Chapter 9
Shock and Awe
Naomi Klein’s Interpretation of Neoliberalism1
Introduction
Authors with both talent and a theme of topical importance are still not guaranteed to seize the public imagination: they also require good timing. More precisely, they require a mass audience predisposed to sympathetically listen to what they have to say. This means that the writers concerned must be, if not exactly ahead of their potential audience, then at least attuned to shifts in popular consciousness that are perhaps not yet fully formed. Several classics of socialist literature appeared, as it were, too early to have immediate impact. George Orwell’s Homage to Catalonia (1938), for example, is now rightly regarded as one of the outstanding autobiographical accounts of the Spanish Civil War and a merciless critique of the bankruptcy of the Popular Front strategy; but by the time of Orwell’s death in 1950 it had failed to sell even the initial print run of 1,500.2 The very defeats that Stalinism had helped bring out meant that the majority of socialists were simply not open to the arguments it contained. Its popularity came later, in the wake of Orwell’s fame as the author of Nineteen Eighty-Four and the emergence of a New Left after 1956.
The Canadian radical journalist Naomi Klein has been rather more fortunate in her timing than Orwell. Between 1995 and 1999 Klein worked to expose how giant multinational brands dominated the world economy. The resulting book, No Logo, appeared early in 2000, only months after the November 1999 demonstrations against the WTO in Seattle had signaled the coalescence of new forms of collective opposition to capitalist globalization. According to Klein’s own account, her book went to the printer’s as the protesters took to the streets: “I consider myself lucky that I happened to write a book just at a movement’s moment.” Klein herself did not fully appreciate the scale and extent of the movement—although to be fair, no one else did either. Indeed, before starting the book she was only aware of “small-scale activism” such as “culture jamming” and “ad busting” and saw these as having an important future only as “an act of faith.”3 No Logo itself concludes by listing the fragmented groups that she hoped together might “wrest” globalization “from the grasp of the multinationals”: “Ethical shareholders, culture jammers, street reclaimers, McUnion organisers, human-rights activists, school-logo fighters and Internet watchdogs are at the early stages of demanding a citizen-centred alternative to the international rule of the brands.”4 Nevertheless, No Logo caught a mood and, once a relatively cohesive movement did emerge, it rapidly achieved classic status among supporters of alternative globalization, elevating Klein to a preeminent position in the movement. Contributors to International Socialism have disagreed with her support for decentralization and opposition to the resolution of strategic differences through hard political argument; but there is no doubt that Klein has played a serious participative role, refusing the temptation to become a mere radical celebrity offering detached commentary on events.5
Klein’s background as a journalist rather than an academic gave her two particular strengths. One was that she was concerned with communicating to large numbers of people in a comprehensible manner, as can be seen by comparing No Logo with what was perhaps its main rival for iconic status among the left during this period: Hardt and Negri’s Empire. The former has exercised more real influence than the latter, despite the greater amount of overearnest citation that Empire’s often incomprehensible prose has received in the academy. The other was that she was interested in recounting those concrete aspects of capitalist globalization that more pretentious contributions ignored, not least the actual conditions experienced by workers in, say, an Ontario Wal-Mart or a Philippine export processing zone. But her account did more than simply expose hitherto concealed aspects of exploitation. Unlike many accounts of the changes to economic life under capitalist globalization, Klein also conveyed the impact of multinational capitalism on the very textures of everyday life, such as the replacement of hitherto public space with retail outlets in which no activity but consumption is allowed, the rendering identical of cities through the intrusion of an inescapably narrow range of shops and products, and the transformation of people into advertisements for their own exploiters by carrying the corporate brand on their clothing.
Nor was this discussion wholly untheoretical, as some of her more patronizing critics have claimed. In relation to branding, for example, Klein turned her fire not only on the corporations themselves but on postmodern cultural theorists whose obsession with displacing class onto identity politics converged with corporate celebrations of the market as the source of freedom and individual choice. In fact, as Klein explained, neoliberal globalization has two aspects. One was certainly the homogenization of the High Street, but the other it is its inescapable obverse, diversification. Capital has no problem at all with Difference, except as a problem of niche marketing. Indeed, Klein argued that even this had been turned into an opportunity: “The market has seized upon multiculturalism and gender-bending in the same ways that it has seized upon youth culture in general—not just as a market niche but as a source of a new carnivalesque imagery.” As she rightly notes, the identity politics of the 1980s and 1990s virtually invited this response from capital: “The need for greater diversity—the rallying cry of my university years—is now not only accepted by the culture industries, it is the mantra of global capital.”6 No Logo was therefore not simply a rallying cry against corporate dominance but a polemic against the intellectual complicity of dominant trends within self-proclaimed “radical” thought with fin-de-siècle bourgeois ideology.7
From global brands to disaster capitalism
Seven years lie between No Logo and Klein’s latest book, The Shock Doctrine, during which time her only substantive publication has been a collection of journalism written between the Seattle protests and 9/11.8 The latter event, and the various responses to it on the left, seem to have been the catalyst for a change in her perspective. In particular, as she recently explained in conversation with the Marxist geographer Neil Smith, she was concerned about the way in which 9/11 divided what had, until then, been a movement finding its way toward opposing the system as a whole:
There was a really powerful global discussion going on and it wasn’t about globalisation, it was actually more and more about capitalism. There’s been a lot of activism since that period, but I feel like we on the left and we who were part of that moment, not really a movement but a moment, went in two different directions. Some of the people who were talking about neoliberalism just sort of put their heads down and kept talking about neoliberalism and pretended there weren’t wars and terrorism and just stayed on message. . . . They were surprised that there weren’t hundreds of people interested in talking about it anymore when they would organise events . . . People were actually interested in what was going on in Iraq and Afghanistan and they wanted an analysis of torture and things changed. The other side of it is that a lot of the energy of that anticorporate, anticapitalist analysis went to just fighting wars, as well it should have. But I think part of the problem was, and it was particularly true in this country [i.e., the United States], was that the promise of a really big movement—a big, popular antiwar, anti-Bush movement—was so seductive to a lot of organisers that there was an idea that we really shouldn’t talk about economics because that’s divisive. . . . Let’s have a big protest saying “Bush is bad and wars are bad” and not talk about the economic agenda that is being served or make connections with what we knew before September 11th.9
What Klein is attempting in The Shock Doctrine is to integrate events like wars—not least the “Global War on Terror”—but also supposedly “natural” disasters, into an account of how contemporary capitalism works. Although there is some stylistic continuity with her earlier work, notably the incorporation of eyewitness journalism and interviews with victims of the system, The Shock Doctrine is in other respects a very different type of book from No Logo. Rather than a series of contemporary snapshots, the approach is historical, tracing the enfolding of the neoliberal era from the Chilean coup of 1973 onward, occasionally moving further back in time to search for precedents. But the differences are not merely structural. The vibrant optimism of tone with which she first caught the movement’s attention has become much more somber, as if the longer-term perspective she adopts here has brought home precisely the extent of the violence committed against humanity during a period that has now lasted nearly forty years.
