Interview with Naomi Klein, rabble.ca, December 3, 2008
Kim Elliott: As you outline so well in your book and in various interviews in the U.S. media, the current financial crisis holds the possibility of being one of those moments when the shock doctrine can best be applied. Can you comment on both the Harper government's economic and fiscal statement introduced last week, and on the Opposition's response to that - that is, the formation of a coalition - in the context of the shock doctrine?
Naomi Klein: Yes, absolutely. What I think we are seeing is a clear example of the shock doctrine in the way the Harper government has used the economic crisis to push through a much more radical agenda than they won a mandate to do.
At the same time we are seeing an example of what I call in the book a "shock resistance," where this tactic has been so overused around the world and also in Canada that we are becoming more resistant to the tactic - we are on to them - and Harper is not getting away with it.
What I think is really amazing about this moment is whatever happens next - whether we end up with this coalition or not, we will have an extremely chastened Harper. So the attempted shock doctrine has failed. I think we can say that decisively.
In a moment of high panic in late September, the US Treasury unilaterally pushed through a radical change in how bank mergers are taxed--a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140 billion in tax revenue, lawmakers found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that "Treasury had no authority to issue the [tax change] notice."
Of equally dubious legality are the equity deals Treasury has negotiated with many of the country's banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals, "Any use of these funds for any purpose other than lending--for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc.--is a violation of the act." Yet this is exactly how the funds are being used.
Then there is the nearly $2 trillion the Federal Reserve has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg News believes that this secrecy violates the law and has filed a federal suit demanding full disclosure.
Since I already sent my serious post, I just wanted to chime in with an anecdote. I was in Washington D.C. last night, staying two blocks from the White House. At 11:30 pm, a half hour after the results were announced, I happened to walk past a very stuffy private club, one that, as far as I can tell, is populated exclusively by hardcore Republican men in their later years. It's the kind of place where you can imagine lobbyists slipping bribes to judges, and Central American coups being plotted... or maybe it's just me. Anyway, as I passed by, two men in black uniforms were high-fiving each other and hooting with delight. From what I could tell, one man was the doorman at the club, the other the chauffeur for one of the club members. Both were African American.
To understand the meaning of the U.S. election results, it is worth looking back to the moment when everything changed for the Obama campaign. It was, without question, the moment when the economic crisis hit Wall Street.
Up to that point, things weren’t looking all that good for Barack Obama. The Democratic National Convention barely delivered a bump, while the appointment of Sarah Palin seemed to have shifted the momentum decisively over to John McCain.
Editor’s note: The online version of this story has been amended to reflect developments since the publication of the print edition.
On October 13th, when the U.S. Treasury Department announced the team of "seasoned financial veterans" that will be handling the $700 billion bailout of Wall Street, one name jumped out: Reuben Jeffery III, who was initially tapped to serve as chief investment officer for the massive new program.
On the surface, Jeffery looks like a classic Bush appointment. Like Treasury Secretary Henry Paulson, he's an alum of Goldman Sachs, having worked on Wall Street for 18 years. And as chairman of the Commodity Futures Trading Commission from 2005 to 2007, he proudly advocated "flexibility" in regulation — a laissez-faire approach that failed to rein in the high-risk trading at the heart of the meltdown.
In the final days of the election, many Republicans seem to have given up the fight for power. But don’t be fooled: that doesn’t mean they are relaxing. If you want to see real Republican elbow grease, check out the energy going into chucking great chunks of the $700 billion bailout out the door. At a recent Senate Banking Committee hearing, Republican Senator Bob Corker was fixated on this task, and with a clear deadline in mind: inauguration. “How much of it do you think may be actually spent by January 20 or so?” Corker asked Neel Kashkari, the 35-year-old former banker in charge of the bailout.
When European colonialists realized that they had no choice but to hand over power to the indigenous citizens, they would often turn their attention to stripping the local treasury of its gold and grabbing valuable livestock. If they were really nasty, like the Portuguese in Mozambique in the mid-1970s, they poured concrete down the elevator shafts.
NOTE TO JOURNALISTS ABOUT FALSE QUOTATION: A September 26 AFP wire story incorrectly attributed a quote to Naomi Klein that should have been attributed to Arun Gupta. The error has been corrected by AFP but please note that the call-out below was NOT written by Naomi Klein and though she supported the original protest call, the statement is correctly attributed to Gupta, as stated in the corrected AFP article also posted below. We would greatly appreciate if this error was not repeated.
This week the White House is going to try to push through the biggest robbery in world history with nary a stitch of debate to bail out the Wall Street bastards who created this economic apocalypse in the first place.
This is the financial equivalent of September 11. They think, just like with the Patriot Act, they can use the shock to force through the “therapy,” and we’ll just roll over!
I wrote The Shock Doctrine in the hopes that it would make us all better prepared for the next big shock. Well, that shock has certainly arrived, along with gloves-off attempts to use it to push through radical pro-corporate policies (which of course will further enrich the very players who created the market crisis in the first place...).
