FEATURE Dr Friedman and Mr Hyde: The Rise of Disaster Polemics

Naomi Klein’s attack on Milton Friedman misses its target, writes Johan Norberg

anadian author Naomi Klein’s book Dr Friedman and Mr Hyde The Shock Doctrine: The Rise of Disaster Klein’s exhibit A against Friedman is a quote from Capitalism is a bible for anti-capitalist ‘one of his most influential essays’: activists that has also won praise Cfrom established reviewers. In a Guardian review Only a crisis—actual or perceived— reprinted in the Sydney Morning Herald, John produces real change. When that crisis Gray explained that ‘there are very few books that occurs, the actions that are taken depend really help us understand the present. The Shock on the ideas that are lying around. Doctrine is one of those books.’ In the New York That, I believe, is our basic function: to Times, Nobel laureate Joseph Stiglitz wrote that it develop alternatives to existing policies, is ‘a rich description of the political machinations to keep them alive and available until the required to force unsavoury economic policies on politically impossible becomes politically resisting countries.’ inevitable. (6)1 Klein’s thesis is that economic liberalisation The quote is not from one of Friedman’s most is unpopular, and therefore it can only win by influential essays, but from a new and very brief deceiving or coercing voters. In particular, free- introduction to the 1982 edition of Capitalism market ideas rely on crises. In a time of a natural and Freedom.2 And it’s not about welcoming disaster, a war or a military coup, when people disasters. From the example Friedman gave, that are disoriented, confused, and fighting for their interest in free markets grew as communism own immediate survival, then corporations, politicians, and economists can push through trade liberalisation, privatisation, and lower public spending. According to Klein, ‘neo-liberal’ Johan Norberg is a senior fellow at the economists welcomed hurricane Katrina, the Cato Institute. He gave the CIS John tsunami, the Iraq War and the South American Bonython Lecture in 2005. This article military coups in the 1970s as opportunities to is an abridged version of Cato Institute erase past policies and introduce radical free- Briefing Paper 102. Detailed footnotes market models. The villain in Klein’s story is can be found in that paper, available Milton Friedman, the Chicago economist who from www.cato.org. did more than anyone in the twentieth century to popularise free market economics. She portrays the mild-mannered and freedom-loving Dr Friedman Endnotes for this article can be as a cold-hearted, warmongering Mr Hyde. found at www.policymagazine.com.

Vol. 24 No. 4 • Summer 2008–09 • Policy  Dr Friedman and Mr Hyde

failed in China and the Soviet Union, and the In other words, if the public is not ignorant, United States and United Kingdom suffered from and not disoriented, but fully informed of the stagflation, it is obvious that Friedman was not reform steps, they would facilitate the adjustment advocating shocks and crises to force anyone to by changing their behaviour when it comes to abandon their old ways. He was merely observing negotiations, saving, consuming, and so on. that people themselves demanded change when Friedman’s view was the complete opposite of old ways failed. But in the rest of the book, Klein what Klein pretends it is.5 pretends that she has proved that Friedman was in favour of deliberately promoting crises. This Six days in Chile is ‘the shock doctrine’, the source of inspiration Klein cites the influence Milton Friedman’s for all those reformers who apparently welcome economic views had on Augusto Pinochet’s conflicts, disasters, and war. military dictatorship in Chile in the 1970s as evidence that free markets rely on tyranny and torture. She writes that Friedman acted as ‘adviser Friedman’s view was the complete to the Chilean dictator’ (7). This is wrong. opposite of what Klein pretends it is. Friedman never worked as an adviser to, and never accepted a penny from, the Chilean regime. He turned down two honorary degrees from Chilean universities that received government funding Klein’s supporting quotes to strengthen her because he thought it could be interpreted as interpretation are taken out of context in the support for the regime. same manner. She takes Friedman’s concept of However, Friedman was in Chile for six days ‘the tyranny of the status quo’ as the tyranny in March 1975 to give public lectures. He had of voters, with a crisis needed for politicians to been invited by a private foundation. While there, bypass the democratic process (6f). For Friedman, he met once with Pinochet for around forty- the tyranny of the status quo was something five minutes, and wrote him a letter afterwards entirely different—an iron triangle of politicians, arguing for a plan to end hyperinflation and bureaucrats and special interest groups (businesses, liberalise the economy. This was the same kind of for example) who advance their own welfare at the advice Friedman gave to communist dictatorships voters’ expense.3 like the Soviet Union, China, and Yugoslavia, yet Of Friedman’s suggestions to reduce inflation, nobody would claim he was a communist. Klein writes, According to Klein, Friedman did not care about the social cost of ending hyperinflation— Friedman predicted that the speed, probably to strengthen the impression that he suddenness and scope of the economic wanted to shock people and let the military deal shifts would provoke psychological with any opposition. She never mentions that he reactions in the public that ‘facilitate the suggested reforms that would lower temporary adjustment. (7) unemployment or that one of his recommendations This gives the impression that Friedman was to create a relief program for Chileans who wanted to incur pain to disorient people and push suffered unemployment and distress.6 his reforms through. But the quote in its entirety Klein writes that the Chilean coup in 1973 was shows that Friedman had something very different a neoliberal one, executed so that Chilean liberal in mind. He actually wrote that if a government economists (‘the Chicago Boys’) could reform chooses to attack inflation in this way, the economy. This is to give the impression that neoliberals have blood on their hands, since the I believe that it should be announced most violent period was shortly after the coup. To publicly in great detail … The more fully do that she has to invent a new chronology and the public is informed, the more will its claim that the liberalisation began when the junta reactions facilitate the adjustment.4 took power (117). This creates a big problem

