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Naomi Klein Takes Down the Shock Therapy Quacks

12.27.2007 | BOOKS

The one time I met Naomi Klein she thought I was a spy. It was during the September 2000 IMF protests in Prague, a big, tear gassy event in the heady pre-9/11 days of the anti-globalization movement. Klein was milling around at a safe distance from a memorable split-screen on the barricades: on one side of a tall security fence were heavily armed Czech riot cops; opposite them, militant South American protesters in sequined Mexican wrestling masks yelled "Ya Basta!" and charged the fence with improvised battering rams.

A few blocks away, teenage anarchists hurled Molotov cocktails and rocks at military police, who returned volley with tear gas, rubber bullets and concussion bombs. It was "Europe's Seattle" at full heat. Klein, already famous for her anti-globalization tract No Logo, was its wandering chronicler.

I had seen Klein speak that morning at the protest's "counter summit" and immediately recognized her behind the paisley pink bandanna she had daintily wrapped around her face. She looked like a frightened sorority girl on her first college newspaper assignment smelling tear gas for the first time, even though I knew from her reporting she was tough as nails and had seen more of these protests than anyone.

I approached her and said, "Are you Naomi Klein? I liked your talk this morning."

She stepped back and stared at me over her bandanna like I had just pinched her ass. I repeated myself. After another hesitation, she finally stammered, "Thanks." Then she turned around and walked away. Bitch, I thought. Did she think I was hitting on her?

Later that day I had a forehead slapping revelation: Of course—she thought I was an agent. I had a crew cut at the time and probably looked to her like a young recruit from the FBI's Prague office, which the agency had opened in the run-up to the summit. Files were being created on people well before the "war on terror" was announced, something Klein understood better than most.

Before I freaked her out at the barricades, Klein had participated in a protest roundtable on the economic "transition" of post-communist Europe. It's a subject to which she returns in The Shock Doctrine, this time schlepping a heftier theoretical tool-kit. More than just a denunciation of imposed-from-above neoliberal policies or a celebration of the people who oppose them, The Shock Doctrine attempts to explain exactly how and why some countries—such as Poland and Russia, her two main post-communist test cases—become Petri dishes for rapid and radical neoliberal economic makeovers. What are the political circumstances that accompany these dramatic overhauls? How are they imposed, and by whom?

The common denominator, Klein posits, from Latin America to Eastern Europe to South Africa, is a prior major shock to the system that disorients the public and results in the suspension or crippling of democratic institutions. Only then does the application of a second wave of shocks—unpopular and painful economic reforms—become possible. This is often followed by yet another round of more literal shocks when the population rebels.

Klein presents a queen's ransom of research and reportage to back up her thesis. She details how in the countries of the Latin American cone, neoliberal shock-therapy was administered only after coups and terror campaigns had weakened or destroyed the popular will and ability to resist. In Poland and Russia, radical free-market reforms were imposed by rapid-fire diktat after the shocking and disorientating collapse of communism, which left publics too dazed, uncertain, and indebted to insist upon remaking their economies according to, say, Solidarity's vision of worker's cooperatives. In the cases of Poland and Russia, western-advised governments asked the public not only to abandon more populist paths of post-communist development, but to hand over their newly won democratic rights to those who knew best—the western shock docs.

In Poland, the "democracy-free moment" in which shock-therapy was administered ended with the downfall of Solidarity and a change of direction. In Russia, an opposition parliament similarly tried to reassert control, but failed. Instead, it was dissolved and shelled by Yeltsin's tanks. In both cases, Klein shows, neoliberal reform was democracy's nemesis.

Poland was the first post-communist state outfitted for a Milton Friedman-designed electrode hat. It was a strange honor, considering the Solidarity movement began as a socialist revolt along the lines of Charter 77's desire for "socialism with a human face." Solidarity's own slogan was, "Socialism—Yes; Its Distortions—No." Uniting the movement wasn't just a hatred of atheistic Russian rule, writes Klein, but a positive "radical vision for huge state-run companies…to break away from governmental control and become democratic workers' cooperatives."

