Monday, April 06, 2009

The Shock Doctrine 8: The New Doctor Shock

(Previous posts here, Matt's posts here, Trend's "How to Overthrow a Government" here.)

I passed up the chance to see Jeffrey Sachs speak at Temple this weekend and now I'm quite happy I did. After this chapter, anyway. Sure, he's changed his tune lately, but I'm still reminded of the fact that so-called "progressive" economists still pay plenty of fealty to Friedman's ideas.

Anyway, this chapter is about the "New Doctor Shock," and that would be Sachs. It's kind of frightening to think that the man who wrote this so recently:

The great scholars of capitalism, from Adam Smith to John Maynard Keynes, understood full well that a functioning economic system depends not on greed, but on moral sentiments and an acceptable social contract between the rich and the rest of society. The rich can make money, of course, but they must not flaunt it or consume it frivolously. Instead, they must invest their wealth for social benefit, whether in business or in philanthropy, or in both as in the case of history's most celebrated capitalist-philanthropists, from Andrew Carnegie and John D. Rockefeller to Bill Gates and Warren Buffett. It is only the dangerously arrogant rich or the servants of the rich who believe that morals don't matter in the great matters of finance.

made his name enacting Friedman-style shock reforms on Bolivia's drug-war-flattened economy. And Sachs gained even more fame by helping push those reforms on a country with a democratically elected leader, one who years earlier had nationalized the country's tin mines and was considered center-left.

Once again, I'll leave digging up the details of Bolivian history to Trend and Erik and take this as a jumping-off point for some thoughts.

In light of Erik's drug war post, I have to note that it was the drug war that set Bolivia up for these "reforms," after Reagan's intervention sent inflation skyrocketing, and it was drugs that helped people survive when the unemployment rate hit 30% and real wages dropped 40%.

As Erik wrote, the war on drugs was an excuse for the American government to crap on people who couldn't fight back. It was also a way for people to make money. When your government's economic philosophy is essentially that whatever you have to do to make a profit is OK, is it at all shocking (yes, I used that word again) that people turn to drugs to make a living?

Like this article in the Nation today says:
As Professor Francisco E. Gonzalez of Johns Hopkins University suggests in explaining this predicament in Current History magazine, "[I]t goes without saying that conditions of hopelessness and extreme life choices abound in developing countries such as Mexico. As long as these conditions persist, and as long as the system put in place to counter the narcotics trade leads to the generation of exceptional profits, there will continue to be individuals willing to play this lottery."

It's also notable that even though a democratically elected leader enacted the reforms, he did so in complete reversal of what he promised, and that repression was still needed to enforce the reforms. In other words, nobody ever votes for the capitalist revolution, because far more people are harmed by it than are helped. Yet Sachs once again was lauded for his efforts, and little notice taken of the union leaders detained so that the reforms could be pressed on the people without organized resistance. Sachs cured hyperinflation, but real metrics of well-being were left on the sidelines.

Once the elections happened, in other words, the actions of the government were presumed to be legitimate, no matter what they were and how little the people approved of them.