The following article is an except form pages 261-269 of my book The Conscience of a Young Conservative. If you enjoy, free PDF copies are available through Liberty.me, and print copies are available on Amazon. 

            Like many of the intellectuals that will be discussed in this chapter, Klein falls into the category of the criminally under qualified. Klein first jumped to fame with the publication of No Logo, an anti-globalization book that one reviewer described as “the bible for anti-corporate militancy.” One company attacked in the book, Nike, saw fit to respond with their own defense of themselves after the book gained traction.[1] Another bestseller of Klein, The Shock Doctrine, is written as a story detailing the horrors of what she calls “disaster capitalism,” with Milton Friedman as the stories main villain. The book received favorable reviews from both Nobel Prize winning economist Joseph Stiglitz and the late Howard Zinn.

The book creates the impression that its author has at least some sort of economics background, as the author description on the first page points out that Klein is a “former Milband Fellow at the London School of Economics,” who holds an honorary Doctor of Civil Laws degree from the University of King’s College. This is misleading, since Klein’s highest level of education is a bachelor’s degree in English and philosophy from the University of Toronto.[2] As for the fact that she has an honorary doctorate, so does Chuck Norris (though no offense to Chuck Norris is implied here).

This critique of Klein’s work relies heavily on the scholarship of Johan Norberg. Norberg created a series called Free or Equal for Milton Friedman’s Free To Choose Network. That series largely expands upon Friedman’s TV series for the book Free to Choose in the 1990’s. Norberg also stared in his own mini-documentary titled “Globalization is good.” As such, Norberg has an immense amount of expertise on both the effects of globalization, and the character of Milton Friedman.

The Case of Milton Friedman

Naomi Klein’s Shock Doctrine aims to give a historical overview and critique of free market economics. The first chapters lay out the analogy of the title, which is referencing shock therapy. Just as shock therapy can transform a patients mind into a “blank slate,” the “disaster capitalists” use disasters as their blank slate to build a new economy from. Klein hypothesizes that while people would naturally have a reluctance to many free market policies, destruction serves as a catalyst for acceptance towards these views.

Klein linked Milton Friedman to many global misdeeds worldwide resulting from “disaster capitalism.” The core focus of Klein’s criticism of Friedman is to the activity of him and other Chicago school economists (known as the Chicago Boys) in Chile. When not explicitly criticizing Friedman, she allows the mind of the reader to fill in the blanks. Since the metaphor of “shock” is a theme of the book, it comes to no surprise that Klein tries to make it almost seem like Friedman supports actual shock therapy to some extent.

To show Friedman’s support for a form of “blank slate” style change, she quotes from what she calls “one of his most influential essays,”[3] where he writes that “only a crisis – real or perceived – produces real change.” This quotation isn’t from Friedman’s most influential essay, but from the introduction to his book “Capitalism and Freedom.” Considering that Klein cited her source correctly in the footnotes,[4] one can only wonder how she got the idea that this qualified as an influential essay. What Klein wants the reader to get from this quotation is more visible from her documentary based off the book, where she displays that quotation over video footage of people being tortured.

Friedman’s quotation isn’t even sinister regardless, and is instead pointing to a very basic truth that people are more accepting of change in a time of crisis. For example, people were much more accepting of the New Deal in a time of depression than they would’ve otherwise been (and no, I’m not pointing this out in one of my most influential essays).

