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Why The Right Loves a Disaster
By Naomi Klein
28/01/08 "Los
Angeles Times" --- - Moody’s, the credit-rating
agency, claims the key to solving the United States’ economic
woes is slashing spending on Social Security. The National Assn.
of Manufacturers says the fix is for the federal government to
adopt the organization’s wish-list of new tax cuts. For
Investor’s Business Daily, it is oil drilling in the Arctic
National Wildlife Refuge, “perhaps the most important stimulus
of all.”
But of all the cynical scrambles to package pro-business cash
grabs as “economic stimulus,” the prize has to go to Lawrence B.
Lindsey, formerly President Bush’s assistant for economic policy
and his advisor during the 2001 recession. Lindsey’s plan is to
solve a crisis set off by bad lending by extending lots more
questionable credit. “One of the easiest things to do would be
to allow manufacturers and retailers” — notably Wal-Mart — “to
open their own financial institutions, through which they could
borrow and lend money,” he wrote recently in the Wall Street
Journal.
Never mind that that an increasing number of Americans are
defaulting on their credit card payments, raiding their 401(k)
accounts and losing their homes. If Lindsey had his way,
Wal-Mart, rather than lose sales, could just loan out money to
keep its customers shopping, effectively turning the big-box
chain into an old-style company store to which Americans can owe
their souls.
If this kind of crisis opportunism feels familiar, it’s because
it is. Over the last four years, I have been researching a
little-explored area of economic history: the way that crises
have paved the way for the march of the right-wing economic
revolution across the globe. A crisis hits, panic spreads and
the ideologues fill the breach, rapidly reengineering societies
in the interests of large corporate players. It’s a maneuver I
call “disaster capitalism.”
Sometimes the enabling national disasters have been physical
blows to countries: wars, terrorist attacks, natural disasters.
More often they have been economic crises: debt spirals,
hyperinflation, currency shocks, recessions.
More than a decade ago, economist Dani Rodrik, then at Columbia
University, studied the circumstances in which governments
adopted free-trade policies. His findings were striking: “No
significant case of trade reform in a developing country in the
1980s took place outside the context of a serious economic
crisis.” The 1990s proved him right in dramatic fashion. In
Russia, an economic meltdown set the stage for fire-sale
privatizations. Next, the Asian crisis in 1997-98 cracked open
the “Asian tigers” to a frenzy of foreign takeovers, a process
the New York Times dubbed “the world’s biggest
going-out-of-business sale.”
To be sure, desperate countries will generally do what it takes
to get a bailout. An atmosphere of panic also frees the hands of
politicians to quickly push through radical changes that would
otherwise be too unpopular, such as privatization of essential
services, weakening of worker protections and free-trade deals.
In a crisis, debate and democratic process can be handily
dismissed as unaffordable luxuries.
Do the free-market policies packaged as emergency cures actually
fix the crises at hand? For the ideologues involved, that has
mattered little. What matters is that, as a political tactic,
disaster capitalism works. It was the late free-market economist
Milton Friedman, writing in the preface to the 1982 reissue of
his manifesto, “Capitalism and Freedom,” who articulated the
strategy most succinctly. “Only a crisis — actual or perceived —
produces real change. When that crisis occurs, the actions that
are taken depend on the ideas that are lying around. That, I
believe, is our basic function: to develop alternatives to
existing policies, to keep them alive and available until the
politically impossible becomes politically inevitable.”
A decade later, John Williamson, a key advisor to the
International Monetary Fund and the World Bank (and who coined
the phrase “the Washington consensus”), went even further. He
asked a conference of top-level policymakers “whether it could
conceivably make sense to think of deliberately provoking a
crisis so as to remove the political logjam to reform.”
Again and again, the Bush administration has seized on crises to
break logjams blocking the more radical pieces of its economic
agenda. First, a recession provided the excuse for sweeping tax
cuts. Next, the “war on terror” ushered in an era of
unprecedented military and homeland security privatization.
After Hurricane Katrina, the administration handed out tax
holidays, rolled back labor standards, closed public housing
projects and helped turn New Orleans into a laboratory for
charter schools — all in the name of disaster “reconstruction.”
Given this track record, Washington lobbyists had every reason
to believe that the current recession fears would provoke a new
round of corporate gift-giving. Yet it seems that the public is
getting wise to the tactics of disaster capitalism. Sure, the
proposed $150-billion economic stimulus package is little more
than a dressed-up tax cut, including a new batch of “incentives”
to business. But the Democrats nixed the more ambitious GOP
attempt to leverage the crisis to lock in the Bush tax cuts and
go after Social Security. For the time being, it seems that a
crisis created by a dogged refusal to regulate markets will not
be “fixed” by giving Wall Street more public money with which to
gamble.
Yet while managing (barely) to hold the line, the House
Democrats appear to have given up on extending unemployment
benefits and increasing funding for food stamps and Medicaid as
part of the stimulus package. More important, they are failing
utterly to use the crisis to propose alternative solutions to a
status quo marked by serial crises, whether environmental,
social or economic.
The problem is not a lack of ideas “alive and available” — to
borrow Friedman’s phrase. There are plenty available, from
single-payer healthcare to legislating a living wage. Hundreds
of thousands of jobs can be created by rebuilding the ailing
public infrastructure and making it more friendly to public
transit and renewable energy. Need start-up funds? Close the
loophole that lets billionaire hedge fund managers pay 15%
capital gains instead of 35% income tax, and adopt a
long-proposed tax on international currency trading. The bonus?
A less volatile, crisis-prone market.
The way we respond to crises is always highly political, a
lesson progressives appear to have forgotten. There’s a
historical irony to that: Crises have ushered in some of
America’s great progressive policies. Most notably, after the
dramatic market failure of 1929, the left was ready and waiting
with its ideas — full employment, huge public works, mass union
drives. The Social Security system that Moody’s is so eager to
dismantle was a direct response to the Depression.
Every crisis is an opportunity; someone will exploit it. The
question we face is this: Will the current turmoil become an
excuse to transfer yet more public wealth into private hands, to
wipe out the last vestiges of the welfare state, all in the name
of economic growth? Or will this latest failure of unfettered
markets be the catalyst that is needed to revive a spirit of
public interest, to get serious about the pressing crises of our
time, from gaping inequality to global warming to failing
infrastructure?
The disaster capitalists have held the reins for three decades.
The time has come, once again, for disaster populism.
Naomi Klein is the author of many books, including her most
recent, The Shock Doctrine: The Rise of Disaster Capitalism,
which will be published in September.Visit Naomi’s website at
www.naomiklein.org , or
to learn more about her new book, visit
www.shockdoctrine.com
.
© 2008 The Los Angeles Times
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