The Shock Doctrine
The Shock Doctrine covers the rise of the Chicago School Revolution, an extreme capitalist school of thought emanating from the economists at The University of Chicago under (the now deceased) Milton Friedman. The idea of this ‘shock therapy’ was that radical economic policies that would normally be extremely unpopular could be pushed through during times of disaster, war or terror when the populace in question would be otherwise distracted by the basic act of survival. The Chicago Boys, as they were known, thought that such disasters were the perfect time to ‘wipe the slate clean’, starting the economy over again, replacing it with a free trade capitalist system.
The true enemy of the Chicago Boys was the social democrats of the developed world and the developmentalists who argued that Third World countries could only finally escape their cycle of poverty if they developed an inward-orientated industralisation strategy instead of relying on the export of their natural resources, advocating the nationalisation of their resources so that some of the profits could be used to rebuild their countries. By the 1950s, the developmentalists, like the social democrats in richer countries were very successful. The best example of developmentalism was in the southern tip of Latin America, known as the Southern Cone: Chile, Argentina, Uruguay and parts of Brazil, public money was poured into infrastructure projects such as highways and steel plants, local businesses were given generous subsidies to build new factories producing everything from cars to washing machines and foreign imports were kept out with high tariffs. Everybody was doing really well but the heads of the multinationals, who couldn’t get their cars and washing machines into these countries and had to pay generous salaries to their unionised work forces thought they could do better. However if a head of one of these multinationals had stood up and said this, he’d have been accused of being a robber baron, but if Milton Friedman said the same thing, no, that was scientific, so Friedman advised;
- Governments must remove all rules and regulations standing in the way of profit.
- Governments should sell off any assets they own that could be run privately at a profit.
- Governments should dramatically cut back on social funding programs.
So, taxes, if they must exist, should be the same rate for everyone, rich or poor. Corporations should be free to sell their products anywhere in the world. All prices, including labour, should be determined by the market, there should be no minimum wage.
Under pressure from corporate interests, developmentalist governments were started to be compared to totalitarian Communists in American and British foreign policy circles. The Southern Cone however was a hard nut to crack, so the Americans sponsored a program to send Chileans to learn economics at none other than the University of Chicago, officially launched in 1956, it was expanded in 1965 to include students from across Latin America, the idea being that they were training the next generation of economic leaders, determined to dismantle their respective protectionist countries. However, it didn’t work and the Southern Cone countries were talking about how to develop developmentalism even further but then Nixon was elected.
When Salvador Allende won Chile’s 1970 elections on a platform of nationalisation, Nixon instructed the CIA to make Chile’s economy “scream”. A committee of the soon to be nationalised in Chile multinationals formed in Washington with the aim to make Allende back off his nationalistion by confronting him with economic collapse, but even after three years of multinational sponsored dirty tricks, Allende was re-elected. It was time they decided for something more forceful.
General Pinochet staged his coup in Chile on 11 September 1973, he had immediate control of the military and the police, Allende on the other hand had just 36 supporters in the Presidential Palace, even so the military still launched 24 rockets at it. By mid-afternoon Allende was dead and his cabinet captured and with no sign of resistance the coup was over, however in a precursor to “Shock and Awe” Pinochet ordered mass torture and murder across the country. Meanwhile Chile’s Chicago Boys were preparing for the junta’s take over of power, preparing a 500 page manual known as “The Brick”, the precse instructions for economic control. Finacial chaos ensued alongside the terror.
US backed military coups spread throughout the Southern Cone, bringing terror from the dictatorships and economic chaos as the Chicago Boys continued their failing experiments.
The Chicago Boy’s Shock Doctrine wasn’t however just confined to developing countries, the ‘shock’ of war over the Falkland Islands allowed Margaret Thatcher (despite a previously unpopular government) to start Britain privatisation process.
It was also used to control the forming democracies of Poland, Russia and South Africa, all in shock as their worlds changed so quickly, they could only get much needed aid if they agreed to economic conditions that basically allowed the multinationals to come in and pillage their countries.
The most famous and current example of The Shock Doctrine in action is of course Iraq, where the country was demolished by America’s sub sub contractors and then rebuilt by America’s sub sub contractors, all at a profit of course. The Iraqi chapters were the most scary, the way how a whole business has erupted over other peoples misery. There is now a whole business bubble created round disaster (the same firms ‘reconstructing’ Iraq ‘reconstructed’ New Orleans after Katrina), making me question is that another reason why the American government won’t sign up to increased environmental regulation, are they dependent on the disaster waiting to happen?
I am really not doing this book justice and I’m aware this review is getting a tad too long. The Shock Doctrine covers everything in so much detail, including the aftermath of the Tsunami disaster and how it’s being used as an excuse to wipe the beaches clear of their native fishermen to be replaced by tourist development. It also gives hope in described how after thirty years the shock is wearing off in the Southern Cone giving rise to more fairer economies.
Reading this book made me feel naive, I consider myself fairly clued up on world affairs but I had no idea how easily democracy is cast aside for capitalism of all things. How it’s not the politicians that ultimately control the world, it’s the chairmen of the global conglomerates making a buck out of disaster, it makes for a scary future. I realise however that this book is not impartial, I am no economics expert and I suspect I’d have a fairer view point and be able to judge better if I’d read something from the Chicago School, however it makes it hard for me to imagine what’s being described in this book as justified.
