Bleakonomics Book Review

Bleakonomics
By JOSEPH E. STIGLITZ
 Sept. 30, 2007

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  There are no accidents in the world as seen by Naomi Klein. The destruction of New
Orleans by Hurricane Katrina expelled many poor black residents and allowed most of the city’s
public schools to be replaced by privately run charter schools. The torture and killings under
Gen. Augusto Pinochet in Chile and during Argentina’s military dictatorship were a way of
breaking down resistance to the free market. The instability in Poland and Russia after the
collapse of Communism and in Bolivia after the hyperinflation of the 1980s allowed the
governments there to foist unpopular economic “shock therapy” on a resistant population. And
then there is “Washington’s game plan for Iraq”: “Shock and terrorize the entire country,
deliberately ruin its infrastructure, do nothing while its culture and history are ransacked, then
make it all O.K. with an unlimited supply of cheap household appliances and imported junk
food,” not to mention a strong stock market and private sector.
“The Shock Doctrine” is Klein’s ambitious look at the economic history of the last 50 years and
the rise of free-market fundamentalism around the world. “Disaster capitalism,” as she calls it, is
a violent system that sometimes requires terror to do its job. Like Pol Pot proclaiming that
Cambodia under the Khmer Rouge was in Year Zero, extreme capitalism loves a blank slate,
often finding its opening after crises or “shocks.” For example, Klein argues, the Asian crisis of
1997 paved the way for the International Monetary Fund to establish programs in the region and
for a sell-off of many state-owned enterprises to Western banks and multinationals. The 2004
tsunami enabled the government of Sri Lanka to force the fishermen off beachfront property so it
could be sold to hotel developers. The destruction of 9/11 allowed George W. Bush to launch a
war aimed at producing a free-market Iraq.
In an early chapter, Klein compares radical capitalist economic policy to shock therapy
administered by psychiatrists. She interviews Gail Kastner, a victim of covert C.I.A. experiments
in interrogation techniques that were carried out by the scientist Ewen Cameron in the 1950s. His
idea was to use electroshock therapy to break down patients. Once “complete depatterning” had
been achieved, the patients could be reprogrammed. But after breaking down his “patients,”
Cameron was never able to build them back up again. The connection with a rogue C.I.A.
scientist is overdramatic and unconvincing, but for Klein the larger lessons are clear: “Countries
are shocked — by wars, terror attacks, coups d’état and natural disasters.” Then “they are
shocked again — by corporations and politicians who exploit the fear and disorientation of this
first shock to push through economic shock therapy.” People who “dare to resist” are shocked for
a third time, “by police, soldiers and prison interrogators.”
Image
Credit...Photograph by Andrew Stern
In another introductory chapter, Klein offers an account of Milton Friedman — she calls him
“the other doctor shock” — and his battle for the hearts and minds of Latin American economists
and economies. In the 1950s, as Cameron was conducting his experiments, the Chicago School
was developing the ideas that would eclipse the theories of Raul Prebisch, an advocate of what
today would be called the third way, and of other economists fashionable in Latin America at the
time. She quotes the Chilean economist Orlando Letelier on the “inner harmony” between the
terror of the Pinochet regime and its free-market policies. Letelier said that Milton Friedman
shared responsibility for the regime’s crimes, rejecting his argument that he was only offering
“technical” advice. Letelier was killed in 1976 by a car bomb planted in Washington by
Pinochet’s secret police. For Klein, he was another victim of the “Chicago Boys” who wanted to
impose free-market capitalism on the region. “In the Southern Cone, where contemporary
capitalism was born, the ‘war on terror’ was a war against all obstacles to the new order,” she
writes.
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One of the world’s most famous antiglobalization activists and the author of the best seller “No
Logo: Taking Aim at the Brand Bullies,” Klein provides a rich description of the political
machinations required to force unsavory economic policies on resisting countries, and of the
human toll. She paints a disturbing portrait of hubris, not only on the part of Friedman but also of
those who adopted his doctrines, sometimes to pursue more corporatist objectives. It is striking
to be reminded how many of the people involved in the Iraq war were involved earlier in other
shameful episodes in United States foreign policy history. She draws a clear line from the torture
in Latin America in the 1970s to that at Abu Ghraib and Guantánamo Bay.
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Klein is not an academic and cannot be judged as one. There are many places in her book where
she oversimplifies. But Friedman and the other shock therapists were also guilty of
oversimplification, basing their belief in the perfection of market economies on models that
assumed perfect information, perfect competition, perfect risk markets. Indeed, the case against
these policies is even stronger than the one Klein makes. They were never based on solid
empirical and theoretical foundations, and even as many of these policies were being pushed,
academic economists were explaining the limitations of markets — for instance, whenever
information is imperfect, which is to say always.
Klein isn’t an economist but a journalist, and she travels the world to find out firsthand what
really happened on the ground during the privatization of Iraq, the aftermath of the Asian
tsunami, the continuing Polish transition to capitalism and the years after the African National
Congress took power in South Africa, when it failed to pursue the redistributionist policies
enshrined in the Freedom Charter, its statement of core principles. These chapters are the least
exciting parts of the book, but they are also the most convincing. In the case of South Africa, she
interviews activists and others, only to find there is no one answer. Busy trying to stave off civil
war in the early years after the end of apartheid, the A.N.C. didn’t fully understand how
important economic policy was. Afraid of scaring off foreign investors, it took the advice of the
I.M.F. and the World Bank and instituted a policy of privatization, spending cutbacks, labor
flexibility and so on. This didn’t stop two of South Africa’s own major companies, South
African Breweries and Anglo-American, from relocating their global headquarters to London.
The average growth rate has been a disappointing 5 percent (much lower than in countries in
East Asia, which followed a different route); unemployment for the black majority is 48 percent;
and the number of people living on less than $1 a day has doubled to four million from two
million since 1994, the year the A.N.C. took over.
Some readers may see Klein’s findings as evidence of a giant conspiracy, a conclusion she
explicitly disavows. It’s not the conspiracies that wreck the world but the series of wrong turns,
failed policies, and little and big unfairnesses that add up. Still, those decisions are guided by
larger mind-sets. Market fundamentalists never really appreciated the institutions required to
make an economy function well, let alone the broader social fabric that civilizations require to
prosper and flourish. Klein ends on a hopeful note, describing nongovernmental organizations
and activists around the world who are trying to make a difference. After 500 pages of “The
Shock Doctrine,” it’s clear they have their work cut out for them.
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 Sept. 30, 2007

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