Economic Destruction

In The Shock Doctrine , Naomi Klein spends a fair amount of time outlining the free market blather of Milton Friedman and his demented acolytes, and then proceeds to show how these policies have been implemented throughout the world, by way of one form of shock therapy or another. She compares this economic shock therapy (new economic rules implemented at the moment of crisis) to actual physical torture. I was prepared to find this torture metaphor simplistic; I find that it is not. The book is simply devastating.

When it comes to the Chicago Boys and their ilk, the question must be asked: were they extremely cynical or extremely stupid? Both? In A Brief History of Neoliberalism, Harvey argues that their rhetoric on freedom was exactly that, rhetoric, that they knew full well the damage they were doing, but didn't care, or rather that it was exactly this damage they wanted to do (that is, to echo zunguzungu's use of James Ferguson's The Anti-Politics Machine, the very apparent failure was the desired result, was success itself: "Sometimes there are structural reasons why 'failure' only reproduces the conditions which necessitate yet more failure."). This is certainly possible, even likely. Is it also possible that they believe all their nonsense about the free market? That they truly believe that it is the best way for the most freedom, for the most people? I suspect it's some combination, with varying degrees depending on the ideologue (recalling that, for example, the American planners--men like George Kennan--of the immediate post-WWII period knew the Soviet Union was no real threat, but by the 1980s we had a situation where, to loosely quote Lewis Lapham from memory, we had a president in Ronald Reagan who believed the movie was true).

As narrated by Klein, and in more detail by Michael Schwartz in War Without End: The Iraq War in Context, the Americans in charge of the invasion and occupation of Iraq (and its anticipated magical conversion into a free market paradise) seem to have been genuinely surprised that things didn't go well, while at the same time they very clearly intended for utter destruction and chaos. The stereotype of the quiet American is of a patriot with good intentions, characterized by well-meaning bumbling. But these so-called good intentions amount to a refusal to consider that anyone would want anything other than the American way of life, such as it is, with freedom narrowly understood as commitment to free market fundamentalism (combined with an inability to understand that those genuine freedoms Americans do have, have nothing to do with the free market and have been fought for, not bestowed). In Iraq, this results in the deliberate destruction of a country, to be followed by a shiny new country completely run according to free market ideology, so they can be just like Americans (except, only poor Americans, apparently, since previously well-positioned Iraqis were not given the opportunity to even become owners of privatized firms). It being impossible to run a country according to the free market, extreme violence, as ever, is needed. Such good intentions are of course essentially malevolent.

Adrift on the neoclassical sea

A couple of quotes from jane dark's recent post:

Even economists able in some regard to have seen the crisis with a clear eye are still largely compelled to speak of it in almost purely cyclical terms. . .

And:

It is tempting to assert that this waveform horizon results from being adrift on the neoclassical sea; had they their feet planted in the critique of political economy, they would see the drive of the world capital system toward terminal crisis. But this too may be a mistake, albeit one of scale rather than simplicity. The inability to think the crisis in relation to geopolitics and state power afflicts various Marxian analysts as surely as it does the doyens of the core institutions. That there will not be a recovery in the full sense is explicable only through the coordination of economic and state power, and indeed the horizon of knowability here is not that of an unforeseeable economic unfolding but the difficulty in conceiving of what form the transfer of global power away from the U.S. will take.

In The New Imperialism, David Harvey points out that when capitalism has hit its inevitable crises of overaccumulation, capital has invariably sought to solve its problems overseas, with imperial adventure and investment. In part this is because in general, as a class, the ruling class simply refuses to give up on the class war. Where the problem could perhaps have been fruitfully addressed via extensive investment in the social sphere, ideologically this is simply a non-starter. This is one of the many aspects of capitalism that reveals that the notion that the market involves rational actors, behaving rationally, making rational decisions, is nothing more than a fiction. Nevertheless, crisis is inevitable. The current crisis is one more necessary crisis, pointing towards, as jane puts it, a terminal crisis, not simply an awful downturn in the cyclical (read: natural) order of things.

How do you make peace with those who don't seem to want it?

Amid his run of posts covering Israel's all too typical criminal attack on the people of Gaza, and the outraged international response to it, Ellis Sharp reads Time magazine so I don't have to [by the way, I am also indebted to many other blog commentators, but, as ever, especially Richard Seymour and his remarkable series of posts at Lenin's Tomb's over the last several weeks. These are just three of them: "The myth of Hamas rejectionism"; "At what point does it become genocide?"; and "An extremist minority who should be ostracized"]. Though the author of the Time article seems impatient with Israel, he asks these crucial questions:

How do you make peace with those who don't seem to want it? How do you win a war when the other side believes time is on its side? And what would true security, in a hostile neighborhood populated with enemies, actually look like?

