Tuesday, 1 December 2015

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

A few notes by  Huibert de Man, December 2015


This is one of those books that people are supposed to read if they are critical of economic doctrine and interested in international business and politics. So this is a book for me, I decided when a friend wrote enthusiastically about it. I did not like it too much however, as I will explain below.

What kind of book is this? First of all, it is a thick book, with its 565 pages. It contains loads of information about governments, companies, politicians, military events and economic data. In style, however, it is resembles a political pamphlet more than a scholarly book. It contains one argument, repeated almost on every page, from a specific political position: on the left, anti-globalist, anti-big business, anti neo-liberal economist and anti neo-liberal governments. Governments, advised by neo-liberal economists of the so-called Chicago school, and big business, in their corporatist networks, deliberately create crises and disasters, and exploit existing ones, to expand their power and to curtail democracy and individual freedom. This process is not restricted to North-America and Europe, but applies to a wide variety of countries, including South-America, China and the Arab world, where the combination of free market economy and authoritarian, anti-democratic governments flourish and crisis is used to create the ‘clean slate’ for the neo-liberal economy and power for right-wing governments and business in their mutually supportive networks.

Klein is a politically inspired journalist, not a scholar and she uses an impressive amount of data to support her selective argument. She does seem to be inspired by a mixture of Marxist, Keynesian and Schumpeterian theory, however. From the last thinker she uses the concept of ‘creative destruction’.  In the present stage of economic development, existing structures and institutions are being destroyed to make place for a new order, which in the last few decennia has been inspired by neo-liberal theory. I think many economists and sociologists would agree with her, also those without her left-wing sympathies. The term ‘creative destruction’ often has a positive connotation for these other authors: the destructive phase in the economic development unleashes energy for innovation, including social innovation. In Klein’s book, the negative is emphasized: government and business use create crisis and disaster to increase their power and their wealth, at the expense of the population, its freedom and rights.

The author suggests that this process is universal and tries to demonstrate that it is not basically different in China, where a party elite uses market reform to enrich itself and to deny the population their democratic rights, than in Chile or Great Britain. The mechanism is also the same: the ideology of the Chicago School of economics is used as a legitimation for ‘shock therapies’ that must create the readiness for change in the direction of this unholy combination of market economy and authoritarian state.

Klein has some interesting themes here, which certainly deserve attention. Her style is too pamphletistic to be convincing. It tries to put the whole world – from the war in Iraq to Margaret Thatcher’s politics, the story of Allende’s government and 9-11-  in one simple scheme: with the help of neoliberal theory and the deliberate use of crisis, governments and business seize power and use fear to abandon democracy.

There is some truth in all these stories, I guess, but the explanations are just too simple to account for the complex reality of the present world. It does not seem to occur to Klein that reality may sometimes be too complex to understand, too ambiguous to catch in one simple theory. An important simplification she makes is the intentionality in the behavior of government and business, which often leads to untestable conspiracy interpretations, like the American elites who consciously and willfully created the fear and confusion after 9-11 to expand business opportunities, or the intentional creation of chaos in Iraq as some sort of a business strategy. These conspiracy interpretations combine a overly rational view of strategy and government with a division of good and bad people, where the good of course are victims of the bad who conspire against the population. This kind of often implicit conspiracy theory in Klein’s work goes at the expense of its credibility.

The emphasis on one universal global pattern leads to a serious neglect in context in the book. For an interpretation of the Tiananmen incident under Deng Xiaoping, the combination of neoclassical economics and a corporate state is a rather poor framework, although certain aspects may apply. Without knowledge of the workings of the Communist Party and its roots in Chinese (imperial) culture, the strategy of Deng and the party cannot be understood. How much influence neoclassical economics really had or still has in China is an open question to me. In any way, we should not assume that China passively uses American theories here. The pattern of relationships between elites, corporations and the State in China cannot be understood using American concepts: it is simply a different world, which Klein does not seem to realize. Her perspective remains typically North American, with its combination of universalism and an unambiguous good-versus-bad logic.

The tone of the book is negative: neoliberal economics destroys economies and societies. And much of what she writes here is relevant. Her story does not explain however that in exactly the decennia she deals with most of the world population is better off in terms of life expectation and living conditions, whether as a consequence of neoliberal policies or despite of them. Globalization and liberalization apparently had not only negative consequences. This is something that this book does not seem to accept.

Periods of innovation, creative destruction or how you choose to call them, are also periods of social unrest, growing inequality and conflicts, as the Venezolan economist Perez (2002) shows in her book about technological revolutions and financial capital. But until now, ‘golden ages’ have followed these periods of disruptive innovation, writes Perez, who uses a Schumpeterian and Marxist-inspired framework, but avoids conspiracy theories of power as used by Klein.

In her eagerness to criticize right-wing politicians and their economic advisers and caught in her left-wing conspiracy theory, Klein seems to neglect the opportunities that are hidden in the present chaos.

References


Klein, Naomi (2007). The Shock Doctrine: The Rise of Disaster Capitalism. Knopf Canada.


Perez, Carlota (2002), Technological Revolutions and Financial Capital: the dynamics of bubbles and golden ages. Cheltenham: Edward Elgar Publishing Ltd.