, telephones, water, power and pharmaceutical distribution. Obviously I think that Australians should act quickly to familiarise themselves with Naomi Klein’s book and to begin to appreciate the danger to what remains of our democracy, public wealth and institutions. The possibility for land redistribution in South Africa by Mandela’s government had been similarly hamstrung.

Familiar bland illogical assertions come up along with the names of familiar corporations. Klein quotes (p. 355), “Michael Fleisher, the founder of the Chicago School based Shock Doctrine, saying in 2003 of Iraq that ‘protected businesses never, never become competitive’, and she comments: “he appeared to be impervious to the irony that Halliburton, Bechtel, Parsons, KPMG, RTI, Blackwater and all the other US corporations that were in Iraq to take advantage of the reconstruction were part of a vast protectionist racket whereby the US government had created their markets with war, barred their competitors from even entering the race, then paid them to do the work, while guaranteeing them a profit to boot – all at taxpayer expense. The Chicago School crusade, which emerged with the core purpose of dismantling the welfare statism of the New Deal, had finally reached its zenith in this corporate New Deal. It was a simpler, more stripped down form of privatisation – the transfer of bulky assets wasn’t even necessary: just straight-up corporate gorging on state coffers. No investment, no accountability, astronomical profits. The double standard was explosive, as was the systematic exclusion of Iraqis from the plan.”

Reading of the desecration and live dismemberment of Iraq and seeing the name KPMG, I could not help but think of how our recent Premier, Steven Bracks, who was so fond of public-private partnerships, and whose government gave away 20 ha of public land in Royal Park (Melbourne central) to private 52% owned Singapore developer, Australand. In a move which even the departing Queensland Premier criticised, Bracks recently began to work for KPMG Peat Marwick, which, incidentally, is involved in reconstruction efforts in East Timor.

Klein argues convincingly that the Chicago school acolytes have supported reigns of pure terror where peoples have, almost overnight, been reduced to poverty and starvation, with their states brought from sovereignty to economic indigence and crippling debt to the International Monetary Fund and other private agencies as they paid for ridiculously expensive, publicly resisted corporate projects and sold off state assets.

Klein tells how the IMF came about through an international agreement to prevent countries from falling into desperation and war by loaning them money to get through rough spots. It was modelled on the post WW2 Marshall Plan. The Marshall Plan for Germany was particularly careful to preserve protection for Germany’s industry and workers. But Chicago-school economics came to rule the IMF, she says, and the book is about how this doctrine stripped its victims of democracy, labour protection and public assets, and, when war broke out or torture and imprisonment were rife, its practitioners turned a blind eye, instead celebrating the chaos as a clean slate for the birth of a rational economy.

The hypothesis is that democracy is destroyed by causing social shocks to countries and, in the ensuing panic and disorientation, the political system is dismantled and the economy pillaged through privatisation and government contracted debt. The International Monetary Fund is severely implicated in this as are a number of international corporations.

Examples of things which socially shock a country, most of which are dealt with by Klein using examples in many countries, are:
- The Breaking down of labour laws and trade regulations
- Mass immigration and the Contracting of business to foreign imported labour in preference to local labour
- Falling wages
- bank privatisation, deregulation of the economy
- Breaking down of the public service, public welfare
- Loss of public subsidy of therapeutic drugs
- Privatisation of public hospitals, schools…
- Privatisation of public technology, power and utilities – telephones, electricity, water and energy resources like oil and gas
- Unaffordable privatised housing and land development
- Land speculation leading to homelessness
- Unaffordable justice systems
- Privatisation of the military – use of mercenaries and contractors
- Torture, disappearance, and war
- Natural disasters

Signs of the dismantling of a political system and its reinvention as a corporatocracy include:
- education of young people, educators and politicians, in economic rationalist doctrines as the only true way
- growth economics
- the normalisation of theft of the public wealth through its transfer to the private sector
- loss of restrictions on investment by political regulators
- acceptance of ostentatious lifestyles in politicians and their public frequentation of corporate figures
- Phoney enquiries
- Commercial-in-confidence activities which make it impossible for the public to obtain information
- the privatisation of areas normally administered by government, for instance mercenaries for soldiers, corporations for military support and logistics like accommodation, clothing and food, immigration (immigration agents)
- The institutionalisation with public funded support for corporations. (The Victorian Government’s gift to Australand of public land and $80 m in exchange for what many would call very little, comes to my mind).

At the end of the book Naomi Klein tells us about countries which are fighting back against the robber-baron corporatisation of their governments, land, and industries. Examples are described in Latin America, Lebanon, Thailand, and many other places.