Good questions. Naturally, he's referring to the Palestinians here. Ellis observes that painting the Palestinians as "intransigent savages who just don't want peace" is "one of the defaults of colonialist and imperialist discourse". Similarly, I would add, it is said of such oppressed peoples that violence is the only thing they understand, something often said of the Palestinians. Meanwhile, in reality it's Israel which has continually violated ceasefires and resisted any peaceful solution. And the only limited gains the Palestinians have ever achieved have been when they've fought back, with force, implying that it's Israel that understands nothing but violence. At this point the question must be asked whether Israel, as a nation-state, wants peace of any kind.

Unexpectedly, Naomi Klein provides some insight into these matters*. In her excellent book, The Shock Doctrine, Klein narrates in numbing detail the economic shock therapy applied in country after country, from Chile to Argentina to Brazil to Mexico to Poland to Russia to South Africa and on and on and on. Neoliberal lunatics recommending and enforcing their untenable, wildly unpopular policies, which can be and have been implemented only either with extreme violence or through sleight of hand (itself usually accompanied by violence, once people realize what has happened). The hollowing out of the U.S government, including Rumsfeld's outsourcing of various tasks normally handled within the military, is part of this account, as is the creation of the security market and the emerging power of private security firms.

It is in this context that Klein discusses Israel, and the breakdown of the Oslo Peace Accords and collapse of subsequent peace agreements. She identifies two little-discussed factors "that contributed to Israel's retreat into unilateralism", both related to this global neoliberal program:

One was the influx of Soviet Jews, which was a direct result of Russia's shock therapy experiment. The other was the flipping of Israel's export economy from one based on traditional goods and high technology to one disproportionately dependent on selling expertise and devices relating to counterterrorism. [. . .] [T]he arrival of Russians reduced Israel's reliance on Palestinian labor and allowed it to seal in the occupied territories, while the rapid expansion of the high-tech security economy created a powerful appetite inside Israel's wealthy and most powerful sectors for abandoning peace in favor of fighting a continual, and continuously expanding, War on Terror.

The mass exodus of Soviet Jews into Israel amounted to "roughly 1 million" Jews entering Israel throughout the 1990s. One of the factors leading to the Oslo agreement had been the widespread feeling within the Israeli business community that enough was enough. But this changed with this major demographic shift (Soviet Jews now amounting to up to 18% of the Jewish population of Israel):

This demographic transformation upended the agreement's already precarious dynamic. Before the arrival of the Soviet refugees, Israel could not have severed itself for any length of time from the Palestinian populations in Gaza and the West Bank; its economy could no more survive without Palestinian labor than California could run without Mexicans. Roughly 150,000 Palestinians left their homes in Gaza and the West Bank every day and traveled to Israel to clean streets and build roads, while Palestinian farmers and tradespeople filled trucks with goods and sold them in Israel and in other parts of the territories. Each side depended on the other economically, and Israel took aggressive measures to prevent the Palestinian territories from developing autonomous trade relationships with Arab states.

Then, just as Oslo came into effect, that deeply interdependent relationship was abruptly severed. Unlike Palestinian workers, whose presence in Israel challenged the Zionist project by making demands on the Israeli state for restitution of stolen land and for equal citizenship rights, the hundreds of thousands of Russians who came to Israel at this juncture had the opposite effect. They bolstered Zionist goals by markedly increasing the ratio of Jews to Arabs, while simultaneously providing a new pool of cheap labor. Suddenly, Tel Aviv had the power to launch a new era in Palestinian relations.