But it wasn't to be. The Solidarity government inherited enormous communist-era debts and a ruined economy; it needed help. Sensing opportunity in Poland's crisis, the IMF and U.S. Treasury failed to offer Lech Walesa and his fellow union men-turned-politicians much assistance—the initial package was $119 million and a note of congratulations. That changed only after the Polish government agreed to be strapped to the gurney and bite a plastic bit while a few hundred volts coursed through its economy.

The man who flipped the metaphorical electricity switch on Poland was 34-year-old Harvard economist Jeffery Sachs. He arrived in Poland promising to deliver western aid in exchange for initiative bold reforms. They were interested in hearing what he had to say, but when he presented his shock-therapy program to the Solidarity leadership, it was aghast. After a bitter internal debate, the Solidarity leadership ultimately agreed and asked their supporters to join them in biting on the plastic bit. Poland proceeded to enact the policies called for in the Sachs plan: rapid privatization, cuts in subsidies, price liberalization, etc. The result was an almost immediate deepening of mass misery and a huge spike in strikes—from 250 at the beginning of the plan to 7,500 two years later. Solidarity was voted out of office in 1993, with Adam Michnik muttering, "The worst thing about communism is what comes after."

Like the leaders of Solidarity, Mikhail Gorbachev also came in for a rude awakening. At the 1991 G7 meeting, donor countries, led by the U.S., told the embattled Soviet president that there would be little aid on offer unless he embraced radical free-market reforms that bore no resemblance to his plans for transforming the Soviet states into Scandinavian social democracies. When Gorbachev hesitated, his usefulness was suddenly and violently called into question by elite western media, enamored with the newly christened "Washington Consensus." Klein's collection of newspaper clippings from this period makes for interesting reading in light of current Western condemnations of Putin's managed democracy. The Economist, today so hypersensitive to the health of Russian democracy, in 1990 urged Gorbachev to adopt "strong-man rule" and imitate Pinochet, even if it involved "blood-letting." The Washington Post likewise supported the idea of a coup and thought Russia needed a "despot [like] Pinochet." So much for Gorby Fever.

Such attitudes would reappear with a vengeance during Yeltsin's shelling of a recalcitrant, anti-shock-therapy parliament. By then Jeffery Sachs was ensconced at Yeltsin's side, where he supported the assault. That Sachs did not have a problem attacking democratic institutions was something he had made clear earlier in his career as a neoliberal advisor/guru in Bolivia. It was this early chapter of Sachs' career that led one Solidarity leader at the time of the Warsaw debate to declare, "I would love to see Bolivia. I'm sure it's very lovely, very exotic. I just don't want to see Bolivia here."

Understanding why the Poles might not want to emulate Sachs' Bolivian experiment requires reviewing what really happened there under Sachs' tutelage in the mid-80s. In The Shock Doctrine, Klein offers a fuller version of the story than is usually presented in gushing recaps of Sachs' career.

Sachs was a 30-year-old academic with no experience in development economics when he arrived in La Paz with a radical plan to conquer that country's runaway inflation. Fancying himself a latter-day Keynes, he wrote a plan calling for the usual litany: free trade, privatization, and the elimination of price controls, subsidies, and most social spending. When he and the new Bolivian government showed the still-secret plan to the local IMF office, the representative was beside himself, and replied, "This is what every official at the IMF has dreamed about. But if it doesn't work, luckily I have diplomatic immunity and I can catch a plane and flee." As would later reoccur in Poland, most of the government was horrified by the plan. But Sachs promised it would work, and if not, well, in Latin America there are always means to control people who get it the way of progress.

Although the center-left government that enacted the Sachs plan was democratically elected, Klein explains that it was not elected on a platform of shock-therapy, and thus kept the plan a secret until the last minute. When the Sachs plan—known as the "brick"—was finally announced, unions and other groups spilled into the streets to oppose it. The government then fell back on other kinds of shocks, imposing what Klein calls a "junta-lite," much as Yeltsin later would. As the reform program went into effect, martial law was imposed; schools, radio stations, and union halls were raided; and, taking a page from Pinochet, opposition leaders were flown to remote prisons in the Amazon.