We now think of that period as one dominated by neoliberalism, although Klein tends to treat neoliberalism and neoconservatism as interchangeable terms for a particular way of organizing capitalism that she prefers to call “corporatism,” characterized by “huge transfers of public wealth to private hands, often accompanied by exploding debt, an ever-widening chasm between the dazzling rich and the disposable poor and an aggressive nationalism that justifies bottomless spending on security.”10 Whatever terminology is employed for the current form of capitalist organization (I will continue to refer to neoliberalism in what follows) Klein rightly distinguishes it from capitalism itself.11 As we shall see, however, this avoids one error (equating neoliberalism with the system as a whole) only to open up the possibility of another (that “another capitalism is possible” shorn of the inhumanity of neoliberalism). I will return to this point below, but first: what is Klein’s argument?
She begins with the way in which theoretical support for free markets was kept alive by a small band of thinkers, above all Milton Friedman (who features as her main intellectual adversary here), after the tide began to turn against free-market capitalism with the Great Crash of 1929: “During these dark days for laissez-faire, when communism conquered the East, the welfare state was embraced by the West and economic nationalism took root in the postcolonial South, Friedman and his mentor, Friedrich Hayek, patiently protected the flame of a pure version of capitalism, untarnished by Keynesian attempts to pool collective wealth to build more just societies.”12 But the coming to power of rulers either searching for economic answers or already committed to market solutions—initially the Chilean military, then the Thatcher and Reagan governments—provided the first opportunities for these ideas to be put into practice. Coincident with the preservation of neoliberal theory at Chicago University by Friedman and his acolytes, a form of electroconvulsive therapy (“electroshock treatment”) was being developed by Ewen Cameron at McGill University with CIA funding. Ostensibly to help psychiatric patients, this was in fact used by his paymasters to reduce prisoners to a vegetative state of blankness and receptivity. Klein claims that this form of psychological torture or “coercive interrogation,” although in actual use, most recently in the aftermath of 9/11, also acts as a metaphor for a broader social process—or perhaps one might say that there is a “social equivalent” of the individual act of torture: “Like the terrorized prisoner who gives up the names of his comrades and renounces his faith, shocked societies often give up things they would otherwise fiercely protect.”13 Social shock treatment and neoliberal economics have been linked, in the sense that the former has been used to pave the way for the introduction of the latter, in a conjoined process Klein calls “disaster capitalism.” She twice quotes Friedman’s statement that “only a crisis—actual or perceived—produces real change” and argues that neoliberalism is a “shock doctrine” that takes advantage of disaster (“crisis”) in order to impose the idea of the new market order.14 The notion of “shock” therefore works on three levels, moving from metaphor to reality: first, “countries are shocked—by wars, coups d’état and natural disasters”; second, “they are shocked again—by corporations and politicians who exploit the fear and disorientation of this first shock to push through economic shock therapy”; and third, “people who resist are, if necessary, shocked again—by police, soldiers and prison interrogators.”15
Putting this argument to work, Klein is able to demonstrate that, contrary to the neoliberal claim that free markets and parliamentary democracy are mutually dependent systems, “this fundamentalist form of capitalism has consistently been midwifed by the most brutal forms of coercion, inflicted on the collective body politic as well as on countless individual bodies.” And not only the introduction, but the maintenance of neoliberal regimes requires at the very least the severe curtailment of democracy, in all respects other than the most formal—the bare right to vote for virtually indistinguishable parties. As this suggests, Klein regards neoliberalism from the beginning as a project reliant on state power. Rather than markets being “freed” from the state as the ideology endlessly proclaims, we have instead witnessed the formation of a new but equally close relationship between the two: “In every country where Chicago School policies have been applied over the last three decades, what has emerged is a powerful ruling alliance between a few very large corporations and a class of mostly wealthy politicians—with hazy and ever shifting lines between the two groups.”16 Klein supports her argument with a series of individual country-by-country case studies, ranging from Chile to post-Stalinist Russia, from post-Apartheid South Africa to post-invasion Iraq (which receives the most detailed treatment), from the path of the Southeast Asian tsunami of December 2004 to the wake of Hurricane Katrina in New Orleans during September 2005. These chapters constitute the core of the book and their cumulative power is undeniable, although as we shall see, her demonstration of the way in which neoliberalism has become generalized throughout the system, irrespective of the nominal politics of the regimes that have introduced it, could stand independently of the “shock” metaphor and would actually be stronger without it. Before turning to that critique, however, I want to note some wholly misguided criticisms of Klein from writers who also claim to be critical of the system, or at least aspects of it.