In addition, Israel's economic reliance on high-tech further lessened its labor needs. So, though business leaders had felt that peace was necessary for prosperity, in fact during the 1990s the Israeli economy performed well, independent of the state of the peace process. Then when the tech bubble burst in 2000, Israel was hit very hard, prompting the government to drastically increase military spending and the tech industry to move into security and surveillance. In the post-9/11 homeland security boom, Israeli firms have emerged as major players. Klein provides a variety of statistics showing how well Israel has fared in this counter-terrorism market; the upshot is you have a situation where elites not only no longer have much use for Palestinian labor, but also directly profit from the avoidance of peace. Combined with the imperial-racist ideology of Zionism and an American sponsor with its own grandiose ambitions in the Middle East (and its own related booming security/surveillance complex), and the prospects for peace and justice seem remote indeed. As Klein puts it, where war has always certainly been a money-maker, it has been a temporary solution, with stability seen as necessary for business prosperity; now the "incentive for peace" for these players has been eliminated. As she says, the War on Terror is "not a war that can be won by any country, but winning is not the point." Israel is a country-sized version of the Green Zone in Iraq, or the rebuilt, wealthy enclaves in post-Katrina New Orleans:

[A]n entire country has turned itself into a fortified gated community, surrounded by locked-out people living in permanently excluded red zones. This is what a society looks like when it has lost its economic incentive for peace and is heavily invested in fighting and profiting from an endless and unwinnable War on Terror. One part looks like Israel; the other part looks like Gaza.

* I say "unexpectedly" only because I read The Shock Doctrine expecting details about and hoping for insight into the workings of the neoliberal order, not looking for information on the decades-old Israeli-Palestinian conflict (though I am finally not surprised to learn of a connection between the two).

Cockburn on Klein

The Sharp Side points to Alexander Cockburn's article in CounterPunch about Naomi Klein's new book, The Shock Doctrine. Cockburn correctly observes that capitalism has always been brutal, as any reading of the history of English enclosures or the Irish famine will tell you. One point I had in mind in my recent post on "Disaster Capitalism", which used a review of Klein's book as a starting point, is that Neoliberalism essentially is capitalism. What’s “neo” about it is the re-assertion of the liberalization of trade, money, etc, from regulation, to the purpose of class war, disguised by the rhetoric of freedom for all. Milton Friedman, of course, is the big name, along with his Chicago boys. But Cockburn makes an important point that singling out Friedman misses the extent to which the mainstream liberal economists were touting the same line of bullshit throughout the 1980s and 19990s. Citing the left economist Robert Pollin (who I've been meaning to read; his Contours of Descent looks very good), he writes:

"Shock therapy" neoliberalism really isn't most closely associated with Milton Friedman, but rather with Jeffrey Sachs, to whom Klein does certainly give many useful pages, even though Friedman remains the dark star of her story. Sachs first introduced shock therapy in Bolivia in the early 1990s. Then he went into Poland, Russia, etc, with the same shock therapy model. Sachs' catchy phrase then was that "you can't leap over an abyss step-by-step," or words to that effect. This is really where contemporary neoliberalism took shape. And, it wasn't just Sachs.

It was also other slightly left of center mainstream economists, most notably Summers and Paul Krugman as well. To his credit, Krugman has now recanted; Sachs also, but only partially. It's true that you can make a case that this all goes back to Friedman. [. . .] But [. . .] to blame Friedman for the whole thing, and not how the entire economics mainstream went along--including the "liberals" like Sachs, Krugman, and Summers--is to let these people off the hook and to misrepresent history.

Cockburn quotes Pollin directly: "it's important to pummel the Sachs's of the world on this point, because they are changing, slowly. To get the world to change, their 1980s-1990s views need to be totally discredited. It's not enough to just say Milton Friedman was an ultra right winger and leave it at that."

Cockburn also chides Klein for her "catastrophism", pointing out that "[j]ust as there is continuity in capitalist predation, there is continuity in resistance". It's a point worth making. In a sense I was trying to hint in this direction in my post when I said that removing states from the equation makes it more difficult for resistance to take place. For how does one really resist a faceless, placeless corporation? But the truth is that I must admit that I am all too susceptible to a certain kind of catastrophism in my own thinking. I've been trying to rise above that kind of thinking, but it's a struggle for me. The interview with Iain Boal, also in CounterPunch, which I linked to last week, was an important reminder in this regard, as is this article by Cockburn, not to mention all of the writings of Noam Chomsky. There is work to do--and resistance does happen, it can happen, it has happened, victories large and small have been attained, many of which have indeed been overturned or undermined by neoliberal policies--hence, again, "neo"--but all the more reason to resist again, but resist better, win fuller, more secure victories. Things may look pretty shitty on many fronts right now, but that's no reason to succumb to thoughts of doom.

Disaster Capitalism

Naomi Klein’s new book, The Shock Doctrine: The Rise of Disaster Capitalism, has been getting a lot of attention lately. I’m interested in reading it. I liked what I read of her earlier book, No Logo (I read about 3/4 of it), and have appreciated her work in recent years.

