Three Days After Klein’s Response, Another Attack

In May I wrote a critical Cato paper on Naomi Klein’s attack on economic liberalisation, The Shock Doctrine: The Rise of Disaster Capitalism, which I claimed was hopelessly flawed on virtually every level. Now Naomi Klein has responded to some of my claims. This response is in itself an example of the methods Klein regularly uses in her works, what I have called disaster polemics. Her response is selective, includes new mistakes, and backs away from some of the claims that she has made without acknowledging it.

Most interestingly, Naomi Klein now admits that her most central claim of the disastrous effects of free markets — that between 25 and 60 percent becomes a permanent underclass in countries where liberalisation takes place — was just a combination of different measures from a few years in no more than four countries.

In her book The Shock Doctrine, Naomi Klein introduces three arguments:

1. Economic liberalisation is unpopular, so those who want to liberalise often hope for a crisis of some sort, so that they can implement their reforms when people can’t resist — a form of “disaster capitalism” that they have learned from the Chicago economist Milton Friedman.
2. Economic liberalisation in recent decades has most often been the result of this “global strategy,” of reformers taking advantage of political violence, military coups, war and natural disasters.
3. This liberalisation, especially after 1990 when global capitalism lapsed into “its most savage form,” has resulted in widespread poverty and unemployment.

What Klein failed to respond to

In my briefing paper on Naomi Klein’s book I show that those three claims are false.

1. Klein doesn’t find any economists who believe in this “global strategy.” She has to take Milton Friedman’s quotes out of context to give that impression. The closest thing she ever comes is one economist who once asked a question at a seminar about whether high inflation might build a pro‐​reform consensus.
2. Since economic liberalisation has happened in almost all countries in the world to some extent in the last decades, Klein can pick examples of reforms taking place in dictatorships and in times of war and natural disasters. But if you look at the whole world and use statistics instead of anecdotes, you see that reforms have gone the furthest in peaceful democracies, and the era of “savage capitalism” has been the era of democracy — the number of electoral democracies increased from 76 to 121 between 1990 and 2007, according to Freedom House.
3. Since 1990, worldwide GDP per capita has increased by a third and absolute poverty has been reduced from 42 to 26 percent according to brand new World Bank statistics (updated since I wrote my paper). 76,000 people were lifted out of extreme poverty every day under “savage capitalism.” And there is a strong correlation: The more economic freedom in a country, the lower the poverty and unemployment rates are.

I also show that Klein is not just unable to support her case with facts and figures, but also she tries to support it with distorted claims, manipulated timelines, and quotes taken out of context.

When Klein now responds to my criticism, it’s not just my name that she consistently avoids mentioning (I think it’s because it sounds more David‐​and‐​Goliath if she is not criticised by a young Swede, but by “The Cato Institute”), she actually defends only one of her central claims that I criticized. Instead she gives the impression that I have just tried to find small mistakes here and there in her book. I leave the readers to guess what that means, and will now go on to look at her attempts to defend herself on specific points.

Milton Friedman and the war

Since the Iraq War is Klein’s strongest example of the “disaster capitalism” that Friedman is said to have influenced, it is interesting that she never mentions that Friedman was in fact opposed to the war. When asked about this before by journalists, her defence was always that she never wrote explicitly that Friedman was in favour of the war (she just tries to give that impression and so far every single reader that I have talked to got that same impression).

In her response there is a new tune, and Klein actually claims that “Milton Friedman supported the war.” That’s right, now we have it on paper. She can say this only by ignoring all Friedman’s statements against the war and relying completely on a German interview from April 2003 that she apparently found recently, since it is not mentioned in her book. Here Friedman says that he is not afraid that the war would result in less freedom and economic troubles (at a time when it seemed like the war would be over in days), gives President Bush the benefit of the doubt regarding the reasons for the war, and says that the end justifies the means and that relations between US and Europe would improve after the war.

Taken out of context and if we ignore what Friedman said in other places, it does sound like he’s in favour of the war. This is a good demonstration of how Klein works. The phrase “the end justifies the means,” for example, is not a statement of Friedman’s philosophy (in his classic book Capitalism and Freedom he insisted on “the more basic end of the use of acceptable means”), but of his analysis of how the EU and the US think about their relations. Obviously, if Klein responds to me now, she would say, “I never wrote explicitly that it was Friedman’s philosophy.” That’s right, she only tried to make it look like it was.

