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The Shock Doctrine: The Rise of Disaster Capitalism

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**FYI** Please note to the best of my knowledge I am NOT related to Naomi Klein.**

If you wonder what happened to the middle class, why poverty is on the rise and what the economies in a democracracy, dictatorship and "communism" have in common, you'll find lots of food for thought in Naomi Klein's THE SHOCK DOCTRINE. Tracing the rise of the "Chicago Boys" laissez-faire economic beliefs, their impact on South America, China, Russia, Poland and South Africa and how it impacted their form of government, Klein makes a compelling argument for the flaws in Milton Friedman's economic "science".

Naomi Klein's book looks at the conflict between Milton Friedman's "laissez-faire" approach to business and government where business is largely unregulated running itself and government is little more than a bare bones system. Friedman believed that the economic theories he espoused would be perfect and that any problems with it would be due to outside forces interferring with his free market world. His approach was in complete contrast to Keynes who believed that the prime mission of politicians and economists was to prevent unemployment and avoid a depression or recession by regulating the market place. People like John Kenneth Galbraith heir to Keynes mantle believe that government was to keep our captalist system fair and prevent business from recreating disasters like the Great Depression and 1929 stock market crash. It is the conflict between these two economic philosphies that our world lives and flourishes.

Klein suggests that "disaster capitalism", i.e., introducing radical changes in terms of economic and government policy when a country is in shock (taking advantage of the fact that massed resistence is unlikely to that change), is allowing the rise of unchecked multi-national corporations that take advantage of and damage our society in the process. She suggests that Friedman's beliefs that the market will manage itself and that free market capitalism undermined the Soviet Union is a idealized and naive belief. The impact for good and bad is that business functions like a plant with too much sunlight and water overgrowing and strangling out everything else in the economic ecosystem and, as a result, causing the system to become unbalanced with human suffering and economic disaster as the result if it is unchecked. She traces a parallel path between the rise of Friedman's economic philosphy and the rise of human rights violations, rise and fall of various governments throughout the world and the opportunism of the business world to exploit it.


She ties all of this together looking at the economic policies and beliefs that are reshaping American society--for good and bad--into a different society where the gap between the wealthy and the poor continues to expand and one where the free market society is being radically retooled. The result is a society where the rich grow richer and the poor grow poorer with the pressured middle class continuing to see their position continually eroding. This book will probably divide those along the more extreme political lines but has the ring of truth nevertheless.

Klein crafts a fascinating book. Although some of her observations might be a bit of a stretch and her arguments occasionally flawed, she provides compelling evidence to support her thesis and connects the dots of events that might otherwise appear to be unrelated. Whether or not you agree with Klein or are outraged by her evidence, you'll find plenty of food for thought in her book.

Naomi Klein's THE SHOCK DOCTRINE is a stunning indictment of American corporatism and institutionalized globalization, on a par with such groundbreaking works as Harrington's THE OTHER AMERICA and Chomsky's HEGEMONY OR SURVIVAL. Comprehensive in its breadth and remarkable for its well-researched depth, Klein's book is a highly readable but disturbing look at how the neoliberal economic tenets of Milton Friedman have been implemented across the world over the last thirty-plus years.

The author's thesis is simply stated: that neoliberal economic programs have repeatedly been implemented without the consent of the governed by creating and/or taking advantage of various forms of national shock therapy. Ms. Klein asserts that in country after country, Friedman and his Chicago School followers have foisted their tripartite economic prescription - privatization, deregulation, and cutbacks in social welfare spending - on an unsuspecting populace through decidedly non-democratic means. In the early years, the primary vehicle was dictatorial military force and accompanying fear of arrest, torture, disappearance, or death. Over time, new organizations such as the IMF and the World Bank were employed instead, using or creating impossible debt burdens to force governments to accept privatization of state-owned industries and services, complete removal of trade barriers and tariffs, forced acceptance of private foreign investment, and widespread layoffs. In more recent years, terrroism and its response as well as natural disasters like hurricanes and tsunamis have wiped clean enough of the slate to impose these Friedmanite policies on people too shocked and focused on recovering to realize what was happening until it was too late.