 Vol. 24 No. 4 • Summer 2008–09 • Policy Dr Friedman and Mr Hyde

for her. If so, it is impossible for her to claim as an endorsement … I do not regard that Friedman’s visit was of such tremendous giving advice on economic policy as importance, because that didn’t take place until immoral if the conditions seem to me eighteen months later. She tries to have her cake to be such that economic improvement and eat it too. would contribute both to the well-being The reality was that initially, military officials of the ordinary people and to the chance were in charge of the economy. They were often of movement toward a politically free corporatist and paternalist, and opposed the society.9 Chicago Boys’ ideas about radical reforms. It wasn’t until this way of governing the economy Friedman’s hopes that economic liberalisation led to runaway inflation that Pinochet threw his would lead to political liberalisation might not weight behind liberalisation and gave civilians always have been realised (though they were in ministerial positions. Their success in the fight Chile’s case), but it is not honest to pretend that against inflation impressed Pinochet, so they were he didn’t have this view so as to give the impression given a larger role.7 Klein could have used the that he didn’t care about democracy. real chronology to blame Friedman for going to a dictatorship that tortured its opponents—the Making violence liberal traditional criticism—but that is not enough for The essence of Klein’s argument is that free-market her. To find support for her thesis that economic reforms more than just coexist comfortably with liberalism needs violence, she has to make it look the most brutal dictatorships. In Klein’s world, like torture and violence was the outcome of the brutality of authoritarian regimes becomes a Friedman’s ideas. way for the ruling class to force through liberal Several chapters after she has given readers the economic reforms. It is important for her that impression that Friedman supported Pinochet, Chile is not an exception, because if it was it Klein admits with a brief quote that Friedman could be used to support Friedman’s thought that did not support Pinochet’s authoritarian policies a successful economy could moderate the regime (117). That is a rather weak description of his and in the end restore democracy. Therefore disagreement with a regime he called ‘terrible’ and Klein makes the case that several other brutal ‘despicable.’8 dictatorships were liberal reformers as well. Klein claims that Friedman’s definition of freedom meant that ‘political freedoms were incidental, even unnecessary, compared with Klein’s argument is that the freedom of unrestricted commerce.’ (185) free-market reforms more than That was not Friedman’s view. He thought that just coexist comfortably with political and economic freedom really are related, and that it would be easy for dictators to rule the most brutal dictatorships. impoverished people fighting for their survival, whereas richer people in a growing economy would begin to demand political rights. From One example is the Argentinean military Friedman’s perspective, an important reason for dictatorship that ruled from 1976 to 1983. She him to try to get both communists and military claims that the southern part of Latin America is regimes to accept liberal economic policies was where ‘contemporary capitalism was born’ (97), that it would increase the chance that they would and she even calls the two countries ‘Chicago become democratic. As he wrote in 1975, School juntas’ (90). There were advisers from the University of Chicago in Argentina—there I approve of none of these authoritarian is strong demand for Chicago economists so regimes—neither the Communist they have been in many places, which provides regimes of Russia and Yugoslavia nor Klein’s conspiracy theory with a lot of material. the military juntas of Chile and Brazil But Argentina’s free market reforms were barely … I do not regard visiting any of them noticeable. In the Fraser Institute’s Economic