The best summary of how the right plans to use the economic crisis to push through their policy wish list comes from Former Republican House Speaker Newt Gingrich. On Sunday, Gingrich laid out 18 policy prescriptions for Congress to take in order to "return to a Reagan-Thatcher policy of economic growth through fundamental reforms." In the midst of this economic crisis, he is actually demanding the repeal of the Sarbanes-Oxley Act, which would lead to further deregulation of the financial industry. Gingrich is also calling for reforming the education system to allow "competition" (a.k.a. vouchers), strengthening border enforcement, cutting corporate taxes and his signature move: allowing offshore drilling.
Whatever the events of this week mean, nobody should believe the overblown claims that the market crisis signals the death of "free market" ideology. Free market ideology has always been a servant to the interests of capital, and its presence ebbs and flows depending on its usefulness to those interests.
During boom times, it's profitable to preach laissez faire, because an absentee government allows speculative bubbles to inflate. When those bubbles burst, the ideology becomes a hindrance, and it goes dormant while big government rides to the rescue. But rest assured: the ideology will come roaring back when the bailouts are done. The massive debts the public is accumulating to bail out the speculators will then become part of a global budget crisis that will be the rationalization for deep cuts to social programs, and for a renewed push to privatize what is left of the public sector. We will also be told that our hopes for a green future are, sadly, too costly.
Naomi has signed this public letter to the U.S. Secretary of State about potential U.S. involvement in recent violence in Bolivia.
An Open Letter to the U.S. State Department Regarding Recent Violence in Bolivia
To Dr. Condoleezza Rice, U.S. Secretary of State
Cc: Phillip Goldberg, U.S. Ambassador to Bolivia
Henrietta Fore, Administrator, U.S. Agency for International Development
Representative Eliot Engel, Chair, Subcommittee on Western Hemisphere, Committee of Foreign Affairs
Senator John McCain
Senator Barack Obama
Dear Dr. Rice,
We are writing out of deep concern over recent events in Bolivia that have left dozens dead and cost millions of dollars in lost revenue to the Bolivian government and the Bolivian people. We are especially concerned that the United States government, by its own admission, is supporting opposition groups and individuals in Bolivia that have been involved in the recent whole-scale destruction, violence, and killings, above all in the departments of Santa Cruz, Pando, and Chuquisaca.
The early results are in: Hurricane Gustav has helped John McCain's bid for the White House. This is nothing short of incredible.
In the combination of New Orleans and hurricanes, we have the most powerful argument possible for the necessity of "change." It's all there: gaping inequality, deep racism, crumbling public infrastructure, global warming, rampant corruption, the Blackwater-ization of the public sector. And none of it is in the past tense. In New Orleans whole neighborhoods have gone to seed, Charity Hospital remains shuttered, public housing has been deliberately destroyed--and the levee system is still far from repaired.
Gustav should have been political rat poison for the Republicans, no matter how well it was managed. Yet, as Peter Baker noted in the New York Times, "rather than run away from the hurricane and its political risks, Mr. McCain ran toward it." If this strategy worked, it was at least partly because Barack Obama has been running away from New Orleans for his entire campaign.
Exactly one year ago, I set off on a book tour to promote The Shock Doctrine. The plan was for it to last three months, quite long by publishing standards. Twelve months later, it is still going. But this has been no ordinary book tour. Everywhere I have traveled– from Calgary, Alberta to Cochabamba, Bolivia – I have heard more stories about how shock strategies have been used to impose unwanted pro-corporate policies. I have also been part of stimulating debates and discussions about how the current round of crises – oil, food, financial markets, heavy weather -- can be transformed into opportunities for progressive change.
So far, the Olympics have been an open invitation to China-bash, a bottomless excuse for Western journalists to go after the Commies on everything from internet censorship to Darfur. Through all the nasty news stories, however, the Chinese government has seemed amazingly unperturbed. That's because it is betting on this: when the opening ceremonies begin friday, you will instantly forget all that unpleasantness as your brain is zapped by the cultural/athletic/political extravaganza that is the Beijing Olympics.
Like it or not, you are about to be awed by China's sheer awesomeness.
Once oil passed $140 a barrel, even the most rabidly right-wing media hosts had to prove their populist cred by devoting a portion of every show to bashing Big Oil. Some have gone so far as to invite me on for a friendly chat about an insidious new phenomenon: "disaster capitalism." It usually goes well--until it doesn't.
For instance, "independent conservative" radio host Jerry Doyle and I were having a perfectly amiable conversation about sleazy insurance companies and inept politicians when this happened: "I think I have a quick way to bring the prices down," Doyle announced. "We've invested $650 billion to liberate a nation of 25 million people. Shouldn't we just demand that they give us oil? There should be tankers after tankers backed up like a traffic jam getting into the Lincoln Tunnel, the Stinkin' Lincoln, at rush hour with thank-you notes from the Iraqi government.... Why don't we just take the oil? We've invested it liberating a country. I can have the problem solved of gas prices coming down in ten days, not ten years."