It is unsurprising that the most severe of these attacks have come from self-deluded liberals whose delusion consists precisely in believing that neoliberalism has simply been an unfortunate, if gigantic, mistake. Will Hutton, long-time Keynesian, scourge of “Anglo-Saxon capitalism,” and currently director of the Work Foundation, began his review in the Observer by claiming: “Naomi Klein is confused”—a confusion apparently demonstrated by the fact that “nowhere does she concede that markets can have good results as well as bad,” nor does she “explore . . . why economic freedom is so appealing to so many,” nor yet “set out an alternative manifesto for running economies or societies”:
In her delusional, Manichaean world view, privatisation, free markets, private property, consumer freedom, the profit motive and economic freedom are just other terms for corporate self enrichment, denial of voice, limitation of citizenship, inequality and, sometimes, even torture. . . . Nothing good ever came from globalisation, which is just more capitalism. Democracy, however, is a halcyon world of political and economic cooperation, citizen voice and engagement, with a freely-arrived at assertion of the common interest in which most think along the same lines as, say, Naomi Klein.
Following this final sneer (for which there is not the slightest justification in anything Klein has written, either here or elsewhere), Hutton then goes on describe Klein as a “mirror image” of Friedman on account of “the absolutist categories in which they think.”17 The condescension and ignorance on display here are both revealing of Hutton’s politics and deeply unfair to Klein. She does not reject markets—indeed, her support for a reformed capitalism is a weakness in her work:
I am not arguing that all market systems are inherently violent. It is eminently possible to have a market-based economy that requires no such brutality and demands no such ideological purity. A free market in consumer products can coexist with free public health care, with public schools, with a large segment of the economy—like a national oil company—held in state hands. . . . Keynes proposed exactly that kind of mixed, regulated economy after the Great Depression, a revolution in public policy that created the New Deal and transformations like it around the world.18
Furthermore, Klein embraces globalization and distinguishes it from capitalism or “corporatism.” Finally, as Hutton himself acknowledges in the quote above, she sees democracy as the alternative to markets. The latter issue is what seems to have most irritated Hutton, containing as it does the danger that “the left . . . should conceive of democracy as a surrogate for socialism.” Here we can detect his real concern:
What was wrong about so much shock therapy and brutal introduction of markets that Klein describes was not that societies should have cleaved to a quasi-socialist alternative under the rubric of democracy. It was that they should have paid infinitely more attention to the building of the “soft” institutions of democracy, including universal education and health care, as the vital precondition for successful markets.19
I have quoted these comments at some length because it is important to realize that, whatever problems there are with Klein’s work, her position is infinitely more realistic about the workings of capitalism, incomparably more sensitive to the enormities its supporters are prepared to commit, than the vacuous waffle about “civil society,” “democratic governance,” and the like, which Hutton has been promoting to a curiously uninterested audience of capitalists and government ministers for several decades now. Above all, Klein is on the side of those who have suffered from and are fighting back against capitalism; Hutton, on the other hand, is committed to defending the system against which they struggle, despite its “excesses,” hence his hysterical response to the popularity of a work that offers at least the possibility of a deeper critique.
In taking sides Klein is quite unsparing of the reputations of organizations that once embodied popular aspirations but that have since capitulated to neoliberalism, like Solidarity in Poland and the ANC in South Africa. Her discussion of the abandonment of the black majority by the latter has inevitably provoked furious defensive responses by ANC apologists. Ronald Suresh Roberts, for example, has accused Klein of condescension toward black South Africans who reelected the ANC with ever-bigger majorities until 2004, who he claims were apparently fully aware the party embodied their best interests. He denounces her main sources (Patrick Bond and William Gamede), for their institutional affiliations and the fact that they may have accepted funding from corporate sources before, in a final absurd reality-reversal, portraying Klein as a dominant figure unfairly victimizing the blameless ANC government: “Klein herself is, of course, a powerful part of the global media, with her well-meaning but stubbornly Orientalist representations of African politics, complete with a ‘culture-shocked’ Mandela and a chronically paralysed native electorate, falsely unconscious of its own best interests.”20 To argue that criticism of postcolonial regimes is a refusal of solidarity, regardless of what these regimes have done or failed to do after taking power, is a piece of moral blackmail that has been used all too often in the past to whip Western liberals and even some would-be revolutionaries into line; it is to Klein’s credit that she refuses to bow to it, rightly understanding that the solidarity we owe is to the exploited and oppressed, not to parties or states that claim to represent them while betraying their interests at every turn.
The limitations of a metaphor
The real problems with The Shock Doctrine lie elsewhere. The detail that Klein provides of how neoliberalism has become the dominant form of capitalist organization is far more convincing than the theoretical framework or, more accurately, the organizing metaphor within which it is presented. Klein presents neoliberalism as the manifestation of the inner logic of corporate capitalism (although perhaps not of capitalism itself) and “shock” as the means by which it can be realized. She therefore treats every geopolitical event (using that term in its broadest sense) since 1973 as one either consciously undertaken or opportunistically manipulated to impose neoliberalism, a fixation that inevitably produces unnecessarily conspiratorial undertones to her work. (As Joseph Stiglitz remarks, “there are no accidents in the world as seen by Naomi Klein.”21) There are three problems with the “shock” metaphor as an aid to understanding contemporary capitalism.
