"The more the global economy followed [Friedman's] prescriptions, with floating interest rates, deregulated prices and export-oriented economies, the more crisis-prone the system became, producing more and more of precisely the type of meltdowns he had identified as the only circumstances under which governments would take more of his radical advice.
In this way, crisis is built into the Chicago School model. When limitless sums of money are free to travel the globe at great speed, and speculators are able to bet on the value of everything from cocoa to currencies, the result is enormous volatility."
On page 200, Naomi Klein nailed it. Well, the whole book is an exercise in nailing it, really, but these two short, simple paragraphs made me stop and shake my head yet again in amazement that anyone bought the argument Bush, Paulson, and others made that "no one could've seen the current crisis coming."
The Shock Doctrine is many things, and at first it doesn't appear to be a guide to internal U.S. policy, but as I've read on, I keep picking out more and more bits and pieces of the crisis we're facing--Klein could go back and write a history of the current crisis without having to do much new work.
This chapter, for example. Klein starts out noting that hyperinflation crises around the world became excuses for the IMF and World Bank to step in and use the crisis as a reason to push their preferred policies of deregulation, privatization, spending cuts and "free trade."
Friedman did not believe in the IMF or World Bank, but his students used them to carry out his policies. IMF was supposed to stabilize the global economy, yet instead it carried out more shocks, holding loans over countries' heads and forcing them to enact Friedmanite "reforms."
Countries were required to pay the debts of their oppressive governments after liberation--sort of like finally divorcing your abusive spouse only to find out that he's left you in thousands of dollars of credit card debt. I've likened the feeling at Obama's inauguration to finally getting rid of an old abusive relationship and starting a new one. That overwhelming relief and optimism. It must've been hundreds of times stronger for Chile and Argentina when their murderous regimes finally collapsed.
And then? In 1982, Argentina's new government agreed to pay the debts of large multinationals while the companies kept their assets--firms like, um, Citibank. Sound familiar? Scarily so.
And the shocks just kept on coming. Paul Volcker--yes, the one who is one of Obama's advisers--let interest rates skyrocket in the early 80s. Since these countries had been pressed into relying on one export for their entire economies, any time a price shifted, economies went into freefall. And the IMF and World Bank, counter to their original purpose, forced even more volatility down their throats in the disguise of "helping."
Free markets are volatile. That's part of the problem, and why unregulated capitalism just doesn't work. Companies fail. This is part of capitalism. Small businesses fail every day--I watched my family business crash and burn in the 90s. No one bailed us out. The less support and regulation you build into the system, the more likely wild price spikes and drops are going to run people out of business. Rebuilding the system the same way it has been is not enough. "Recovery" isn't going to cut it.
I watched MSNBC's new Ed Schultz show for a while the other night when it replaced Olbermann, and I swear I'm never going to complain about Olbermann being a blowhard again. (OK, I still will, but allow me my hyperbole.) Schultz really was the liberal version of a Fox News show, stocking his segments with radio hosts from both sides of the aisle who shouted at each other like Crossfire had returned, and running a segment on immigration with Al Sharpton and three white people. Seriously.
But aside from my critiques of the program, I was also troubled by Schultz's exultation that Wells Fargo (a company that was never in serious trouble to begin with until it bought up troubled Wachovia) is making a profit and will be able to pay back TARP money.
Only problem is, the TARP was Bush's plan, enacted by Secretary of
So while it's good news, sure, that we might get some of that cash back, it hardly means the crisis is solved, let alone that Obama's (read: Geithner/Summers's) plans are working.
We don't want to sound like Rush Limbaugh, so we don't say that we hope the Geithner plan fails. No, we want it to succeed. We even want the TARP to succeed. We're good progressives and we care about the actual people being hurt by the crisis too much to harp on ideology. But at the same time, will it be enough for our system to just go back to where it was? It requires change. Change that wasn't an original part of the Obama plan (clearly--look at his financial team) but that we must now press for, not least because if we don't see this crisis as an opportunity, the other side will.
Klein's work has clearly taught us that.