Friedman in Chile

Most disparaging of Friedman’s character in Klein’s book isn’t his allegedly failed policies, but his alleged support of Chilean dictator Augusto Pinochet. This isn’t a new claim either. In a 1991 question and answer session following a speech by Friedman, one of the questions suggested that Friedman supported Pinochet, to which Friedman briefly replied “I never advised Pinochet, I never supported Pinochet.”[5]

Klein also claims that Friedman worked as an adviser to Pinochet, but this happened nowhere other than in Klein’s imagination. His only direct correspondence with Pinochet is a brief one hour meeting with him, following by a letter in which he offered solutions to the economic problems Chile faced.[6] Many of Pinochet’s advisers were versed in Chicago School economics, but because the University of Chicago had a partnership with the Catholic University of Chile in which Chileans would be given scholarships to study in America.[7]

Friedman never received any monetary compensation from the Chilean government, and even turned down two honorary degrees from the Chilean government because he didn’t want to be seen as supporting the Chilean regime.[8] Commenting on the combination of free market policies and dictatorship of Pinochet, Friedman observed in an interview in 2000 that “the really extraordinary thing about the Chilean case was that a military government followed the opposite of military policies.”[9]

Regarding a speech that he gave at the Catholic University of Chile, Friedman said that “the essence of the talk was that freedom was a very fragile thing and that what destroyed it more than anything else was central control; that in order to maintain freedom you had to have free markets, and that free markets would work best if you had political freedom.”[10] He continues that “it was essentially an anti-totalitarian talk.” This prompted the interview to ask “so you envisaged, therefore, that the free markets ultimately would undermine Pinochet?” to which Friedman replied “oh absolutely.”[11]

But aside from the question of whether or not Friedman endorsed the dictatorship (which he clearly did not), the question of whether or not the free-market policies Friedman and the Chicago-boys prescribed still remains.

Klein is good at tossing out statistics which would suggest otherwise. Trying to explain that the Chicago Boys’ policies failed, Klein writes that “in 1974, inflation reached 375 percent – the highest rate in the world and almost twice the top level under Allende.”[12] One problem – Friedman didn’t come to Chile to offer his solutions on hyperinflation until 1975.[13]

She neglected to mention that the inflation rate was 508% before the Chicago Boys had their policies implemented.[14] Measuring a policy by its effect after one year is a horrible way of conducting analysis anyway, as inflation was sliced down to 30% in 1979, and was as low as 9% in 1981.[15]

Disaster capitalism that wasn’t

Many of Klein’s example of “disaster capitalism” occur countries which showed little or no increases in economic freedom even after their economies were supposedly made new. As Johan Norburg shows using data from the Fraser Institute’s index of economic freedom, this is fairly easy to track. Klein’s example of the Argentinian dictatorship, which lasted between 1976-1983 is our prime example. On a scale of 1 (the least economically free) to 10 (most free), Argentina’s economic freedom barely increased from 3.25 in 1975 to 3.86 in 1985.[16] To put this in perspective, this is a lower economic freedom index than all Eastern European communist countries that Frasier tracked at the time.[17]

The Other Shock-Therapists

Milton Friedman is far from being the only person to prescribe economic shock therapy. In a profile of Polish economist Leszek Balcerowicz, The Wall Street Journal described his economic philosophy as “‘shock therapy’ to slay hyperinflation and build a free market.” His “Balcerowicz Plan” was known as a form of economic “shock therapy” as it was being hawked in 1989 to shift Poland from a Communist economy to a Capitalist one.

The WSJ reports regarding the plan that “Overnight, prices were freed, subsidies were slashed and the zloty currency was made convertible. It was harsh medicine, but the Polish economy recovered faster than more gradual reformers in the old Soviet bloc.” Considering that Poland hasn’t experienced a recession since 1989 (and is the only European country to pull off such a feat),[18] Poland’s economy shows some strength.

That isn’t to say that Poland does have problems, but the problems Klein attributes to economic shock therapy are non-existent. According to Klein, these reforms “caused a full-blown depression: a 30 percent reduction in industrial production in the two years after the first round of reforms.”[19] The more contemporary problems she lists are a 20% unemployment rate (in 2006), and an increase of the impoverished from 15% of the population in 1989 to 59% in 2003.[20] She claims to have sourced these figures from The World Bank.[21] Apparently, there are two World Banks, one which provides economic statistics about countries around the globe, and one that Naomi Klein cites when creating a statistic out of thin air.