First, how necessary was “shock” to the introduction of neoliberalism? “There are huge third world economies that have been ravaged by neoliberalism that haven’t endured ‘the shock doctrine,’” notes Alexander Cockburn.22 He specifically mentions India in this context, but could just as easily have mentioned Mexico or Egypt, neither of which is discussed by Klein, even though they are in the neoliberal vanguard of their respective regions and are at least as important in geopolitical and geoeconomic terms as Chile or Iraq, which receive detailed attention because they appear to confirm her thesis.23 More damaging still is the absence of credible examples of “shock therapy” in the cases of the two states of the developed world where neoliberalism has taken deepest root: the United Kingdom and the United States.
As far as the United Kingdom is concerned, Klein identifies the Falklands War of 1982 as the decisive moment for Thatcher in implementing her program: “the disorder and nationalist excitement resulting from the war allowed her to use tremendous force to crush the striking coal miners and to launch the first privatization frenzy in a Western democracy.”24 In fact, the popular impact of the Falklands victory was relatively short-lived and did not feature particularly prominently in Conservative electoral material during the 1983 campaign, although it certainly helped to consolidate Thatcher’s leadership over her party.25 The Conservative victory that year had a far less epochal and far more conjunctural basis. In electoral terms, they faced a compromised and incoherent Labour Party, a section of whose voting base had shifted to the newly formed Social Democratic and Liberal Party. As one of Thatcher’s earliest and best biographers recounts:
There was nothing in the nature of Thatcherism, nor any brilliant stratagem in the mind of its leader, which brought these propitious circumstances about. . . . Yet [they] produced among the forces ranged against the most unpopular British leader of modern times, on the one hand a party that was unelectable, on the other a grouping destined merely to be a vote-splitter.26
But equally significant was the ideological and organizational situation of a working-class movement already disillusioned by the previous Labour government, weakened by unemployment but offered some relief by the emergence of the economy from the depths of the 1981–82 slump. Far from the Falklands being the shock that made Thatcher’s victory over the miners and everything that followed possible, the outcome of the subsequent miners’ strike was itself the turning point in establishing the neoliberal regime in Britain, the key to which was not the unleashed power of the state—formidable though that was—but the failure of other unions and the TUC to deliver effective solidarity with the NUM. The short- to medium-term effect, exacerbated by the overlapping onslaught against the print unions, was to thoroughly cow the union bureaucracy, and to shatter the confidence of workers to risk resisting in any generalized way through their workplace organizations, although they fought back in other ways, notably in the campaign against the poll tax. In other words, the British working class had been temporarily defeated in a way that had undoubtedly serious consequences (from which it has yet to fully recover), but it was scarcely shocked into a condition of psychological collapse.
Klein’s account of the United States is even more implausible, focusing as it does on the aftermath of 9/11: “What happened in the period of mass disorientation after the attacks was, in retrospect, a domestic form of economic shock therapy. The Bush team, Friedmanite to the core, quickly moved to exploit the shock that gripped the nation to push through its radical vision of a hollow government in which everything from war fighting to disaster response was a for-profit venture.”27 Reading this one might almost believe that the United States had been spared the neoliberal onslaught until the fall of the Twin Towers, whereas it has suffered, from the late 1970s, longer and more intensively than anywhere in the West apart from the United Kingdom. More recently, the Bush administration certainly used the rhetoric of national emergency to feed the military-industrial complex, cut taxation for the wealthy, reduce regulation for business, and attack social provision.28 But all these moves were continuations of existing policies that were already being implemented. And it was the wars in Afghanistan and Iraq that gave them a blanket of patriotic cover, rather than 9/11 itself. In the case of the United States too the key was the weakening of the labor movement, a task made easier by the fact that the US labor movement did not even enjoy the collective successes of the British in the early 1970s: the retreat started much earlier than the US equivalent of the miners’ strike, the defeat of the PATCO air traffic controllers in 1981.29
Second, was “shock” always applied for the purpose of introducing neoliberalism? In general, Klein makes far too direct a link between economics and politics. Take, for example, the two central events that dominate The Shock Doctrine, which she explicitly links: the Chilean coup of 1973 and the invasion of Iraq in 2003.30
Klein is of course right to say that, in Chile, it was only in the aftermath of a violent seizure of power by the military that the neoliberal regime could have been put in place; but this was not the motivation for the coup, which was carried out instead to crush the political aspirations of the working-class movement that had looked to Allende and that was by 1973 beginning to organize on its own behalf. In fact, the generals initially had little idea what economic policies to introduce and in other circumstances might well have looked to the Catholic corporatist model introduced by Franco to Spain after 1939 that had been followed more or less faithfully by previous Latin American dictatorships. In retrospect, the arrival of the “Chicago Boys” to oversee the implementation of Pinochet’s program of privatization and deregulation has a wider significance, but initially it appeared to have no resonance elsewhere and subsequent coups to that in Chile did not immediately adopt neoliberalism. Klein herself notes that the Argentinean dictatorship that came to power in 1976 did not follow its Chilean predecessor in privatizing social security or natural resources: in fact these were achieved decades later by the successor civilian governments.31
In relation to Iraq, Klein quotes Bush the Father at the head of one chapter denying accusations that Bush the Son “invaded Iraq to open up new markets for US companies,” a denial that she regards as self-evidently preposterous.32 However, painful though it is to admit, the elder Bush is simply speaking the truth: the United States did not invade and occupy Iraq in order to create profit opportunities for private security firms, but for strategic reasons connected to Middle Eastern oil—not to guarantee price or even supply for US use, but to control the supply in relation to competitors, above all those ascendant states, above all China, that have already attained regional power status.33
Third, accepting—with the caveats entered above—that neoliberals have opportunistically intervened to take advantage of disaster situations in recent decades, why it was only at a certain stage in postwar history that crises were manipulated to produce these outcomes? Two examples will illustrate the problem.
