Neoliberalism and The Shock Doctrine

Introduction

Modern neoliberalism is a complex phenomenon of political reality. It is a conceptually multifaceted political doctrine, reflecting the system of theoretical propositions, which are taken as a basis for justifying the strategic course of the state, international organizations, and widespread political practice, reflecting the interests of monopolies and hegemonic influence groups (Ferguson 2010). One of the research problems of modern political science is a comprehensive analysis of neoliberalism, as a particular political doctrine, strategy, reform practice, as a kind of political discourse, and a certain belief system that has a large transformative impact on the development of modern political institutions and processes. The central problem of neoliberalism has become the issue of social guarantees of rights and freedoms of individuals. Accordingly, the idea of the state regulation of the social sphere acquired the dominant position. The strategy of neoliberal reforms is aimed at implementing on global and regional levels of economic and political freedom, with proper disposal of which the state is supposedly able to secure sustainable development, economic growth, to create a favorable institutional environment for the formation of a democratic legal order, in which the existing regulatory market entities provide nation-wide efficiency. This essay aims to analyze neoliberalism and the principal ideas of neoliberal discourse. It focuses on different scholarly interpretations of neoliberalism. The current paper also highlights Naomi Klein’s critique of Friedman’s monetarist neoliberalism and describes various methods by which neoliberal reforms were pushed through.

Degree of Scientific Elaboration of the Problem

There is no clear understanding of the term “neoliberalism”. There is one point of view in which neoliberalism is treated as a kind of ideological integration of elements of classical European liberalism with some social democracy postulates. In studies of the history of political economy, neoliberalism means the totality of economic schools, which are opposed to Keynesianism and economic projects of Socialists and Communists in several Western countries (Ferguson 2010). In some works, the neoliberal policy means radical market reforms, undertaken by the proponents of the Washington Consensus (Sheppard & Leitner 2010). In most works, neoliberalism is seen as the leading driver of the global process of marketization, commercialization, and monetization of social relations, advancing the interests of transnational corporations and centers of the global political and economic influence in all spheres of society. The neoliberal turn of neoliberal globalization as a large-scale political project of social relations and social consciousness transformation is aimed at serving the interests of multinational corporations. This approach is one of the central themes of a large number of scientific studies (Peters 2011).

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Five Main Approaches to the Interpretation of the Concept of Neoliberalism

The first approach is the interpretation of neoliberalism, as a new stage in the development of liberal thought, marking the desire to combine the ideas of classical liberalism with the elements of socialist ideology. In other words, neoliberalism is interpreted as a positive step towards the development of the social state and civil society (Peters 2011).

The second approach is methodologically similar to the first one in its intention to combine the ideas of liberal values with socially-oriented state regulation of the market. It is related to the identification of the concept of “neoliberalism” with Keynesianism – the teachings of major economist Keynes who advocated an effective combination of competition with state regulation (Peters 2011).

In the third approach, by the term “neoliberalism”, free competition theory, efficient market enterprise, market-oriented public policy, and promotion of marketing principles in various spheres of public life are meant. According to Harvey (2005), neoliberalism is a primarily political economy theory, the conclusions of which have been widely used in practice. According to this theory, an individual can achieve well-being using entrepreneurial skills in a free market. The state’s role in this is to create and maintain these institutional structures. Neoliberalism is also understood as the philosophy and strategy of total marketization and commercialization of social relations. According to Paul Treanor (2005), neoliberalism is a philosophy that views the world as a metaphor for the market. Friedrich von Hayek and Milton Friedman are among the most prominent political philosophers and ideologists of neoliberalism.

The fourth approach involves the consideration of neoliberalism as a global economic doctrine and strategy of the Washington Consensus, which is aimed at radically reforming the economies of developing countries in the direction of privatization, marketization, and monetization of economic relations. It is mainly associated with the establishment of economic domination of transnational corporations (Sheppard & Leitner 2010).

In the fifth approach, neoliberalism is understood as a modern phase of the development of capitalism, associated with the global transformation of all, without exception, public relations and all forms of social consciousness, aimed at establishing a new world order and the formation of a new type of personality. In this regard, several studies used terms, such as “global neoliberalism”, “neoliberal globalization”, “neoliberal global project”, “the era of neoliberalism,” “neoliberal revolution”, “neoliberal loop”, and “neoliberal yoke” (Ferguson 2010).

The first and second approaches to the interpretation of the concept of “neoliberalism” are unlikely to be acceptable from a methodological point of view. To indicate the forms of liberalism represented in the first and second approaches, the term “new liberalism” would be more appropriate (Ferguson 2010). This term is used by several authors to characterize the views, which are based on the idea of uniting the liberal theory with the concept of the social state. What concerns other approaches, each of them reveals certain basic features of neoliberalism as the most influential trend in the field of economic theory and practice, as well as political philosophy and political ideology of the era of globalization.

Neoliberal Ideas of Monetarist Milton Friedman

When considering the US neoliberal ideas of monetarist Milton Friedman, they played a crucial role in the transformation of the American form of neoliberalism in the practical implementation of the theoretical basis of radical neoliberal reforms throughout the world. In Friedman’s works, quite an attractive idea of liberal freedoms is formulated. This idea made the works very popular among liberal intellectuals from many countries. According to Friedman, the goal of liberalism is to keep a maximum degree of freedom for each individual, so that one does not interfere with the freedom of others (Steger & Roy 2010).