According to Ms. Klein's thesis, these revolutionary economic programs were the "medicine" deemed necessary by neoliberal, anti-Keynesian economists to bring underdeveloped countries into the global trading community. Ms. Klein argues her case in convincing detail a long chronological line of historical cases. Each chapter in her book surveys one such situation, from Chile under Pinochet and Argentina under military junta through Nicaragua and Honduras, Bolivia under Goni, post-apartheid South Africa, post-Solidarity Poland, Russia under Yeltsin, China since Tiananmen, reconstruction of Iraq after the U.S. invasion, Sri Lanka after the tsunami, Israel after 9/11, and New Orleans post-Katrina. Along the way, she lets various neoliberal economists and Chicago School practitioners speak for themselves - we hear their "shock therapy" views in their own words. As just one example, this arrogant and self-righteous proclamation from the late Professor Friedman: "Only a crisis - actual or perceived - producs real change...our basic function, to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable."

What the author makes inescapably clear is that the world economic order has been largely remade in Milton Friedman's image in the last few decades by adopting programs that would never have been democratically accepted by the common people. Military coups, violence and force, wars, induced hyperinflation, terrorism, preemptive war, climate disasters - these have been the disruptive vehicles that allowed such drastic economic packages to be imposed. Nearly always, they are developed in secrecy and implemented too rapidly for citizens to respond. The end results, as Ms.Klein again makes clear, are massive (and too often, continuing) unemployment, large price increases for essential goods, closing of factories, enormous increases in people living in poverty, explosive concentration of wealth among a small elite, and extraordinary opportunity for rapacious capitalism from American and European corporations.

Ms. Klein argues that from its humble beginnings as an economic philosophy, the neoliberal program has evolved (or perhaps devolved) into a form of corporatism. Particularly in America, government under mostly Republican adminstrations has hollowed itself out, using private sector contractors for nearly every conceivable task. Companies ranging from Lockheed and Halliburton to ChoicePoint, Blackwater, CH2M Hill, and DynCorp exist almost entirely to secure lucrative government contracts to perform work formerly done by government. They now operate in a world the author describes as "disaster capitalism," waiting and salivating over the profits to be made in the next slate-wiping war or disaster, regardless of the human cost. In an ominous closing discussion, Ms. Klein describes the privatization of government in wealthy Atlanta suburbs, a further step in self-serving and preemptive corporatism guaranteed to hollow out whatever is left of major American cities if it becomes a widespread practice.

THE SHOCK DOCTRINE is truly a head-shaking read. One can only marvel at the imperiousness of past (mostly) American governmental behavior, the grievous callousness of it all, the massive human despair and suffering created for no other reason than economic imperialism, and the nauseating greed of (mostly Republican) politicians, former political operatives, and corporate executives who prey like pack wolves on people's powerlessness and insecurity. Reading this book, one can no longer ask the question, "Why do they hate us?" The answer is obvious, and no amount of hyperventilation from Rush Limbaugh, Lou Dobbs, or Fox News can erase the facts and consequences of behavior that we as a country have implicitly or explicitly endorsed.

THE SHOCK DOCTRINE proves itself as shaming of modern American governmental policy as Dee Brown's epic of 19th Century America, BURY MY HEART AT WOUNDED KNEE. It is an essential read for intelligent citizens who want to understand the roots of globalization and its blowback effects on our lives.

Naomi Klein has written this book about the rise of what she calls "disaster capitalism": the global imposition/adoption of Chicago School (neoliberal) economics since the early 1970s. This is a particularly important book because, while many have written about the same topic, I have never seen it treated in a form that is both holistic (ie. a global history) and accessible (ie. largely free from the academic jargon of economics and social theory). The book does suffer from some problems however.

