Inspired by Michael Friedman and Chicago School theories, powerful individuals and institutions – especially but not exclusively the IMF, the World Bank, and the US government – have, as the case studies show, increasingly used times of shock and disaster to implement sweeping free market reforms – forcing countries to remove rules and regulations, sell and privatise government owned operations, and cut government social spending and protections.
These institutions are able to do this because of their superior positions financially, politically, and militarily. To achieve reform they take advantage of political disasters that are ‘organic’ (self-developing) or stimulated and manipulated, as well as natural disasters and military conflict. They apply immense pressure and deploy tactics such as using or withholding loans as leverage, manipulating interest rates, threat of sanctions, espionage, and war.
Overtime, these crises have been created more and more consciously, taken advantage of more eagerly and less subtly. Top officials in the World Bank and the IMF (and elsewhere) have overtly stated the value of created and ‘managed’ crises in forcing reform on others.
These actions usually achieve instant financial benefit to foreign bodies and investors, as public assets are sold in liquidation sales. Inflation and unemployment rise, social spending is cut, and domestic poverty, unrest, and crime increase.
And so institutions like the IMF, with a statute to protect global economic stability, and governments supposedly responsible to their people, all take financial and legislative actions driven by a specific economic ideology, with results that often benefit a minority of powerful international players.
The Shock Doctrine offers a far more detailed history and explanation of the development of disaster capitalism than this summary. Natural extensions of this mindset emerge throughout the history: the Greenzone Phenomenon; the economy of war; the distressing confluence of public and private interest; greed and corruption. Several subplots can be pulled out of the over-all narrative: Friedman appears around the world to interject his views; we observe the development specialist Jeffrey Sachs increasingly seek to fight poverty and crippling debt; the US interferes in numerous countries’ governments; popular governments have to pay off debts incurred by tyrants, and reform their economies to meet loan conditions.
With the case studies, I’ve tried to pull out the “Lessons Learned” (as far as I understand them) after each major example.
In contrast to The Shock Doctrine, the current global financial crisis (which broke after the book’s publication) may result in increased regulation in investment and banking systems. This can be seen as a response to the long trend of deregulation and faith in the free market that contributed to creating the crisis. Nonetheless, solutions to the recession (such as stimulus packages) do involve the transfer of large sums of public money into private hands, without necessarily returning power, legislation, wealth, or ownership to the public sector.
Please peruse the case studies, and please read this book!