Naomi Klein: The Shock Doctrine

Naomi Klein. The Shock Doctrine: The Rise of Disaster Capitalism (New York: Metropolitan Books/Henry Holt, 2007)

Naomi Klein, to a casual reader, might seem to hate the free market. Or at least she hates what most people think of as the free market, based on the conventional use of that term by mainstream politicians and journalists. And the usual vulgar libertarian suspects (see here and here and here) have reacted with exactly the kind of by-the-numbers polemics you'd expect. (She's met with a more open-minded reception from real libertarians. See, for example, Sheldon Richman, "Naomi Klein: Free Market Ally?" and Kehlkopfmikrofon, "Left-Libertarian Perspectives on Naomi Klein.")

If Klein hates what she mistakenly believes is the free market, the blame is pretty easy to assess: for the most part the very same folks at Cato, the Adam Smith Institute, and their ilk, that have their panties in such a wad over her book. As I've repeatedly said in the past, if I thought the free market actually meant what those people mean when they talk about "free markets," I'd hate it myself.

It's hard to spend any time at all in the allegedly "libertarian" parts of the Web without being deluged by commentary defending corporate globalization, CO2 emissions, Third World landed oligarchies, Nike's sweatshops, Wal-Mart, Big Pharma's profits, CEO salaries, and Microsoft's market share, all based on the principles of "the free market."

From Smith to Ricardo and Mill, classical liberalism was a revolutionary doctrine that attacked the privileges of the great landlords and the mercantile interests. Today, we see vulgar libertarians perverting "free market" rhetoric to defend the contemporary institution that most closely resembles, in terms of power and privilege, the landed oligarchies and mercantilists of the Old Regime: the giant corporation. When the "free market" is perverted to defend such odious interests, it's not hard to see why sane people view it with the same apprehension they normally reserve for the bubonic plague. Make no mistake: I hate such commentary, and the agenda behind it, with every fiber of my being. But it's not the free market.

If Germany had won the war, there would probably be a mushroom proliferation of Nazi "free market" think tanks (not inconceivably staffed by a considerable portion of the Austrian diaspora returned from America) defending the profits of Krupp and I.G. Farben in terms of "free market principles," along with the Nazi equivalent of Nike sweatshops in Eastern Europe and black Africa. All decent people would hate such intellectual vermin and their monstrous version of the "free market." The version of the "free market" defended by neoliberals and vulgar libertarians in our own world is only better in degree, and even that probably not by much.

Klein uses the term "disaster capitalism" to refer to the neoliberal modus operandi of "waiting for a major crisis, then selling off pieces of the state to private players while citizens [are] still reeling from the shock, then quickly making the 'reforms' permanent."

It's a very real phenomenon. As an account of the process of neoliberal "reform" as it occurred in country after country, and a chronicle of the corrupt collusion between government and corporate interests in formulating the "reforms," it is an outstanding reference work. The endnotes alone are immensely valuable.

My main objection, to repeat, is to her misuse of the term "free market" to describe such policies. Most of the examples of "free market reform" Klein describes could be more accurately described as "economic fascism." What passes for "free market reform," "deregulation," and "privatization" among the neoliberals is probably at least as statist as the various social democratic and mixed economy models to which neoliberalism is opposed. As Nicholas Hildyard argues in "The Myth of the Minimalist State,"

Far from doing away with state bureaucracy, free market [sic] policies have in fact reorganised it. While the privatisation of state industries and assets has certainly cut down the direct involvement of the state in the production and distribution of many goods and services, the process has been accompanied by new state regulations, subsidies and institutions aimed at introducing and entrenching a "favourable environment" for the newly-privatised industries.

The state has actually played a central role in implementing free market [sic] policies and, moreover, has a continued "intimate and ubiquitous" involvement in regulating the minutiae of the market economy -- a direct consequence of the hand-in-glove relationship that free market [sic] governments have fostered between "adjusted" state institutions and market interests....

A good example is the standard neoliberal model of "privatization," as carried out by Milton Friedman in Chile and Jeffrey Sachs in Russia. As Klein herself puts it in regard to New Orleans' massive post-Katrina conversion to charter schools (involving almost the entire school system), neoliberal "privatization" of public functions usually results in "publicly funded institutions run by private entities according to their own rules." [p. 5] Another variant of the same phenomenon is taxpayer-funded vouchers, a favorite of the folks at Cato, the ASI, and the Heritage Foundation. It was implemented in Pinochet's Chile, among other places.