One is from the core of the world system. At the end of the Second World War it quickly became apparent that Britain had unresolved economic problems. These were not helped by a massive rearmament program that began to erode the welfare state within years of it being initiated. When the Conservative Party was returned to office in 1951, some members of the new administration led by Rab Butler drafted a proposal to float the pound, which would have immediately led to it falling in value against the dollar. The central intention here was to put an end to balance-of-payments difficulties that were already characteristic of the British economy. Exports would be given a massive boost, while at the same time imports would fall; domestic prices would be high, but wages would have to be held down to avoid inflationary pressures, not least by allowing unemployment to rise. In effect, the government would be forced to cut funding of the welfare state, especially the housing program, as well as its overseas military commitments. The plan was dropped, largely as a result of Churchill’s nervousness over the likely consequences in electoral terms.34 Historians have tended to treat this episode as a typical example of the consensual thinking that supposedly prevented deep-seated problems from being tackled before the advent of the Thatcher regime.35 The point, however, is that an experiment of this sort would have been, in capitalist terms, both destructive and unnecessary at this time. Destructive, because it ran contrary to the type of economic structures being put in place in the advanced capitalist West; most obviously, it would have destroyed the Bretton Woods agreement, the only components of which to have been put in place were precisely the fixed exchange rates that British actions would have undone. Unnecessary, because from the end of the Korean War in 1953 the British economy began to take off into a boom that meant that any attempt to limit trade-union power or redefine the limits of the welfare state could be postponed. British capitalism did indeed have serious underlying problems, but in conditions of generalized expansion, very few members of the British ruling class felt it was necessary to take action. Those who did argue for proto-Thatcherite solutions in the late fifties, like Enoch Powell, were marginalized.
My other example is from the developing world. The Indonesian coup of 1965 was a successful attempt by a section of the local ruling class, backed by the United States and the United Kingdom, to destroy the power of the Communist Party and the left more generally, in what was at that point the most extreme use of counterrevolutionary violence since the Second World War. But neither internal nor external forces sought to impose what was then thought of as a neoclassical economic program on the country, even though this was the perfect opportunity to do so. Klein draws parallels between the group of Indonesian economists trained at the University of California, the so-called Berkeley Mafia who advised the military both before and after the coup, and the “Chicago Boys,” who played a similar post-coup role for the Chilean Junta ten years later. She rather elides, however, the nature of the economic policies followed in the former case, which were quite different from the latter.36 Indonesia under Suharto was regarded as a reliable ally of the West in the Cold War, but continued the strategy of state-led economic development initiated by the pre-coup regime. This was similar to the strategies of the other newly industrializing countries of East Asia, particularly Taiwan, Singapore, and South Korea, although it was accompanied with even greater levels of corruption. Indeed, so far was Indonesia from what were regarded as neoliberal norms that the financial crisis of 1997 and the overthrow of Suharto the following year in a political revolution saw much neoliberal comment on the necessity of dispensing with so-called crony capitalism. No less a neoliberal luminary than Alan Greenspan described Suharto’s Indonesia as being a “particularly appalling” example of crony capitalism “in the last third of the twentieth century,” that is, the period following the US-backed coup that brought him to power.37
What these examples suggest is that neoliberalism was far from being the application of a doctrine that capitalists, state managers, or politicians had been waiting to apply since the introduction of the New Deal in the 1930s or the creation of the postwar welfare states, since when offered the opportunity to do so before the mid-1970s they did not. In other words, if Klein’s thesis was correct, the policies we now associate with neoliberalism would have been introduced much earlier in the twentieth century than they in fact were. Instead, even the most ferociously counterrevolutionary regimes followed the dominant economic model of state intervention. It is certainly the case that in the global South, the military repression of regimes reflecting the reformist aspirations of the working class and the oppressed opened up opportunities for multinational corporations to play a greater role, but the latter have not themselves always pursued neoliberal policies, nor have they always demanded them from the states with which they have had to deal. Klein writes that “Friedman’s vision coincided with the interests of the large multinationals, which by nature hunger for vast new unregulated markets.”38 But the interests of the multinationals have changed over time. During the Great Boom there was general support for state intervention among the larger businesses and corporations, while small businesses retained their traditional hostility to it—attitudes embodied in the positions taken by their respective organizations, the Business Roundtable and the US Chamber of Commerce. These differences expressed the relative security of their positions within the market: corporations were protected from the worst exigencies of price competition and were able to plan for longer-term investment and growth, often in alliance with the state; small businesses were much more vulnerable, and the state simply represented a source of demands for predatory taxation and bureaucratic regulation. Neoliberal globalization has changed the relative position of the corporations, so that all but the largest transnational corporation are in a similar position in terms of size to the small businesses of the postwar period: “The process of globalisation has sharply increased the degree of competitive pressure faced by large corporations and banks, as competition has become a worldwide relationship.” Corporations still need a home state to act as a base, but they require it to behave differently. Increased competition “pushes them towards support for any means to reduce their tax burden and lift regulatory constraints, to free them to compete more effectively with their global rivals.”39