As an indication of how liberally Klein uses phrases like “pro‐​war” and “hawkish” we don’t need to look any further than her response. Klein uses Friedman’s words “But, having said that [the war was a mistake], once we went in to Iraq, it seems to me very important that we make a success of it” — in other words, that it was important that Iraq became a peaceful, prosperous democracy, to prove that he was “hawkish.” It makes you wonder if there really were opponents of the war who hoped that it would become a tragic failure, and in what way that is a dovish position. (And why would Friedman want to see a success if he wanted disasters?)

Klein’s second defence — and the only one that she used before, when she did not think that Friedman was in favour of the war — is that it is irrelevant what Friedman thought about the Iraq War, because she only presented “the invasion and occupation of Iraq as the culmination of Friedman’s ideological crusade because he was America’s leading intellectual favoring the privatization of the state” — the link being that the American military made widespread use of private contractors, and that the US wanted to liberalise the Iraqi economy.

But Klein does not manage to establish this connection; it’s not enough to pretend that a quote from Deputy Secretary of State Richard Armitage about leading Iraqis to religious reconciliation was really about leading Iraqis to laissez‐​faire capitalism (p. 361). Lavishing public money on private companies without open bidding was something Friedman always opposed. And in the book, Klein admits that the US was not really interested in liberalisation in Iraq, but in corporatism, protectionism, and subsidies to contractors and corporations — the very things Friedman always opposed.

If you use Klein’s bizarre guilt by association, you could just as well say that the invasion of Iraq was the culmination of her own ideas. Sure, she opposed it, but the war was used to attack the free market and increase public spending, which she is a leading advocate of.

Adding confusion

One way in which Naomi Klein can blame free market liberals for everything that goes wrong in the world is that she confuses neo‐​liberalism/​libertarianism with neoconservatism and with corporatism. Now she defends herself:

This is another excellent example of how Klein works. That’s right, she only wrote things like this:

Klein does everything to try to establish a connection in the readers’ minds, to give the impression that Friedman/​liberal economists/​neoconservatives/​corporations/​the Bush administration are all part of one big free‐​market/​corporatism/​militarism‐​complex. And then she can take the worst thing one of them does and blame all the others for it. (Of course, the claim that the Cato Institute is in any way neoconservative, much less “calls itself ‘neoconservative,’ ” is strikingly wrong, as a search of the Cato website for the word neoconservative — which would turn up items like this — would have easily confirmed.)

Now she defends herself, saying that many neo‐​conservatives were more free market in the 1990s, and by implication, it was not strange to call Friedman a neoconservative at that moment. This is bizarre, since her book focuses on the neocons of the next decade, who were in favour of big government conservatism. She writes about the result — “big business and big government combining their formidable power to regulate and control the citizenry,” and shamelessly calls this “the pinnacle of the counterrevolution launched by Friedman,” even though he opposed every step aggressively, only because she has created an imaginary link between minimal‐​state liberals and big‐​government conservatives.

Friedman and the tsunami

The same tools are at use when Klein writes about how Sri Lanka’s government stole the land of fishing families to build luxury hotels after the tsunami. When I criticise her for implicating Friedman and Chicago economists with the crime, she explains that this is “dishonest” and “pure fabrication,” because “[h]is [Friedman’s] name does not appear once in my 25‐​page chapter on the tsunami.”

How very true, but Klein does not have to mention Friedman’s name there, because the reader thinks of him already, she has already established a fake connection. In the first chapter of the book she writes about how Friedman supposedly learned to exploit crises and shocks to force through his corporation‐​friendly ideas. In the very next paragraph she explains that she witnessed “another version” of this method in — you’ve guessed it — Sri Lanka, when the government confiscated the land. And later, in the 25‐​page chapter, when she blames “shock therapy” and “disaster capitalism” for the confiscation, the reader reacts just like Klein intends, because these are her words she consistently uses for Friedmanism and Chicago economics.

In the short film that accompanies the book she doesn’t even bother to cover her back. In this, Naomi Klein speaks about how Friedman taught politicians to use crises to force through their market‐​friendly policies before people regain their footing — while showing images of the tsunami and the coastline that was now about to be stolen. Klein is right, she “never wrote” that Friedman had anything to do with the confiscation. She just uses all her powers of suggestion to give that impression.