Perhaps the most egregious example of this phenomenon is the fascist economy that has grown up around the national security state, including both the "private" firms that act as camp followers to the U.S. military in its wars abroad, and the "private" firms contracting with Homeland Security and other police state agencies at home. Klein, who aptly calls it the "disaster capitalism complex," considers it the booming sector of the economy in the same way as housing until recently, and the tech sector before that.

In my opinion the very term "private sector," in regard to such entities, is grossly misleading. Big business interests whose profits depend on direct subsidies and protections from the state are, in fact, a part of the state. If Marx was right in calling the state "the executive committee of the ruling class"--and I think he was--then the owners and managers of the corporate economy make up the lion's share of that ruling class. Corporate directors and senior management from the state capitalist sector constantly shuffle, in classic revolving door style, into political appointments in the state apparatus and then back to "private" employment.

Brad Spangler put it this way:

...one robber (the literal apparatus of government) keeps you covered with a pistol while the second (representing State-allied corporations) just holds the bag that you have to drop your wristwatch, wallet and car keys in. To say that your interaction with the bagman was a “voluntary transaction” is an absurdity. Such nonsense should be condemned by all libertarians. Both gunman and bagman together are the true State.

Large corporations are neither passive victims nor passive beneficiaries of the state; they act through the state. Or rather, to a large extent they are the state. It makes about as much sense to separate them from the state, as it would have made to separate the landholding class from the state in Medieval times.

And here's how the Libertarian Alliance's Sean Gabb described the model of fake "privatization" promoted by the Adam Smith Institute:

As reconstructed in the 1980s - partly by the Adam Smith Institute - the new statism is different. It looks like private enterprise. It makes a profit. Those in charge of it are paid vast salaries, and smugly believe they are worth every penny....

But for all its external appearance, the reality is statism. And because it makes a profit, it is more stable than the old. It is also more pervasive. Look at these privatised companies, with their boards full of retired politicians, their cosy relationships with the regulators, their quick and easy ways to get whatever privileges they want....

As with National Socialism in Germany, the new statism is leading to the abolition of the distinction between public and private. Security companies, for example, are being awarded contracts to ferry defendants between prison and court, and in some cases to build and operate prisons. This has been sold to us on the - perfectly correct - grounds that it ensures better value for money. But it also involves grants of state powers of coercion to private organisations. All over the country, private companies are being given powers of surveillance and control greater than the Police used to possess.

....There has been no diminution in the economic power of the State, only a change in its mode of operation....

Sometimes neoliberal "privatization" involves not just the contracting out of public functions with continued taxpayer funding, but the auctioning off of state assets. The process generally goes something like this: The World Bank cultivates technocratic elites within a Third World government, educating them in the neoliberal model of economic development and promoting their autonomy from democratic political pressure. The World Bank acts collusively with these elites to arrange loans for building the transportation and utility infrastructure needed for Western industry to build profitable facilities in the country. When the country incurs a crushing debt load, owing to the collusion between domestic technocratic elites and the World Bank, the World Bank and IMF use the debt as leverage to impose a "structural adjustment reforms," including "privatization" of the very infrastructure that was created at taxpayer expense to subsidize Western industry. Naturally, the infrastructure is bought up by Western capital--the same interests it was originally built at taxpayer expense to serve--for pennies on the dollar. During the privatization process, the Third World government may invest more money in the infrastructure, to make it salable, than it gets from the sale. And following "privatization," the new owners' first order of business will be systematic asset stripping, with the income from sale of capital assets exceeding what they paid for the infrastructure. Pretty neat, huh?

Sean Corrigan described the process in more colorful terms:

Does he [Treasury Secretary O'Neill] not know that the whole IMF-US Treasury carpet-bagging strategy of full-spectrum dominance is based on promoting unproductive government-led indebtedness abroad, at increasingly usurious rates of interest, and then – either before or, more often these days, after, the point of default – bailing out the Western banks who have been the agents provocateurs of this financial Operation Overlord, with newly-minted dollars, to the detriment of the citizenry at home?

Is he not aware that, subsequent to the collapse, these latter-day Reconstructionists must be allowed to swoop and to buy controlling ownership stakes in resources and productive capital made ludicrously cheap by devaluation, or outright monetary collapse?

Does he not understand that he must simultaneously coerce the target nation into sweating its people to churn out export goods in order to service the newly refinanced debt...?

Joseph Stromberg referred to such privatization of state assets as "funny auctions, that amounted to new expropriations by domestic and foreign investors."

Proposals to auction off Iraqi properties, with the state acting as effective owner, would likely lead, if implemented, to a massive alienation of resources into the hands of select foreign interests.

...and for Stromberg, a real free market libertarian, remember, this is a bad thing.

