by Naomi Klein
In Bolivia, former president Gonzalo Sánchez de Lozada, in whose living room the economic “atomic bomb” had been built, was wanted on several charges relating to the gunning down of protesters and his signing of contracts with foreign gas companies that allegedly violated Bolivian laws.8 In Russia, not only had the Harvard Men been found guilty of fraud but many of the Russian oligarchs, the well-connected businessmen who made billions from the overnight privatizations that the Harvard team had helped engineer, were either in jail or living in exile. Mikhail Khodorkovsky, former head of the oil giant Yukos, was serving an eight-year sentence in a Siberian prison. His colleague and principal shareholder, Leonid Nevzlin, was in exile in Israel, as was fellow oligarch Vladimir Gusinsky, while the infamous Boris Berezovsky had settled in London, unable to return to Moscow for fear of arrest on fraud charges; yet all these men deny wrongdoing.9 Conrad Black, who, with his newspaper chain, was the most powerful ideological amplifier of Friedmanism in Canada, was facing charges in the U.S. that he had defrauded the shareholders of Hollinger International, treating the company, according to prosecutors, like “the bank of Conrad Black.” Also in the United States, Enron’s Ken Lay—the poster boy for the ill effects of energy deregulation—died in July 2006, having been convicted of conspiracy and fraud. And Grover Norquist, the Friedmanite think-tanker who had made progressives’ hair stand on end by declaring, “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub,” was neck-deep in the influence-peddling scandal surrounding the Washington lobbyist Jack Abramoff, though no charges had been laid.10
Despite the attempts of everyone from Pinochet to Cavallo to Berezovsky to Black to portray himself as a victim of baseless political persecution, this list, by no means complete, represents a radical departure from the neoliberal creation myth. The economic crusade managed to cling to a veneer of respectability and lawfulness as it progressed. Now that veneer was being very publicly stripped away to reveal a system of gross wealth inequalities, often opened up with the aid of grotesque criminality.
Besides legal trouble, there was another cloud on the horizon. The effects of the shocks that had been so integral to creating the illusion of ideological consensus were beginning to wear off. Rodolfo Walsh, another early casualty, had regarded the Chicago School ascendancy in Argentina as a setback, not a lasting defeat. The terror tactics used by the junta had put his country into a state of shock, but Walsh knew that shock, by its very nature, is a temporary state. Before he was gunned down on the streets of Buenos Aires, Walsh estimated that it would take twenty to thirty years until the effects of the terror receded and Argentines regained their footing, courage and confidence, ready once again to fight for economic and social equality. It was in 2001, twenty-four years later, that Argentina erupted in protest against IMF-prescribed austerity measures and then proceeded to force out five presidents in only three weeks.
I was living in Buenos Aires in that period, and people kept exclaiming, “The dictatorship just ended!” At the time I didn’t understand the meaning behind the jubilation, since the dictatorship had been over for seventeen years. Now I think I do: the state of shock had finally worn off, just as Walsh predicted.
In the years since, that wide-awake shock resistance has spread to many other former shock labs—Chile, Bolivia, China, Lebanon. And as people shed the collective fear that was first instilled with tanks and cattle prods, with sudden flights of capital and brutal cutbacks, many are demanding more democracy and more control over markets. These demands represent the greatest threat of all to Friedman’s legacy because they challenge his most central claim: that capitalism and freedom are part of the same indivisible project.
