Black Book of Neo-liberalism

I just finished reading Naomi Klein’s latest book, The Shock Doctrine. Klein is a celebrated critic of multi-national corporatism and neo-liberal economic policies, and the Shock Doctrine reads like a black book of neo-liberalism similar to the Black Book of Communism.

The Black Book of Communism sought to document the history of repressions in Communist states, including extrajudicial executions, torture, and man-made famines that the book argues resulted from communist policies. Similarly, the Shock Doctrine argues that similar political repression was necessary to implement the neo-liberal economic policies which came to dominate the global market in the past 30 years. Klein spends most of the book documenting this claim with a thorough history of the origins of the global free market and its close links to crises or shocks, which create a state of emergency necessary to implement unpopular economic reforms. The main argument of the book is summed up in this clever short film by Jonas Cuarón:

Klein argues that the ideology of neo-liberalism, much lauded in economic policies in the 1980s and 1990s, bears responsibility for these crimes committed on its behalf – just as Marxist-Leninist ideology has been held accountable for the crimes of communism. This is the part that I find especially interesting, as it seeks to connect massive political and economic repression with the libertarian free market ideology expounded by Milton Friedman:

Unfortunately, Klein doesn’t talk very much about the details of Friedman’s ideology, which continues to hold such sway over so many economists and political ideologues. As John Gray notes in his review of the book in the Guardian:

But [Klein] says remarkably little about the illusions by which neo-liberal ideologues were themselves blinded. Milton Friedman and his disciples believed a western-style free market would spring up spontaneously in post-communist Russia. They were left gawping when central planning was followed by the criminalised free-for-all of the 90s, and were unprepared for the rise of Putin’s resource-based state capitalism. These ideologues were not the sinister, Dr Strangelove-like figures of the anti-capitalist imagination. They were comically deluded bien-pensants, who promoted their Utopian schemes with messianic fervour and have been left stranded by history, as the radiant future they confidently predicted has failed to arrive.

Seen in this light, Friedman’s neo-liberal ideology with its unfaltering belief in the economic rationality and self-interest of the individual as the driving force of democracy, personal freedom and economic growth does appear Utopian: Wealth and influence did not trickle down from the elite to the masses. Perhaps it would have done so if everybody acted in the same self-serving way that Friedman suggests, since that would force some sort of balance of interests, but probably not even that: Since the wealthy and the influential have proven very apt at maintaining their positions without giving up their privileges.

As a new movement of economists have argued, neo-liberal economics are autistic, since it is built on a close-minded, self-absorbed vision of economics as a perfect science based on economic rationality, which could be modelled mathematically. Like physics, which is founded on a set of laws, so should economics be founded on laws of the economic rationality and self-interest of the individual.

But this perfect, rational Homo Economicus doesn’t exist. Being free to choose doesn’t mean that you actually make the rational choices from which you would benefit the most – perhaps because they’re unethical, unreasonable or uncertain. Certainly, it is rational to save the environment to ensure the future of the human race, but what if corporate and political leaders find it more relevant to secure their own short-term economical and political success? It would certainly be in their own best interest, but would it make sense in the long run?

The failure of the neo-liberal ideology lies in its presumption that all people make rational, macro-economic and ethical decisions. This presumption may work well enough on an individual basis to legitimatize individual decisions and actions, but it fails when applied to masses of people.

And that is what the Shock Doctrine documents: When individuals are given a ideological carte blance to be self-serving, those in a position to take advantage of the system will serve themselves well, at the ethical, economic and political long-term cost of everybody else who aren’t as familiar with the workings of the system.

In this way, economic freedom advocated by neo-liberal ideology doesn’t breed political freedom, personal responsibility, and democracy as Friedman claims. Rather, it breeds and legitimatizes greed, repression and cronyism that borders the irrational. Thus, the fundamental question to ask of neo-liberal ideology is:

If people don’t make rational choices, is it rational to assume that they do?