Review: Black Books of Neoliberalism

^{(Illustration by Nicholas Callaway)}

Discussed in this essay:

The Shock Doctrine: The Rise of Disaster Capitalism
Naomi Klein
Metropolitan Books, 2007

A Brief History of Neoliberalism
David Harvey
Oxford University Press, 2005

Naomi Klein has a knack for timing. Her first book, the cult-hit No Logo, came out in 2000 at the height of the global justice movement, helping the movement define itself. Her new book, The Shock Doctrine, exposes the nexus of free market capitalism and violence that characterized the last thirty years. At a time when social movements in the Global North have been unable to move forward, she provides a map of the political landscape that might help orient a renewal of political action. This comes just as the global food crisis (1), sub-prime lending crunch and skyrocketing cost of oil have brought signature issues of the anti-corporate globalization movement such as global inequality, the predations of financial capital and the unsustainability of current consumption and production practices back into the public eye.

Chock-full of biographical portraits of the founding fathers of the neoliberal economic order, Klein’s latest work brings a “secret history” of the past three decades to a general readership. She exhumes the buried bodies—the Allendes and the disappeared—and the barrage of violence, coups, and disasters that she argues was necessary to bring about the global transition to neoliberalism. Less flashy but no less fascinating, David Harvey’s A Brief History of Neoliberalism is the definitive critical overview of both the theory and practice of neoliberalism. While Klein has put together an incendiary account of the worldwide implementation of “free market fundamentalism,” Harvey has synthesized a brilliant and wholly complementary explanation of neoliberalism as a political/economic project and regime of capital accumulation. Klein digs up the story of the dirty politics that went into making the Washington Consensus a consensus; Harvey explains how neoliberalism was designed to increase the narrowing wealth gap while weakening the position of labor.

Shock and Accumulation

The Shock Doctrine centers on the symbiotic relationship between violence and neoliberalism, showing that the invisible hand has worn an iron glove all along. Klein weaves academic sources, on-the-ground reporting and theoretical argumentation into a history that documents how violence has made possible the implementation and reproduction of neoliberalism across the globe. In her ambitious and compellingly told chronicle she details the exploitation and creation of violent shocks against whole populations to order to implement three-fold policies of privatization of state enterprises, market liberalization, and stabilization of currencies and state spending. With populations rendered docile by the shock of military

coups, invasions, environmental disasters, or economic collapse, U.S.-backed and trained policymakers imposed a cookie cutter set of reforms. Formulated by the free market acolytes of the Chicago School led by Milton Friedman, these reforms promised to unleash the dynamic potential of markets, but for the most part resulted in a redistribution of wealth upwards to the already wealthy.

Klein’s story has two main points of departure. She opens her story by describing research conducted at McGill University in the 1950s on the remolding of mental patients’ personalities via electroshock therapy that was later integrated into CIA torture manuals. But the book actually grew out of a series of incisive articles she wrote for Harper’s and The Nation on the rise of “disaster capitalism” in post-invasion Iraq, post-tsunami Southeast Asia and post-Katrina New Orleans. In each instance, she witnessed policymakers and ideologues using a state of crisis to push through pre-fabricated free market policies while awarding lucrative contracts to corporations such as Haliburton and Bechtel to administer what were traditionally government-run programs.

In a series of bold steps, she transitions from the use of electroshock techniques at McGill to the use of shock techniques against whole populations in the Southern Cone of Latin America by military governments under U.S. tutelage. In her telling, it was General Pinochet’s Chile—where tens of thousands were tortured and disappeared after the military coup against the democratically elected socialist government of Salvador Allende—which provided the model that would be followed over the next three decades. Chile was a “laboratory” of neoliberalism, where free market policies conceived at the University of Chicago economics department were implemented upon a population whose capacity for resistance had been tortured away. In Chile, Milton Friedman’s metaphor of prescribing “shock therapy” to cure economies of the distortions caused by government interference with self-regulating markets took a literal and ghastly meaning.