The Bush administration remains so committed to perpetuating this false union that, in 2002, it embedded it in the National Security Strategy of the United States of America. “The great struggles of the twentieth century between liberty and totalitarianism ended with a decisive victory for the forces of freedom—a single sustainable model for national success: freedom, democracy and free enterprise.”11 This assertion, made with the full force of the U.S. military arsenal behind it, was not enough to hold back the tide of citizens using their various freedoms to reject free-market orthodoxy—even in the United States. As a headline in The Miami Herald after the 2006 midterm elections put it, “Democrats won big by opposing free-trade agreements.” A New York Times/CBS poll a few months later found that 64 percent of U.S. citizens believed the government should guarantee health care coverage to all and “showed a striking willingness…to make tradeoffs” to achieve that goal, including paying up to $500 a year more in taxes.12
On the international stage, the staunchest opponents of neoliberal economics were winning election after election. The Venezuelan president Hugo Chávez, running on a platform of “21st Century Socialism,” was reelected in 2006 for a third term with 63 percent of the vote. Despite attempts by the Bush administration to paint Venezuela as a pseudodemocracy, a poll that same year recorded that 57 percent of Venezuelans were happy with the state of their democracy, an approval rating on the continent second only to Uruguay’s, where the left-wing coalition party Frente Amplio had been elected to government and where a series of referendums had blocked major privatizations.13 In other words, in the two Latin American states where voting had resulted in real challenges to the Washington Consensus, citizens had renewed their faith in the power of democracy to improve their lives. In stark contrast to this enthusiasm, in countries where economic policies remain largely unchanged regardless of the promises made during campaigns, polls consistently track an eroding faith in democracy, reflected in dwindling turnout for elections, deep cynicism toward politicians and a rise in religious fundamentalism.
More clashes between free markets and free people took place in Europe in 2005, when the European Constitution was rejected in two national referendums. In France, the document came to be seen as the codification of the corporatist order. It was the first time citizens had ever been asked for their direct input into whether free-market rules should reign in Europe, and they seized the opportunity to say no. As the Paris-based author and activist Susan George put it, “People really didn’t know Europe was all encapsulated, all written down in a single document…. Once you start to quote it, and people find out what’s actually in this and find out what’s going to be constitutionalized and not revisable and not amendable, they get scared to death.”14
The powerful rejection of what the French call “savage capitalism” takes many different forms, including reactionary and racist ones. In the U.S., rage at the shrinking of the middle class has been easily redirected to calls for border fences, with CNN’s Lou Dobbs leading a nightly campaign against the “invasion of illegal aliens” waging “war on the American middle class”—stealing jobs, spreading crime, as well as bringing in “highly contagious diseases.”15 (This kind of scapegoating provoked the largest immigrants’ rights protests in U.S. history, with more than a million people participating in a series of marches in 2006—another sign of a new fearlessness among casualties of economic shocks.)
In the Netherlands, the 2005 referendum on the European Constitution was similarly hijacked by anti-immigration parties, turning it into a vote less against a corporate order than against the specter of Polish tradespeople flooding into Western Europe to push down wages. What drove many voters in both the French and Dutch referendums was “fear of the Polish plumber”—or “plumber phobia,” in the words of the former European Union commissioner Pascal Lamy.16
In Poland, meanwhile, the backlash against the policies that impoverished so many in the nineties has unleashed its own set of disturbing phobias. When Solidarity betrayed the workers who had built the movement, many Poles turned to new organizations, eventually putting the ultraconservative Law and Justice Party into power. Poland is now ruled by President Lech Kaczyński, a disaffected Solidarity activist who, when he was mayor of
Warsaw, made a name for himself by banning a gay-pride-day march and participating in a “normal people pride” event.* Kaczyński and his twin brother,
Jaroslaw (now prime minister), won the 2005 elections with a campaign largely based on rhetoric attacking Chicago School policies. Their main opponents were promising to do away with the public pension system and to introduce a 15 percent flat tax—both straight out of the Friedman playbook. The twins pointed out that these policies would steal from the poor and enrich a nexus of big-business and on-the-take politicians. When the Law and Justice Party came to power, however, it switched its aim to easier targets: gays, Jews, feminists, foreigners, Communists. As one Polish newspaper editor put it, “Their project is definitely an indictment of the past 17 years.”17
In Russia, the Putin era is seen by many as a similar backlash against the shock therapy era. With tens of millions of impoverished citizens still excluded from the fast-growing economy, politicians have no difficulty riling up public sentiment about the events of the early nineties, which are frequently portrayed as a foreign conspiracy to bring the Soviet empire to its knees and put Russia “under external management.”18 Despite the fact that Putin’s legal moves against several oligarchs have mostly been symbolic—with a new breed of “state oligarch” rising around the Kremlin—the memory of the chaos of the nineties has made many Russians grateful for the order Putin has restored, even as growing numbers of journalists and other critics die mysteriously, and the secret police enjoy seemingly total impunity.
