NAOMI KLEIN and MILTON FRIEDMAN: The Luxury of Opinion on What Constitutes Freedom

Here’s a short excerpt from an interview Milton Friedman gave to Nathan Gardels just before Friedman’s death, and just before Naomi Klein’s Shock Doctrine came out:

NPQ | With globalization, are we seeing the freest world economy we’ve ever seen?

Friedman | Oh no. We had much freer trade in the 19th century. We have much less globalization now than we did then.

Will we go ahead back to this freedom of the 19th century? I don’t know. We have a freer world because of the collapse of the Soviet Union and the changes in China. Those two have been the main contributors to freedom in our time.

The countries that have risen and separated out as a result of the collapse of the Soviet Union are, on the whole, following freer economic policies. Most of these states have freer government and less restrictions on trade.

This free-market base will likely expand from there by example to others not so free. Everyone, everywhere, now understands that the road to success for underdeveloped countries is freer markets and globalization.

NPQ | In the end, your ideas have triumphed over Marx and Keynes.

Is this, then, the end of the road for economic thought? Is there anything more to say than free markets are the most efficient way to organize a society? Is it the “end of history,” as Francis Fukuyama put it?

Friedman | Oh no. “Free markets” is a very general term. There are all sorts of problems that will emerge.

Free markets work best when the transaction between two individuals affects only those individuals.

But that isn’t the fact. The fact is that, most often, a transaction between you and me affects a third party. That is the source of all problems for government. That is the source of all pollution problems, of the inequality problem.

There are some good economists like Gary Becker and Bob Lucas who are working on these issues.

This reality ensures that the end of history will never come.

The full interview is here.

THE SHOCK DOCTRINE

Below the interview is a long excerpt from an (audio and video) interview Naomi Klein gave to Mark Molaro describing the thesis of her book The Shock Doctrine, which deeply implicates Milton Friedman and the so-called Chicago School of Economics.

From Klein (with Mark Molaro) describing the thesis of her book The Shock Doctrine:

What I’m doing with the book [the Shock Doctrine] is providing an alternative history of our contemporary economic era—the chapter we’ve been living in the US since Reagan, in Latin America since the 70s. This revolution stared in different parts of the world in different moments. In Eastern Europe it was after the Berlin Wall fell, and so the timing is different in different parts of the world.

It did begin 35 years ago in Latin America. There’s a broad agreement on this, that we have been living a new chapter, and that Milton Friedman is—was—the guru of this chapter of history—what’s often described as “the triumphs of the free markets.”

I think we’ve been living with a fairy tale version of how this economic model spread throughout the world and there have been what I call the official stories. One of them is a PBS series called Commanding Heights, which was a three part series on the great battle between [Friedrich] Hayek and [Milton] Friedman and [John Maynard] Keynes.

So what I’m doing with the Shock Doctrine is I’m covering the same ground, but I’m telling the story differently, because in the official version you don’t hear about the importance of shocks and crises.

You hear that free markets and free people go hand in hand. That this ideology spread throughout the world because people wanted it, because they wanted their Reaganomics with their Big Macs after the Berlin Wall fell.

This is the official story.

When Milton Friedman died in 2006, there was a retelling of that official history. The merging of the idea of this radical vision of free markets with democracy, the two-for-one deal that has been sold to us by people like Francis Fukuyama.

So I’m telling the same history, the same chapter, but I emphasize different key dates.

Many people when they tell the story they begin with Thatcher and Reagan. I begin with Pinochet—because that’s really when it began. It is a victor’s history, the one that we get. It has been cleansed of the unflattering details like the fact that it started under a military dictatorship…

The idea of what was called the Chile Project—the idea of bringing Latin American students, their tuition paid for by the US government and later by the Ford Foundation, is that by training this group of students, under these very radical Right Wing economists [the Chicago School of Economics], that they would be a counterpoint to the Socialists in Latin America and now it would be a battle of ideas.

So the influence of the University of Chicago and the influence of Friedman under the Juntas of South America—and hundreds of students went through these programs. It extended from Chile to Argentina to Mexico, Brazil—the influence went well beyond Friedman. It was that a generation of politicians was trained in this radical ideology. They went on to be finance ministers, heads of the central bank; they went on to work for the IMF and the World Bank and they were really the proselytizers of this ideology….”

