Last week in “Fair Laissez-Faire”, Michael wrote about Laissez-faire economics and the rise of crony capitalism. This week I’m following up with what has become known as crony capitalism’s extreme cousin, ‘disaster capitalism’. The majority of this article is influenced by The Shock Doctrine: The Rise of Disaster Capitalism, a book I recently read by Naomi Klein. On rare occasions, a book will echo my thoughts completely. Despite my colleagues admonishment of whipping up conspiracy theory, this was one of those occasions.
Disaster capitalism is the offspring of the Friedman economic school of thought which has its roots at the University of Chicago. Milton Friedman was a Nobel Prize winning economist and statistician who founded and led the Chicago School of Economics. He was an economic adviser to Barry Goldwater and President Ronald Reagan and is generally considered the father of laissez-faire capitalism. Friedman rejected most Keynesian policies, and predicted they would cause stagflation (high inflation combined with limited growth). Though, ironically, he helped institute the Keynesian policy of payroll tax withholding during WWII.
Friedman was an advocate of complete deregulation of the market, so when you hear politicians cry for less government, that’s who they are echoing. Friedman initially did not have many opportunities to test unfettered free market capitalism. The Great Depression left the nation staggering from economic meltdown blamed on market manipulation in the early part of the 20th century. People were subsequently highly suspicious of corporate motives.
The depression did not signal the end of capitalism, but it was, as John Maynard Keynes forecast a few years earlier, “the end of laissez-faire”—the end of letting the market self-regulate.
Friedman dreamed of de-patterning societies and returning them to a state of pure capitalism, cleansed of all interruptions—government regulations, trade barriers, and entrenched interests. The core of the sacred Chicago teachings was that the economic forces of supply, demand, inflation, and unemployment were like forces of nature, fixed and unchanging.
It wasn’t until the seventies that Friedman would get to try out his theories during the political upheaval of Chile and Indonesia. Chile, in particular, provided a ‘blank slate’ on which Friedman could test his hypotheses. After Augusto Pinochet staged a bloody and swift coup ousting and killing President Salvador Allende and ending decades of peaceful democratic rule, Friedman recruited several Chileans into the Chicago School of Economics and indoctrinated them with the idea of deregulation of government intervention.
Did it work? In short, no.
In 1974, inflation reached 375 percent—the highest rate in the world and almost twice the top level under Allende. The cost of basics such as bread went through the roof. At the same time, Chileans were being thrown out of work because Pinochet’s experiment with “free trade” was flooding the the country with cheap imports. Local businesses were closing, unable to compete, unemployment hit record levels and hunger became rampant. The Chicago School’s first laboratory was a debacle.
It did not help matters that Augusto Pinochet was a brutal dictator who ran a terror campaign where people routinely ‘disappeared’. If you rocked the boat at all, chances were good that a Ford Falcon (symbolic because the Government used this model of car and people came to fear the sight of one) could show up and escort you from your house, never to be seen or heard from again. It’s likely your body was dumped at sea after your stomach was cut open to keep you from floating.
Chile was a harbinger of things to come, however.
Chile under Chicago School rule was offering a glimpse of the future of the global economy, a pattern that would repeat again and again, from Russia to South Africa to Argentina: an urban bubble of frenetic speculation and dubious accounting fueling superprofits and frantic consumerism, ringed by the ghostly factories and rotting infrastructure of a development past; roughly half the population excluded from any of the economy altogether; out-of-control corruption and cronyism; decimation of nationally owned small and medium-sized businesses; a huge transfer of wealth from the public to private hands, followed by a huge transfer of private debts into public hands.
Disaster capitalism is nothing more than ideological cover for capital accumulation by multi-national corporations.
The whole idea is to “shock” the economy and reduce it to a blank slate and while everyone is still reeling from the shock, pour unlimited, unregulated capitalism onto it. Friedman (with the help of the CIA) would go on to try this out on other countries. He even advocated dismantling the public school system in lieu of privatized voucher system after Hurricane Katrina ‘cleaned out all the undesirables’ (read: poor black people).
Conservatives have learned from the shock doctrine. George W. Bush used it rather effectively after 9/11 when the nation was reeling in grief and disbelief to declare war on Iraq, a country that had nothing to do with 9/11 but made sound financial sense if you had a company that profited off of such conflicts. In a move that historians will be pondering for decades, Bush invaded Iraq in an attempt to nation build while we were sleeping. This worked out well for Blackwater, Halliburton, and Bechtel…not so much for the Iraqi people nor the American people who were handed the bill.
What’s more, conservatives have learned that if you don’t have a disaster, you can just make one up. Case in point: the gubernatorial coups started by Governor Scott Walker of Wisconsin and being tentatively abandoned by other Republican governors that were apparently supposed to be the tsunami wave after the initial Wisconsin quake. The nation experiences a near economic disaster, Walker gives away millions in corporate tax breaks and then tells the citizens that the economy is on the verge of collapse and that they have to make sacrifices to save it. It’s an emergency. Then use the emergency to dismantle the last vestige of protections (unions) and fundraising for the people’s political party.
What with the looming government shutdown it certainly feels as though the Republicans are actively campaigning for a financial disaster. It almost feels as though they want the government to collapse in a last ditch effort to collectively disable the Democratic party and fill in their own agenda. That fits with the template for disaster capitalism. Break everything down and fill the void with your policy. The meme that Republicans have the market cornered on fiscal policy went out the window when they lobbied for and coerced the tax break extension for the wealthy. Just as Walker is learning that looting the coffers has consequences, so may the Republicans if the Government shuts down next week. And Walker may indeed be recalled next year.
Disaster capitalism does achieve results—if you’re a corporation. For the rest of us, it usually means things are about to get a lot worse. When politicians make decisions based on corporate wishes, when rulings of our highest court grant corporations more rights than its citizens, we know that the revolution cannot be far behind.
Conservative writer David Frum recently lamented that, “Republicans originally thought that Fox [News] worked for us and now we’re discovering we work for Fox.” He was mostly right, but I would take it one step further. Republicans originally thought their party worked for them, now they’re discovering their party works for the corporations. Fox is merely the PR department.
What began under Reagan thirty years ago—that “government is not the solution to our problems, government is the problem”—at the time when Milton Friedman was his economic adviser, has finally culminated into a corporatocracy well versed in using disaster capitalism to impose its will on a distracted populace. Friedman and Reagan were both wrong. Laissez-faire capitalism presumes a market of unending resources and never expanding consumers; both of which are illusions. It also fosters an ever increasing unsustainable inequity of class division so evident in the last thirty years of income disparity.
Middle class Americans who self-identify as Republicans have more in common with Democrats than they realize; they just don’t know it yet.
- George Monbiot comes out fighting on ‘Left Hook’ tour (guardian.co.uk)
- Neoliberal policies have no place in the post-crash world | Deborah Doane (guardian.co.uk)
- Fair Laissez-Faire (538refugees.wordpress.com)
- The coalition has sneaked a coup on a sleeping public | John Harris (guardian.co.uk)