Monday 29 May 2023
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This article first appeared in Wealth, The Edge Malaysia Weekly on April 25, 2022 - May 1, 2022

Are you a proponent of capitalism who believes that free trade and free market thinking has spread smoothly throughout the world? Naomi Klein’s The Shock Doctrine by Naomi Klein will turn that perception on its head. 

Klein writes about the propagation in the 20th century of free market thinking, otherwise known as the theory of neoliberalism, which supports eliminating price controls, deregulating capital markets and lowering trade barriers. 

At its core, the theory believes that when a market is left to its own devices and is at equilibrium, it “would create just the right number of products at precisely the right prices, produced by workers at the right wages to buy those products — an Eden of plentiful employment, boundless creativity and zero inflation”. It advocates that government intervention in the markets should be minimised and businesses given as much freedom as possible to conduct their activities. 

The key figure behind this theory is the late Milton Friedman, who was a professor at the University of Chicago for three decades and who was awarded the Nobel Memorial Prize in Economics in 1976. Friedman and his disciples — proponents of neoliberalism— played a pivotal role in the adoption of neoliberalism policies by Latin American governments then. 

Many believed that Friedman, together with the US government and Central Intelligence Agency (CIA), brought benefits to South American countries by converting their economies from socialist to capitalist.

But Klein does not agree. Instead, she is of the view that they created social unrest and extreme inequality in the region, which can still be seen today. The process also involved bloodshed, major violations of human rights and the sacrifice of countless people in those countries. 

For instance, the book highlights that neoliberal policies were implemented by Chile’s Augusto Pinochet, a dictator who seized power through a coup d’état that overthrew its democratically elected socialist president, Salvador Allende. Bolstered by the support of the US government, Pinochet deployed tanks and fighter jets to attack the presidential palace, while Allende fought the army from inside the building with 36 followers as he refused to organise his supporters into an armed defence league. He was later found dead. 

Pinochet then formed a military government which saw the Chicago Boys (a group of prominent economists the majority of whom were educated at the University of Chicago) rise to power to help the new government implement new economic policies conforming to neoliberalism. Friedman would later visit Pinochet to provide him with advice. 

Some may argue that political changes and economic policies are separate matters. But the author demonstrates that this is untrue through research and extensive interviews. She claims that the Chicago Boys had fully anticipated the regime change and played critical roles in helping the Pinochet government implement new economic policies. These changes were possible only because they were brutally forced upon the people through collaboration between the military government, economists and corporations. 

To Klein, corporations were directly responsible for civilian blood spilt in the Southern American countries. For instance, when a right-wing military government took power in Argentina in 1976, Ford and several multinational companies which previously operated in a socialist environment were pleased. Ford supplied cars to the military and, in exchange, the government helped the company in “ridding the assembly lines of troublesome trade unionists”. The Ford Falcon sedan, for instance, was used for thousands of kidnappings and disappearances back then, the author says. 

She also writes that the “Ford factory in suburban Bueno Aires was turned into an armed camp; in the weeks that followed, it was swarming with military vehicles including tanks and helicopters buzzing overhead” while “a detention centre was set up inside the factory gates” and workers tortured. Similar and far worst incidents are described in the book. 

Some might justify the use of such violence as being for the long-term good of the people of these countries, but Klein disagrees. For instance, as the Chilean government freed up markets and trade, it also sold assets and government-owned entities to multinational corporations at generous prices. These companies quickly laid off workers and scaled back employees’ benefits and subsidies during times of economic turmoil. They imported products from overseas rather than produced them locally, while skill transfer scarcely happened as foreign expertise was hired. All these led to weak to negative economic growth, a surge in unemployment, high inflation and social unrest over the short term. 

Klein says that over the long term, the benefits promised by neoliberalism are arguable, given various issues such as inequality that persist today in countries such as Chile and Brazil. 

Interestingly, the author draws a parallel between electroconvulsive therapy (ECT) and how free market policies were implemented in South American countries by military governments in cohort with various parties. 

ECT, a controversial psychiatric treatment that involves the application of electric current to the human body, was intensely experimented with during the mid-20th century by the late psychiatrist Ewan Cameron, a Scottish-born American citizen who had been president of several reputable associations. 

In fact, Cameron was once funded by the CIA and had participated in the Project MKUltra mind control programme, which gave birth to the KUBARK Counterintelligence Interrogation manual — a guide that details the use of abusive techniques, including electric shock, threats and fear, sensory deprivation and isolation.

Throughout the book, the author finds similarities between the Latin American people under abrupt regime changes, and captives in prisons and detention camps tortured through electrocution and other methods outlined in the KUBARK manual. The violent regime changes, wars, weapons and oppression left the people in a state of shock, rendering them idle and unresponsive to their surroundings for a while. It was precisely during this period that some dictators, governments and economists alike forced through significant policy changes without democratic means. 

In the later part of her book, Klein outlines how the “shock and awe” method came full circle in the US under the Bush administration. She points out how the US government quickly pushed through huge changes after the 911 terrorist attack that shocked Americans to their core. Other than President George W Bush, at the centre of this push was Donald Rumsfeld, then secretary of defence and once an admirer of Friedman. 

The author depicts how Bush and Rumsfeld, among others, played a critical role in “corporatising” and “hollowing” the US government through the outsourcing of key functions to private players, partly based on their belief that the market knows best. The government became more of an intermediary that passed on contracts to profit-driven private companies than a provider of social benefits and welfare programmes to the people. 

Equally fascinating is the account of how the Bush administration fuelled the rise of disaster capitalism, which allowed corporations, particularly those in defence technology and cybersecurity, to profit hugely from the war in Iraq. The extreme example of disaster capitalism is showcased through the Israeli economy, market and businesses, which the author delves into in detail in one of the chapters.

The Shock Doctrine is an insightful book that gives readers a view of modern economics and political history through the lens of a supporter of left-wing politics and a critic of corporate globalisation.

Also a successful filmmaker, the author expresses her ideas through colourful stories and descriptions based on her life experience and extensive research conducted on the ground. Its strong narrative makes it compelling reading, taking the reader smoothly from chapter to chapter.

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