With socialism still closely associated with the decades of brutality carried out in its name, public anger has few outlets for expression except nationalism and protofascism. Incidents of ethnic-based violence are up roughly 30 percent a year and in 2006 were reported almost daily. The slogan “Russia for Russians” is supported by close to 60 percent of the population.19 “The authorities are fully aware that their social and economic policy is very flawed with respect to providing acceptable living conditions to the majority of the population,” said Yuri Vdovin, an antifascist activist. Yet “all the failures are allegedly due to the presence of other people with the wrong religion, the wrong skin colour or other ethnic background.”20
It is a bitter irony that when shock therapy was prescribed in Russia and Eastern Europe, its painful effects were often justified as the only way to prevent a repeat of the conditions in Weimar Germany that led to the rise of Nazism. The casual exclusion of tens of millions of people by free-market ideologues has reproduced frighteningly similar explosive conditions: proud populations that perceive themselves as humiliated by foreign forces, looking to regain their national pride by targeting the most vulnerable in their midst.
In Latin America, the original Chicago School laboratory, the backlash takes a distinctly more hopeful form. It is not directed at the weak or the vulnerable but focuses squarely on the ideology at the root of economic exclusion. And unlike the situation in Russia and Eastern Europe, there is an irrepressible enthusiasm for trying the ideas that were subverted in the past.
Despite the Bush administration’s claim that the twentieth century ended with a “decisive victory” for free markets over all forms of socialism, many Latin Americans understand perfectly well that it was authoritarian communism that failed in Eastern Europe and parts of Asia. Democratic socialism, meaning not only socialist parties brought to power through elections but also democratically run workplaces and land holdings, has worked in many regions, from Scandinavia to the thriving and historic cooperative economy in Italy’s Emilia-Romagna region. It was a version of this combination of democracy and socialism that Allende was attempting to bring to Chile between 1970 and 1973. Gorbachev had a similar, though less radical, vision to turn the Soviet Union into a “socialist beacon” on the Scandinavian model. South Africa’s Freedom Charter, the dream that animated the long liberation struggle, was a version of this same third way: not state communism, but markets existing alongside the nationalization of the banks and mines, with the income used to build comfortable neighborhoods and decent schools—economic as well as political democracy. The workers who founded Solidarity in 1980 pledged to struggle not against socialism but for it, with workers eventually winning the power to run their workplaces and country democratically.
The dirty secret of the neoliberal era is that these ideas were never defeated in a great battle of ideas, nor were they voted down in elections. They were shocked out of the way at key political junctures. When resistance was fierce, they were defeated with overt violence—rolled over by Pinochet’s, Yeltsin’s and Deng Xiaoping’s tanks. At other times, they were simply betrayed through what John Williamson called “voodoo politics”: the Bolivian president Víctor Paz Estenssoro’s postelection secret economic team (and mass kidnapping of union leaders); the ANC’s backroom bargaining-away of the Freedom Charter in favor of Thabo Mbeki’s top-secret economic program; Solidarity’s exhausted adherents succumbing to economic shock therapy after the elections in exchange for a bailout. It is precisely because the dream of economic equality is so popular, and so difficult to defeat in a fair fight, that the shock doctrine was embraced in the first place.