Klein's main thesis is problematic. She writes that the idea of economic shock therapy arose out of the same logic as Electric Convulsive Therapy (ECT). This idea is to create or exploit a destructive event in order to create regression, passivity, and a 'blank slate' on which to build a new order. In supporting this thesis, Klein uses all of Part I of her book to write about psychological torture and the CIA's mind control experiments. She attempts to develop a 'poetics of torture' that links the individual violence of ECT to the structural violence that occurs when neoliberalism is imposed as a governing strategy. Klein is no poet however, and the metaphor seems to die pretty early on in the book. She does thankfully offer a more implicit thesis that she invokes more regularly and supports more thoroughly: free markets did not develop through freedom, but through authoritarian or technocratic interventions.

Secondly, Klein treats capitalism as if it were only 35 years old. Her book however is thematically similar to the work of another woman who wrote on the same issues a century before: Rosa Luxemburg. By only going as far back as the rise of Keynsianism and developmentalism, Klein makes it seem as though neoliberalism is a radical historical exception. Yet it seems that, since the industrial revolution, it is Keynsianism that itself was the historical exception.

This book is mostly comprised of what are essentially case studies. Each case study could certainly be expanded into its own 600-page book, so simplification was necessary. I think that it is also necessary for the author to explicitly admit the complexity of any situation beyond just the power of market forces, which act strongly and ubiquitously but never alone. I think she does admit the shortcomings of her case studies for Israel/Palestine, South Africa, and Iraq (her best and most personally-involved ones), but not for the rest.

All in all, this book is worth a read and is a good introduction to one of the most powerful forces of our times. I just hope that it inspires people to read some other books that illuminate more of the complexities in regards to the theory and practice of neoliberalism in our communities, countries, and worlds. I particularly recommend David Harvey's A Brief History of Neoliberalism.

The late Milton Friedman, the renowned economist, believed that democracy and a free-market economy went hand-in-hand, that the greatest threat to both was nationalization, government regulation, and social spending. He preached this philosophy to his disciples at the University of Chicago School of Economics, and they would go forth spreading the Gospel according to the Book of Milton.

There is also the International Monetary Fund, an agency founded after World War II to help struggling countries and their economies get back on their feet. Many of its managers and policy makers will be graduates of the Chicago School of Economics, and they will begin to impose the Friedman creed wherever possible.

There is only one thing wrong. No population seems to vote in the people who support their brand of economics. Its first success is when a socialist, democratically elected President of Chile, Salvador Allende, is overthrown and killed when the presidential palace is stormed by fascists. Augusto Pinochet comes into power and immediately places the "Chicago boys" in charge of the economy. With the death of price controls and lunch programs, Chileans find themselves spending one quarter of their monthly salaries just to buy bread. They will leave hours earlier for work than usual because they can no longer afford public transportation. Even Chile's social security program, once a model of efficiency is privatized, becoming virtually worthless overnight. Chilean children begin fainting in school from lack of food or milk and many stop attending altogether.

The story of Chile will be repeated in Argentina, Bolivia, China, Peru, Poland, South Africa, Sri Lanka, and Russia where the IMF will demand that borrowers meet Draconian conditions before they lend money. In each case these austerity measures will be made overnight, all at once. A shocked population will come to their senses if such radical changes are made over time. They will be able to organize, mobilize and challenge the implementation of such policies. It has to come all at once, right after elections, a coup, or a hurricane when the population will be too dazed and disorganized to respond. This will be the shock, or as author Naomi Klein calls it, shock doctrine. For those who are still lucid, there is the next step in the shock doctrine, terrorize, torture, or make them disappear.

In each case, in each country, prices on food and other common items will go through the roof, the number of destitute will increase exponentially, and democracy will be squashed. In China, the communist elite will impose these changes on the masses while ensuring that they will profit handsomely from the economic and social upheaval. President Clinton will cheer the economic shock doctrine instituted by Boris Yeltsin as he dissolves the Court and the Parliament, bringing the Russian army out to attack the latter, which killed more than 300 people and several deputies. A new class of super mega apparatchiks will emerge increasing the divide between the "have mores" and the "have nothings," and Russians will put up with a few KGB murders and disappearances for the promise of stability that Vladimir Putin will provide.

