Naomi Klein’s The Shock Doctrine explores what she calls ‘disaster capitalism’. What is that?
The Shock Doctrine explains some of the mechanisms by which patrimonial capital acquires power and enhances its wealth. It’s a brilliant piece of work, and one of those rare books that changes the way you perceive the world.
By showing how neoliberals, in particular, use disasters to create opportunities to extend their programme in ways that would never be accepted in ordinary circumstances because they are profoundly undemocratic and exclusive, she was able to explain a series of phenomena that we see operating all over the world.
She is able to fill in some of the gaps in Piketty’s account. Piketty demonstrates quite rightly that there is an organic momentum in patrimonial capital, in that once you’ve got money you can increase that money through what is laughably called ‘investment’.
As Andrew Sayer points out in Why We Can’t Afford the Rich, ‘investment’ means two completely different things. It means investing in creating new products, ideas and things that did not exist before, and it also means putting money into things that already exist in order to multiply that money. These are opposed meanings. The second one should be called ‘speculation’. But it disguises itself under the term ‘investment’ in order to justify the simple harvesting of rent and interest payments.
“This isa brilliant piece of work, and one of those rare books that changes the way you perceive the world.”
Klein shows that the organic momentum of patrimonial capitalism is greatly enhanced by being extended through the doctrine of capitalising on crises, which is what neoliberal advisors, governments and corporations have been doing from Iraq to New Orleans.
They move in and hit any place that has suffered from catastrophic disruption as hard as they can with a whole series of new policies that people are in no state to resist. These policies basically involve transferring public or generally shared wealth into the hands of a private elite.
We saw something very similar in the UK following the financial crash—a financial crash caused by the neoliberal policy of the deregulation of the banks—which was used to enhance neoliberal policy. While we were reeling, George Osborne and others moved in and said right, we’re having that. Basically, through austerity, they transferred a great deal of public wealth and public sector assets into the hands of their chums in the city and in corporations.
Naomi Klein attributes the most succinct formulation of the shock doctrine to Milton Friedman and the Chicago school.
Yes. Milton Friedman and the Chicago school are just one component of a global movement that began in 1947 with the formation of the Mont Pelerin Society. This was set up by Friedrich Hayek and others following the success of his book The Road to Serfdom, which really laid out the territory for neoliberal philosophy. It created ‘a kind of neoliberal international’ (as Daniel Stedman Jones called it in his book Masters of the Universe) composed of academics, journalists, think-tanks, and a whole series of independent thinkers around the world who gradually worked this up into a series of strategies and tactics—of which the shock doctrine was one.
Very patiently, they waited for Keynesian economics to get into trouble, which it did in the 1970s. They were able to move in and say that they had got the solutions: a completely different way of doing economics and a new way of organising society. This was then picked up by Thatcher and Reagan, and then by Clinton and by Blair, and became hegemonic.
What we’re lacking now is a new narrative that acknowledges that neoliberalism has failed, but offers a new story to replace it. We can’t go back to Keynesianism. It ran into all sorts of problems in the 1970s which have not gone away.
When people say they’re Keynesians today, they’re just talking about a very small fraction of the Keynesian program: they’re talking about stimulus spending and interest-rate manipulation. But there is a lot more to it than that: capital controls, foreign exchange controls and the International Clearing Union, and a whole series of all other issues that were essential for his program to be carried out. But it’s very hard to see how they could be brought in today. We can certainly recruit elements of Keynesianism but we can’t use the whole package. We need a new political narrative.