Explaining the neoliberal moment
In many respects Klein’s position is close to David Harvey’s. Although he is only mentioned once in the text (in a footnote about the introduction of neoliberalism to China after the Tiananmen Square massacre), Klein refers in her acknowledgments to him as one of “several thinkers and chroniclers of neoliberalism [who] have shaped my thinking.”40 More recently she has said that her object, “using David Harvey’s parameters,” was to track “the counter revolution against Keynesianism and developmentalism and the period from the 1930s through to the end of the ’60s, where there was a period when there was a response to another crisis, which was the market crash of 1929.”41 There is, however, one central problem with the concept of a neoliberal “counterrevolution” shared by Harvey and Klein, which is that it perpetuates the neoliberal myth that socioeconomic developments in the postwar period were fundamentally detrimental to capital, when in fact this was the period when it enjoyed the highest levels of growth in human history. It is certainly true that a number of concessions were granted to the working class, and it is for this reason that the reputation of “the Golden Age” remains high, particularly in contrast to what Eric Hobsbawm calls “the landslide” that followed. It rests on two main factors.42 One was high, indeed for practical purposes full, employment. The other was the expansion of the “social wage” through the provision of education, health, and social security, particularly unemployment benefits and pensions.43 Both of these were necessary to capital: to gain the support of the labor force, thus helping to ensure social stability and to aid increases in productivity, thus contributing to international competitiveness. Consequently, these measures were not necessarily dependent for their introduction on social or even liberal democratic governments. As Tony Judt has correctly noted:
Outside of Scandinavia—in Austria, Germany, France, Italy, Holland, and elsewhere—it was not socialists but Christian Democrats who played the greatest part in installing and administering the core institutions of the activist welfare state. Even in Britain, where the post–World War II Labor government under Clement Attlee indeed inaugurated the welfare state as we knew it, it was the wartime government of Winston Churchill that commissioned and approved the Report by William Beveridge (himself a Liberal) that established the principles of public welfare provision: principles—and practices—that were reaffirmed and underwritten by every conservative government that followed until 1979.44
Judt’s target here is that particularly ignorant type of North American journalist (exemplified by Thomas Friedman) who imagines that the welfare state was socialist in inspiration, but in Britain postwar social welfare was at least partly initiated by the local representatives of social democracy and lies within the recognizable world of European social welfarism. In the United States, although some reforms were directly introduced during the New Deal of the 1930s, above all Social Security, their expansion, let alone the introduction of more general social welfare provisions such as Medicaid and Medicare, was the result of the movements of the 1960s, above all that for black civil rights. But these were implemented not by the Democrats but by the Republicans during Richard Nixon’s first term between 1968 and 1972. Nixon’s discovery that “we are all Keynesians now” proved quite compatible with the saturation bombing of Cambodia and the targeted assassination of leading members of the Black Panther Party.45 The fundamental point of all reforms associated with the welfare state in Britain, the New Deal and Great Society programs in the United States, or their analogues elsewhere, is therefore that they were not just compatible with capitalism, but organized in line with its requirements. Edward Thompson made the point powerfully in relation to Britain as the Keynesian era was coming to an end:
The reforms of 1945 were assimilated and re-ordered within the system of economic activities, and also within the characteristic concepts, of the capitalist process. This entailed a translation of socialist meanings into capitalist ones. Socialised pits and railways became “utilities” providing subsidised coal and transport to private industry. Private practice, private beds in hospital, private nursing-homes and private insurance impoverished the public health service. Equality of opportunity in education was, in part, transformed into an adaptive mechanism through which skilled labor was trained for private industry: the opportunity was not for the working class but scholarship boy to escape from this class. . . . In short, what was defeated was not each “reform” . . . but the very meaning of reform as an alternative logic to that of private enterprise, profit and the uncontrolled self-reproduction of money.46
In short, as Hilde Nafstad and her colleagues write, “welfare states should not be understood simply as a protective reaction against modern capitalism, but as varieties of modern capitalism.”47
Klein rightly rejects the Soviet Union and its satellites and imitators as a model for the contemporary radical left, but nevertheless considers them to be “post-capitalist” societies, which consequently required an entirely new capitalist class to be created after their demise. (She regards “Venezuela’s Hugo Chávez or Cuba’s Fidel Castro” as proponents of “socialist government” partly on account of their willingness to expropriate corporate holdings.48) However, rather than view these societies as being fundamentally different from those of the West, as was endlessly declared in the Cold War propaganda of both sides, it is better to see them as existing on a continuum of state intervention, with two extremes, the United States and the Soviet Union, at opposite ends of the scale. In Eastern Europe the state itself assumed the role of a “collective capitalist.” As Paul Mattick writes: “Arising at the same time as the mixed economy, the state-capitalist system may be regarded as Keynesianism in its most developed and consistent form.”49 Between the two extremes lay many states that combined elements of both, most in the postcolonial world, particularly in those that were to be classified as the newly industrialising countries. Nigel Harris notes that South Korean development “was as state capitalist