At ads without products, I came across the following short advertising film for the book, directed by Alfonso Cuarón of Children of Men fame:


In the film, and it appears the book, Klein draws comparisons between the use of torture in U.S. interrogation techniques (laid out in the CIA manuals) and the methods of “crisis capitalism”, or what she calls the economic “shock doctrine”: each is intended to soften up the victim so that they are more likely to bend, less likely to resist.

In a respectful review in the Guardian (link via The Reading Experience), John Gray puts Klein's thesis like this:

As Klein sees it, the social breakdowns that have accompanied neo-liberal economic policies are not the result of incompetence or mismanagement. They are integral to the free-market project, which can only advance against a background of disasters.

[. . .]

Klein uses torture as a metaphor, and does not claim any cause-and-effect link between its re-emergence and the rise of neo-liberal shock therapy; but she does point to some disquieting similarities. Individuals and societies have been "de-patterned" with the aim of remaking them on a better, more rational model. In each case, the experiments have failed, while inflicting lasting and often irreparable damage on those who were subjected to them.

In his penultimate paragraph, he writes:

There can be no doubt that fortunes have been reaped from the Iraq war as they have been from other experiments in disaster capitalism. Yet I remain unconvinced that the corporations Klein berates throughout the book understand, let alone control, the anarchic global capitalism that has been allowed to develop over the past couple of decades - any more than the neo-liberal ideologues who helped create it foresaw where it would lead. Rightly, Klein insists that free market ideology must bear responsibility for the crimes committed on its behalf - just as Marxist ideology must be held to account for the crimes of communism. But she says remarkably little about the illusions by which neo-liberal ideologues were themselves blinded. Milton Friedman and his disciples believed a western-style free market would spring up spontaneously in post-communist Russia. They were left gawping when central planning was followed by the criminalised free-for-all of the 90s, and were unprepared for the rise of Putin's resource-based state capitalism. These ideologues were not the sinister, Dr Strangelove-like figures of the anti-capitalist imagination. They were comically deluded bien-pensants, who promoted their utopian schemes with messianic fervour and have been left stranded by history, as the radiant future they confidently predicted has failed to arrive.

I disagree with most of this paragraph, which is packed with a lot of questionable assumptions. I won't attempt a point-by-point response, but let me try to address some of them.

In an earlier post in which I briefly asserted that capitalism needs states, I quoted a passage from a Noam Chomsky essay from 1977 ("American Foreign Policy in the Middle East", collected in Towards a New Cold War). As the titles makes plain, the essay was specifically about American policy in the Middle East and, in part, about the role of the oil companies in the region. Here is how the passage began:

The oil companies face local problems as a result of continued American barriers to a political settlement of the Arab-Israeli crisis in the only possible manner, that is, with a two-state settlement along roughly the 1967 borders. But the basic long-term interests of American capitalism have, so far, been adequately served by this policy. As noted before, this is not the first time that the oil companies, despite their power, have been subordinated to more general interests.

And what are these more general interests? They are the maintenance of the capitalist system as a whole. This is where the idea that capitalism needs states comes in. In his review, Gray says: "There are very few books that really help us understand the present." I agree. Gray suggests that Klein's is just such a book. Here are two more: A Brief History of Neoliberalism, by David Harvey, and Empire of Capital, by Ellen Meiksins Wood.

In his book, Harvey traces the development of, experimentation with, and eventual widespread political accommodation to neoliberal ideas and policies. The bankruptcy of New York City in the 1970s; the assassination of Allende of Chile in 1973, followed by the first imposition of Milton Friedman's neoliberal ideas on a nationwide scale by Pinochet, guided by Chicago-trained economists; Thatcherite England; Carter and Reagan; the capitalization of China: Harvey discusses all of this and more, along the way comparing the rhetoric of neoliberalism with the practice. Where Gray paints Friedman and his followers as deluded "utopians" (not unlike popular conceptions of communist revolutionaries), Harvey shows that "the theoretical utopianism of neoliberal argument has . . . primarily worked as a system of justification and legitimation for whatever needed to be done to achieve" the goal of "restoring, or some instances (as in Russia and China) creating, the power of an economic elite". In short, class war, justified by the attractive but ultimately empty rhetoric of freedom. That is, they knew what they were doing, even if Gray is right (and I think he probably is) that "disaster capitalism is now creating disasters larger than [the system] can handle". (For more on what happened to New York City in the 1970s, see "Neoliberalism and the City" from Studies in Social Justice (the link is to a pdf); for an even briefer history of neoliberalism than offered by Harvey's book, see this excellent interview with Harvey at The Monthly Review's MRZine.)

