In her best-selling book, The Shock Doctrine: The Rise of Disaster Capitalism [1], Naomi Klein outlines the disturbing trend of governments using crisis as a means for corporate profit-advancement. She cites Hurricane Katrina, 9/11, and Pinochet’s Chile as examples of the practice.

At her January 29 speaking engagement at Loyola University, the award-winning author made the case that America’s current economic crisis is just another “big bang moment” in this evolution.

Klein cautioned listeners at the packed 750-seat Mundelein Auditorium against cheerily consenting to the wave of Obama-fueled optimism. Throughout his campaign, Obama rejected the “worn out dogmas” and suggested it was time for an ideological sea change. Klein isn’t ready, however, to embrace the recent market interventions as a shift in American policy, and instead implored her audience to work for a deepening, rather than deadening, of democracy in these tense economic times.

The concept of an American version of The Shock Doctrine [1] is predicated upon two basic principles: panic forces the electorate to search out paternalistic political policy; and the resulting distraction stifles public debate.

These conditions nudge the collective American eye off the ball, allowing politicians to “override the will of the electorate.” Disillusionment creates what Klein called a “temporary democracy free zone.” She argued that the recent economic panic is an explicit example of The Shock Doctrine and she termed the $700 billion bailout the “greatest heist in modern history.”

With a total of more than $7 trillion in estimated corporate handouts so far, the world is witnessing the largest transfer of wealth in history. Congress has opened the federal wallet to the financial and automotive sectors, justifying unregulated corporate welfare with warnings of economic collapse, frozen credit markets, and rampant unemployment. This “no-strings-attached” federal policy, orchestrated by former Secretary of Treasury Henry Paulson, offers a disturbing illustration of domestic shock doctrine in action.

Klein said that the recent actions of Paulson and company fly in the face of democracy. She revealed that Paulson began working on the bailout in secret six months prior to its sudden announcement just before the election. She added that a federal willingness to hand out taxpayer funds to banks with no prerequisite lending requirements has not only failed to unfreeze the credit markets, it has put massive pressures on public “entitlements.”

In her speech, Klein quoted bank CEOs who referred to the bailout as a “cushion” and an “insurance policy,” clearly defining their intent for use of the funds. British Prime Minister Gordon Brown’s successful enforcement of lending increases in the U.K. version of the bailout clearly shows that it is possible to use built-in regulation to thaw credit markets.

While federal bureaucrats exhibit an obvious aversion for corporate micromanagement, they have eagerly restricted the rights of workers. During negotiations for the auto industry bailout, Congress forced the United Auto Workers to roll back its members’ pay to non-union levels prior to releasing funds. Klein remarked that it was odd that they “got this one in writing” after failing to do so with the lending increases from banks.

After issuing caution, Klein offered the Loyola audience cause for optimism and a few possible solutions to the current shock doctrine policies. The author’s democracy-reclamation project begins with campaign finance reform. She framed the current economic atmosphere as a dichotomy of people power versus the corporate lobby, with the business set holding a stated advantage until election financing is made more equitable.

Klein’s next step is the nationalization of America’s banks. Her argument is simple: These private entities have already proved themselves failures within the market. If the banks are not viable, don’t throw money at them – nationalize. After bailouts, Klein pointed out, both Citigroup and Bank of America actually received more in federal gifts than their total market value.

The U.S. financial industry has been effectively nationalized by the bailout, but Klein said the banks are “encouraged to pretend they’re still private” because, otherwise, shareholders would lose their stakes. She posed the rhetorical question, if private banks knew how to effectively conduct business would this economic crisis exist in the first place? She also pointed out that U.S. taxpayers failed to receive even one seat on the Boards of Directors of any of the banks that have been aided by bailout funds.

Klein advocates green investment in industrial infrastructure as the follow-up to the nationalization of banks. As factories go under in today’s economic maelstrom, she argued that government-directed “green audits” should take place to discern the cost of environmental retrofitting the failing shops.

If entrepreneurs are unwilling to take on these costs, Klein suggests that the federal government divert wasteful corporate subsidies and make a national investment in environmentally friendly production. She identifies this as the kind of bold action that would bolster employment and have positive ecological impacts. She posited a local case, the recently shuttered Republic Windows and Doors, as an exemplary instance of need for this “green-audit” policy.

Lastly, Klein encouraged the proliferation of democracy in the workplace. She argued that democratically run workers’ cooperatives offer an egalitarian alternative to today’s corporate hierarchy. As examples, she cited the success of the Argentinean co-ops portrayed in The Take, a film she made with her husband Avi Lewis.

She also came out strongly in favor of other policies to extend the social safety net so thoroughly picked apart since the Reagan administration. She insisted that it is time for a health care system “that covers every person in the country, and the model that works is single payer health care.” Her view matched the sentiments of the local Transition Team Health Forums reported on in the last edition of The Urban Coaster, and her comments were loudly cheered throughout the auditorium.

Klein closed an excellent speech with a deeply relevant anecdote harking back to the New Deal era. President Franklin Roosevelt was well known for maintaining a dialogue with the electorate. At town-hall style meetings, Roosevelt would hear his political base’s calls for change and challenge them to “go out and make me do it” – effectively admonishing the public to force his hand on policy.

Klein positioned President Obama as an executive caught in a tug-o-war between corporate and democratic interests, and one who needs to be pushed as FDR was. She stated that, “one scandal at a time, government has failed to extract any kind of meaningful reform.” She’s hopeful that the American public can remove government from its current position as a “corporate valet.”

Klein is optimistic that due to its repeated use around the world, the affected are becoming resistant to the arguments for shock doctrine policy. She said that, “if we want a healthier, more just, and more peaceful world we must go out there and make them do it.” And she urged readers, listeners, and interested voters around the world to go about that by demanding “war-levels of funding to fight Global Warming, exploitative health care, inequality, and poverty.”

© The Urban Coaster, Inc.

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