The Polish people, fed up with the broken promises of Solidarity who succumbed to IMF demands to relieve them of their crushing debt, will be thrown out of office in 1996 elections. Nelson Mandela will focus so much on achieving political control of South Africa he will neglect the real political power of controlling the economic engines that run the nation. He soon discovers that without economic power, he has no political muscle. He becomes a slave of economic apartheid. Shanty towns will get larger and people will become poorer. The population is disillusioned with their new-found "equality." The tsunami in Sri Lanka will allow the hoteliers to make a deal with the government, and place security guards around the beaches of what once belonged to villagers who fished from there for hundreds of years. After all, what right did they have to be there? Besides, the smell of fish made their guests complain. They will be driven inland where they will be given boats and houses, just no access to water to fish.

But that could never be allowed to happen here, or could it? One of the first things President George W. Bush does after he finally realizes what happened in New Orleans after Hurricane Katrina is remove union wage scale that contractors would have to pay to laborers. (After all, it is the corporations that must benefit the most from disaster capitalism, not the people of New Orleans). The shock has begun as developers are already seeing how they can take over the utterly destroyed neighborhoods of the poor and turn them into luxury condos and hotels. Charter schools are replacing the public schools and teachers. Contractors will wake up illegal laborers in the night to tell them that the Immigration officers are coming to arrest them. They will run away without having been paid. The Federal Emergency Management Agency, once a functional, effective, national emergency response unit, has had so much work farmed out to contractors, it cannot mount an effective response to the disaster. They will pay top dollar for roofing that can be done at a fraction of the cost. They will supply trailers for homeless that are made of material unsafe to breathe, and people will die in a stadium because no one can take care of them.

In Iraq, the local population rose up after our invasion and began to elect their own leaders and councils. They announced plans to take over city governments, services and industry. When Iraqis were asked what they wanted more of when surveyed, they clamored for more government jobs. But L. Paul Bremer wasn't about to allow democracy to get in the way of disaster capitalism. He ordered the military to disband all local democratic initiatives, which he replaced with a council not chosen by the Iraqi people, but by him.

George Bush talks democracy (in Iraq), but walks capitalism by performing a Marshal Plan in reverse. The original plan implemented right after World War II called for keeping foreign investors out of Germany. Our government wanted the Germans to be able to build up their own industry and wealth. Not so in Iraq. Unemployed and starving Iraqis watched how American contractors brought in cheap Asian labor to rebuild their country. Iraqi unemployment remains at approximately sixty percent. American oil companies and American banks make long-term contracts with the new Iraqi government, and the IMF wants Iraq to sell off its own oil industry to foreigners. The second largest military commitment in Iraq, after the Americans, will be mercenaries.

Does anyone wonder why there is an insurgency? "No 'capitalization' without representation!"

The author makes it clear. In every country that holds free elections, no one votes for the shock doctrine of disaster capitalism. No one will vote away social programs, controls, or selling off their industries and companies to foreign investors. Klein's conclusion? Capitalism and democracy are not inherently compatible as Friedman always believed. It was just the opposite.

This book is powerful and moving. As I reread my review, I feel I have not done her book justice in relating the power and depth of Naomi Klein's words. Her documentation is exceptional. Her ability to craft together different events and present them in a coherent and believable hypothesis is necromantic.

Once in a while you find a book, a special book, one you keep as a reference, a "go-to" one. This is such a text. It is one of the two most important I have read for 2008. I have enough admiration for this woman's work that I would buy anything she writes, without hesitation. Her writing will hold your attention.

"The Shock Doctrine" is eye-opening and of course, absolutely shocking.






July 14, 2008
Bastille Day--How Appropriate.

In THE SHOCK DOCTRINE, Naomi Klein brilliantly proposes a compelling counter-story to the prevailing fable of free market infallibility. Buttressed by painstaking and wide-ranging research, and an ability to see connections where others only see coincidence, Ms. Klein amply shows that profit-making is not the essence of democracy as Milton Friedman and his minions would have it. She shows instead that the machinery of the state and the requirements of "disaster capitalism" are now so tightly synchronized in their exploitation of disasters both man-made and natural as to be virtually one in the same.