The textbook case of "funny auctions" was the looting carried out under the supervision of Yeltsin and Sachs. The Russian state ministers transferred enormous public funds into banks owned by the oligarchs--themselves major figures in the state and former Communist Party leadership. The oligarch's banks, in turn, conducted the privatization auctions of state industry--and they bid on it themselves, using the embezzled funds received from the government. [p. 233] Klein refers to it as "the strip mining of an industrialized state." [p. 242] This, by the way--and Yeltsin's suspension of parliament and rule by decree--went largely unremarked on by the same people currently squealing about Putin's authoritarianism. The difference is that Putin is using his muscle against the oligarchs and even Western capitalist interests.

Neoliberal "privatization" may leave a larger share of functions under nominally private direction, but the new "private" enterprises operate within a web of protections, advantages and subsidies defined by the state.

A much better model for privatization is that of Murray Rothbard and Karl Hess. As Hess argued in 1969, real free market libertarians don't reflexively defend anything that's called "property."

The truth, of course, is that libertarianism wants to advance principles of property but that it in no way wishes to defend, willy nilly, all property which now is called private.

Much of that property is stolen. Much is of dubious title. All of it is deeply intertwined with an immoral, coercive state system which has condoned, built on, and profited from slavery; has expanded through and exploited a brutal and aggressive imperial and colonial foreign policy, and continues to hold the people in a roughly serf-master relationship to political-economic power concentrations.

Hess called for creative libertarian analysis, confronting issues of "the revolutionary treatment of stolen "private" and "public" property in libertarian, radical, and revolutionary terms." For example, he asked, "What... should happen to General Motors in a liberated society?"--a question that's never been raised at the Cato Institute or the Heritage Foundation, I'll wager. ["The Student Revolution," The Libertarian (soon renamed The Libertarian Forum) May 1, 1969, p. 2.]

Rothbard attempted to provide some answers to the question Hess raised. He argued that state property should simply be treated as "unowned," and then homesteaded by those currently occupying and using it. In the case of utilities and other public services, this would mean turning them into consumer cooperatives. Universities would be turned either into consumer cooperatives, owned by student guilds, or into producer co-ops owned by the faculty. State-owned industry should be handed over to its workers. He even argued that private industry that got the majority of its profits from the state should be treated as state property and homesteaded by its workers. ["Confiscation and the Homestead Principle," The Libertarian Forum June 15, 1969 p. 3]

In the specific case of the post-Soviet economies and other state socialist countries attempting market reforms, he argued in "How and how not to desocialize" that state property should be privatized on the principle of "all land to the peasants, all factories to the workers!" ["How and How Not to Desocialize," The Review of Austrian Economics 6:1 (1992) 65-77]

That was, incidentally, the form of privatization actually envisioned by Solidarity at the fall of the pro-Soviet regime: the transformation of all state enterprises into workers' co-ops. But under the influence of the Chicagoids who infested Poland, with their dire threats of capital flight, the new Solidarity government was browbeaten into opening the country up to corporate looting. That was the model envisioned by Gorbachev (surely a more legitimate claim to the name of "free market reform" than what actually occurred), before a wrathful deity visited Russia with the triple calamity of Yeltsin, Sachs, and the oligarchs. I'll take emerods in my secret parts any day.

Neoliberal policies depart from genuine free market principles in numerous other ways.

For example, they tend to be adopted in contexts where corporate elites desire to roll back the bargaining power of labor. The governments that adopt Chicago School policies also tend to terrorize unions and other forms of poltical organization by workers in ways that no genuine believer in free markets could possibly support (any implied commentary on George Reisman is very much intentional).

A large part of he appeal of Chicago School economics was that, at a time when radical-left ideas about workers' power were gaining ground around the world, it provided a way to defend the interests of owners... [p. 52]

As the countries of the South American cone, one after another, fell under military dictatorships and played host to pestilential swarms of Chicago Boys, the first targets of their terror were the trade unions and their parties. And they were actively encouraged by Kissinger. [p. 97] The main purpose of the infamous Operation Condor was to organize mutual support among the intelligence operations of the South American military dictatorships, in identifying and assassinating the leaders of the left-wing opposition. In several countries of the region, military coups were followed immediately by raids on trade union headquarters, and by military raids on factories in which union organizers and radicals--helpfully pointed out by managers--were "disappeared." [p. 106]

Now, even by the avowed principles of the vulgar libertarians, labor and capital are supposedly coequal "factors of production." Imagine the reaction at Cato or the ASI if corporate headquarters were raided and terrorized in the way that union headquarters were, or if prominent and influential capitalists were tortured, murdered, and "disappeared," and later discovered in ditches with their faces hacked off, as a means of intimidating them and reducing the bargaining power of capital in the market. The difference, for the Catoids and Misoids, is that such treatment of labor is a regrettable necessity, or an aberration in the "political" realm that did not affect the fundamentally "free market" orientation of the regime; identical policies carried out against capital, on the otherhand, would be directly repugnant to their "free market" principles. The control of the state by the owners of one "factor of production" (capital), and the use of state power to terrorize the owners of another "factor of production" (labor-power) on behalf of capital, is just as repugnant to free market principles as the reverse case.

