110948 Cato_Bp102.qxp 5/1/08 5:12 PM Page 1 The Klein Doctrine The Rise of Disaster Polemics by Johan Norberg No. 102 May 14, 2008 Executive Summary Naomi Klein’s The Shock Doctrine purports to them, the better to prepare themselves in be an exposé of the ruthless nature of free-market advance. Further, Friedman condemned the capitalism and its chief recent exponent, Milton Pinochet regime and opposed the war in Iraq. Friedman. Klein argues that capitalism goes hand Klein’s historical examples also fall apart in hand with dictatorship and brutality and that under scrutiny. For example, Klein alleges that dictators and other unscrupulous political fig- the Tiananmen Square crackdown was intended ures take advantage of “shocks”—catastrophes to crush opposition to pro-market reforms, real or manufactured—to consolidate their power when in fact it caused liberalization to stall for and implement unpopular market reforms. Klein years. She also argues that Thatcher used the cites Chile under General Augusto Pinochet, Falklands War as cover for her unpopular eco- Britain under Margaret Thatcher, China during nomic policies, when actually those economic the Tiananmen Square crisis, and the ongoing policies and their results enjoyed strong public war in Iraq as examples of this process. support. Klein’s analysis is hopelessly flawed at virtual- Klein’s broader empirical claims fare no bet- ly every level. Friedman’s own words reveal him to ter. Surveys of political and economic freedom be an advocate of peace, democracy, and individ- reveal that the less politically free regimes tend ual rights. He argued that gradual economic to resist market liberalization, while those states reforms were often preferable to swift ones and with greater political freedom tend to pursue that the public should be fully informed about economic freedom as well. Johan Norberg is a senior fellow at the Cato Institute and the author of, among other books, In Defense of Global Capitalism. Cato Institute • 1000 Massachusetts Avenue, N.W. • Washington, D.C. 20001 • (202) 842-0200 110948 Cato_Bp102.qxp 5/1/08 5:12 PM Page 2 Klein’s thesis blames Milton Friedman for encouraging is that economic Introduction reform by stealth. To do so, she engages in one of the most malevolent distortions of a thinker liberalization Since its publication last fall, Canadian that has been done in a major work in recent is unpopular author Naomi Klein’s book The Shock Doctrine: years. Klein tries to portray the mild-mannered The Rise of Disaster Capitalism has already and freedom-loving Dr. Friedman as a cold- and, therefore, become a bible for young anti-capitalist hearted, war-mongering Mr. Hyde. can only win by activists. Established reviewers have praised it deceiving or as well. As philosopher John Gray explains in The Guardian: “There are very few books that Dr. Friedman and Mr. Hyde coercing voters. really help us understand the present. The Shock Doctrine is one of those books.”1 In the According to Klein, Milton Friedman wel- New York Times, Nobel laureate Joseph Stiglitz comed crisis as a way of making people dis- writes that it is “a rich description of the polit- oriented and confused. With the public thus ical machinations required to force unsavory preoccupied, the economy could be drastical- economic policies on resisting countries.”2 ly liberalized without any concern for the According to Amazon.com’s editors, it is one human costs. Klein’s Exhibit A against Fried- of the 10 best nonfiction books of 2007. man is a quote from “one of his most influ- Klein’s thesis is that economic liberalization ential essays”: is unpopular and, therefore, can only win by deceiving or coercing voters. In particular, free- Only a crisis—actual or perceived—pro- market ideas rely on crises. In a time of a nat- duces real change. When that crisis ural disaster, war, or military coup, people are occurs, the actions that are taken depend disoriented and confused and fight for their on the ideas that are lying around. That, own immediate survival or wellbeing, setting I believe, is our basic function: to develop the stage for corporations, politicians, and alternatives to existing policies, to keep economists to push through trade liberaliza- them alive and available until the politi- tion, privatization, and lower public spending cally impossible becomes politically without facing any opposition. According to inevitable.3 Klein, “neoliberal” economists welcomed Hurricane Katrina, the 2004 Indonesian tsuna- This is “the shock doctrine,” according to mi, the Iraq War, and the South American mil- Klein, the very source of inspiration for all itary coups of the 1970s as opportunities to those reformers who apparently welcome erase past policies and introduce radical free- conflicts, disasters, and war. In the not very market models. If wars and