The Shock Doctrine: The Rise of Disaster Capitalism

by Naomi Klein

For more than three decades, Friedman and his powerful followers had been perfecting this very strategy: waiting for a major crisis, then selling off pieces of the state to private players while citizens were still reeling from the shock, then quickly making the “reforms” permanent.

Friedman articulated contemporary capitalism’s core tactical nostrum, what I have come to understand as the shock doctrine.

to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.”

Boris Yeltsin’s decision to send in tanks to set fire to the parliament building and lock up the opposition leaders that cleared the way for the fire-sale privatization that created the country’s notorious oligarchs.

some sort of additional major collective trauma has always been required,

the disaster economy may well have saved the world market from the full-blown recession it was facing on the eve of 9/11.

powerful ruling alliance between a few very large corporations and a class of mostly wealthy politicians—with hazy and ever-shifting lines between the two groups.

A more accurate term for a system that erases the boundaries between Big Government and Big Business is not liberal, conservative or capitalist but corporatist.

Any attempt to hold ideologies accountable for the crimes committed by their followers must be approached with a great deal of caution. It is too easy to assert that those with whom we disagree are not just wrong but tyrannical, fascist, genocidal. But it is also true that certain ideologies are a danger to the public and need to be identified as such. These are the closed, fundamentalist doctrines that cannot coexist with other belief systems; their followers deplore diversity and demand an absolute free hand to implement their perfect system. 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 toward violence. The ideologies that long for that impossible clean slate, which can be reached only through some kind of cataclysm, are the dangerous ones.

Prawo I Sprawiedliwość!

Keynes proposed exactly that kind of mixed, regulated economy after the Great Depression, a revolution in public policy that created the New Deal and transformations like it around the world.

It is in these malleable moments, when we are psychologically unmoored and physically uprooted, that these artists of the real plunge in their hands and begin their work of remaking the world.

“the first real revolution in the cruel science of pain in more than three centuries.”

prisoners are captured in the most jarring and disorienting way possible, late at night or in early-morning raids, as the manual instructs. They are immediately hooded or blindfolded, stripped and beaten, then subjected to some form of sensory deprivation.

If anyone asked, U.S. agents were tutoring their developing-world students in modern, professional policing methods—they couldn’t be responsible for “excesses” that happened outside their classes.

According to the White House, torture was still banned—but now to qualify as torture, the pain inflicted had to “be equivalent in intensity to the pain accompanying serious physical injury, such as organ failure.”

to be born again. On this front Cameron was a spectacular failure. No matter how fully he regressed his patients, they never absorbed or accepted the endlessly repeated messages on his tapes. Though he was a genius at destroying people, he could not remake them. A follow-up study conducted after Cameron left the Allan Memorial Institute found that 75 percent of his former patients were worse off after treatment than before they were admitted.

The problem, obvious in retrospect, was the premise on which his entire theory rested: the idea that before healing can happen, everything that existed before needs to be wiped out.

Disaster capitalists share this same inability to distinguish between destruction and creation, between hurting and healing.

It was not just training students; it was building and strengthening the Chicago School of economics, the brainchild of a coterie of conservative academics whose ideas represented a revolutionary bulwark against the dominant “statist” thinking of the day.

Friedman’s mission, like Cameron’s, rested on a dream of reaching back to a state of “natural” health, when all was in balance, before human interferences created distorting patterns.

The assumption is here that any public institution is per se a bad solution (?)

Also like Cameron, Friedman believed that when the economy is highly distorted, the only way to reach that prelapsarian state was to deliberately inflict painful shocks: only “bitter medicine” could clear those distortions and bad patterns out of the way.

In the truly free market imagined in Chicago classes and texts, these forces existed in perfect equilibrium, supply communicating with demand the way the moon pulls the tides.

Those words went unheeded at the time, but when Europe was rebuilt after the Second World War, the Western powers embraced the principle that market economies needed to guarantee enough basic dignity that disillusioned citizens would not go looking once again for a more appealing ideology, whether fascism or Communism.

Poland’s case

First, governments must remove all rules and regulations standing in the way of the accumulation of profits. Second, they should sell off any assets they own that corporations could be running at a profit. And third, they should dramatically cut back funding of social programs.

Milton formula

In the years leading up to the coup, U.S. trainers, many from the CIA, had whipped the Chilean military into an anti-Communist frenzy, persuading them that socialists were de facto Russian spies, a force alien to Chilean society—a homegrown “enemy within.”

September 11, 1973, was far more than the violent end of Allende’s peaceful socialist revolution; it was the beginning of what The Economist would later describe as a “counterrevolution”—the first concrete victory in the Chicago School campaign to seize back the gains that had been won under developmentalism and Keynesianism.

The Chicago Boys had confidently assured Pinochet that if he suddenly withdrew government involvement from these areas all at once, the “natural” laws of economics would rediscover their equilibrium, and inflation—which they viewed as a kind of economic fever indicating the presence of unhealthy organisms in the market—would magically go down. They were mistaken. In 1974, inflation reached 375 percent—the highest rate in the world and almost twice the top level under Allende.