The rest of the book follows the implementation of the strategy established in Chile: the imposition of free market policies, when a crisis—manufactured or natural—leaves a shocked population unable to revolt. Along the way, Klein untangles how the privatization of assets, conducted under the ideological cover of liberating markets and allowing for competition, meant the transfer of those assets to elites. Theorizing about free markets has often been translated into crony capitalism in practice.

With her study of Bolivia, which underwent “shock therapy” in 1985 as a “treatment” for hyper-inflation, Klein’s focus switches from free market policies imposed at the barrel of a gun to those imposed by policymakers under the sway of institutions like the World Bank or the International Monetary Fund (IMF). While less violent, shock treatments initiated by politicians in Bolivia were just as devastating in their effect on the masses and more democratic in form only. President Estenssoro came to office through an election rather than a coup, but once in power he promptly discarded his electoral platform for the economic program peddled to him by economist Jeffrey Sachs, who at that time was a Harvard professor advising the Bolivian government. With a shock therapy resume that also includes Poland and Russia, Sachs became a leading intellectual force of the Washington Consensus during the 1990s—and consequently a major player in the second part of Klein’s story.

Although Klein’s work is convincingly argued, it invites a number of potential critiques. Her emphasis on particular figures such as Pinochet and Friedman rather than on underlying economic structures or political and ideological movements keeps the story lively, but it also makes The Shock Doctrine read like an elaborate conspiracy theory at times, as social theorist Michael Hardt mentions in his excellent essay on the book (2). Furthermore, in sculpting her narrative of crisis-driven transformation to neoliberalism, Klein tends to downplay the role of ideology and non-violent forms of coercion in the implementation of neoliberalism. This is perhaps most evident in her chapter on South Africa, which is impressively, if unevenly, researched, but provides only a weak explanation for why the African National Congress pursued a policy of “talking left, acting right” in the absence of military violence, economic meltdown or natural disaster (3). By fetishizing the logic of violence as inherent to transitions to neoliberalism, she tends to make all examples fit the "shock doctrine” of the title. Finally, her assertion that a kinder, gentler capitalism is possible is undercut by both the theoretical portion of her argument and historical evidence. While the trente glorieuses or “golden age”  of Keynesian policies from 1948-75 that she idealizes may have been accompanied by social peace in the Global North, this period too saw its own share of violent capitalist transformation and reproduction. The transformation to capitalism, as well as its reproduction and expansion, has invariably been accompanied by some degree of widespread violence.

The Project Behind the Politics

Harvey’s starting point is an obvious one: neoliberalism looks a whole lot like a triumph of the bourgeoisie. Despite claims that the Washington Consensus became dominant because it “works,” worldwide economic growth in the ‘80s and ‘90s was considerably slower than that of the previous three decades. Meanwhile, the broad redistribution of wealth that characterized the “golden age” of 1948-75 was replaced by skyrocketing economic inequality on a national and international level. Given that the neoliberal framework developed by Milton Friedman and his colleagues at the University of Chicago consistently resulted in both weak overall economic growth and an upward redistribution of wealth, Harvey argues that achieving this latter outcome was most likely policy makers’ intent. Whatever Friedman & Co.’s contentions about the perfection of self-regulating markets, the lackluster results from early neoliberal testing grounds had come in well before the policies were spread across the globe. Harvey makes a compelling case that the transition from Keynesian economic policies to neoliberalism was spurred not so much by the oil shocks or resource scarcity of the ‘70s but by the decline in corporate profits and the drop in the percentage of wealth held by the rich.

From Chile, neoliberal policies quickly spread and supplanted Keynesianism as the reigning orthodoxy in policy making circles. The shift dates perhaps from the decision of the Federal Reserve to change course and raise interest rates in 1979, which helped trigger the Third World debt crisis. The elections of Reagan and Thatcher enshrined this ideology as hegemonic and the collapse of the Soviet Bloc left it without effective competition in the international arena. Concretely, the shift to neoliberalism meant the move away from an economy centered on production to one based on speculation, with the financial sector becoming the primary site of capital accumulation. Concurrently, the neoliberal turn involved a resurgence of a set of practices which Harvey calls “accumulation by dispossession" (4). These range from the privatization of non-market assets to the devaluation of entire economies. Examples include putting commonly held lands up for sale and selling off public enterprises on the cheap, as well as the patenting and marketing of genetic data for medical or cosmetic purposes, or "biopiracy.” Accumulation by dispossession also encompasses activities such as buying devalued assets after busts created by speculative activity, as occurred in the aftermath of the 1997 East Asian financial meltdown.

