Friday, October 19, 2007

Shock (me with your ignorance of) Capitalism

Wow. Naomi Klein may have written the single most illogical and confused book since...well, since THIS intellectual indignity was foisted on an unsuspecting world.

A review.

An excerpt:

Hot tip: Invest in "Disaster Capitalism." This new investment sector is the core of the emerging "new economy" that generates profits by feeding off other peoples' misery: Wars, terror attacks, natural catastrophes, poverty, trade sanctions, market crashes and all kinds of economic, financial and political disasters.

In this Orwellian future, everything must be seen with new eyes: "Disasters" are "IPOs," opportunities to buy into a new "company." Corporations like Lockheed-Martin are the real "emerging nations" of the world, not some dinky countries. They generate huge profits, grow earnings. And seen through the new rose-colored glasses of "Disaster Capitalism" they are hot investment opportunities.

To more fully grasp this new economy, you must read what may be the most important book on economics in the 21st century, Naomi Klein's "The Shock Doctrine: The Rise of Disaster Capitalism" ...


Another. By Joe Stiglitz. He must be in love, because he certainly doesn't actually review the book. Why give her a pass like that? Say it ain't so, Joe!

Excerpt: Klein is not an academic and cannot be judged as one.

I think Prof. Stiglitz means that this idiotic book cannot be criticized for misusing evidence, or ignoring logic. I disagree, actually: evidence and logic are also useful in arguments made outside the academy.

Here's the thing: essentially every example she gives, EVERY example, shares one thing: They are all bad actions by government. This is a critique of capitalism...how?

Milton Friedman, and the Chicago School, and Buchanan/Tullock and the Public Choice school, share on very important tenet, one core belief. And that is that powerful governments will be dominated by powerful economic interests. Interest groups capture regulatory agencies, and financial interests come to control money supply growth and bailouts.... BUT ONLY IF: (and that's a big "if")

ONLY IF the government tries to micro-regulate firms, and if the government tries to control the money supply and offer risk buyouts like FDIC and "too big to fail" safety nets. It's the solution that's the problem. If government doesn't try to manage money supply growth, then financial interests can't bribe the government to control money to their advantage.

All of the problems in "Not Dr." Klein's book are of a piece: government goes to war, government uses tsunami to redistribute property, etc. It is the conceit that government can do good that leads to us giving it too much power. And, a government powerful enough to give Naomi Klein everything she wants is powerful enough to take everything she has.

4 comments:

Shawn said...

...she doesn't propose that government is the answer, does she?

say it ain't so. Even after 5 beers, I can't believe that it could be.

(what the hell am I doing reading economics blogs and typing legibly after 5 beers? Well, for the legibly, I can thank Firefox, who kindly tells me with a red line that I've misspelled a word)

Angus said...

per the first review, we have a Plutocratic government here at Chez Angus as well!

randytsimmons said...

Thanks for reading the book so the rest of us do not have to. I did not know Stiglitz had been lobotomized until reading his review.

Jeremy said...

This is a critique of capitalism...how?

Depends on what you mean by capitalism. Many people use the term as if it were synonymous with "the free market" or "laissez faire", but I think it's more accurate to view capitalism as a political order where the privileged parties are not aristocrats or government elites or a single political party but, rather, favored business interests. I agree with you that the State is the root problem here, but with the amount of input business elites have into the administration of government, through regulatory capture, political contributions, subsidies, monetary policy, etc. it's difficult to speak of them as even separate from the State. What is a corporation, after all, without it's charter, granted by the government, and the legal privileges that go along with that charter? For all intents and purposes, corporations are "quasi-states" that rely on privilege and not on market forces. Much of our business environment is not the result of a free market, but of a massaged market, with certain parties favored over others, and policies that aim for certain outcomes that can't help but benefit some at the expense of others.

Capitalism, in my view, is not the free market - it is a system in which the State and connected elites rig the game, then yell "let's have free trade... starting NOW!" after they've created the conditions for unequal exchange among market actors. You can disagree with this definition, but the content of the definition is factual. That's part of Klein's argument - these politicians create the conditions for a crisis, then supply a so-called "market solution" that ends up being cost-plus, connected contractor cronies. It's simply another way of using the State to redistribute income, though she frames it in terms that left-leaning types prefer. As a left libertarian, however, I'm very interested in finding common ground with these types and showing them that libertarianism is the genuine "proletariat revolution".

I'd prefer if Klein stood up for genuine free trade and the superiority of non-coercive forms of organization and cooperation, but at least we're aiming at the same immediate enemy.