Sergio de Castro and the other Chicago Boys argued (in true Chicago fashion) that the problem didn’t lie with their theory but with the fact that it wasn’t being applied with sufficient strictness. The economy had failed to correct itself and return to harmonious balance because there were still “distortions” left over from nearly half a century of government interference. For the experiment to work, Pinochet had to strip these distortions away—more cuts, more privatization, more speed.

Causing a recession or a depression is a brutal idea, since it necessarily creates mass poverty, which is why no political leader had until this point been willing to test the theory. Who wants to be responsible for what BusinessWeek described as a “Dr. Strangelove world of deliberately induced depression”?

It was in Argentina, however, that the involvement of Ford’s local subsidiary with the terror apparatus was most overt. The company supplied cars to the military, and the green Ford Falcon sedan was the vehicle used for thousands of kidnappings and disappearances. The Argentine psychologist and playwright Eduardo Pavlovsky described the car as “the symbolic expression of terror. A death-mobile.”

According to the Latin American historian Karen Robert, by the end of the dictatorship, “virtually all the shop-floor delegates had been disappeared from the country’s biggest firms … such as Mercedes-Benz, Chrysler and Fiat Concord.”49 Both Ford and Mercedes-Benz deny that their executives played any role in the repression. The cases are ongoing.

Prisoners were goaded into being as individualistic as possible, constantly offered Faustian bargains, like choosing between more unbearable torture for themselves or more torture for a fellow prisoner.

He conveniently ignored the fact that the central hypothesis for which he was receiving the prize was being graphically proven false by the breadlines, typhoid outbreaks and shuttered factories in Chile, the one regime ruthless enough to put his ideas into practice.

Claudia Acuña, an Argentine journalist and educator, told me how difficult it had been in the seventies and eighties to fully grasp that violence was not the goal of the junta but only the means.

torture is an indicator species of a regime that is engaged in a deeply anti-democratic project, even if that regime happens to have come to power through elections.

Is neoliberalism an inherently violent ideology, and is there something about its goals that demands this cycle of brutal political cleansing, followed by human rights cleanup operations?

In this way, Bolivia provided a blueprint for a new, more palatable kind of authoritarianism, a civilian coup d’état, one carried out by politicians and economists in business suits rather than soldiers in military uniforms—all unfolding within the official shell of a democratic regime.

Poland became a textbook example of Friedman’s crisis theory: the disorientation of rapid political change combined with the collective fear generated by an economic meltdown to make the promise of a quick and magical cure—however illusory—too seductive to turn down.

Yeltsin took the latter approach—and he was in a hurry. In late 1991, he went to the parliament and made an unorthodox proposal: if they gave him one year of special powers, under which he could issue laws by decree rather than bring them to parliament for a vote, he would solve the economic crisis and give them back a thriving, healthy system.

The vast majority of Russians—70 percent—were opposed to lifting price controls, he explained, but “we could see that the people, then and now, were concentrating on the yields of their private [garden] plots and in general on their individual economic circumstances.”

the market Bolsheviks believed in a kind of magic: if the optimal conditions for profit making were created, the country would rebuild itself, no planning required. (It was a faith that would reemerge, a decade later, in Iraq.)

“In order to have a democracy in society there must be a dictatorship in power,”

Nor were these catastrophic results unique to Russia; the entire thirty-year history of the Chicago School experiment has been one of mass corruption and corporatist collusion between security states and large corporations, from Chile’s piranhas, to Argentina’s crony privatizations, to Russia’s oligarchs, to Enron’s energy shell game, to Iraq’s “free fraud zone.”

In much of the Southern Hemisphere, neoliberalism is frequently spoken of as “the second colonial pillage”: in the first pillage, the riches were seized from the land, and in the second they were stripped from the state.

After every one of these profit frenzies come the promises: next time, there will be firm laws in place before a country’s assets are sold off, and the entire process will be watched over by eagle-eyed regulators and investigators with unimpeachable ethics. Next time there will be “institution building” before privatizations (to use the post-Russia parlance).

But calling for law and order after the profits have all been moved offshore is really just a way of legalizing the theft ex post facto, much as the European coloniz...

Carolyn Eisenberg, author of an acclaimed history of the Marshall Plan.

Overton’s window!

When Yeltsin abolished the Soviet Union, the “loaded gun” that had forced the development of the original plan was disarmed. Without it, capitalism was suddenly free to lapse into its most savage form, not just in Russia but around the world. With the Soviet collapse, the free market now had a global monopoly, which meant all the “distortions” that had been interfering with its perfect equilibrium were no longer required.

They were there not to build their own businesses and compete but to snap up the entire apparatus, workforce, customer base and brand value built over decades by Korean companies, often to break them apart, downsize them or shut them completely in order to eliminate competition for their imports.