Citing pertinent examples to prove her thesis that "disaster capitalism" is now rampant around the world - in Russia, in China, in Iraq to name just a few - she describes how in times of crisis, elites everywhere have learned that they can profit by implementing policies, e.g., "shock therapy" or "shock and awe," that would have been vigorously opposed in normal times. When these changes to Friedmanite free-market dicta are opposed, as they were in Chile, a third shock is implemented. This, according to Klein is a shock that is entirely man-made - the torture and murder of those who would stand in the way of the takeover of the public sector, or, as neo-liberal economists would have it, the bringing forth of a new birth of freedom.

During the "Reagan Revolution," Klein argues, the notion of the `Entrepreneur As Hero' was buffed to a high gloss though the influence of right-wing think tanks whose pronouncements were reported by a cowed and obedient media. A decade later in the dot.com era, entrepreneurs were burnished to blinding sheen when the media fed the world images of swashbuckling venture capitalists who were touted as bringing forth a new millennium through the Internet. Klein maintains that George W. Bush's "public offering" -- the War on Terror - covered slavishly and avidly by the media, has been wildly successful, lining the pockets of investors in the new Homeland Security sector as promises of taxpayer money everlastingly flowing into the coffers of the military-industrial-energy complex have been fulfilled. This is the new "new economy:" the looting of the public sector through the now tried-and-true methods of disaster capitalism.

THE SHOCK DOCTRINE reveals the many wounds that disaster capitalism has inflicted upon the body politic both here in the U.S. and throughout the world over the past 25 years. It is a breathtaking achievement. Highly recommended.

I've been listening to the (abridged) audio version of Ms. Klein's book over the past week. I suspect the parallels she draws between electroshock therapy, torture, and economic "reforms" may alienate those on the ideological right.

That said, this is an important book, in that it documents (for a lay audience) the anti-democratic (and anti-social) nature of so-called "neoliberalism." Hayek and Friedman may well have held human freedom as their highest goal, but their inability, their unwillingness to see past their narrow ideology, their fetishism of capital and the individual, led them to promote some of the most violently anti-democratic and anti-freedom policies the world has seen since feudalism.

As Ms. Klein documents, the so-called "freedom" of Friedman's free-market economics has been - and still is - repeatedly (and quite predictably) abused by the few who have the connections and capital to play in that system.

If absolute power corrupts absolutely, then Friedman and Hayek's absolutist views on the world corrupted them and their followers so absolutely that they refuse to acknowledge the great violence they have done to the goal of human liberation.

Many thanks to Ms. Klein for taking the time and effort to document this travesty for those of us who did not join that cult.

To those who rated this as a bad book and then go on to say the book faults capitalism is missing the point. The world is not black or white or pure capitalism versus total dictatorial communism. For capitalism to really work there needs to be regulations so that the playing field is fair. For a free country to really be free the people must have an opportunity to be part of it (i.e. free quality public education, health care, etc.).

If those who find pure capitalism and the shrinking middle class ok, I only point you to the words of John F. Kennedy, "If a free society cannot help the many who are poor, it cannot save the few who are rich". If you don't like communism or dictatorships, then support social programs that give the poor an opportunity to become middle class. I can point to example after example of countries where the wealthy took more and more and gave no opportunity to the poor that eventually had the poor take over and end up with a dictatoral communist country that was far worse than a democratic republic with good regulations on business and robust social programs.

I read this book while crossing the Atlantic. The author has done something extraordinary, the equivalent of Silent Spring for industrial-era capitalism as an immoral form of human organization. This book is unique but also tightly linked to the books that I list below.

The conclusion of the book focuses on how Wall Street has discovered how to profit from mega-disasters and financial melt-downs, and contrary to popular belief, Wall Street makes money from these economic down-turns. It is the individual, and the indigenous owners who are forced to sell below market, that lose, every time.