Vol. 24 No. 4 • Summer 2008–09 • Policy  Dr Friedman and Mr Hyde

Freedom of the World (EFW) index, which ranks started to gather to mourn the former secretary countries between 1 (the least free) and 10 (the general Hu Yaobang, one of the most important most free), Argentina moved from 3.25 in 1975 reformers. These students and intellectuals wanted to 3.86 in 1985. It is interesting to compare this democratic reforms, specifically to secure free with economic freedom in countries that Klein speech. The protests grew and included everybody mentions as good alternatives to the brutal ‘neo- who wanted democratic reform, both those who liberal’ models, because this score leaves Argentina wanted more economic reform and those who a long, long way from Sweden, a country she wanted less (the element that Klein equates with thinks represents ‘democratic socialism’, which the whole protest). went from 5.62 to 6.63 between 1975 and 1985 There are no indications that the majority of (450), and from Malaysia, one of the ‘mixed, party elders decided to end the demonstrations by managed economies’ she prefers (267), which force because they wanted to save the free-market went from 6.43 to 7.13. But Argentina was the project as Klein claims. They wanted to save the country with torture, so in Klein’s world, it has to party’s power, and the majority was made up of be the more economically liberal. economic conservatives who were sceptical towards liberalisation. Some even refused to visit the free- trade zones on principle.12 And the reforms did not Klein … rewrites the history of the accelerate after the massacre, as Klein writes. For the first time since their inception, they stalled. Tiananmen Square massacre of 1989. The most consistent free-marketer in the leadership, General Secretary Zhao Ziyang, was purged because he supported the protesters, According to Klein, Latin America’s Southern and spent the rest of his life under house arrest. Cone was ‘the first place where the contemporary Friedman met him in Beijing in 1988, and wrote religion of unfettered free markets escaped from him a letter of advice, another meeting with a tyrant the basement workshops of the University of that Klein blames him for. Zhao’s rivals, including Chicago and was applied in the real world’ (102). Premier Li Peng, who was pushing for a violent In fact, after the military dictatorship supposedly crackdown on the protesters, now tried to roll applied those ideas with religious zeal, Argentina’s the market reforms back and reintroduce controls economy was less free-market than all Eastern on the economy. The conservatives blamed the European communist economies tracked by EFW, unrest on openness, and Deng’s position in the including Poland, Hungary, and Romania.10 party was weakened. Far from being the start of Klein sees China as another example of a country shock therapy, Tiananmen Square was almost the where the leaders have adopted Friedman’s ideas end of economic liberalisation in China. Klein and enforced market reform in a violent manner. writes that ‘Tiananmen paved the way for a radical To make her case, she rewrites the history of the transformation free from fear of rebellion’ (189), Tiananmen Square massacre of 1989. She claims but according to EFW, China was actually less that the protesters were primarily opposed to economically open in 1990 than it was in 1985 economic liberalisation, and that the Communist (from 5.11 to 4.91). Party, led by Deng Xiaoping, attacked them to Klein fakes the chronology and she knows it, save its free-market program and move on with because she writes that Deng opened the Chinese the most sweeping reforms yet while people were economy ‘in the three years immediately following still in shock. the bloodbath’ (190). She has to change the But if the students were protesting against meaning of ‘immediate’ into ‘three years,’ because economic reform, they seldom expressed this for three years after Tiananmen Square, there grievance. Instead, they demonstrated in favour was a reform vacuum. This forced Deng to try to of democracy, government transparency, and jumpstart liberalisation in a public way in the spring equality before the law, and against bureaucracy of 1992, even though he had formally retired and and violence.11 The real picture is very different was eighty-seven years old. This ‘southern tour’ from the one Klein paints. The protesters was a trip filled with speeches and networking