Sachs doesn't mention any of this when describing his work in Bolivia. Klein notes that Sachs' bestselling 2005 book, The End of Poverty, completely glosses over the repression that accompanied his reforms (as well as the large role cocaine played in reviving the Bolivian economy). Perhaps the only thing Sachs likes to talk about less than repression in Bolivia is Russia in the 90s.

Klein interviewed Sachs extensively for The Shock Doctrine, and probably should be given some sort of journalism award just for getting him to talk about the Russia years. Sachs is notorious for threatening to hang up on journalists who push the sensitive subject, and the colossal failure of shock-therapy in this country probably contributed in no small part to Sachs' transformation from a Friedmanite crusader into an aid and development do-gooder. Still, it took some banging on the door to get Sachs to open up. At first, the superstar academic acted as if he had no role whatsoever in the disaster that befell Russia in the 90s. "I was right and they were wrong," he told Klein. "Ask Larry Summers [what went wrong], don't ask me; ask Bob Rubin; ask Clinton, ask Cheney…" Anyone but Jeffery Sachs!

But Sachs was there at the creation, and there's no getting around his central role in the story of Russia in the 90s. He was literally in the room when Yeltsin dissolved the USSR. As Sachs tells it, what followed was a case of good intentions and advice on his part unmatched by political will in Washington to help Russia. Yeltsin acceded to shock therapy on the assumption that Sachs would get the aid taps flowing fast and heavy, as he did in Poland. But it never happened, a fact Sachs blames for everything bad that followed. Still, as Klein points out, its hard to see how aid would have effected the criminal stripping in broad daylight of Russian industry that happened under his watch and advice. In their discussions of Russia, writes Klein, Sachs repeatedly made it sound as if he were "a Boy Scout who stumbled into an episode of The Sopranos."

Sachs scripted Russia's shock-therapy program and stood by Yeltsin's side throughout his assault on the country's nascent democracy in the name of the reform agenda. Even before the massacre of 1993, Yeltsin had suspended democracy during his "year of special powers." Klein reviews the story of how, starting in late '91, Yeltsin gathered a team of Russian reformers led by Yegor Gaidar known as Russia's Chicago Boys. Together with Sachs, they crafted a Friedmanite blueprint of radical privatization, price liberalization, and free-trade policies. These shocks were to be administered as quickly as possible on an already dazed public.

When the daze started to wear off, the vast majority of Russians weren't happy to find they were wearing the electrode hat. When parliament voted to repeal Yeltsin's special powers and end the experiment (as happened in Poland), Yeltsin's response was to abolish the constitution and dissolve parliament, moves that started the crisis culminating in his bloody shelling of the White House. The western media duly fell in line behind Yeltsin "the reformer". Klein describes the ease with which the major papers dismissed elected Duma members as suffering from "a Soviet mentality" (The New York Times) and even of representing "antigovernment" forces (The Washington Post).

Western editorialists had called for a Russian Pinochet, and they got one, although in reverse order. In Klein's words: "Pinochet staged a coup, dissolved the institutions of democracy and then imposed shock therapy; Yeltsin imposed shock therapy in a democracy, then could defend it only by dissolving democracy and staging a coup. Both scenarios earned enthusiastic support from the West."

And both scenarios buttress the thesis of Klein's fascinating book: That sweeping neoliberal reforms are generally not possible in democracies. Which is why powerful boosters of such economics rarely have much use for democracy in any meaningful sense of the word.

This article originally appeared in the eXile.

About the Author
Alexander Zaitchik co-founded Freezerbox in 1998. He has reported from more than a dozen countries for publications such as the International Herald Tribune, Bulletin of Atomic Scientists, Wired, the San Francisco Chronicle, The Believer, and many others. He lives in New York City.
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