The author's opening focus is on privatization, deregulation, and deep cuts in social spending, each as mandated by the International Monetary Fund and the World Bank, with other nasty triggers demanded by the World Trade Organization, that have been systematically used to loot entire nations and their commonwealths--this is apart from the immoral predatory capitalism that uses bribes to clear areas of indigenous peoples so they can steal all the gold or other natural resources, and their only cost is the bribe, while the host peoples lose billions in natural resources.

The author teaches us that "disaster capitalism" is the next step above immoral predatory capitalism, in which wars and disasters have been privatized and the global military-industrial-prison-hospital complex has moved one step closer to displacing all governments.

She spends time discussion torture by dictators as a silent partner to the free-market crusade, and this is a good time to mention that the book is a standing condemnation of all that Milton Friedman and "the Chicago boys" inserted into the IMF and World Bank via their students.

She provides a helpful discussion of how believers in Armageddon, including the neo-conservatives, are motivated by the belief that there is such a thing as a clean slate, and that Africa without Africans, or Iraq without Iraqis, are both desirable for that reason.

She does a tremendous job of outlining the three shock waves of disaster capitalism:

1. Government Disaster/War out-sourced
2. Corporate looting
3. Police terrorism

A portion of the book focuses on the urgency of restoring unions and the middle class, unions because they protect fair wages that create a middle class. She stresses that the 1970's through the 1990's saw a global (but particularly southern hemisphere) campaign to use the cover of counter-terrorism to murder and terrorize union leaders. As a graduate of the Central American and Andean wars, I can certainly testify to the fact that government death squads were as about looting and killing opposition leaders, and I for one saw no terrorists, only indigenous people's at the end of their rope.

Interestingly the author singles out visionaries as being among the top targets for being hunted down and "disappeared." Visionaries counter the government lies that seek to rule by secrecy, impose scarcity, and concentrate wealth within a small elite.

The author damningly documents how eager corporations have been to work with dictators to create police states that eliminate unions and enslave peoples at wages that cannot support a family, much less create a middle class.

She focuses on national debt and on government corruption as the two pillars of social destruction. As a student of E. O. Wilson and Medard Gabel, and many others, I can testify that there is plenty of money for all of us to be virtual billionaires, but it is corruption and greed at the top, enabled by secrecy, that have allowed a handful to create a global class war and impoverish the 90% that do the hard work (see my list on this one).

I am utterly blown away by the author's overall assessment, in the middle of the book, to wit, that crisis is now used routinely to side-step reasoned democracy and completely halt political and social reform while furthering the ends of those who seek to concentrate wealth and power exclusive of the larger body of We the People.

The author is damning across the board of the failures of neoliberalism, which has been a "second pillage" of the looting of state-owned enterprises, following the first pillage, the looting of the natural resources of the commonwealth being targeted.

As part of this the author explicitly accuses the IMF of deliberately fostering crises in part by fabricating and manipulating statistics, or as the author puts it, "statistical malpractice."

The author suggests that unlike the Mexican bail-out, when Rubin was seeking to protect Wall Street investments, Asia was allowed to collapse financially because the US wanted to put an end to the prospects of their being a "third" way that was more balanced than either capitalism for the few on one side, or socialism for all on the other. This is especially noteworthy because Latin America is today pursuing a similar "third way" and very likely to succeed.

The author declares that Donald Rumsfeld's over-riding objective as Secretary of Defense was the privatization of war. The author tells us that he declared war on the Pentagon bureaucracy on 10 September (this is the same day that Congresswoman McKinney's was grilling him on the missing 2.3 trillion dollars). On 11 September the missile won Rumsfeld his war with the Pentagon bureaucracy *and* it destroyed the computers with all the records on the missing money.

The author goes on to document how the Bush Administration privatized Homeland Security across the board.

As the book draws to a close she reviews the history of corporate-driven foreign policy, summing it up in three steps:

1. Corporation suffers set-back in a foreign country
2. Politicians loyal to the corporation demonize the foreign country
3. Politicians "sell" US public on the need for regime change.

The author scorns political appointees, noting that their "service" these days is little more than a pre-raid reconnaissance.