Washington has always regarded democratic socialism as a greater threat than totalitarian Communism, which was easy to vilify and made for a handy enemy. In the sixties and seventies, the favored tactic for dealing with the inconvenient popularity of developmentalism and democratic socialism was to try to equate them with Stalinism, deliberately blurring the clear differences between the worldviews. (Conflating all opposition with terrorism plays a similar role today.) A stark example of this strategy comes from the early days of the Chicago crusade, deep inside the declassified Chile documents. Despite the CIA-funded propaganda campaign painting Allende as a Soviet-style dictator, Washington’s real concerns about the Allende election victory were relayed by Henry Kissinger in a 1970 memo to Nixon: “The example of a successful elected Marxist government in Chile would surely have an impact on—and even precedent value for—other parts of the world, especially in Italy; the imitative spread of similar phenomena elsewhere would in turn significantly affect the world balance and our own position in it.”21 In other words, Allende needed to be taken out before his democratic third way spread.
The dream he represented was never defeated. It was, as Walsh noted, temporarily silenced, pushed under the surface by fear. Which is why, as Latin America emerges from its decades of shock, the old ideas are bubbling back up—along with the “imitative spread” Kissinger so feared. Ever since the Argentine collapse in 2001, opposition to privatization has become the defining issue of the continent, able to make governments and break them; by late 2006, it was practically creating a domino effect. Luiz Inácio Lula da Silva was reelected as president of Brazil largely because he turned the vote into a referendum on privatization. His opponent, from the party responsible for Brazil’s major sell-offs in the nineties, resorted to appearing in public looking like a socialist NASCAR driver, wearing a jacket and baseball hat covered in logos from the public companies that had not yet been sold. Voters weren’t persuaded, and Lula got 61 percent of the vote, despite disillusionment with the corruption scandals plaguing his government. Shortly afterward in Nicaragua, Daniel Ortega, former head of the Sandinistas, made the country’s frequent blackouts the center of his winning campaign; the sale of the national electricity company to the Spanish firm Unión Fenosa after Hurricane Mitch, he asserted, was the source of the problem. “You, brothers, are suffering the effects of these outages every day!” he bellowed. “Who brought Unión Fenosa to this country? The government of the rich did, those who are in the service of barbarian capitalism.”22
In November 2006, Ecuador’s presidential elections turned into a similar ideological battleground. Rafael Correa, a forty-three-year-old left-wing economist, won the vote against Álvaro Noboa, a banana tycoon and one of the richest men in the country. With Twisted Sister’s “We’re Not Going to Take It” as his official campaign song, Co
rrea called for the country “to overcome all the fallacies of neo-liberalism.” When he won, the new president of Ecuador declared himself “no fan of Milton Friedman.”23 By then, the Bolivian president Evo Morales was already approaching the end of his first year in office. After sending in the army to take back the gas fields from multinational “plunderers,” he moved on to nationalize parts of the mining sector. In this same period in Mexico, the results of the fraud-tainted 2006 elections were being contested through the creation of an unprecedented “parallel government” of the people, with votes held in the streets and plaza outside the seat of government in Mexico City. In the Mexican state of Oaxaca, the right-wing government sent in riot police to break a strike by teachers who were demanding an annual pay raise. It provoked a statewide rebellion against the corruption of the corporatist state that raged for months.
Chile and Argentina are both led by politicians who define themselves against their countries’ Chicago School experiments, though the extent to which they provide genuine alternatives remains a subject of intense debate. The symbolism, however, represents its own kind of victory. Several of the people in the cabinet of the Argentine president, Néstor Kirchner, including Kirchner himself, were imprisoned during the dictatorship. On March 24, 2006, the thirtieth anniversary of the 1976 military coup, Kirchner addressed demonstrators in the Plaza de Mayo, where the mothers of the disappeared held their weekly vigils. “We are back,” he declared, referring to the generation that had been terrorized in the seventies. In the huge assembled crowd, he said, were “the faces of the 30,000 disappeared compañeros returning to this plaza today.”24 Chile’s president, Michelle Bachelet, was one of the thousands who were victims of Pinochet’s reign of terror. In 1975, she and her mother were imprisoned and tortured in Villa Grimaldi, known for its wooden isolation cubicles, so small that prisoners could only crouch. Her father, a military officer, had refused to go along with the coup and was murdered by Pinochet’s men.