Chavez Venezuela:

(p.455) “In Venezuela Chavez has made the co-ops a top political priority, giving them first refusal on government contracts and offering them economic incentives to trade with one another. By 2006, there were roughly 100,000 co-operatives in the country, employing more than 700,000 workers. Many are pieces of state infrastructure – toll booths, highway maintenance, health clinics – handed over to the communities to run. It’s a reverse of the logic of government outsourcing – rather than auctioning off pieces of the state to large corporations and losing democratic control, the people who use the resources are given the power to manage them, creating, at least in theory, both jobs and more responsive public services. Chavez’s many critics have derided these initiatives as handouts and unfair subsidies, of course. Yet in an era when Halliburton treats the U.S. government as its personal ATM for six years, withdraws upward of $20 billion in Iraq contracts alone, refuses to hire local workers either on the Gulf coast or in Iraq, then expresses its gratitude to U.S. taxpayers by moving its corporate headquarters to Dubai (with all the attendant tax and legal benefits), Chavez’s direct subsidies to regular people look significantly less radical.”

Lebanon:

(p.459) “So when delegates from thirty wealthy nations got together in Paris in January 2007 to pledge $7.6 billion in reconstruction loans and grants, they naturally assumed that Lebanon’s government would accept whatever strings they attached to the aid. The conditions were the usual ones: phone and electricity privatizations, price increases on fuel, cuts to the public service and an increase to an already controversial tax on consumer purchases. Kamal Hamdan, a Lebanese economist, estimated that, as a result, ‘household bills [would] increase by 15 percent because of increased taxes and adjusted prices’ – a classic peace penalty. As for the reconstruction itself, the jobs would of course go to the giants of disaster capitalism, with no requirement to hire or subcontract locally - ” …

(p.460): “Many Lebanese citizens, however, were distinctly less cooperative. Despite the fact that a lot of their homes still lay in ruins, thousands participated in a general strike, organized by a coalition of unions and political parties, including the Islamist party, Hezbollah. The demonstrators insisted that if receiving reconstruction funds meant raising the cost of living for a war-ravaged people, it hardly deserved to be called aid. So while Siniora was reassuring donors in Paris, strikes and road blockades brought the country to a halt – the first national revolt specifically targeting post-war disaster capitalism. Demonstrators also staged a sit-in, which went on for two months, turning downtown Beirut into a cross between a tent city and a street carnival.” … “The biggest motivator driving many of those camped out in downtown isn’t Iran or Syria, or Sunni versus Shiite. It’s the economic inequality that has haunted Lebanese Shiites for decades. It’s a poor and working-class peoples’ revolt.”

Thailand:

(p. 402), “Some of the most direct clashes took place in Thailand, where, within 24 hours of the wave, developers sent in armed private security guards to fence in land they had been coveting for resorts. In some cases the guards wouldn’t even let survivors search their old properties for the bodies of their children. The Thailand Tsunami Survivors and Supporters group was hastily convened to deal with the land grabs.”…

(p. 463) “…villagers approached all government promises with intense scepticism and refused to wait patiently in camps for an official reconstruction plan. Instead, within weeks, hundreds of villagers engaged in what they called ‘land reinvasions’. They marched past the armed guards on the payroll of developers, tools in hand, and began marking off the sites where their old houses had been…” (p.464) A Thai NGO, commented that, ‘With the entire community camping out there, it became difficult for the authorities to chase them away, especially given the intense media attention being focused on tsunami rehabilitation.’”

[Should the homeless in Australia and those who stand to lose their overly expensive homes due to government facilitation of land-speculation consider such a move?]

New Orleans:

And, with the dispossession by corporations and public private partnerships in New Orleans in the wake of Hurricane Katrina (with which the book begins): (p.465) “In February 2007, groups of residents who had lived in the public housing projects that the Bush administration was planning to demolish began ‘reinvading’ their old homes and taking up residence. Volunteers helped clean out apartments and raised money to buy generators and solar panels.”

Klein concludes (p. 466), “The best way to recover from helplessness turns out to be helping – having the right to be part of a communal recovery.”… “These are movements that do not seek to start from scratch but rather from scrap, from the rubble that is all around. As the corporatist crusade continues its violent decline, turning up the shock dial to blast through the mounting resistance it encounters, these projects point a way forward between fundamentalisms. Radical only in their intense practicality, rooted in the communities where they live, these men and women see themselves as mere repair people , taking what’s there and fixing it, reinforcing it, making it better and more equal. Most of all, they are building in resilience – for when the next shock hits.”

I hate to resort to clichés, but this is a ‘must read’ book – the kind that only gets published once in a hundred years.

Also published on Web Diary. See also: "Shock Doctrine's Shocking Short Shrift" of 8 Nov 07 by Carolyn Baker.