In a recent interview with progressive economist James K. Galbraith, Deborah Solomon of The New York Times pointed out that out of at least 15,000 professional economists in the country, only two or three of them foresaw the mortgage crisis.
Galbraith's candid defense was that most of the thousands of economists teach and that "most of them teach a theoretical framework that has been shown to be fundamentally useless."
Stepping into this fray where many mere mortal economists obviously fear to tread is Naomi Klein. Klein's newest book, The Shock Doctrine: The Rise of Disaster Capitalism, is a look at the economic history of the past 50 years. Klein, an investigative reporter rather than economist, takes the tepid talk of economists and goes one step further, exposing the dark side of contemporary capitalism.
Given the terrifying labyrinth Klein exposes as contemporary economics, it may be no surprise that writers of lesser genius would hesitate to undertake exploring this maze. But Klein's razor-sharp trailblazing efforts result in one of the most brilliant, important, and disturbing books to become a bestseller. It may well be the most important economic book of the decade.
The Shock Doctrine is dedicated to helping us understand the present and how we arrived here. Klein guides the reader through a web of countries as diverse as post-Saddam Iraq, China, Pinochet's Chile and Yeltzin's Russia. She reveals a pattern of changing world economic structure around the globe.
And for Americans, she shows the potential change from a democracy to a government controlled by special interests that are often shadowy. She reveals long-secret agendas of the Bush administration to show how opportunists such as Halliburton have used disaster as a cover for their own economic gain. Meanwhile, she writes, individuals such as Donald Rumsfeld and Dick Cheney have become extremely wealthy.
Klein developed the ideas in her book from her sojourn as a reporter into Iraq. While researching the "shock and awe" invasion that made for an extreme country makeover, she determined that such shock therapy had backfired. The Iraqis saw the U.S. economic policies as a kind of pillage.
She explored the process of what happens when a nation goes into a state of shock and found that it went beyond Iraq. She began to see a pattern she termed "disaster capitalism" that was present in numerous situations including Sri Lanka after the Asian tsunami and New Orleans after Hurricane Katrina.
The shock doctrine is essentially the practice of seeking out wars or natural disasters and then, while the people involved are too shell-shocked to protest, clearing a way for corporations to take over and profit. In recent history, the practice has been that if a disaster is not to be found, to create one.
She compares this economic shock to psychiatric shock therapy. She interviews a victim of covert CIA experiments in interrogation techniques that were carried out in the 1950s. The idea was to break down the patient completely so they could then be reprogrammed. The treatment was often unsuccessful.
Klein took the idea of disaster capitalism back to economist Milton Friedman who perfected the idea of an economic strategy of "waiting for a major crisis, then selling off pieces of the state to private players while citizens were still reeling from the shock, then quickly making the 'reforms' permanent." Friedman wrote, "Only a crisis - actual or perceived - - produces real change."
Friedman developed the ideas that would become known as the "Chicago School" of economics. Countries, like the psychiatric patient, are "shocked - - by wars, terror attacks, coups d'etat and natural disasters," she writes. These shocks can continue, literally in waves, finally for people who resist "by police, soldiers and prison interrogators."
Numerous instances of this disaster capitalism took place around the world and Klein is a masterful researcher in an effort to support her thesis. There are 60 pages of the book dedicated to notes.
Her portrait is a disturbing one. She condemns not only Friedman, but also the followers who have utilized his ideas for corporate objectives. She parallels the torture in the Abu Ghraib Prison and at Guantanamo Bay with policies undertaken in Latin America.
Klein's analysis is not completely without hope. The shock doctrine requires the element of surprise, and that can become more difficult to create. "Once the mechanics of the shock doctrine are deeply and collectively understood, whole communities become . . . shock resistant," she writes.
But don't expect to be lulled after reading Klein's account. The Shock Doctrine is a profoundly insightful, disturbing and riveting book. Read it.