Barack Obama waited just three days after Hillary Clinton pulled out of the race to declare, on CNBC, "Look. I am a pro-growth, free-market guy. I love the market."
Demonstrating that this is no mere spring fling, he has appointed 37-year-old Jason Furman to head his economic policy team. Furman is one of Wal-Mart's most prominent defenders, anointing the company a "progressive success story." On the campaign trail, Obama blasted Clinton for sitting on the Wal-Mart board and pledged, "I won't shop there." For Furman, however, it's Wal-Mart's critics who are the real threat: the "efforts to get Wal-Mart to raise its wages and benefits" are creating "collateral damage" that is "way too enormous and damaging to working people and the economy more broadly for me to sit by idly and sing 'Kum-Ba-Ya' in the interests of progressive harmony."
Obama's love of markets and his desire for "change" are not inherently incompatible. "The market has gotten out of balance," he says, and it most certainly has. Many trace this profound imbalance back to the ideas of Milton Friedman, who launched a counterrevolution against the New Deal from his perch at the University of Chicago economics department. And here there are more problems, because Obama--who taught law at the University of Chicago for a decade--is thoroughly embedded in the mind-set known as the Chicago School.
He chose as his chief economic adviser Austan Goolsbee, a University of Chicago economist on the left side of a spectrum that stops at the center-right. Goolsbee, unlike his more Friedmanite colleagues, sees inequality as a problem. His primary solution, however, is more education--a line you can also get from Alan Greenspan. In their hometown, Goolsbee has been eager to link Obama to the Chicago School. "If you look at his platform, at his advisers, at his temperament, the guy's got a healthy respect for markets," he told Chicago magazine. "It's in the ethos of the [University of Chicago], which is something different from saying he is laissez-faire."
Another of Obama's Chicago fans is 39-year-old billionaire Kenneth Griffin, CEO of the hedge fund Citadel Investment Group. Griffin, who gave the maximum allowable donation to Obama, is something of a poster boy for an unbalanced economy. He got married at Versailles and had the after-party at Marie Antoinette's vacation spot (Cirque du Soleil performed)--and he is one of the staunchest opponents of closing the hedge-fund tax loophole. While Obama talks about toughening trade rules with China, Griffin has been bending the few barriers that do exist. Despite sanctions prohibiting the sale of police equipment to China, Citadel has been pouring money into controversial China-based security companies that are putting the local population under unprecedented levels of surveillance.
Now is the time to worry about Obama's Chicago Boys and their commitment to fending off serious attempts at regulation. It was in the two and a half months between winning the 1992 election and being sworn into office that Bill Clinton did a U-turn on the economy. He had campaigned promising to revise NAFTA, adding labor and environmental provisions and to invest in social programs. But two weeks before his inauguration, he met with then-Goldman Sachs chief Robert Rubin, who convinced him of the urgency of embracing austerity and more liberalization. Rubin told PBS, "President Clinton actually made the decision before he stepped into the Oval Office, during the transition, on what was a dramatic change in economic policy."
Furman, a leading disciple of Rubin, was chosen to head the Brookings Institution's Hamilton Project, the think tank Rubin helped found to argue for reforming, rather than abandoning, the free-trade agenda. Add to that Goolsbee's February meeting with Canadian consulate officials, who left with the distinct impression that they had been instructed not to take Obama's anti-NAFTA campaigning seriously, and there is every reason for concern about a replay of 1993.
The irony is that there is absolutely no reason for this backsliding. The movement launched by Friedman, introduced by Ronald Reagan and entrenched under Clinton, faces a profound legitimacy crisis around the world. Nowhere is this more evident than at the University of Chicago itself. In mid-May, when university president Robert Zimmer announced the creation of a $200 million Milton Friedman Institute, an economic research center devoted to continuing and augmenting the Friedman legacy, a controversy erupted. More than 100 faculty members signed a letter of protest. "The effects of the neoliberal global order that has been put in place in recent decades, strongly buttressed by the Chicago School of Economics, have by no means been unequivocally positive," the letter states. "Many would argue that they have been negative for much of the world's population."
When Friedman died in 2006, such bold critiques of his legacy were largely absent. The adoring memorials spoke only of grand achievement, with one of the more prominent appreciations appearing in the New York Times--written by Austan Goolsbee. Yet now, just two years later, Friedman's name is seen as a liability even at his own alma mater. So why has Obama chosen this moment, when all illusions of a consensus have dropped away, to go Chicago retro?
The news is not all bad. Furman claims he will be drawing on the expertise of two Keynesian economists: Jared Bernstein of the Economic Policy Institute and James Galbraith, son of Friedman's nemesis John Kenneth Galbraith. Our "current economic crisis," Obama recently said, did not come from nowhere. It is "the logical conclusion of a tired and misguided philosophy that has dominated Washington for far too long."
True enough. But before Obama can purge Washington of the scourge of Friedmanism, he has some ideological housecleaning of his own to do.