Crisis and Opportunity

Naomi Klein’s 2007 book, Shock doctrine: The rise of disaster capitalism (New York, Picador), provides a great way of framing how the shortcomings of capitalism might be corrected.  What I’m after is what might be called a reverse shock doctrine, though the reversal is not a simple mirror image. (This post assumes familiarity with some of my previously presented arguments, especially How bad…?, Reinventing…, and And here it is…)

Klein calls “orchestrated raids on the public sphere in the wake of catastrophic events, combined with the treatment of the disasters as exciting market opportunities, ‘disaster capitalism'” (p. 6). She traces the origins of disaster capitalism to Milton Friedman’s articulation of:

“contemporary capitalism’s core tactical nostrum, what I have come to understand as the shock doctrine. He [Friedman] observed that ‘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.’12 Some people stockpile canned goods and water in preparation for major disasters; Friedmanites stockpile free-market ideas. And once a crisis has struck, the University of Chicago professor was convinced that it was crucial to act swiftly, to impose rapid and irreversible change before the crisis-racked society slipped back into the ‘tyranny of the status quo.’ He estimated that ‘a new administration has some six to nine months in which to achieve major changes; if it does not seize the opportunity to act decisively during that period, it will not have another such opportunity.’13 A variation on Machiavelli’s advice that injuries should be inflicted ‘all at once,’ this proved to be one of Friedman’s most lasting strategic legacies.” (pp. 7-8)

So what I propose is the positive opposite of disaster capitalism and the shock doctrine. The opposition takes two forms. First, what might be called genuine prosperity capitalism or whole wealth capitalism takes advantage of the crises induced by market failures to effect changes that are the diametric opposite of disaster capitalism. In Bolivia in 1985, for instance, the government countered hyperinflation with a shock program that implemented free market principles while incurring huge costs in terms of human suffering, social upheaval, and environmental impacts (Klein’s Chapter 7, pp. 177-193).

This was privatization on a massive scale, with the simultaneous near-complete abandonment of externalized welfare costs previously funded by tax revenues, shifting responsibility for the consequences of an environment more attuned to corporate welfare directly onto the poor. Of course, one of the reasons why this was possible is that no one is responsible for the indirect social and environmental costs. Because the unmeasured and unmanaged dead capital is off the books and not included in the models, it doesn’t count, no matter how essential it is to the overall functioning of the economy.

My plan would do just the opposite, not in the sense of shifting costs off society at large and onto business but in transforming dead capital into living. I propose taking advantage of market failures to internalize social and environmental costs, to follow through on the general capitalist principle that maximizing social welfare depends on having each firm in an economy maximize its total market value. The current (2007-2010) great recession, for instance, has laid bare the need for a new infrastructure of human, social, and natural capital metrics. Universally available uniform measures of each form of living capital would function as common currencies for the exchange of the value of intangible assets.

Such currencies are needed for reducing the astronomical transaction costs associated with 90% of the capital under management in the economy as a whole. It may be impossible to transform economic models and financial standards so completely outside of the context of a widespread disaster, and it may now be too late in the course of this disaster to begin the process. This period may someday be seen in retrospect, however, as the quiet before the real storm, and so I can do no better than to work toward accumulating a stockpile of new ideas that may come to be seen as vital tools essential to making needed changes when the opportunity arises.

Second, in contrast with Klein, rather than seeing the shock doctrine as a pure imposition of power, we would do better to understand the sources of that power and how it is sustained and perpetuated. What I want to consider is not an apology for the injustices, but a coherent narrative, however much it was a case of one step forward and five back.

Though it does not appear to have been intentional, the stage for the 1985 Bolivian crisis was set by the Reagan-era war on drugs, which had cut Bolivia’s export revenues by 50% in 1984 (p. 178). This economic disaster came just as Bolivia was making a political shift from dictatorship to democracy. It is highly ironic that the shock therapy was administered by an elected leftist government, but there is also a kind of consistency to the course of events that lends itself to a narrative of ongoing development.

With 20-20 hindsight, it is obvious that alternative policies, such as the legalization, regulation, and taxation of cocaine, could have prevented to some degree, at least, the tragic consequences of the shock doctrine that were suffered by the Bolivian people. But that does not change the fact that a fundamental level of progress was achieved in abandoning the socially irresponsible, humanly immoral, and economically unsustainable dictatorship, illegal drug trade, and state-owned mining operations. Would not the re-entrenchment of these in 1985 have produced far more suffering, upheaval, and environmental deterioration than actually did occur? After all, though labor and social leaders were temporarily kidnapped while the shock policies were implemented, mass murder was not part of this picture.

Even so, far from relieving anyone of responsibility, this damning with faint praise frames a perspective on a positive way forward. If free market principles had been expanded to include all the forms of capital (human, social, and natural in addition to the existing manufactured, liquid, and property), the shock doctrine might have instead been realized as a soothing, reassuring, care or love doctrine. Opportunities for instituting such a doctrine do not seem to be in short supply. They will apparently continue to offer themselves for as long as capitalism remains in its current incomplete state. And capitalism will remain in that state as long as we do not emulate Friedman’s example and accumulate a stockpile of ideas as to how the profit motive can be harnessed as a source of energy for growing genuine wealth: fulfilled human potential, safe and creative communities, and a thriving natural environment.

All of my work is focused on contributing to the stock of intellectual capital needed for realizing how true it is that love makes the world go round.

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p. 174, Repeats Friedman quote from p. 7:
“‘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.’33 It was to become a kind of mantra for his movement in the new democratic era. Allan Meltzer elaborated on the philosophy: ‘Ideas are alternatives waiting on a crisis to serve as the catalyst of change. Friedman’s model of influence was to legitimize ideas, to make them bearable, and worth trying when the opportunity comes.’34”

p. 175:
“The idea that market crashes can serve as catalysts for revolutionary change has a long history on the far left, most notably in the Bolshevik theory that hyperinflation, by destroying the value of money, takes the masses one step closer to the destruction of capitalism itself.35 This theory explains why a certain breed of sectarian leftist is forever calculating the exact conditions under which capitalism will reach ‘the crisis,’ much as evangelical Christians calibrate signs of the coming Rapture. In the mid-eighties, this Communist idea began to experience a powerful revival, picked up by Chicago School economists who argued that just as market crashes could precipitate left-wing revolutions, so too could they be used to spark right-wing counterrevolutions, a theory that become known as ‘the crisis hypothesis.’36
“Friedman’s interest in crisis was also a clear attempt to learn from the victories of the left after the Great Depression: when the market crashed, Keynes and his disciples, previously voices in the wilderness, had been ready and waiting with their ideas, their New Deal solutions. In the seventies and early eighties, Friedman and his corporate underwriters had attempted to mimic this process with their unique brand of intellectual disaster preparedness. They painstakingly built up a new network of right-wing think tanks, including Heritage and [p. 176] Cato, and produced the most significant vehicle to disseminate Friedman’s views, the ten-part PBS miniseries Free to Choose–underwritten by some of the largest corporations in the world, including Getty Oil, Firestone Tire & Rubber Co., PepsiCo, General Motors, Bechtel, and General Mills.37 When the next crisis hit, Friedman was determined that it would be his Chicago Boys who would be the ones ready with their ideas and their solutions.”

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