as any East European economy and as Keynesian as any West European social democracy,” and although a major contributor to the growth of world trade, “as regards the role of the state,” it was “as ‘socialist’ as most of the countries that applied that term to themselves.”50 So even though these countries engaged in foreign trade in a way that the Stalinist countries did not, the role of the state was essentially the same in both cases. This raises the question of why the two camps were in such potentially lethal opposition if both were fundamentally capitalist, but the answer is less obscure than is sometimes supposed. Capitalist nation-states, after all, had been known to go to war with each other before the onset of the Cold War, notably in 1914 and 1939. In this case, however, there was an additional reason. Mattick notes that the displacement of “the market system by the planned system” or the complete supersession of private capital by state capital would be experienced by individual capitalists as “their death warrant,” and would not be accepted by them without opposition or, as Mattick suggests, “civil war.”51 The same is also true on the other side, as any attempt to reintroduce private capital into wholly state-capitalist economies would mean that some sections of the bureaucratic ruling class would lose their privileged positions in a situation of market competition—as a minority did after 1991, although perhaps as much as 80 percent managed to transform themselves into private capitalists or managers.52
It is at the end of this period of exceptional growth that the real roots of neoliberalism are to be found. The precise causes of the return to crisis after 1973 have been widely debated, but some key features are highlighted by most analysts. Increased price competition from West Germany and Japan within the advanced world was made possible by intensive investment in technology and relatively low wages. This forced their hitherto dominant rivals—above all the United States—to lower their own prices in a situation where production costs remained unchanged. US corporations were initially prepared to accept a reduced rate of profit in order to maintain market share but, ultimately, they too undertook a round of new investments, thus raising the capital-labor ratio and increasing the organic composition of capital, leading to consequent further pressure on the rate of profit.53 As Al Campbell writes, neoliberalism was therefore a solution to “a structural crisis of capitalism” in which “policies, practices and institutions” that had hitherto served capital accumulation no longer did so: “More narrowly, one can say that capitalism abandoned the Keynesian compromise in the face of a falling rate of profit, under the belief that neoliberalism could improve its profit rate and accumulation performance.”54 But the inadequacy of Keynesian policies was itself the result of changes to the nature of the world economy that had taken place during the long boom—an unprecedented threefold expansion of international trade, the advent of cross-border production, the increase in large-scale foreign direct investment, and the creation of “offshore” banking and flows of money capital unlimited by national boundaries—all of which made these policies increasingly difficult to apply with any possibility of success. States had not become completely powerless in the face of markets—that is the myth of globalization assiduously cultivated by politicians seeking to shift responsibility for neoliberal policies onto what T. S. Eliot once called “great impersonal forces” over which they had no control.55 In that sense neoliberalism represented a choice, but it was a choice increasingly difficult to avoid so long as the goal was the preservation and expansion of capitalism at all costs.
The economic roots of neoliberalism were therefore decisive. The one condition that was universally required in order to impose the neoliberal regime was to eliminate or at least reduce the power of the organized working class. The real reason for the attack on the ability of unions to effectively defend their members was threefold. The first was to ensure that wage costs fell and stayed down, so that the share of profits going to capital was increased. This also extended to the social wage, the expansion of which in the postwar welfare states was also a cost to capital, a drain on investment, which capitalists and state managers were only prepared to pay so long as the system was expanding: when it began to contract, as it did after 1973, these costs had to be reduced. The second was to enable corporate restructuring, the closing of “unproductive” units, and the imposition of “the right of managers to manage” within the workplace. The third, and a more long-term tactical consideration, was to assist social democracy to adapt to neoliberalism by weakening the main source of countervailing pressure from the broader labor movement.
Only very rarely did these attacks involve destroying the trade union movement. The Chilean Coup of 1973, the “other 9/11,” is exceptional in this respect and it was only possible on a temporary basis. At the time, however, it was regarded as a tragic reversal of the reformist strategy adopted by Allende and Popular Unity, but not as foreshadowing any new development; Latin America had, after all, experienced numerous coups in the twentieth century, albeit few as violent as this. In the very important case of China, the ruling class was fortunate in that there was no movement to be destroyed: the reality of this so-called workers’ state being an atomized labor force presided over by official trade unions that were an arm of the state. (Ironically, the emergence of a genuine labor movement in China has been in response to the regime’s neoliberal turn.) In most cases, however, the attack on trade union power involved two strategies.
One was to provoke a decisive confrontation between a state-backed employer and one or two important groups of unionized workers (textile workers in India in 1980, air traffic controllers in the United States in 1981, miners in the United Kingdom in 1984–85) whose defeat would act as an example to the others, against a background of multiplying legal restraints and increasing employer intransigence. In these circumstances politicians gambled that most sections of the trade union bureaucracy would give priority to the continued existence of their organizations, however much reduced in power, rather than mount effective resistance. Looking back at the refusal of other unions, the AFL-CIO, and TUC to give effective support to unions under attack, the bet appears to have involved a limited amount of risk.
