Can Radical Capitalism Survive the Disasters It Creates?

The era of "free market" economic policies forced on societies after disasters happen as detailed in Naomi Klein's book <i>The Shock Doctrine</i> may be on the verge of ending.
Over the past few decades, many of the ideas of the far left have found new homes on the right. Lenin believed that it was in conditions of catastrophic upheaval that humanity advances most rapidly, and the idea that economic progress can be achieved through the devastation of entire societies has been a key part of the neo-liberal cult of the free market. Soviet-style economies left an inheritance of human and ecological devastation, while neo-liberal policies have had results that are not radically dissimilar in many countries. Yet, while the Marxist faith in central planning is now confined to a few dingy sects, a quasi-religious belief in free markets continues to shape the policies of governments.

Many writers have pointed to the havoc and ruin that have accompanied the imposition of free markets across the world. Whether in Africa, Asia, Latin America or post-communist Europe, policies of wholesale privatisation and structural adjustment have led to declining economic activity and social dislocation on a massive scale. Anyone who has watched a country lurch from one crisis to another as the bureaucrats of the IMF impose cut after cut in pursuit of the holy grail of stabilisation will recognise the process Naomi Klein describes in her latest and most important book to date. Visiting Argentina not long before the economic collapse of 2002, I found the government struggling to implement an IMF diktat to roll back public spending at a time when the economy was already rapidly contracting. The result was predictable, and the country was plunged into a depression, with calamitous consequences in terms of poverty and social breakdown.

Klein believes that neo-liberalism belongs among "the closed, fundamentalist doctrines that cannot co-exist with other belief-systems … The world as it is must be erased to make way for their purist invention. Rooted in biblical fantasies of great floods and great fires, it is a logic that leads ineluctably towards violence." As Klein sees it, the social breakdowns that have accompanied neo-liberal economic policies are not the result of incompetence or mismanagement. They are integral to the free-market project, which can only advance against a background of disasters. At times, writing in a populist vein that echoes her first book No Logo, published seven years ago, Klein seems to suggest that these disasters are manufactured as part of a deliberate policy framed by corporations with hidden influence in government. Her more considered view, which is also more plausible, is that disaster is part of the normal functioning of the type of capitalism we have today: "An economic system that requires constant growth, while bucking almost all serious attempts at environmental regulation, generates a steady stream of disasters all on its own, whether military, ecological or financial. The appetite for easy, short-term profits offered by purely speculative investment has turned the stock, currency and real estate markets into crisis-creation machines, as the Asian financial crisis, the Mexican peso crisis and the dotcom collapse all demonstrate."

There are very few books that really help us understand the present. The Shock Doctrine is one of those books. Ranging across the world, Klein exposes the strikingly similar policies that enabled the imposition of free markets in countries as different as Pinochet's Chile, Yeltsin's Russia, China and post-Saddam Iraq. Part of the power of this book comes from the parallels she observes in seemingly unrelated developments. In a fascinating and alarming examination of the underside of recent history, she notes the affinities between the policies of shock therapy imposed in the course of neo-liberal market reform and the techniques of torture that have been routinely used by the US in the course of the "war on terror." Klein begins her first chapter with a moving account of a conversation she had with a victim of a covert programme of mind-control experiments, carried out in Canada in the 1950s, which used people suffering from minor psychiatric ailments to try out techniques of "de-patterning" that aimed to scramble and reshape their personalities.

Employing electroshock therapy, sensory deprivation and drug-induced comas, these experiments helped develop some of the "coercive interrogation techniques" that have been practised in Guantánamo Bay. Klein uses torture as a metaphor, and does not claim any cause-and-effect link between its re-emergence and the rise of neo-liberal shock therapy; but she does point to some disquieting similarities. Individuals and societies have been "de-patterned" with the aim of remaking them on a better, more rational model. In each case, the experiments have failed, while inflicting lasting and often irreparable damage on those who were subjected to them.

But has the free market experiment failed? As Klein sees it, free market shock therapy may actually have succeeded in achieving its true objectives. Post-invasion Iraq may be "a ghoulish dystopia where going to a simple business meeting could get you lynched, burned alive or beheaded." Even so, Klein points out, Halliburton is making handsome profits -- it has built the green zone as a corporate city-state, and taken on many of the traditional functions of the armed forces in Iraq. An entire society has been destroyed, but the corporations that operate in the ruins are doing rather well. Klein's message, then, seems to be that -- at least in its own, profit-centred terms -- disaster capitalism works.

There can be no doubt that fortunes have been reaped from the Iraq war as they have been from other experiments in disaster capitalism. Yet I remain unconvinced that the corporations Klein berates throughout the book understand, let alone control, the anarchic global capitalism that has been allowed to develop over the past couple of decades -- any more than the neo-liberal ideologues who helped create it foresaw where it would lead. Rightly, Klein insists that free market ideology must bear responsibility for the crimes committed on its behalf -- just as Marxist ideology must be held to account for the crimes of communism. But she says remarkably little about the illusions by which neo-liberal ideologues were themselves blinded. Milton Friedman and his disciples believed a western-style free market would spring up spontaneously in post-communist Russia. They were left gawping when central planning was followed by the criminalised free-for-all of the '90s, and were unprepared for the rise of Putin's resource-based state capitalism. These ideologues were not the sinister, Dr. Strangelove-like figures of the anti-capitalist imagination. They were comically deluded bien-pensants, who promoted their utopian schemes with messianic fervour and have been left stranded by history, as the radiant future they confidently predicted has failed to arrive.

The neo-liberal order is already facing intractable problems. The Iraq war may have allowed another experiment in shock therapy, but a failed state has been created as a result of which Gulf oil -- which a former chair of the US joint chiefs of staff accurately described as "the jugular vein of global capitalism" -- is less secure than before. Faced with defeat in Iraq, the Bush administration seems to be gearing up for an assault on Iran -- a desperate move that would magnify the existing catastrophe many times over. At the same time financial crisis has reached into the American heartland as an implosion in speculation-driven credit markets has started to spread throughout the system. It is impossible to know how these crises will develop, but it is hard to resist the suspicion that disaster capitalism is now creating disasters larger than it can handle.
John Gray's most recent book is Black Mass: Apocalyptic Religion and The Death of Utopia (Allen Lane)
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