10 Vol. 24 No. 4 • Summer 2008–09 • Policy Dr Friedman and Mr Hyde

to save the reform program. The trip was not book of more than 500 pages, Klein gives almost reported in the national media at first, because no argument to the person who isn’t already that was controlled by Deng’s rivals. Deng even convinced of this. She does give a few examples found himself forced to write articles supporting of poverty and unemployment increasing soon his agenda under a pen name to get access. But after the collapse of a planned economy, or soon he was successful in winning local support and after hyperinflation has been brought down. But building alliances with provincial governors who that is not strange, and often it is precisely what were in favour of liberalisation. Only when this economists would predict. However, they would happened did a reluctant President Jiang Zemin also say that this is the only way to reduce poverty decide to support Deng. and unemployment in the long run. And that is precisely why Klein never provides the reader What’s left? with any data over a longer period. She says that If we strip away obvious distortions and the reforms turned the Chilean working class misunderstandings, there is not much left of the into ‘the disposable poor,’ but never once admits arguments against libertarianism and Milton that Chile is the social and economic success Friedman in The Shock Doctrine. Is her claim story in Latin America and has virtually abolished against a movement really that its guru economist extreme poverty. She writes that reforms have used crises to get people to buy his ideas and increased income gaps between cities and rural flattered fascist and communist dictators to get areas in China, but she never mentions that their support? this development also led to the biggest poverty Nothing in The Shock Doctrine suggests that reduction in history. Klein thinks that there is something wrong with In two instances, Klein does briefly mention using crises to promote your ideas. Klein herself the broad picture and the long run. They are has never hesitated to suggest her own solutions to variations on the same claim—that between problems after Hurricane Katrina or the Iraq War, 25% and 60% of the population is discarded or and she would never dream of considering it as becomes a permanent underclass in countries that cynically taking advantage of suffering people to liberalise their economies (405 and 442). A look at implement her own theories. She would say that the EFW data shows that Klein has it backwards. it was a way of helping others. Her only reason for thinking it cynical and evil when libertarians do exactly the same thing is that she thinks that their Nothing in The Shock Doctrine ideas are evil and produce horrible consequences. suggests that Klein thinks that And Klein herself has nice things to say about dictators. She has nothing but praise for Cuba there is something wrong with using (456), Che Guevara (104, 443) and Hezbollah crises to promote your ideas. (461f) when she mentions them in the book, and has defended the Iraqi fascist Islamist leader Muqtada al-Sadr as representing the mainstream Poverty and unemployment is the lowest in the of Iraq and fighting only in self-defence.13 And countries with the most economic freedom. In the leaders who implement the ‘economic the freest fifth of countries, poverty according nationalism’ Klein asks for are people like Russia’s to the United Nations is 15.7%, and in the rest Vladimir Putin, Venezuela’s Hugo Chavéz, of the world it is 29.8%. Unemployment in the and Iran’s Mahmoud Ahmedinejad, who do it freest quintile is 5.2%, which is less than half of while dismantling independent and democratic what it is in the rest of the world. In the least institutions. In other words, Klein does not seem economically free quintile, filled with the kinds to mind dictators, fascists, and murderers, as long of restrictions on private property, businesses and as they don’t reduce taxes and trade barriers.14 trade that Klein claims are ways of helping the Klein’s argument depends on the assumption people against the powerful, poverty is 37.4% that free markets are bad. Astonishingly, in a and unemployment is at 13%.15

Vol. 24 No. 4 • Summer 2008–09 • Policy 11 Dr Friedman and Mr Hyde

Klein writes that global capitalism has lapsed The number of war deaths in 2005 was the lowest into ‘its most savage form’ since 1990 (252). If she in half a century. In 1990 there were nine ongoing is right about the connection between free markets genocides around the world. In 2005, there was and deprivation, poverty should have increased only one, in Darfur. Despite a few conspicuous at a dramatic speed since then. The opposite has exceptions, the world is becoming more peaceful happened. Between 1990 and 2004, extreme in the era of ‘savage’ capitalism.19 poverty in developing countries was reduced The world has also become more democratic, from 29% to 18%, according to the World Bank. contrary to the implications of Klein’s thesis. In This means that extreme poverty has been fact, while markets have been opened the world reduced by 54,000 people every day under ‘savage’ has simultaneously undergone a democratic capitalism.16 And the proportion of people in revolution. Between 1990 and 2007 the number slums, which is another result of liberalisation of electoral democracies increased from 76 to 121. according to Klein, has been reduced from 47% In 1990 there were more countries defined as ‘not to 37% during the same time.17 Averages doesn’t free’ by Freedom House than were ranked as ‘free.’ tell the whole story, so it’s important to point In 2007, there were twice as many ‘free’ countries out that the biggest improvements took place as there were ‘not free’ countries.20 in the parts of the world that liberalised the So in the absence of serious arguments against most, whereas we have seen setbacks in the least the consequences of free markets, we are left with liberalised countries. Klein’s reasonable critique of torture, dictatorships, If Klein is right about the connection between government corruption, and corporate welfare. free markets and political violence, we should also Klein has actually written a book that says that have seen more war and dictatorships in the era of Milton Friedman and free markets are bad ‘savage’ capitalism. Klein also insists that ‘the world because governments are incompetent, corrupt, is becoming less peaceful’ (424).18 She is wrong. and cruel. If there is a disaster here, it is not one According to the Human Security Centre at the of Milton Friedman’s making. It is probably not a University of Columbia, the number of military coincidence that there are blurbs from four fiction conflicts involving at least one state declined writers on the back of Klein’s book. from almost fifty in 1990 to thirty-one in 2005.

12 Vol. 24 No. 4 • Summer 2008–09 • Policy