The other strategy was to establish new productive capacity, often virtually new industries in geographical areas with low or nonexistent levels of unionization, and prevent the culture of membership from becoming established: the classic example of this strategy being the movement of productive capital from the old “rust belt” industrial regions of the northeastern United States to the southern “sun belt.”56 Actual geographical shifts within nation-states were more common and more damaging to trade union organization than the threatened geographical shifts to locations in the global South, which were often made by employers but far less frequently carried out, not least because of their lack of technological infrastructure and the cost in abandoning fixed capital that such relocations would involve. However, as Graham Turner notes, “it is the threat of relocation that proves just as powerful as the reality of a transfer somewhere cheaper.”57
The emergence of neoliberalism as a conscious ruling-class strategy, rather than the esoteric ideological doctrine associated with Friedman and company, therefore took place in response to the end of the postwar boom, but in changed conditions created by that boom. Politicians and state managers began to implement some of the policies long advocated by Hayek and Friedman, not because individual opportunities to do so that had previously been missing finally presented themselves, as Klein claims, but because the changed conditions of accumulation required changed strategies; given the limited number of strategies available (assuming these were to be in the interests of capital), it is unsurprising that theory and practice began to overlap. In 1974, the Economist, at that time still advocating a more or less Keynesian approach, accused Sir Keith Joseph of being a “follower” of Friedman. Joseph responded saying “the evolution of my views owes little to him”:
On the contrary, it stems primarily . . . from critical re-examination of local orthodoxies in the light of our own bitter experience in the early 1970s. . . . By early this year [1974], we had a historically high rate of inflation, an enfeebled economy, the worst relations with the trade union movement in decades, and a lost election with the greatest fall in our share of the vote since 1929. Surely this was sufficient incentive to rethink—we are practical people who judge ideas and policies by results.58
The more credible advocates of capitalist globalization, like Martin Wolf, have been able to emphasize the way in which neoliberalism (although he refuses the term) has been an adjustment to reality rather than an adoption of dogma:
To many critics, the last two decades of the twentieth century were the age of a manic “neo-liberalism” imposed by ideological fanatics on a reluctant world. This picture is false. The change in politics was, with very few exceptions, introduced by pragmatic politicians in response to experience.59
Wolf wants to defend the neoliberal order, but his essential point is correct. As Andrew Gamble writes, neoliberalism as “a global ideology” was less significant than “the competitive pressures of capital accumulation in forcing the convergence of all capitalist models and all national economies towards neo-liberal institutions and policies.”60 Even then, with the exception of the onslaught on the labor movement, neoliberalism as a system only emerged in a piecemeal fashion, after many false starts, accidental discoveries, opportunistic maneuvers, and above all the certainty that no one in mainstream political life—that is, the adherents of social or liberal democracy—would do anything seriously to impede its implementation, and that they would eventually adopt it, in the name of realism, as their own. That is why Wolf, while acknowledging the role of Thatcher and Reagan, is able to add: “But many of the leaders who made most of the difference were far from being committed liberals. Many were on the left.”61 Or perhaps it would be more accurate to say, as Klein so clearly demonstrates, that many were formerly on the left.
Conclusion
Neoliberalism is mutating in response to the current crisis. The precise character of this new stage of capitalist organization is not yet settled. We can, however, be sure that, in the absence of a boom comparable to that of the postwar period (which seems unlikely, to say the least), any new formation will prove to be no more beneficial to the working class than its predecessor. Understanding neoliberalism is therefore not a historical issue, but one of urgent practical concern, as it has shaped the conditions under which the working class still has to fight, conditions that extend beyond economic structures, or even the immediate situation in the workplace, to the types of political representation and the forms of consciousness with which workers will enter the struggles to come. Yet despite the crucial importance of the issue, there is no wholly satisfactory account of this most recent period in the history of capitalism. The book that comes nearest from a Marxist perspective is Harvey’s A Brief History of Neoliberalism, but theoretically it is highly eclectic and consequently misleading on several key points.62 Furthermore, although it is markedly more readable than the average work of Marxist political economy (including most of Harvey’s earlier works), it presents a formidable challenge to anyone not already familiar with a series of complex theoretical debates.
For this reason alone, The Shock Doctrine is an important work. Although, as we have seen, it draws on Harvey in some respects, it presents an argument about neoliberalism in terms far more comprehensible to nonacademic activists than the jargon of, say, “the spatial-temporal fix.” The very fact of its popularity does, however, place an onus on Klein’s fellow members of the radical left to draw friendly but critical attention to its weaknesses. In the end, these do not stem so much from the metaphor that provides Klein with her title and structure as from the understanding of capitalism that underlies it. Economic crisis barely features here, unless as something consciously created by ruling classes to change economic structures to their advantage. The idea that capitalism enters into involuntary crisis, as a result of the internal mechanisms of the mode of production, is almost entirely absent from The Shock Doctrine, yet it is in this fact that hope actually lies.
If neoliberalism was indeed the essence of capitalism, then we would expect the bourgeoisie to endlessly seek to reimpose that model, whenever conditions are apt. This is certainly what Klein expects, based on her response to the outbreak of the current crisis: “During boom times it is profitable to preach laissez-faire, because an absentee government allows speculative bubbles to inflate. When these bubbles burst, the ideology becomes a hindrance, and goes dormant while government rides to the rescue. But rest assured: the ideology will come roaring back once the bail-outs are done.”63 But if this is so, from where is the impetus for her desired Keynesian welfare-state reforms to come? Surely, not from capitalists since, according to Klein, they are merely waiting to reimpose free market conditions. But equally, how can the oppressed and exploited force a change on the capitalist class if the latter have been able to suppress the possibilities of democracy to the extent that her account reveals? Something of this dilemma is apparent in Klein’s final chapter, where she offers some tentative reasons for optimism, which (apart from the Lebanese general strike of 2006) mainly amount to small-scale attempts at post-disaster “community reconstruction.”64 Her failure to understand the role of crisis, rather than some omnipresent capitalist urge toward free markets, as the motivation behind neoliberalism, also blinds her to the possibilities that a renewed period of crisis has for both sides in the class struggle. Neoliberalism was founded on the weakening of the labor movement, and if what replaces neoliberalism is to be in the interests of the exploited and oppressed, the labor movement must be rebuilt. That task will have to involve much more than projects of reconstructing what we had before the neoliberal catastrophe. We know, not least because Naomi Klein has shown us in this flawed but immensely valuable book, what our enemies are capable of if we fail.