In the book I talk about three distinct forms of shock which reinforce each other—in a sort of cycle, a circle of shock, if you will. The first shock is the shock to countries. It’s the crises. In Iraq it was called “Shock and Awe.” It was the military invasion. It was an invasion strategy based on a theory that you needed to put the entire population of Iraq into the state of shock and awe to convince them of the futility of resistance. If you read the Shock and Awe manual, it spells it out. That was the first shock.

The Second Shock Paul Bremer arriving in Baghdad in May of 2003 and his trademark Brooks Brothers suits and his Timberlane boots and declaring Iraq open for business. So much has happened in Iraq, spiraling in chaos today, that one can forget that first summer of frantic law-making under Paul Bremer.

This was a period of relative stability in Iraq. This is where you can see very clearly what the Bush post-war plan was. You know, we often hear, they didn’t have a plan. Well they had a plan, but it didn’t work. It backfired badly but there certainly was a plan and Paul Bremer implemented that plan with great enthusiasm. The plan was to turn Iraq into a model, free-market economy.

And when they were finished, then they were going to have elections—and it’s very important to get the order right because the Iraqis had this crazy idea that they should have elections first and then they should have a democratic government decide what the economic policies should be.

You know, very backwards people. But of course, Bremer, and Wolfowitz and Rumsfeld and Cheney knew better and there plan was to push through—Bremer wrote a hundred laws, edicts, they were very radical.

You know they often talk about them is if they were technocratic little housekeeping measures. But in fact economists described it as the wish list for foreign investors. Foreign companies were allowed 100% ownership over Iraqi assets. They were allowed to take a hundred percent of their profits out.

These are laws that are unheard of in the region, which is actually very protected economically—but these were radical laws anywhere in the world. These were laws Bremer pushed through that the Republican party has been trying to impose in the United States and never been able to, like a flat tax. Iraq got a fifteen percent flat tax in this period.

So that was the economic shock therapy program, and it was based on this theory that Iraqis would be so disoriented, and reeling from the Shock and Awe invasion—focused on daily concerns like the fact that they didn’t have electricity or water—that they wouldn’t be able to resist these economic shocks.

Richard Armitage, who I quote in the book, former Under Secretary of State under Powell, said that ‘The theory was that Iraqis would be easily marshaled from point A to point B.’

Now of course that didn’t happen and Iraqis did organize in that first summer, and they demanded elections, in fact there were a series of local elections. There were protests almost daily outside the Green Zone. People wanted their jobs back. And they were very against, particularly, the foreign investment law. Iraqi business people organized, opposed this law.

As that mostly non-violent resistance turned into the armed resistance, then there was the emergence of the Third Shock that I talk about in the book. And that is the non-metaphorical shocks to the body—the shock of torture. And torture is always an enforcement tool.

We talk about torture in a very narrow way in this country. Does it work? Does it get reliable information? But the real meaning of torture is that it’s a tool of state terror. It’s a way to gain control of a country that you can’t govern with consent. If you can’t govern a country with the consent of the people, then you have to govern it by fear. And a classic way of governing through fear is the use of torture because it says to a people—and Saddam used it to great effect—‘You cross me, and this is what happens to you.’

[In other words, torture—be it state torture or any other kind—is not used simply as a tool to get information, to gather information. It is a tool to send a message to the people. Indeed, in America, and the thought of Western countries using torture, it is seen as a means—some even argue a necessary means—of gathering information. But Middle Eastern terror, or Mafia killings, and so on, are scene as heinous cruelty that sends a message: don’t cross us…

The full interview is here.

Food for thought—sometimes too much, but a fascinating rereading of the story, nonetheless. It is remarkable to remember that our actions have meaning, and some meanings are profound.

Lots of love to you,

Pete

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One Response to “NAOMI KLEIN and MILTON FRIEDMAN: The Luxury of Opinion on What Constitutes Freedom”

  1. Tommi says:

    I’m glad you posted this. I recently read The Shock Doctrine and one thing that bothered me about Klein’s work is her (somewhat) scapegoating of Milton Friedman. Below a link to my blog post. (I’ve also used trackback – but I’m not sure how that exactly works or what it does ;-0

    http://worstwriter.wordpress.com/2008/01/14/the-non-shocked-doctrine/

    Regards.

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