She concludes by suggesting that disaster apartheid is leaving 25-60% of the populations as an underclass, destroyed middle classes, and creating walled cities for the elite, death and suffering for everyone else. Dubai is one such walled city.

Corporations are red-lining the world, using stocks, currency, and real estate markets to crash economies, buy cheap, and then restore with a sharp re-concentration of wealth.

Ending on a positive note, she suggests that We the People are in the process of reconstructing our own world, and while I did not see mention of the World Index of Social and Environmental Responsibility (WISER) or Interra and the other community-oriented systems, I believe she is correct, and that the Earth Intelligence Network, the Transpartisan Policy Institute, the People's Budget Office, are all part of taking back the power and the commonwealth.

This is a great and necessary book. Others (the first two DVDs) listed below reinforce her findings.

The Corporation
Wal-Mart: The High Cost of Low Price
The Soul of Capitalism: Opening Paths to a Moral Economy
Confessions of an Economic Hit Man
The Global Class War: How America's Bipartisan Elite Lost Our Future - and What It Will Take to Win It Back
The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead
The Working Poor: Invisible in America
Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It
Breach of Trust: How Washington Turns Outsiders Into Insiders
Vice: Dick Cheney and the Hijacking of the American Presidency

Klein's book is a solid and invaluable study of "economic shock therapy" (sudden privatization removal of all trade barriers, accompanied by drastic reductions in taxes and social spending) over the past three decades. She concludes that economic shock therapy (originally formulated by economist Milton Friedman) cannot be implemented without a preceding crisis (eg. hyperinflation (eg. Chile, Bolivia), weather disasters (eg. Katrina or the 2004 tsunami in South Asia), war (eg. 9/11, Iraq War II), or major political upset (eg. the Soviet Union after Gorbachev's resignation), and requires suppression of dissent to succeed. The "really bad news" is that each example cited by Klein quickly led to massive economic worsening for the general populace. Worse yet, is Friedman's statement that "our (true free-market enthusiasts) basic function is to develop alternatives to existing policies, and to keep them alive and available until the politically impossible becomes politically inevitable." Worst of all, is a suspicion that the current administration is committed to bringing about such crises if they don't naturally occur.

Friedman first learned to exploit large-scale crisis in the mid-70s while acting as advisor to Chile's General Pinochet following his violent 1074 coup. Tax cuts, free trade, privatized services, cuts in social spending, deregulation, voucher-funded private schools quickly followed. Torture cells and mass murders stifled dissent. Unemployment went from 3 to 20% (ultimately 30% in 1982), and thousands of business foundered. Eventually Pinochet was forced to rescind much of what had been done, and Chile began recovering - mainly thanks to its government copper mines that had not been privatized. A lasting result, however, that in 2007, Chileans had the 8th most unequal income distribution.

Russia's Yeltsin wasted no time after Gorbachev's 10/91 resignation, and in his first week announced lifting price controls (70% opposed), free trade policies, and the beginning of rapid privatization of the nation's 225,000 state-owned companies. Parliament agreed to give Yeltsin free rein for a year. At the end of that period the economy had fallen 40%, and rising opposition prompted Yeltsin to disband Parliament and back up his decrees with military rule and arrests. A small group of oligarchs managed to use government monies deposited in their just-created banks to buy vast national assets at fire-sale prices - eg. 51% of one oil company went for $130 million, only to be valued two years later at $2.8 billion. (Only Russians were allowed ownership.) These oligarchs then supported Yeltsin with large donations and heavy media coverage - 800X that of his rivals. Despite winning the election, Yeltsin's approval rating fell to 6%, and by '98, over 80% of Russian farms were bankrupt, those living in poverty rose from 2 million to 74 million in 8 years, the population declined 10%, etc.