Rooted in Marxist theory without slipping into jargon, A Brief History of Neoliberalism provides a well-written and magisterial overview of a phenomenon that an untold number of campaigners and researchers have struggled to understand. By boiling down a sea of academic writings to a little over 200 broadly accessible pages, Harvey provides the handbook for anyone trying to grasp neoliberalism as an overall project. As with any work attempting to provide a global account of three decades of economic and political history, Harvey’s text has its gaps and unsatisfactory explanations. Perhaps most notable is his problematic description of events in China since the ascension to power of “to be rich is glorious” Deng Xiaoping in the late ‘70s as “neoliberalism with Chinese characteristics.” But such weaknesses are minor compared with Harvey’s ability to lend coherence to a set of phenomena that appear unrelated, from the imposition of structural adjustment programs in Africa and Latin America to the rise of speculative financial markets and the imposition of Reaganomics in the core capitalist countries.

From Practice to Theory—and Back Again

Neoliberalism was the name that social movements gave to that common enemy called Reaganism in the United States, Thatcherism in the UK and Structural Adjustment or the Washington Consensus in the Global South. As they came together, activists and researchers from across the world realized that what they experienced as distinct struggles were actually particular manifestations of a planet-wide class war launched by the rich against everyone else. While campaigns and studies had begun to map the contours of neoliberalism prior to 1999, it was the Battle of Seattle that brought neoliberalism into the U.S. public eye and discourse (5).

The cycle of contestation evoked by Seattle came to a crashing halt on 9/11, unable to find its footing on the changed terrain of the War on Terror. Under the impetus of the invasion of Iraq, the anti-corporate globalization movement became an anti-war movement, shifting from a discourse centered around debt and international financial institutions to one focusing on oil and U.S. aggression. But after the tens of millions in the streets on February 15, 2003 failed to bring real change, the anti-war movement quickly sputtered and ran out of steam. Despite a steadily growing, if silent, anti-war majority in the United States (6), the only significant public protest in recent years has come not from anti-war forces but from an immigrant rights movement that mustered an impressive show of force on May 1, 2006—only to vacate the streets under the pressure of an intensified crackdown against undocumented immigrants. But while the anti-corporate globalization movement has disintegrated—in the Global North anyway—intellectuals who conceive of themselves as part of this movement are still digesting the insights thrown up by its brief upsurge.

In this respect, the works of Naomi Klein and David Harvey are important contributions to the global justice movement, extending its struggle in practice to the plane of theory. Models of politically engaged intellectuals, they provide a political, economic and historical account of the past three decades that spurs the reader to act while helping them understand the terrain on which they must take action. It is unclear how or whether their writings on neoliberalism will re-enter practice in the form of social-movement activity, but if a renewed and reinvigorated movement against capitalism gone wild is to emerge in the United States, their writings will have no small part to do with it. The Shock Doctrine and A Brief History of Neoliberalism are essential packing for anyone interested in trying to make the trip to that other world that is possible.

Matt Wasserman is a rootless radical and itinerant intellectual currently based out of Marseille, France. For a while now he's been attempting to decommodify his day to day. He thanks Liz Fink for invaluable editing in the preparation of this article.

(1) A joint UN/OECD report published on May 29, 2008, forecasts higher food prices for the next decade. The primary factors the report names are: the increase in demand due to population growth and changing diets, the use of crops such as corn and sugar to make biofuels and higher prices for fossil fuels, which are the key input in industrial fertilizers. See: http://www.iht.com/articles/2008/05/29/business/food.php