"They knew what they were doing." Who is "they" in this case? If Gray's review is any indication, it sounds as if Naomi Klein focuses on the depredations of "disaster capitalism" through the prism of large corporations. If so, this isn't surprising, given the balance of her work in the past, including No Logo. It's not unimportant, of course. We need to know what those corporations are up to. But, as suggested by the Chomsky passage, there are general systemic interests over and above the short-term needs of even the most powerful corporations. Who attends to the system? Whereas many have observed the existence of hugely powerful multinational corporations and organizations such as the WTO and concluded that we are living in a period of the declining importance of states, in Empire of Capital Ellen Meiksins Wood argues that

. . . for all the globalizing tendencies of capitalism, the world has become more, not less, a world of nation states, not only as a result of national liberation struggles, but also under pressure from imperial powers.

These powers have found the nation state the most reliable guarantor of the conditions necessary for accumulation, and the only means by which capital can freely expand beyond the boundaries of direct political domination. As market imperatives have become a means of manipulating local elites, local states have proved to be far more useful transmission belts for capitalist imperatives than were the old colonial agents and settlers who originally carried the capitalist market throughout the world.

Where formerly it was the British who enforced the nascent global system (Mike Davis' Late Victorian Holocausts, which I am currently reading, is proving invaluably instructive on this score), with the end of World War II (and adverserial inter-ally politics during the war) the United States emerged as its guarantor. Wood spends some time discussing the differences between various empires throughout history (Roman, Chinese, Spanish, Arab Muslim, Dutch, Venetian, British) in order to show how the empire presided over by the United States is different: the first truly capitalist empire. If capitalist imperatives are self-replicating and "purely economic", and neoliberalism promises freedom for all, where is the problem? The problem is

this mode of imperialism, like capitalism itself, has contradictions at its very core. On the one hand, it depends on the separation of the ‘economic’ and ‘political’, which makes possible the unbounded expansion of capitalist appropriation by purely economic means and the extension of the capitalist economy far beyond the limits of the nation state. Capitalism has a unique drive for self-expansion. Capital cannot survive without constant accumulation, and its requirements relentlessly drive it to expand its geographic scope beyond national boundaries too. Yet, on the other hand, capital has always needed the support of territorial states; and while the wide-ranging expansion of capitalist appropriation has moved far beyond national borders, the national organization of capitalist economies has remained stubbornly persistent. At the same time, the nation state has remained an indispensable instrument – perhaps the only indispensable ‘extra-economic’ instrument – of global capital.

'Extra-economic' means politics; 'extra-economic' instrument means the political state, usually in the form of a monopoly on violence. Within countries, the process is more straightforward: "capital appropriates, while the 'neutral' state enforces the system of property, and propertylessness." It's a lot more complicated in the global system, but I think the actions taken by the United States since the end of World War II--from containment policy, including the wars in Korea and Vietnam, to "support" for not only Israel and, earlier, South Africa, but countless Third World despots--make a whole lot more sense when viewed within the conceptual framework of the United States as enforcer and guarantor of the capitalist world system (which is not to say that individual personalities don't impact the political situation in their own ways). Now, as American economic hegemony has all but collapsed, American attempts to throw its weight around militarily seem increasingly desperate.

There is a lot more that can be said about Wood's book (I found the idea of the state as the enforcer of not only the system of property but also "propertylessness" extremely important, and now that she's brought it to my attention, obvious), but I'll leave with one more thing before finishing up here. She points out that the idea that states are declining in importance, the premise that "the nation state is giving way to a new form of stateless 'sovereignty' that is everywhere and nowhere" (as argued by Michael Hardt and Antonio Negri in their popular book Empire, which I have not read)--"such views", she says, "not only miss something truly essential in today's global order but also leave us powerless to resist the empire of capital." Recognizing the remaining importance of states means that there can be--and are--centers of power, potential loci of resistance. Many of us feel powerless enough as it is, but without political entities (in this case states) to resist against, without a place to act politically, that sense of powerlessness can only increase.

I like what I've heard about Naomi Klein's The Shock Doctrine, and I look forward to learning a lot from it. For those interested in understanding the present world, I highly recommend also reading A Brief History of Neoliberalism and Empire of Capital.