disasters aren’t subtle short film that accompanies the book, enough to shock the citizens, neoliberals are Klein shows this quote over images of pris- purportedly happy to see the opponents of oners being tortured and given electrical reform being attacked and tortured into sub- shocks, to give the impression that this is the mission. The chief villain in Klein’s story is kind of crisis Friedman would welcome.4 Milton Friedman, the Chicago economist who But the quote is not from one of Fried- did more than anyone in the 20th century to man’s most influential essays. It’s from the popularize free-market economics. very brief introduction to the 1982 edition of To make her case, Klein exaggerates the free- Capitalism and Freedom (which was originally marketreformsthattakeplaceintimesofcrisis, published in 1962).5 And it’s not about wel- often by ignoring central events and rewriting coming disasters, it’s about pointing out the chronologies. She uses loose metaphors and relatively uncontroversial fact that people wild distortions to claim that free markets are a change their ways when it seems like the old form of violence. She confuses libertarianism ways fail—something Klein does not contra- with corporatism and neoconservatism and dict. In fact, from the example that Friedman 2 110948 Cato_Bp102.qxp 5/1/08 5:12 PM Page 3 provided (that interest in free markets grew as and so on. Friedman’s view was the complete communism failed in China and the Soviet opposite of what Klein pretends it is.10 Union, and the United States and United In the same manner, Klein conveys the Kingdom suffered from stagflation), it is obvi- image of the “Chicago school” of economics ous that Friedman was not advocating shocks as a home for dogmatists and fundamental- and crises to force anyone to abandon the old ists, brainwashing their students and plotting ways that they cling to, but merely observing their global power grab. The reality is that the people themselves demanded change when old Chicago school became eminent not just for systemsfailed.Butintherestofthebook,Klein its quality but for its openness. All ideas were pretends that she has proved that Friedman welcome as long as you could argue well. was in favor of deliberately provoking crises. Friedman himself listed “tolerance for diversi- Klein also provides supporting quotes to ty” as one of the reasons for the Chicago strengthen this interpretation, and they are School’s success.11 After having talked to taken out of context in the same manner. She Friedman’s former colleagues and students, pretends that Friedman’s concept of the his biographer Lanny Ebenstein writes that he “tyranny of the status quo” means the tyran- encouraged students to learn from other ny of voters, and that a crisis was needed for approaches than his own and he didn’t try to politicians to bypass the democratic process.6 convert them to his positions. His method was Friedman never For Friedman, the tyranny of the status quo the rigorous testing of hypotheses with empir- worked as an was something entirely different—an iron tri- ical data, and he was quick to admit mistakes adviser to angle of politicians, bureaucrats, and special when someone else found them in his work.12 interest groups (businesses, for example) who Pinochet and advance their own welfare at the voters’ never accepted a expense.7 Six Days in Chile When Klein talks about Friedman’s sug- penny from the gestions to reduce inflation, she writes, Klein cites the influence of Milton Fried- Chilean regime. “Friedman predicted that the speed, sudden- man’s economic views on Augusto Pinochet’s ness and scope of the economic shifts would military dictatorship in Chile in the 1970s as provoke psychological reactions in the public evidence that free markets rely on tyranny and that ‘facilitate the adjustment.’”8 torture. She writes that Friedman acted as Klein gives the impression that Friedman “adviser to the Chilean dictator.”13 This is was brutal and wanted to inflict pain to dis- wrong. Friedman never worked as an adviser orient people and push his reforms through. and never accepted a penny from the Chilean The use of the words “psychological reactions” regime. He even turned down two honorary is also important, because Klein tries to associ- degrees from Chilean universities that received ate liberal reforms with psychological torture government funding because he thought it and electrical shocks. But the quote in its could be interpreted as a support for the entirety shows that Friedman had something regime. very different in mind. He actually wrote that However, he was in Chile for six days in if a government chooses to attack inflation in March 1975 to give public lectures, invited by this way: “I believe that it should be an- a private foundation. When he was there he nounced publicly in great detail .