There's nothing inherent in free market principles, as such, that implies greater affinity for owners than workers. In fact, one can make a free market argument (as I repeatedly have) that the state's interventions in the market have served mainly the interests of the owning classes, to the great detriment of the bargaining power of labor. Taft-Hartley, for example, surely had that effect. So did the draconian police state regime imposed on the British working classes (e.g. the Laws of Settlement, the Riot Act, and the Combination Laws) during the early Industrial Revolution. The state's enforcement of artificial scarcity in land and capital, by maintaining entry barriers and other special privileges on behalf of landlords and capitalists, makes the means of production artificially scarce and expensive for workers so that they are forced to sell their labor in a buyer's market. Instead of jobs competing for workers and driving down the rate of profit until wages equal the full product of labor, which would be the case in a free market without such special privilege, we have instead a state of affairs in which workers are forced to compete for jobs and drive down wages, and pay a form of tribute for access to the means of production.

The neoliberal version of "free markets" tends to reflexively support any title to "private property" in land, with absolutely no regard to issues of just acquisition. In all the Latin American countries where the Chicago Boys were given free rein, land reforms were reversed and the peasants' land restored to the latifundistas and other feudal landed oligarchs. And every time a left-leaning Third World government nullifies the illegitimate titles of such feudal elites, and gives the land to its rightful owners--the peasants working it--the predictable squeals of outrage start among the Catoids.

The only form of property the Catoids and other vulgar libertarians don't respect is the property of ordinary working people. In Sri Lanka after the Tsunami, and in New Orleans after Katrina, one of the top items on the agenda, as a condition for disaster relief aid, was to eliminate legal barriers to expropriating and evicting poor people from land desired by commercial interests. In Sri Lanka, the reconstruction plan was drafted by a coalition of businesspeople, of whom the largest portion represented the tourist industry that coveted beachfront property. The plan they came up with included the eviction of entire beachfront villages so their land could be used for hotels, and the use of disaster relief funds to provide corporate welfare for superhighways and industrial port facilities.[pp. 292-293, 297] The same pattern was followed in India and Indonesia, with peasants forbidden to rebuild on their own land, driven into holding camps, and their land (and lots of aid) given to hotel companies. [p. 399] In Honduras after Hurricane Mitch, the mining laws were changed to make it easier to evict peasants from land the mining companies wanted. [p. 395]

But there is absolutely no legitimate basis in free market principle for the artificial property rights of feudal landlords. I admit I'm not a typical free market advocate in that regard. As an individualist anarchist, I tend to be hostile toward absentee landlords in principle; that sets me apart from the libertarian mainstream, which is predominantly Lockean (with a large minority of Georgists thrown in for good measure). But even the Lockean principles of Murray Rothbard and his followers are fundamentally hostile to the artificial property rights of quasi-feudal landlords like the latifundistas of Latin America. Rothbard denounced such feudal property titles in no uncertain terms.

10. The Problem of Land Theft

...suppose that centuries ago, Smith was tilling the soil and therefore legitimately owning the land; and then that Jones came along and settled down near Smith, claiming by use of coercion the title to Smith’s land, and extracting payment or “rent” from Smith for the privilege of continuing to till the soil. Suppose that now, centuries later, Smith’s descendants (or, for that matter, other unrelated families) are now tilling the soil, while Jones’s descendants, or those who purchased their claims, still continue to exact tribute from the modern tillers. Where is the true property right in such a case? It should be clear that here, just as in the case of slavery, we have a case of continuing aggression against the true owners—the true possessors—of the land, the tillers, or peasants, by the illegitimate owner, the man whose original and continuing claim to the land and its fruits has come from coercion and violence.... In this case of what we might call “feudalism” or “land monopoly,” the feudal or monopolist landlords have no legitimate claim to the property. The current “tenants,” or peasants, should be the absolute owners of their property, and, as in the case of slavery, the land titles should be transferred to the peasants, without compensation to the monopoly landlords....