I’ve seen a depression defined as a 10% or larger reduction in GDP. Poland did indeed experience a decline in GDP during their transition stage, and it was a 22% decline in GDP from 1989-1990. The economy rebounded quick, and GDP in 1991 was higher than in 1989. In fact, GDP growth was almost flat before reforms were enacted. The World Banks’s statistics for Polish GDP begin in 1985, as I have charted below:

poland

Source: “GDP (current US$)” The World Bank, <http://data.worldbank.org/indicator/NY.GDP.MKTP.CD>.

In a 1994 report on poverty in Poland, the World Bank reported that “Throughout the 1980s, the poverty rate…oscillated between 5 and 10 percent of the population. In 1990, the first year of the stabilization, it jumped to 15 percent where it has stayed since. However…the poverty rate in 1993 seems to be edging downwards.”[22] And indeed, it continued to edge downward. The World Bank’s statistics show that the poverty rate in Poland was 10.6 in 2008,[23] which is quite a stretch from Klein’s mythical “59%” figure for the year 2003. It also has to be remembered that while Poland’s poverty rate hasn’t changed much, those impoverished are defined as such in a much richer country.

Real GDP per capita began to take off in 1992, after some small declines during the transitions. Real GDP per capita by this standard increased a measly $1,912 under a centrally planned Poland from 1980 to 1989, but by $4,467 from 1990-2000. Real GDP almost doubled from 2000-2010, increasing from $10,310 to $18,981.[24]

Friedman vs. Neoconservatives

Further misunderstanding the philosophy of Friedman, she brands him as a being “neo-conservative,” a term used to describe conservatives who favor heavy military involvement in foreign nations. Capitalism, Corporatism, and Neo-Conservativism are three terms used interchangeably throughout The Shock Doctrine, which misleads readings into thinking that there’s no difference between the three terms. Of course, the difference is that one term refers to an economic system, the second is a sociological term, and the third refers to foreign policy.

After being criticized by Johan Norburg of the Cato Institute for this gross mischaracterization,[25] Klein backtracked and wrote that she “never said Milton Friedman was a “neo-conservative” – all while claiming that Milton Friedman supported the Iraq war.[26]

It’s hard not to reply to all the minor inconsistencies in Klein’s work. Even if she didn’t explicitly claim that Friedman was a neo-conservative, she did a phenomenal job giving the reader that impression. Klein mentions that George W. Bush’s speechwriter (David Frum) was neo-conservative, and wanted “shock therapy style economic revolution in the U.S.,”[27] which she believes Friedman wanted abroad. Early in the book, she mentions that although Friedman’s beliefs would be characterized as conservative in the US, they would be known as neo-liberal in most of the world.[28] Three hundred pages later, Klein describes the Chicago School of Economics (of which Friedman belonged) as neoliberal, noting that this would be called neoconservative in the US.[29] In Klein’s view, among think tanks that she considers neoconservative are the American Enterprise Institute, Heritage Foundation, and Cato Institute, which she also describes as being Friedmanite to their core.[30]

As for Klein’s claim that Friedman supported the war, her source on this is a 2003 interview in German, which she failed to mention once in her book.

Throughout all this, perhaps Klein is ignorant of one of Milton Friedman’s many revolutionary ideas: a volunteer military. While serving as an adviser in the Nixon administration, Friedman would “return to our heritage, get rid of the compulsion in our military service, and return to a voluntary system.” Nixon would end up holding a commission to debate ending the draft, and appointed Friedman to speak. Friedman debated General Westmoreland at this commission, to whom he posed the question “would you rather command a slave force?” Westmoreland “didn’t like to hear his drafted soldiers as slaves,” and Friedman “didn’t like to hear my patriotic volunteers referred to as mercenaries.” Alan Greenspan, who also was appointed to speak at the commission described Friedman as “taking apart his arguments piece of piece, never raising his voice. The general got redder and redder, and at the end of this set of dissections, the mercenary argument was thoroughly demolished.” Additionally Martin Anderson, another adviser of Nixon who write a policy paper advocating the abolition of the draft claimed to have “borrowed liberally from Milton’s paper.”[31]

