Market Fundamentalism and Liberty

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Naomi Klein spoke at the University of
Illinois in late October about a liberation
movement that began in South America
on September 11, 1973. It was a liberation
movement for the international corporation.
The current American economic
crisis is a direct result of this liberation
(deregulation) of corporations. A shocked former
Federal Reserve chairman Alan Greenspan testified to a
congressional committee that he had mistakenly believed
that rational self-interest would preclude the need for
more regulation of the financial sector.
It is sometimes claimed that the failures of the Iraq
occupation indicated a lack of planning. Klein found that
this was not the case, that the plan used was a particularly
severe form of policies routinely applied by the International
Monetary Fund. The Bush administration expected
to create a democratic and economic powerhouse in Iraq
as a result of their policies. Their failure in Iraq was the
inspiration for Klein’s new book, The Shock Doctrine: the
Rise of Disaster Capitalism.
Nobel Laureate economist Milton Friedman believed that
state interference in the economy was the cause of market
underperformance and instability, and that it was dangerous
to political liberty. He was so confident of the connection
between political liberty and a free market that he suspected
that a free market would spontaneously generate political
liberty. He had been teaching these ideas, sometimes referred
to as market fundamentalism, for some years at the University
of Chicago when a unique opportunity presented itself.
The opportunity was the 1973 Chilean coup against
elected President Allende. A group of Chileans trained in
Friedman’s economics had the ear of General Pinochet,
who led the coup. Moving quickly, using what Klein calls
the shock doctrine, they privatized state industries, gave
international corporations a nearly free hand, eliminated
the social safety net, and waited for the spontaneous
appearance of prosperity and liberty. Instead, the economy
sank into deep recession. The measures were so wildly
unpopular that a police state was required to keep them in
place. The general prosperity that is necessary to a stable
democracy did not emerge. Only the newly liberated international
corporations did well. What had gone wrong?
The liberation of corporations was tried over and over
with similar results. It was tried in much of Latin America
and later in parts of the dissolved Soviet Union. Most
recently, it has been tried in the United States, producing a
reverse Robin Hood effect in which the wealthy prosper at
the expense of general prosperity. The police state is not yet
much in evidence in the United States, but the ongoing
expansion and privatization of the security apparatus are
more dangerous to democracy and liberty than to terrorists.
In retrospect, it is clear that the lack of adequate economic
regulation caused the triumph of greed over the
public good. The result was not a free market, but only
free corporations. The notion that some regulation is
needed to preserve a free market may seem counterintuitive.
Media scholar Robert McChesney has demonstrated
that a functional free press did not arise spontaneously in
early America, but was rather partly a result of government
policy that supported it. It is now evident that the same
must be true for a functional free market.
In discussing how to prevent such excesses of greed,
Klein emphasized the importance of a democratic culture
and of not trusting the government. She said that a culture
of democratic activism is essential to the prevention of the
exploitation of disasters to the benefit of the wealthy, as in
the ongoing US financial sector bailout fiasco.
Klein is self-described as from the Left, but her emphasis
on suspicion of the state is something a Libertarian
would heartily endorse. Howard Zinn’s warnings that we
must never forget that the interests of the government are
not the interests of the people come to mind.
Klein gives us reason to hope that there is an emerging
consensus between the democratic Left and democratic
Right. It might resemble the Progressives of a century ago,
who set out to curb the excesses of the Gilded Age, a time
similar to our own. We’ve tried the extremes of complete
state control of the means of production and of corporate
control of the means of production. They have failed
repeatedly in similar ways, producing police states and an
absence of general prosperity.
The balance between the interests of the people as a
whole and the interests of the individual that is enshrined
in the Constitution, if applied to the economy, offers an
alternative that is viable, although an anathema to the fundamentalists
of the Left and Right. Klein warned against
fundamentalisms of all kinds, emphasizing that in our
exploration of good public policy regarding the economy,
a free and open conversation is critical.
This conversation is nowhere more needed than
between the United States and Latin America. The shock
doctrine was visited on Latin America first, and some of
the most interesting resurgences of democratic economic
policy are found there as it recovers from the damage. No
one knows what form or degree of regulation of the economy
is best, or even whether or not there are multiple
forms that work well. But we certainly know that the
extremes do not work.
For more information on Naomi Klein’s publications,
see A recording of her appearance
on Focus 580 on October 30, 2008 is available from the
AM/Focus580 archives at See for information on Robert
McChesney’s work regarding the free press.

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