11. Land Monopoly, Past and Present

Land monopoly is far more widespread in the modern world than most people—especially most Americans—believe. In the undeveloped world, especially in Asia, the Middle East, and Latin America, feudal landholding is a crucial social and economic problem—with or without quasi-serf impositions on the persons of the peasantry.... [American "free market"] preachments naturally fall on deaf ears, because “free market” for American conservatives obviously does not encompass an end to feudalism and land monopoly and the transfer of title to these lands, without compensation, to the peasantry....

American conservatives... exhort the backward countries on the virtues and the importance of private foreign investment from the advanced countries, and of allowing a favorable climate for this investment, free from governmental harassment. This is all very true, but is again often unreal to the undeveloped peoples, because the conservatives persistently fail to distinguish between legitimate, free-market foreign investment, as against investment based upon monopoly concessions and vast land grants by the undeveloped states. To the extent that foreign investments are based on land monopoly and aggression against the peasantry, to that extent do foreign capitalists take on the aspects of feudal landlords, and must be dealt with in the same way....

Another divergence of neoliberal "market reform" from the real thing is its treatment of odious debt. In country after country, even as the neoliberals lauded the global "sweep of democracy," they refused any forgiveness of debts acquired by the previous military regimes--such debts acquired, by the way, largely to create the subsidized transportation and utility infrastructure necessary to render Western capital investments profitable (when not used, that is, to fund the repressive military and police apparatus). [pp. 156-157]

The neoliberal version of "market reform," as opposed to the real thing, tends to take a jaundiced view of tort liability law and its use to hold corporate interests accountable for the harm they do. We've seen this domestically, with "tort reform" being a top item on the corporate agenda during the past two decades. In Iraq, the CPA puppet regime indemnified American crony capitalists of liability for any actions taken in that country. [p. 358] In effect, Bremer resurrected the venerable principle of extraterritoriality. Real free market libertarians, on the other hand, view a vigorous tort law regime as the free market alternative to the regulatory state. Real free market libertarians consider the evisceration of traditional common law liability in the nineteenth century, by judges in the service of commerical interests, to be a bad thing. In a genuine free market order, corporations that dumped waste or polluted groundwater would be eaten alive by lawsuits.

Finally, although Klein devotes little attention to it, a central preoccupation of the Washington Consensus, and in the model of disaster capitalism imposed in the areas under its thumb, is "intellectual property" [sic]. Although I haven't managed to track it down, I still recall a statement by Paul Bremer in 2003 announcing that the goal of the Coalition Political Authority was to create a market democracy with "strong intellectual property rights." Now so-called "intellectual property" is an abomination to free market principles.

The main function of patents, domestically, was to enable the cartelization of industry through patent control. General Electric and Westinghouse, for example, cartelized the home appliance industry by an exchange of patents. The power of AT&T was rooted in the Bell Patent Association. Internationally, patents give transnational corporations a monopoly on the newest generation of production technology, effectively enabling them to lock host countries into supplying sweatshop labor for foreign-owned industry. "Intellectual property" is especially important to the new global economy. It's hardly coincidental that the sectors of the American corporate economy that flourish in the global economy are all heavily dependent either on direct subsidies, on patents and copyrights, or both: agribusiness and biotech, software, entertainment, electronics, and arms. If patents, copyrights, and excessive trademark rights disappeared, most of the global economy would vanish right along with them. The first order of business of any genuine free market regime would be to repudiate--totally--the IP accords of the Uruguay Round of GATT. The first order of business in Washington, of course, would be to declare it a terror state.

Klein herself admits at times that the neoliberal policies she rightly condemns are not consistent with genuine free market principles. For example:

Friedman framed his movement as an attempt to free the market from the state, but the real-world track record of what happens when his purist vision is realized is rather different. In every country where Chicago School policies have been applied over the past 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. In Russia, the billionaire private players in the alliance are called "the oligarchs"; in China, "the princelings"; in Chile, "the piranhas"; in the U.S., the Bush-Cheney campaign "Pioneers." Far from freeing the market from the state, these political and corporate elites have simply merged, trading favors to secure the right to appropriate precious resources previously held in the public domain--from Russia's oil fields, to China's collective lands, to the no-bid reconstruction contracts for work in Iraq.

A more accurage term for a system that erases the boundaries between Big Government and Big Business is not liberal, conservative or capitalist but corporatist. Its main characteristics are 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. For those inside the bubble of extreme wealth created by such an arrangement, there can be no more profitable way to organize a society. But because of the obvious drawbacks for the vast majority of the population left outside the bubble, other features of the corporatist state tend to include aggressive surveillance (once again, with government and large corporations trading favors and contracts), mass incarceration, shrinking civil liberties and often, though not always, torture. [p. 15]

It's clear that Chile was never the laboratory of "pure" free markets that is cheerleaders claimed. Instead, it was a country where a small elite leapt from wealthy to super-rich in extremely short order--a highly profitable formula bankrolled by debt and heavily subsidized (then bailed out) with public funds. When the hype and salesmanship behind the miracle are stripped away, Chile under Pinochet and the Chicago Boys was not a capitalist state featuring a liberated market but a corporatist one. Corporatism, or "corporativism," originally referred to Mussolini's model of a police state run as an alliance of the three major power sources in society--government, businesses and trade unions--all collaborating to guarantee order in the name of nationalism. What Chile pioneered under Pinochet was an evolution of corporatism: a mutually supporting alliance between a police state and large corporations, joining forces to wage all-out war on the third power sector--the workers--thereby drastically increasing the alliance's share of the national wealth....

...[P]erhaps shock treatment was never really about jolting the economy into health. Perhaps it was meant to do exactly what it did--hoover wealth up to the top and shock much of the middle class out of existence. [p. 86]

...[China] is a mirror of the corporatist state first pioneered in Chile under Pinochet: a revolving door between corporate and political elites who combine their power to eliminate workers as an organized political force. [p. 190]

But following every such burst of clarity, she immediately resumes identifying the neoliberal agenda with the "free market." For example, the passage on p. 15 block quoted above is followed directly, in the very next paragraph, by this sentence: "From Chile to China to Iraq, torture has been a silent partner in the global free-market crusade." By my count, she misuses "free market" in this way some times.

I think I understand why she does it. That is, after all, the conventional usage of "free market" in mainstream American politics and in the mainstream press. Just this past week, I heard a pinhead on some conservative talk radio show contrast the Canadian single payer healthcare system to "our free market system" of healthcare--the latter industry being, in fact, about as heavily subsidized, protected and cartelized as the aerospace industry.

Although she seems aware that what the neoliberal politicians and journalists call the "free market" agenda is in fact a highly statist form of corporatism, she does not seem to be aware that their use of the free market label is heavily contested by a genuine, philosophically consistent strand of free market thought. Although she often judges the neoliberal version of "free markets" by their corporatist reality, she neglects even to consider the possibility of an intellectually honest free market movement that judges such corporatism illegitimate in terms of genuine free market principles.

And in taking the neoliberal use of "free market" at face value, she also seems unaware of just what an enormous ideological victory she's handing the corporate ruling class.

As Sean Gabb argued, it's about as legitimate to identify the existing neoliberal model of corporate globalization with "free markets" and "free trade" as it would be to call the Soviet oligarchy under Stalin with "workers' power." The transnational corporations and financial elites, and the neoliberal court intellectuals who service them, have appropriated the language and symbolism of the classical liberal movement to legitimize their corrupt power interests. In much the same way, Stalin appropriated the libertarian and humanist symbolism of the nineteenth socialist movement to letitimize the exploitative class system under the Party apparat.

The neoliberals have no more right to the heritage of the classical liberal movement--to the thought of Thomas Hodgskin, Benjamin Tucker, Lysander Spooner, and Franz Oppenheimer--than Stalin had to the red banner and the Internationale. The language of free market liberalism ought to burn their filthy mouths; by their very use of the term, they set themselves up as an abomination of desolation in the holy place.

Most importantly, one of the most effective weapons we have against corporate power and its intellectual mouthpieces is to demonize the neoliberals in terms of their own professed "free market values," and show them up for the corporate welfare parasites they really are.

There is, in fact, a considerable degree of mirror imaging between the mainstream right and left, when it comes to this understanding of free markets. The corporate economy and its court intellectuals have a vested interest in promoting the belief that big business got that way because of superior efficiency and other competitive virtue in the "free market." Big government liberals, on the other hand, have a parallel vested interest in pretending that the concentration of wealth and corporate power is the inevitable result of the normal market process, and the only way to stop it is to create a centralized government bureaucracy run by them.

Klein buys into the liberal side of this matrix reality when she regurgitates Art Schlesinger's goo-goo myth of the New Deal, referring to the Great Depression as a "market-created disaster" and the New Deal as "the end of laissez-faire." [p. 54]

A genuine laissez-faire economy would have produced something about as far from the state of affairs in 1929 as you could get. Absent the role of the state-promoted national railroad system in creating a centralized national market for firms operating on a national scale, absent the cartelizing effects of patents and tariffs, and absent the cartelizing effects of "Progressive" Era regulation, I would expect the American pattern of industrialization to have looked a lot more like something envisioned by Kropotkin and Lewis Mumford, and a lot less like something out of Schumpeter and Chandler.

Klein also buys into the Schlesingerite idea that American big business "grudgingly accepted" the New Deal. [p. 251] Big business didn't grudgingly accept the New Deal; it designed the New Deal. I strongly recommend G. William Domhoff's work (especially The Power Elite and the State and The Higher Circles) on the role of GE's Gerard Swope and the Business Advisory Council in formulating FDR's economic agenda. The blueprint they originally came out with, the NIRA, was a classic example of the kind of corporatist economy that Klein refers to elsewhere. It might have come from the desk of Hjalmar Schacht in Nazi Germany: it essentially organized every major industry into a state-authorized and state-protected cartel, with the avowed purpose of restricting production and keeping up prices. In other words, had it been allowed to stand it would have done, successfully, exactly what the great trusts at the turn of the century had tried and failed to do, by private means.

While acknowledging a legitimate role for markets, Klein calls for tempering "market fundamentalism" by such expedients as

requir[ing] corporations to pay decent wages, to respect the right of workers to form unions, and for governments to tax and redistribute wealth so that the sharp inequalities that mark the corporate state are reduced. [p. 20]

This implies that such "sharp inequalities" actually result from the unregulated market, and not from active state intervention on behalf of privileged capitalist elites. In fact our billionaire plutocracy and CEOs like Welch and Nardelli are not the products of a free market. They're turtles on fenceposts. In a genuine free market, organized around the principle of equal exchange and free from special privilege, the natural tendency is for prices to fall to production cost and for short-term entrepreneurial profits for innovative behavior to fall to zero as competitors enter the market and adopt new techniques. The only way to draw perpetual profits from innovation is to erect market barriers. R.A. Wilson made essentially this argument in The Illuminatus! Trilogy:

If you and I exchange equal goods, that is trade: neither of us profits and neither of us loses. But if we exchange unequal goods, one of us profits and the other loses. Mathematically. Certainly. Now, such mathematically unequal exchanges will always occur because some traders will be shrewder than others. But in total freedom— in anarchy— such unequal exchanges will be sporadic and irregular. A phenomenon of unpredictable periodicity, mathematically speaking. Now look about you, professor— raise your nose from your great books and survey the actual world as it is— and you will not observe such unpredictable functions. You will observe, instead, a mathematically smooth function, a steady profit accruing to one group and an equally steady loss accumulating for all others. Why is this, professor? Because the system is not free or random, any mathematician would tell you a priori. Well, then, where is the determining function, the factor that controls the other variables? You have named it yourself, or Mr. Adler has: the Great Tradition. Privilege, I prefer to call it. When A meets B in the marketplace, they do not bargain as equals. A bargains from a position of privilege; hence, he always profits and B always loses. There is no more Free Market here than there is on the other side of the Iron Curtain.

Interestingly, an article in New Scientist observed that wealth among the richest 3% of the population followed a power law distribution described by Pareto: in layman's terms, "to him that hath, much shall be given." The distribution of wealth for everyone else, on the other hand, corresponded to the law that describes the spread of energies of atoms in a gas.

Klein also takes at face value the corporate liberal rhetoric used to sell the IMF and World Bank in the 1940s [p. 162]--when, as pointed out by Gabriel Kolko in The Politics of War, their actual purpose was to subsidize the disposal of surplus American goods and capital in foreign markets. The World Bank and IMF were created as an adjunct of William Appleman Williams' "Open Door Imperialism," a safety valve for the chronic overproduction and overaccumulation under state capitalism.

Klein sees the spread of anti-Washington and anti-neoliberal regimes, especially in Latin America, as a sign of hope; this is the subject of her conclusion, appropriately titled "Shock Wears Off." The usual suspects at Cato, predictably, have turned Chavez and Morales as whipping boys. But the economic model pursued by the "Bolivarian revolution" is arguably no more statist than that of the Washington consensus. The land policy of Chavez and Morales, and of the Landless Workers Movement in Brazil, is far more legitimate from a free market standpoint than the Catoids' instinctive sympathy for the latifundistas. And Chavez's nationalizations and his subsidies to the cooperatives are no more statist than the policies pursued under the Washington consensus; they're just statist in a different direction. Frankly, when a former ruling class starts tasting a bit of the repressive medicine it was formerly accustomed to spooning out, it's hard for me to work up too much moral outrage.