Friedman is opposed to the priority of state interests over the interests of individuals. For a free man, the country should be a set of its individuals and not some higher authority. A free person has to look at the state as a means and a tool. Friedman’s main contribution to the development of ideas and principles of neoliberalism is his theory of monetarism, which was the basis for the project of neoliberal reforms in different regions of the world. This theory includes the following tenets: the use of monetary instruments as principal promoters and regulators of the free market; liberalization of prices and foreign trade; total privatization of state property; use of the method of shock therapy in the course of reform (Steger & Roy 2010).

The Shock Doctrine: The Rise of Disaster Capitalism

The radical critique of Friedman’s monetarist neoliberalism is contained in the fundamental study by Naomi Klein called The Shock Doctrine: The Rise of Disaster Capitalism. There is also a documentary with the same title that is based on Klein’s book and a set of facts of genocide, repression, political upheavals. Klein (2008) destroys the myth that deregulation leads to freedom, democracy, and economic prosperity. The author shows brutal truth about the modern world order and tells the story of how the American “free market economy” conquers the world (Klein 2008). Each global catastrophe today ends up in a new triumph of private capital. These events are examples of a new strategy of the world conquest, which Naomi Klein calls “the shock doctrine”: the use of the confusion of nations, arising from massive social upheavals – wars, terrorist attacks, and natural disasters. The aim of this is to carry out economic reforms known as “shock therapy” (Klein 2008). A logical formula of The Shock Doctrine is the following: the initial disasters – revolutions, acts of terrorism, market crashes, and wars are the introduction of a society into a state of collective shock (Klein 2008).

Klein shows that the neoliberal reforms in various countries are accompanied by not only huge economic and human losses but also terrorism, leading to the extermination of democracy. So it was in Russia (the burning of the White House, the war in Chechnya), in Bolivia, in China (in the Tiananmen Square), and in Iraq (Klein 2008). In all countries, where there was a threat of neoliberal reforms failure, and the emergence of riots against them, advisors, experts, and specialists in the crackdown, including sophisticated techniques of torture, were involved.

Klein speaks about an alternative to the neoliberal course with its doctrine of shock therapy. It is the development of programs that offer leftist forces that have come to the authority in Latin America and formed the association The Bolivarian Alliance for the Peoples of Our America (ALBA) (Klein 2008). At its core, ALBA is a response to the continent’s neoliberal shock therapy on trade principles that meet the interests of multinationals.

The Shock Doctrine combines two meanings of the word “shock.” It is believed that during the crisis of the economy, there are some benefits from the “shock therapy”: rapid deflation of the currency and the sale of state assets. There is another concept of “shock therapy”, developed by psychologists. This concept is also used in the practice of torture. The combination of these two meanings of the word “shock” is designed to strengthen the emphasis on violence that is inherent in economic policy. The shock applied to the body (sometimes literal electric shocks, sometimes metaphorical), must be controlled to mislead the public for the use of “economic shock.” Klein (2007) draws attention to understanding the functions of the crisis of Milton Friedman. He argues that only a crisis – real or imagined – produces changes; when it occurs, the decisions depend on ideas at their disposal. The main goal is to create alternatives to existing policies, to protect them, and keep up until the politically impossible becomes politically inevitable. In Klein’s (2008) opinion, Friedman’s followers use and create crises for more than three decades, to impose a rough policy of laissez-faire and corporate ideology.

The author describes a variety of methods by which neoliberal reforms were pushed through. In England, the national euphoria around the Falklands War diverted citizens’ attention from Thatcher economic policy. In Bolivia, the government, elected on a nationalist platform, behind closed doors, was subjected to pressure for a radical transition to a neoliberal policy. In the “transitional” societies, such as South Africa and Eastern Europe, the new leaders were disoriented by a flurry of propaganda of neoliberalism miracles. It is increasingly aggravated by the threats of suspending the necessary credit loans if they were not backed up by an extensive privatization program (Klein 2008).

Outright fraud was used everywhere to amplify the concerns of a debt crisis that was used to push through neoliberal policies. In China, the events in Tiananmen Square were a shock to the population, creating the ground for calming this protest and preparing a new dose of “medicine” from Milton Friedman (Giroux 2015). Even the “miraculous” economy of East Asia was put on its knees by the financial crisis in 1997, which was the result of the free movement of capital in the region. In many other cases, from Chile to China and Poland, the alternative policy, based on a strong public sector, developed workers’ cooperatives, and democratic institutions were dropped in favor of rough neoliberal policy (Giroux 2015).

Conclusion

Neoliberalism, offering its vision of government regulation problems, has become a platform for social rights and guarantees, which are indispensable for the freedom and dignity of the individual. The study of neoliberalism as an influential political phenomenon is theoretically important for the understanding of content and mechanisms for implementing global and other trends in the political life of the society, especially the state changes and management practices. Among these trends, there are strengthening of the rule of transnational corporations and financial capital, increased competition for spheres of influence, weakening state sovereignty, deepening of the processes of social inequality, expanding the areas of socio-political and economic turbulence. It is possible to combine all the views on neoliberalism in a single integrated system and offer a brief definition of neoliberalism. Neoliberalism is dominant in the era of globalization ideological and political course, strategically aimed at the transformation of social relations, based on the comprehensive approval of marketing paradigm, and the implementation of the doctrine of Washington Consensus in the interests of transnational corporations. Speaking about Naomi Klein’s The Shock Doctrine destroys the myth that the global market economy has triumphed all over the world and is accepted by the countries based on the free will of their people. The author shows the deep connection between the corporate modernization of modern society and the secret CIA experiments on the management of human behavior. Klein is quite critical about the human rights movement at that time, because it separates the terror, conducted by the state from economic policies, thus freeing Friedman from liability.