Page 2 of
3 BOOK REVIEW Power, passion and
neo-liberalism The Shock
Doctrine
by Naomi
Klein
Reviewed by Walden
Bello
that was a symptom of a deeper
crisis, the growing gap between enormous
productive capacity and limited consumption,
leading to erosion of profitability that Marxists
have called the crisis of overproduction.
In Latin America, the leading critics of
the developmental state
were
found on the left, who charged that the process of
industrial import substitution presided over by
the state was "agotado", or exhausted,
owing to a domestic market limited by a very
unequal distribution of income.
In the
United States and Britain, the experience of
seeing their salaries and savings eroded by double
digit inflation made the middle strata receptive
to the Friedmanite message. In Chile, they were
initially receptive to the left's critique of the
developmental state. But when the left came to
power with a socialist project in 1970, the middle
classes - fearing the rise of the poor, whom they
called rotos, or "lowlifes" - turned on the
left with a vengeance, with the middle-class-based
Christian Democrats joining the right on an
anti-communist platform that shrilly proclaimed a
defense of private property, capitalism, and
"liberty".
Neo-liberal ascendancy
This leads us to the question of how the
neo-liberals came to power. This was not simply a
matter of the elite using the military or
manipulating democracy to impose a neo-liberal
program on a recalcitrant but stunned population,
which is the image that Klein's account -
wittingly or unwittingly - projects. This was not
the case even in Klein's paradigmatic example,
Chile. Neo-liberalism's coming to ascendancy there
involved the elite and the military acting in
concert with a counterrevolutionary middle-class
mass base that controlled the streets, with
Christian Democratic youth joining their more
fascist brethren, Fatherland and Liberty, in
intimidating and beating up partisans of the left.
I know, since as a PhD student doing a
dissertation on the rise of the counterrevolution,
I was nearly beaten up a couple of times by angry
anti-Allende middle class youths who insisted I
was a Cuban agent sent by Fidel to destroy Chile.
Sure, the CIA played a critical role, but it was
in support of an already heated counterrevolution
with a middle-class base, a process that was
reminiscent of Italy and Germany in the post-World
War I period.
In other words, in
practically every instance, neo-liberalism found a
middle class that was disenchanted with the
Keynesian or developmental state or felt
threatened by the left, or both.
The
construction of hegemony This is why to
counter Stiglitz's suggestion that she operates
with a conspiracy paradigm, Klein's
instrumentalist account must be supplemented with
David Harvey's notion of the "construction of
hegemony", a process by which the elite creates a
consensus among the subordinate classes in support
of a neo-liberal project that principally serves
its interests. (David Harvey, A Brief History
of Neo-liberalism (Oxford: Oxford University
Press, 2005.)
In the case of the United
Kingdom, it was not so much the jingoistic
atmosphere of the Falklands War as the ideological
captivation of the middle class by a conservative
leader adept at evoking the themes of freedom, the
individual, and property that was the tipping
point toward neo-liberal reform. Thatcher was an
expert at promoting what Harvey calls a "seductive
possessive individualism" and she "forged consent
through the cultivation of a middle class that
relished the joys of homeownership, private
property, individualism, and the liberation of
entrepreneurial opportunities".
The
construction of consent was the main avenue to
hegemony in the United States, where neo-liberals
deftly connected their free market program to the
agenda of a middle class-based coalition that was
propelled by resentment against minorities that
were allegedly coddled by liberal democrats and by
an inflamed attachment to religious values that
were seen as being under attack from the left.
"Not for the first time," says Harvey, speaking of
the ascendancy of the Republicans under Reagan,
"nor, it is feared, for the last time in history
has a social group voted against its material,
economic, and class interests for cultural,
nationalist, and religious reasons."
Even
some blue-collar workers were in danger of being
co-opted: "Greater freedom and liberty of action
in the labor market could be touted as a virtue
for capital and labor alike, and here, too, it was
not hard to integrate neo-liberal values into the
'common sense' of the work force."
Neo-liberalism, in fact, became so
"commonsensical" that even where social democratic
parties have come to power, displacing the
traditional conservative parties of
neo-liberalism, as they have in Britain, Chile and
the United States, they have not dared to
reassemble the interventionist liberal state and
have made it a point to pay homage to the "magic
of the market". Indeed, it has not been
conservatives but social democrats such as the
Blairites in Britain, the Clintonites in the
United States, and the socialist-led Concertacion
government in Chile, with their rhetoric about
"market-oriented social policies," that have
consolidated the neo-liberal economic regime.
Crisis of the Keynesian state
The book's most important contribution is
its theory of "disaster capitalism". But to fully
appreciate Klein's insight, it is important to go
back to the roots of the crisis of the Keynesian
state and the developmental state in the 1970s
that she glosses over. This crisis, which paved
the way for the neo-liberal ascendancy, had its
origins in what economists have called the crisis
of overaccumulation or overproduction.
The
golden period of postwar growth globally that
skirted major crises for nearly 25 years was due
to the massive creation of effective demand via
rising wages for labor in the North, the
reconstruction of Europe and Japan, and the
import-substituting industrialization in Latin
America and other parts of the South. This dynamic
period came to a close in the mid-1970s, with
stagnation setting in, owing to global productive
capacity outrunning global demand, which was
constrained by continuing deep inequalities in
income distribution.
According to the
calculations of Angus Maddison, the premier expert
on historical statistical trends, the annual rate
of growth of global gross domestic product (GDP)
fell from 4.9% in what is now regarded as the
golden age of the post-World War II Bretton Woods
system, 1950-73, to 3% in 1973-89, a drop of 39%.
These figures reflected the wrenching
combination of stagnation and inflation in the
North, the crisis of import substitution
industrialization in the South, and erosion of
profit margins all around. For global capital,
neo-liberal policies, which included
redistribution of income toward the top via tax
cuts for the rich, deregulation, and an assault on
organized labor, were one escape route from the
crisis of overproduction. Another was
corporate-driven globalization, which opened up
markets in the developing world and moved capital
from high-wage to low-wage areas.
Financialization A third was
what Robert Brenner and others have called
"financialization", or the channeling of
investment toward financial speculation, where
much greater returns were to be derived than in
industry, where profits were largely stagnant.
Feverish speculation triggered the
proliferation of novel sophisticated speculative
instruments like derivatives that escaped
monitoring and regulation. Finance capital also
forced the elimination of capital controls, the
result being the rapid globalization of
speculative capital to take advantage of
differentials in interest and foreign exchange
rates in different capital markets.
These
volatile movements, the result of capital's
liberation from the fetters of the post-war
Bretton Woods financial system, were one source of
instability. What was fundamentally problematic
with speculative finance, however, was that it
boiled down to an effort to squeeze more "value"
out of already created value instead of creating
new value since the latter option was precluded by
the problem of overproduction in the real economy.
But the divergence between momentary
financial indicators like stock prices and real
values can only proceed to a point before reality
bites back and enforces a "correction", like the
recent collapse of stocks tied up in myriad
Byzantine ways to overvalued subprime mortgages.
Corrections or crises have become more frequent in
the neo-liberal era, with one Brookings study
counting about 100 over the past 30 years.
At any rate, neo-liberal policies,
globalization and financialization, while
restoring and strengthening elite power by
redistributing income from the bottom to the top,
have not been effective in reinvigorating global
capital accumulation. Its actual record, Harvey
points out, "turns out to be nothing short of
dismal". Aggregate annual global growth rates came
to 1.4% in the 1980s
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