Something similar, but even more complicated is at work when Klein writes about IMF’s actions during the Asian crisis. Granted, she does write, in another context (p. 161–62), that Friedman did not believe in the IMF and the World Bank, but nonetheless she claims that they were “orthodox Chicago Boys” who believed in him. And in the chapter on Asia, she gives the reader the impression that Friedman’s opposition to a bailout was a “Don’t help Asia” position (p. 266), and that this was in fact shared by the IMF, which supposedly only responded with demands to subject the Asian economies to shock therapy, “Chicago‐​style.” After having discussed IMF’s actions, Friedman is then quoted saying that the Asian crisis will soon be over, so that it looks like he thought that this was the positive result of IMF’s actions (p. 276).

The reader consistently gets the impression that Chicago‐​style policies that Friedman approved of were carried out by the IMF during the Asian crisis. Nowhere does Klein admit that Friedman himself said that IMF in many ways was the cause of the crisis.

Facts and figures

Despite 74 pages of endnotes, Klein often omits notes and sources when there is a central and controversial claim about the horrors of markets that needs documentation. To show how Chicago policies failed, she often picks data from a particular year that suits her, and changes the yardstick when the old one yields results she doesn’t like.

We can see this in her response as well when she claims that Chile is not a “free market success story,” because poverty 20 years ago was almost as high as it was in the rest of Latin America. She does not mention that it has since been reduced from 45 to slightly more than 10 percent (according to the national poverty line — if we use the “extreme poverty” concept it is virtually abolished). Instead she changes the yardstick. When she writes about the situation today, she has suddenly forgotten all about poverty; now the problem is inequality, that is, the rich have become richer even faster than the poor have increased their living standards.

This is why one claim that is repeated in the book is so important: “that between 25 and 60 percent of the population is discarded or becomes a permanent underclass in countries that liberalize their economies.” This is important because it is the only time when it seems like she provides the reader with data on problems from liberalisation over a longer period and worldwide, not just a short time‐​period in a country of her choosing, in the middle of a crisis. This in essence is her argument for why free markets and economic liberalisation are bad for mankind.

In my paper I wondered why she provided us with neither an explanation for what this means, nor a footnote or source. Now we know, because in her response she openly admits that this is just her own summary of different (and sometimes incomparable) statistics on poverty and unemployment from a brief period and sometimes only a year from no more than four countries — Bolivia in 1987, Russia in 1996, some areas of Poland in 1993 and so on. She doesn’t even use data series, but newspaper articles and books with information on just that particular year.

Astonishingly, Naomi Klein calls this way of handling statistics and producing general conclusions on the effect of particular policies “standard practice.” Well, it might be standard practice for some Canadian leftist fanzines, but at university we usually call it “rubbish.” Not just because of the lack of data, but also of the biased choices — there is no explanation for the particular selections, it’s not that they liberalised more than others, or that they are representative, and the years chosen are not the most recent ones, or from a particular period after liberalisation. It is that she found countries and years when things were really, really bad.

For example, I don’t think that Klein just happened to pick the one year Bolivia’s unemployment was 25–30 percent and just forgot to mention that it was soon reduced to less than 10 percent. And it is probably no coincidence that she looks at mass unemployment in Poland 15 years ago, and not today when it has been reduced to less than 10 percent. We don’t have to mention that one of her statistics on Poland in 2006 comes from a 2005 article to see that something is very, very strange here.

If I took four other countries, other regions and/​or other periods I would easily get the opposite result (for example if I looked at liberalisers like Estonia, Ireland, Iceland and Australia that Klein never writes about because they are too peaceful, democratic and successful).

The fact that Klein thinks that this is serious research is actually much more damaging for her than any of the conscious distortions that I have examined elsewhere.

If you want unbiased data you obviously can’t cherry‐​pick countries and years, you have to look at longer periods and more countries. But if you do, you get the opposite results — the more liberal economy, the lower the unemployment and poverty rates, is the consistent result. And this is the reason why Klein never even tries.

As I write in my paper, in the freest fifth of countries, poverty according to the United Nations is 15.7 percent, and in the rest of the world it is 29.8 percent. Unemployment in the freest quintile is 5.2 percent, which is less than half of what it is in the rest of the world.

In the least economically free quintile, with the kinds of restrictions on private property, businesses, and trade that Klein claims are ways of helping the people, poverty is 37.4 percent and unemployment is 13 percent.

Perhaps Klein should take a break from her intense book tour and re‐​read her book, read the critique and check the sources, and then decide for herself if this sentence from her was also just words without any basis in reality: