Sabernomics and Social Change

I do disagree, however, that all economic systems are evil.  We just haven't found the one(s) that work(s) for everyone yet.

And yes, Friedman is not really from Chicago.  It was just that- "and he is from, big gasp, the Chicago School of Economics"- didn't quite fit the Cubs bashing sentiment I was going for.

I deal with Keynes in my research almost exclusively as a cultural figure within Bloomsbury rather than as an economist, but I've encountered Klein as a champion of Keynes, all the while playing fast and loose with his writings. I have two close friends who are economists--one in academia and one doing consulting for green development in Georgia--neither thinks much of Klein as an idea person. The academic thinks she gets the situation with 2005 Tsunami exactly wrong.

Apparently, her Q&A with Alan Greenspan a few months ago revealed that she didn't even have a basic understanding of how the Fed worked. I didn't see it, however, so I don't know if that's accurate.

I am sympathetic to Klein's ideas, but in my very little experience of her work she strikes me as unconvincing. I'd be interested in hearing what more expert econ/polisci people think of The Shock Doctrine.

Maybe it was a mistake to bring up Klein's book the way I did.  I have actually spent a great deal of time writing a critique of her book using many of the very criticisms of Keynes that you have brought up here.  

The difference in our thinking, that I am seeing, is that I think alternatives systems can be created on local levels independent of the greater economic context, and these alternatives are worth working toward (Not to mention it is really fun and worthwhile to work collectively with people to solve problems).

To hopefully clarify a bit where I am coming from here is the beginning of an open letter I wrote to Klein:

Dear Naomi Klein,
    I recently finished reading your latest book, The Shock Doctrine.  Your detailed account of the connections between neoliberal economic policy and the use of violent repression, the decline of welfare states, and the rise of corporatized war and disaster capitalism is compelling.  You begin by threading together the recent histories of military brutality in the Southern Cone of South America, union busting in Margaret Thatcher's England, and the Tiananmen Square massacre in China.  Through these histories you make explicit that acts of violent political repression against leftist organizers were not chance occurrences during periods of economic transition.  On the contrary, you show that they were deliberate acts of "shock therapy" used by governments to numb and eliminate those opposed to the implementation of neoliberal policies such as the privatization of public services, the elimination of spending on social programs, and the deregulation of industry wage, safety and environmental standards.
    You continue on to demonstrate the "constricted freedom" of post cold-war governments in Poland, Russia, and South Africa, who, in spite of initial aspirations to build social democratic welfare states, ended up implementing neoliberal economic reforms with disastrous consequences for the majority of their people.  You then bring your analysis of neoliberalism to the United States, describing the rise of the privatized war machine and the parallel emergence of the occupation of Iraq as a profitable market for investments in military technology, homeland security, and the rebuilding of basic infrastructure destroyed by the aforementioned military technology.  Finally, you tie it all together by concluding that the neoliberal economic model, in its thirst for new markets, is now preying upon areas struck by natural disasters to accumulate the profits it desires.  "Disaster capitalism," as you aptly name it, was evident in New Orleans after Hurricane Katrina and in Sri Lanka after the tsunami when large numbers of poor people were prevented from returning to their weather damaged homes in order to create lucrative new investment opportunities on the land they previously inhabited.  The scariest part of neoliberalism's trajectory, as you note at the end of your book, is that when war and disaster are profitable enterprises, there are increased incentives to start wars and allow natural phenomena to deteriorate into social catastrophes.      
    To begin, I want to say that I learned a lot from reading your book.  I was continually impressed by your ability to organize complex historical events into easily understandable patterns.  You have clearly demonstrated neoliberalism's historical dependence on political, economic, and physical "shock."  I am writing you, however, because despite my deep appreciation for the work you have done, I also have a major concern. You do a very good job of describing many of the problems that come with neoliberalism, but I am afraid your analysis does not give a good account as to why neoliberal ideas are being implemented in the first place.  Without a clear understanding of why neoliberalism is the policy of choice for many governments and economists today, you are unable to put forward a comprehensive vision for how neoliberalism can be transformed.
     For these reasons, I am concerned that many people will read your book and become motivated to make change, but will not be equipped with the right tools to do so.  I am concerned that without the right tools, these motivated people will continue to focus on pressuring governments and/or economists to make change but will not have much success persuading them to do so.  I am concerned that these motivated people, after not having much success, will start to believe those who say that the fall of the Berlin Wall and the collapse of the Soviet Union prove that free market capitalism is the final stop on the train of economic history.  Moreover, I am concerned that these motivated people, frustrated by their inability to make change, will reluctantly give into the idea that capitalism (and the neoliberal ideology that now accompanies it) is the only way to organize economies after all.
    With these concerns in mind, I would like to make a suggestion.  I would like to suggest that you take a look at another book that maps the rise of neoliberalism in the latter half of the twentieth century.  The book is The Dilemmas of Social Democracies by two Peace Studies Professors at Earlham College, Howard Richards and Joanna Swanger.  Instead of focusing on the violence and repression associated with neoliberal economics, Richards and Swanger focus on rules.  They would argue that your book takes a wrong turn on the second to last page of the introduction when you make the claim that there is no reason that market-based economies are incompatible with decent wages, free health care, and quality public education.  They would say that there is a very good reason that markets and government led social welfare programs do not mix: the basic cultural rules that shape our current economy do not allow them to.  They would explain that until the basic rules of our economy are changed, governments have few options for making economic policies that serve the needs of all of their people.  
    Fearing that people might understand this to mean that capitalism is here to stay, Richards and Swanger would then enthusiastically proclaim that effective strategies for ending the problems of neoliberalism do exist.  There is no reason that the basic rules of our current economic cannot be changed or that concerned people can work collectively to change them so that everyone's needs can be met in ecologically sustainable ways.  In the following pages, I will explain some of these strategies as I more fully articulate my concern with your book.  I will start by describing what Richards and Swanger mean by "basic cultural rules of capitalism."  I will then summarize a few of their case studies of nations whose experiments with social democracy failed as a result of these basic cultural rules.  One such case study, that of South Africa after Mandela rose to power, is particularly illuminating.  Both you and Richards and Swanger give detailed accounts of how Mandela's South Africa ended up implementing neoliberal economic policy, but have very different explanations as to why this happened.  The conclusion of this letter will explain how your differing analysis of South Africa, and the rise of neoliberalism in general, lead to vastly different approaches to transformative social and economic change.    
    According to Richards and Swanger, the basic cultural rules that shape and sustain our current economic system are made up of a couple of interconnected parts.  First, as Marx explains in Capital, capitalism is based upon a culture of accumulation through commodity exchange.  Commodities are not produced in order to meet people's needs directly, but to sell to make profit that is then reinvested in the production of even more commodities.  Second, a simple set of ethics exists that produces, protects, and makes normal both the right to own property and the freedom to do with it whatever one wishes.  This minimalist set of ethical values emerged in western culture as the Romans sought to create a basic system of rules- a common economic language- that could facilitate commerce between the vastly different cultures that had been conquered in their quest for empire.  Enlightenment philosophers, such as Immanuel Kant, and classical economists, such as Adam Smith, would later adopt this emphasis on property and freedom to construct the ethical foundations of free market capitalism.
    Focusing on the two interconnected parts of capitalism's basic rules allows Richards and Swanger to provide a simple explanation as to why capitalist markets and welfare states usually cannot coexist peacefully. This simple explanation, preceded by another brief summary of capitalism's interconnected parts, now follows.  First, the summary: at the core of capitalist culture is the accumulation of profit through investment.  At the same time, the ethical values of property and freedom give investors the right to do what they want with their capital because it is their capital.  The freedom to invest in whichever market one chooses, the freedom to remove investment from one market and place it in another, and the freedom to not invest in any market at all, are guaranteed by the rules of the system.  Now, the simple explanation: in a capitalist economic system where the purpose of investment is to make profits, and the basic rules of the system give investors the freedom to choose where they invest, investors inevitably choose markets where profit can be made.  One is unlikely to find profitable markets in countries with high wages and a large tax base to support government funded health care and education.  Thus, markets in these countries are not usually chosen.

You can download the rest of the letter that has some case studies supporting this critique of Klein as well as some tools to help us work towards creating other rules here:

http://download.yousendit.com/6F8C97A079776091

Hope this clarifies what I am trying to say better.

And, uh, oh yeah, go Reds.

I've talked to many doctors who would welcome nationalized health care.  Two in particular:  One worked in an emergency room in Detroit.  He said that those without, or who have inadequate, insurance are wasting valuable (and expensive) resources by waiting until they have to go to an emergency room, where they have to be treated whether they can pay or not.  The other used to be a general practioner in Canada.  He said that the horror stories you hear are generally overblown - sure, you can't get a liposuction this week, but if you really need an MRI today the gov't will pay for you to go to the nearest hospital to get one if it's really necessary (even if it's the US).

And again, the proof is in the pudding.  Despite all of the breast-beating, Canadians (and almost every other nationality with socialized medicine) are healthier and live longer than Americans, while spending less money.

I'd also like to dispel the myth of the "free market" when it comes to medicine - there isn't one.  Sure, you can choose your family doctor, but that isn't where the real costs are.  If you have a heart attack, do you have the ability to shop around for the cheapest care, or call 2 or 3 EMS services to find the cheapest ride to the hospital?  Even if you break your arm, are you going to call 3 or 4 hospitals to get the best price?  Of course not.  Why do you think health care costs rise so steadily?  Because no matter what, we need health care, so we pay for it.