The Catoid reaction to Chavez is fairly typical of vulgar libertarianism: corporate welfare and special protections for the rich are kinda sorta bad, in principle, maybe, I guess, and we oughta possibly, maybe, get around to writing a position paper on it someday... But welfare and protections for the poor and for aid to cooperative enterprise, now--they're flaming red ruin on wheels! A Pinochet who terrorizes unions and transfers land from the peasants to the oligarchy, well, that's too bad, I guess, but you've gotta break a few eggs, and yada yada yada.... But a Chavez who uses a bit of muscle on Western-owned corporations--why that's an outrage!

The reaction among American elite circles to the authoritarianism of Yeltsin and that of Chavez, respectively, speaks volumes. Nothing Chavez has done yet has remotely approached the openly avowed "Pinochet option" taken by Yeltsin, and his use of tanks to shut down the Russian parliament. None of Chavez's nationalizations remotely approaches the sheer scale of looting that transferred state assets directly into the bank accounts of the oligarchs.

Like Klein, I also see Chavez and allied regimes as a net positive force. Until about a decade ago, the Washington Consensus was almost universally regarded as "the only game in town." Now these new regimes, as statist in many ways as they admittedly are, are presenting a fundamental challenge to the statist global order that corporate capital depends on. The Washington Consensus is no longer the only game in town. If we're going to have one superpower, it's better that it be restrained by another one.

I've argued in the past that one of the best things we could hope for would be a concerted repudiation of neoliberalism, by a large enough number of Third World countries that they couldn't be crushed by American invasion or covert action. I can imagine a substantial agenda of "libertarian socialist" policies to be pursued by such a coalition, that would be closer to genuine free market principles than anything festering in the bowels of the Heritage Foundation. For starters, genuine land reform: nullifying the feudal titles of the landed oligarchies, granting full and permanent title to those cultivating, and restoring the land stolen in recent decades to those evicted from it (or their descendants). For another, a model of privatization that turns state services into consumer cooperatives, and state industry into worker cooperatives. For yet another, absolute and total repudiation of so-called "intellectual property" [sic] accords. Such a Third World coalition might wield, as its doomsday weapon, the threat of a coordinated repudiation of debt and/or of the dollar as reserve currency, and call on a coalition of Eurasian nuclear powers to protect them from military attack.

I am no social democrat. I'm under no illusions about the central role of big business in formulating the New Deal. I don't like statism of any kind. In my opinion, New Deal liberalism and the Reagan-Thatcher model of neoliberalism are like two farmers. The first farmer thinks he can get more work out of his livestock, in the long run, if he feeds them well and gives them comfortable shelter and sufficient rest. The second farmer thinks he can get more work out of them if he works them to death and then replaces them. There's no question that both "farmers" view us as "livestock," and that their prime concern is with their own profit. But I know which farm I'd rather live on.

Quite frankly, if my only choices are corporate liberalism and social democracy, and a banana republic on the neoliberal model, I'll take the former any day. If I get to choose between the paternalism of Brave New World and the jackboot in my face of 1984, it won't take me long to decide. I'm not ashamed to say that if my only choices are the welfare statist and neoliberal versions of statism, I'll take the kind of statism whose yoke weighs less heavily on my own back.

But my hope is that the social democratic statism of the Chavez-Morales bloc in the Third World, aligned with the European variant of mixed capitalism, will serve as an effective counterbalance against the neoliberal world order, and provide enough breathing room that both systems will be open to genuine libertarian change. My hope is that Chavez's aid to cooperatives and the solidarity economy, when all is said and done, will even out the previous statism in the other direction, and leave in place a decentralized and cooperative economy that will be able to survive on a stable basis when the oil subsidies are withdrawn and Chavez is long gone. My hope, above all, is that, as the two world power blocs fight each other to a standstill, we--the working people in both blocs--can build a genuine alternative from the ground up, in the interstices of both systems. We can build an economic order based on self-governing neighborhoods, cooperatives, LETS systems, peer production, mutual aid associations, human-scale technology, community-supported agriculture, and the informal and household economies, linking all those facets together into a coherent counter-system, that will be ready to replace the corporate economy in the one sphere and the bureaucratic state in the other when the two systems of power reach their limits. We can, in short, build the foundation of the new society within the shell of the old.

Finally: I must stipulate that I regard Klein's symbolic identification of economic shock treatment with the literal electroshocks used by CIA interrogators and Third World secret police as quite forced. Nevertheless, her chapter on the history of the American role in refining and promoting torture, from the development of the techniques in MK Ultra, through their promotion by the Green Berets and SOA in an endless series of atrocities, to the use of the very same techniques against Jose Padilla and the detainees at Gitmo and Abu Ghraib, is a brilliant work of research in its own right. For any serious student of the subject, the chapter alone is worth the price of the book.