Undeterred, reformers' next stop was Iraq. This time, U.S. firms would be the first in line for the anticipated easy billions. Bremer spent most of his first four months almost exclusively on economic matters - privatizing everything in sight (except oil - was warned that to do so would create enormous resistance), lowering the corporate tax rate from 45 to 15%, allowing foreign companies to own 100% of Iraqi assets and take out 100% of the profits, and cementing deals with 40-year leases and contracts. Meanwhile, de-Baathification removed skilled people from their posts, weakened the voice of secular Iraqis, and fed the resistance - already red hot from Bremer's having dismissed the entire 400,000 man Iraqi army. Unemployment, already high, rose even more. Then, it was on to rewrite the Iraq constitution to cement these changes - this succeeded at first, but opposition led to a second rewriting where these changes were lost.

Only 15,000 Iraqis were hired for reconstruction projects under Bremer; meanwhile, American companies made billions, aided by 20-50% overheads that incorporated multiple levels of contracting to share the wealth with Kuwaitis and Saudis.

As for U.S. government waste - no problem! Our decaying infrastructure becomes an opportunity to turn additional areas over to private enterprise, companies like Blackwater ($950/day to guard FEMA staff and facilities during Katrina) and Custer Battles provide a solid source of on-going Republican-party donations. Iraq War expenditures and tax cuts provide motivation for standing against children's' health care funding.

Meanwhile, the U.S. continues to "benefit" from expanded free trade just like Chile, Bolivia, Poland, Russia, and Iraq have done - with increased income inequality and lower standards of living.

Joseph Stiglitz, 2001 Nobel Prize-winner in economics, also reviewed this book (New York Times, 9/30/07). While not entirely supportive, he also concluded that "the case against these (Friedman's) policies is even stronger than the one Klein makes. They were never based on solid empirical and theoretical foundations, and even as many of these policies were being pushed, academic economists were explaining the limitations of markets."

Naomi Klein's new book, "The Shock Doctrine", revisits the past thirty years of world history to argue that capital, large and small, has developed a set of techniques for exploiting disasters to pull off power grabs. She identifies Milton Friedman, University of Chicago economist, Nobel award winner, and militant "free market" crusader, as the intellectual mentor of today's neoconservatives and privatizers. Their argument, that free markets and democracy go together, is painstakingly dissected and refuted by Klein's analysis.

Her conclusion is that free markets are fundamentally incompatible with democracy.

"Free markets", as implemented in today's world, mean people are not allowed to use government to take care of one another's needs. Nothing can be done unless a capitalist enterprise is doing it for a profit. All restrictions on capital - minimum wages, safety standards, union contracts and the rest - are done away with. The public sector - schools, utilities, transportation and the rest - is handed off to private ownership, often for free, or at least at fire-sale prices. The social contract - social security, medical systems and the rest - is destroyed. The cost of labor is driven down to bare subsistence, millions of people lose their homes and livelihoods, and they pile up in slums and shantytowns.

Naturally, these wrenching changes are not adopted democratically. It is no accident that this kind of "freedom" so often arrives in a hail of bullets, as in Pinochet's Chile in 1973, or behind battalions of riot police, as in Thatcher's Britain ten years later, or in the wake of economic collapse and foreign invasion, as in Iraq today.

In the ongoing struggle, capital and the governments that support it have learned to take advantage of shocks, like coups, hyperinflation, debt crises, natural disasters like the Asian tsunami of 2004 and Hurricane Katrina, or terrorist attacks like 9/11, to push through this kind of "reform". Hence the term "disaster capitalism"

"Free markets", in Klein's analysis, are a coded way of saying that capital gets to treat the rest of us any way it wants. It means freedom for capital and poverty for society. She quotes Uruguayan author Eduardo Galeano: "People were in prison so that prices could be free". Iraq may be a bloody mess, but Halliburton and its ilk are doing very well there.

It is not a coincidence that the governments that practice these policies most enthusiastically are the most likely to arrest and torture masses of their opponents. Nor is it a coincidence that, once these dictatorships are overthrown, the people promptly elect representatives who try to resist and undo these policies, as in Latin America today. The neoliberal agenda offers nothing but suffering to most people, so it is no surprise that its projects tend to break down over time. Its most ill-considered efforts, like Bush's Iraq war, wind up making global capital less secure than it was before.

As Klein points out, shock will eventually wear off.

I recommend this book very highly. It is one of a very few books that illuminate our modern age.