On a related note, the 6,300 word Wikipedia entry on the term “Neoconservatism” mentions Milton Friedman a total of zero times.[32]

 

[1] “Nike’s Response to No Logo (by Naomi Klein).” Nike, 8 Mar. 2000. <http://web.archive.org/web/20010618162615/http://nikebiz.com/labor/nologo_let.shtml>.

[2] Viner, Katharine. “Hand-To-Brand-Combat: A Profile Of Naomi Klein.” Common Dreams, 23 Sept. 2000. <http://www.commondreams.org/views/092300-103.htm>.

[3] Klein, Naomi. “The Shock Doctrine: The Rise of Disaster Capitalism.” (New York: Picador, 2008), p. 7.

[4] Ibid., p. 592.

[5] Friedman, Milton. “On Liberty and Drugs.” November 16th 1991 at America’s Drug Forum, sponsored by The Drug Policy Foundation.

[6] Doherty, Brian. “The Economist and the Dictator.” Reason, 15 Dec. 2006. <http://reason.com/archives/2006/12/15/the-economist-and-the-dictator>.

[7] Ibid.

[8] Norberg, Johan. “The Klein Doctrine: The Rise of Disaster Politics.” The Cato Institute, 14 May 2008. <http://www.cato.org/sites/cato.org/files/pubs/pdf/bp102.pdf>.

[9] Friedman, Milton. “The Indispensable Milton Friedman: Essays on Politics and Economics.” Ed. Alan O. Ebenstein. (Washington, DC: Regnery, 2012), p. 249

[10] Ibid., p. 250.

[11] Ibid.

[12] Klein, “The Shock Doctrine,” p. 97.

[13] Norberg, “The Klein Doctrine.”

[14] Historic Inflation Chile – CPI Inflation.” Worldwide Inflation Data. <http://www.inflation.eu/inflation-rates/chile/historic-inflation/cpi-inflation-chile.aspx>.

[15] Ibid.

[16] Norberg, “The Klein Doctrine.”

[17] Ibid.

[18] Cienski, Jan. “A Market for the Newly Wealthy.” Financial Times, 28 May 2012. <http://www.ft.com/intl/cms/s/0/9fd24a46-a0e2-11e1-851f-00144feabdc0.html>.

[19] Klein, “Shock Doctrine,” p. 241.

[20] Ibid., pp. 241-2.

[21] Ibid., p. 241.

[22] “Poverty in Poland.” The World Bank, Sept. 1994. <http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTPA/0,,contentMDK:20205276~menuPK:435735~pagePK:148956~piPK:216618~theSitePK:430367,00.html>.

[23] “Poverty Headcount Ratio at National Poverty Line (% of Population).” The World Bank, <http://data.worldbank.org/indicator/SI.POV.NAHC/countries/PL?display=graph>.

[24] “Poland GDP (purchasing Power Parity).” Index Mundi, <http://www.indexmundi.com/poland/gdp_(purchasing_power_parity).html>.

[25] Norberg, “The Klein Doctrine.”

[26] Klein, Naomi. “One Year After the Publication of The Shock Doctrine, A Response to the Attacks.” 2 Sept. 2008. <http://www.naomiklein.org/articles/2008/09/response-attacks>.

[27] Klein, “Shock Doctrine,” p. 13.

[28] Ibid., 17.

[29] Ibid., 319.

[30] Ibid., 407.

[31] See the documentary: “The Commanding Heights, the Battle for the World Economy.” PBS, 2002.

[32] < http://en.wikipedia.org/wiki/Neoconservatism>. Accessed on February 15th 2012.