Blog Entry

The other Dr. Shock (Friedman)

...Friedman's mission [...] rested on a dream of reaching back to a state of "natural" health, when all was in balance, before human interferences created distorting patterns. [...] Friedman dreamed of depatterning societies, of returning them to a state of pure capitalism, cleansed of all interruptions--government regulations, trade barriers and entrenched interests.

[...] Friedman always prided himself on approaching economics as a science as hard and rigorous as physics or chemistry. But hard scientists could point to the behavior of the elements to prove their theories. Friedman could not point to any living economy that proved that if all "distortions" were stripped away, what would be left would be a society of perfect health and bounteous, since no country in the world met the criteria of perfect laissez-faire.

[...] Like all fundamentalist faiths, Chicago School economics is, for its true believers, a closed loop. The starting premise is that the free market is a perfect scientific system, one in which individuals, acting on their own self-interested desires, create the maximum benefits for all. If follows ineluctably that if something is wrong within a free-market economy [...] it has to be because the market is not truly free.

[...] The United States was already a capitalist country, but as far as they were concerned, just barely. In the U.S., and in all supposedly capitalist economies, the Chicagoans saw interferences everywhere. To make products more affordable, politicians fixed prices; to make workers less exploited, they set minimum wages, to make sure everyone had access to education, they kept it in the hands of the state. These measures seemed to help people, but Friedman and his colleagues were convinced--and they "proved" it with their models--that they were actually doing untold harm to the equilibrium of the market and the ability of its various signals to communicate with each other.

[...] For this reason, Chicagoans did not see Marxism as their true enemy. The real source of the trouble was to be found in the ideas of the Keynesians in the United States, the social democrats in Europe and the developmentalists in what was then called the Third World.

[...] Developmentalists economists argued that their countries would finally escape the cycle of poverty only if they pursued an inward-oriented industrialization strategy instead of relying on the export of natural resources, whose prices had been on the declining path, to Europe and North America. They advocated regulating or even nationalizing oil, minerals and other key industries so that a healthy share of the proceeds fed a government-led development process.

[...] During this dizzying period of expansion, the Southern Cone began to look more like Europe and North America than the rest of Latin America or other parts of the Third World.

[...] Though always cloaked in the language of math and science, Friedman's vision coincided precisely with the interests of large multinationals, which by nature hunger for vast new unregulated markets. In the first stage of capitalist expansion, that kind of ravenous growth was provided by colonialism--by "discovering" new territories and grabbing land without paying for it, then extracting riches from the earth without compensating local populations. Friedman's war on the "welfare state" and "big government" held out the promise of a new front of rapid riches [...].

[...] Although he had little appetite for reversing Keynesianism at home, Eisenhower proved eager to take swift and radical action to defeat developmentalism abroad. It was a campaign in which the University of Chicago would eventually play a pivotal role.

[...] The first was in 1953, when a CIA plot successfully overthrew Mossadegh in Iran, replacing him with the brutal shah. The next was the 1954 CIA-sponsored coup in Guatemala, done at the direct behest of the United Fruit Company. The corporation [...] was indignant that President Jacobo Arbenz Guzmán had expropriated some of its unused land (with full compensation) as part of his project to transform Guatemala, as he put it, "from a backward country with a predominantly feudal economy into a modern capitalist state"--apparently an unacceptable goal. Soon enough Arbenz was out, and United Fruit was back in charge.

The Shock Doctrine: the rise of disaster capitalims (2007)
Naomi Klein

Posted on:
2009.10.04 -0500

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