Awakenings: The Shock Doctrine

I am not sure how I missed it, but although Naomi Klein’s third book, The Shock Doctrine: The Rise of Disaster Capitalism, was published in September 2007, it was not until eight years later that I finally came across it. By that time, Naomi had moved on to considering how responses to climate change were impacted by economic and political forces, including many of the forces that were the subject of her earlier work. This latter work resulted in her 2014 book This Changes Everything: Capitalism vs. the Climate.

When I did finally come across The Shock Doctrine in early 2015, it was a complete revelation to me as a documentation of how an extreme economic and political ideology has been spread throughout the world. It turns out that many things I had supposed to be normal and obvious about how the world is ordered have been selected and shaped to appear so and my conceptions of fairly recent historical events were revealed to be woefully incomplete as far as how the world has been reshaped by US centred interests during the last 60 years. However, the idea that the US was not the benevolent champion of freedom and democracy it claimed to be was not a new one to me. Indeed, although I had not been intimately familiar with the details of US global hegemonic aims and hypocrisy, being a child of the late fifties, I had been very much aware of many of the terrible tragedies of the Vietnam War. I can still vividly recall television and magazine images from the fall of Saigon, the Mei Lai massacre, the stripping of the jungles using Agent Orange, the carpet bombing of Laos and Cambodia and the famous picture of the girl running naked from a napalm attack. Of course, the official rationale for war in Vietnam was very much couched in terms of a just and righteous mission to prevent the spread of evil communism throughout South East Asia and, potentially, even further. A virulent anti-war movement took shape during my teen years, which was in part inspired by US-based opposition to the drafting of young people as fodder for the war.  This protest movement framed the New Zealand anti-tour movement which vigorously opposed rugby matches with the Springbok team of apartheid South Africa during the early 1980’s.

History was not my thing at that time and, even if it had been, it is doubtful that a balanced view would have been provided through the schooling system. Certainly, the lies told about the Gulf of Tonkin incidents, which provided the cover for the US to go to war, and the national liberation motivations of the North Vietnamese leadership were never discussed as far as I was aware. My father was a serviceman with the New Zealand Airforce. He voted National (our conservative party, which supported US policy aims and spent money on the armed forces). He also served in Malaysia during the Malayan Emergency when the British and Commonwealth forces assisted the newly independent Malayan government to quash a communist insurgency in that country. This set a particular lens which shaped my early impressions of the wars taking place at the time and the motivations of the US as continuing in their post-WW2 role as liberators and champions of freedom and peace. After all, they saved us from the evil Germans and the barbarically cruel Japanese, didn’t they?

Looking back, it is easy to see how economically and politically naive I was. Indeed, in hindsight and given the revelations of books such as The Shock Doctrine, much of the population was in those days. Through the fifties and sixties, New Zealand was a small agricultural nation recovering from the war years. All foreign exchange was jealously controlled. In the fifties, new cars were expensive due to high tariffs and a had a six month or more waiting list. Anyone wanting an overseas holiday or to buy something from offshore had to apply to the Reserve Bank for permission to buy foreign currency—sometimes this was declined or the sum arbitrarily reduced. People voted National because they owned businesses or occupied managerial positions for the tax reductions and strong defence policies, farmers for the production subsidies and a strong hand against the unionised freezing workers or were being in the armed forces for the extra pay and weapons to play with. The Labour party was strongly associated with the union movement and was largely supported by workers and intellectuals.

Although there had long been a class struggle in New Zealand (the use of the military to break the 1951 wharf strikes was legendary), the anti-Vietnam war protest movement and the anti-tour movement shattered the innocence of New Zealand society. Police fought protesters in the streets and families were set into opposing sides. On top of this, the impact of the United Kingdom’s entry into the European Union and the OPEC-inspired oil shocks of the 1970’s, coupled with intransigent economic management under accountant Prime Minister and Minister of Finance, Robert Muldoon, had resulted in the country being on the brink of bankruptcy. When Muldoon called a general election in 1984, the incoming Labour government under David Lange, Roger Douglas and Geoffrey Palmer faced a currency run and subsequently set about an unheralded radical economic and social reform programme. Ironically, under Labour the country moved from what had “probably been the most protected, regulated and state-dominated system of any capitalist democracy to an extreme position at the open, competitive, free-market end of the spectrum”.

In this context, I joined the government-owned Bank of New Zealand in 1980, initially working in its head office as a research analyst and then a spell in a branch in 1983-1985 before moving back into head office roles in international banking and IT. During this time, the bank went through a period of radical change. In 1983, I was helping customers to fill in forms begging the Reserve Bank to allow them to take more than $200 of their own money on an overseas holiday; while in 1987, the bank was operating a full dealing room and I was daily working on new dealing limit approvals for banks around the world. Once the BNZ was deregulated and freed from the constraints of government regulation it set about entering into the commercial world with enthusiasm. This exuberant activity was reinforced when corporate raider Ron Brierley was appointed to the board in 1985 and then to the chair in 1987. By 1987, the BNZ had secured over half the New Zealand corporate debt market, and it was aggressively building a loan book in Australia.  In 1989, the government sold 30.5% of its stake to Capital Markets, the investment vehicle of merchant bankers Michael Fay and David Richwhite. With them on the board, the bank made a lot of dodgy deals so that in November 1990 the incoming National government was confronted with a new crisis at the BNZ resulting from its lending in Australia. With a new CEO, the issue was addressed by separating the bad loans into a separate company. After recapitalisation by the government (NZ$620m) and Capital Markets (NZ$100m), the good bank portion was sold to the National Australia Bank. During this period, Fay and Richwhite and their associated companies were involved in a series of other government asset sales: in total, they made NZ$402 million in profits from the sale of formerly state-owned assets – NZ$274 million on Telecom, NZ$41 million from the BNZ and NZ$87 million on Tranz Rail. After effectively distracting the public through their very popular support for the America’s Cup races, they finally decamped to Switzerland in 1990 with an estimated worth of more than half a billion New Zealand dollars each and a knighthood for Michael Fay.

With the sale of the Bank of New Zealand to National Australia Bank, and subsequently of the Auckland Savings Bank to Commonwealth Bank of Australia, all four of the commercial trading banks in New Zealand were now owned by Australian interests. The Australian banks made huge profits in the New Zealand market to the extent that over the past 25 years the New Zealand operations have consistently outperformed the Australian arms. This has seen a huge transfer of wealth from New Zealand to Australia, which has only partially been offset by the advent of Kiwibank, a wholly owned New Zealand subsidiary of New Zealand Post. Being in the industry and seduced by the Libertarian ideal at the time, I was very supportive of the free market moves because they appeared to introduce an element of freedom and ability for New Zealanders to act in whatever ways they desired. I could not see the point of Kiwibank because New Zealand already had banks in the market that would ostensibly be competing against each other to ensure a good deal for customers. Looking back, this was a naive stance given that the banks have effectively colluded to ensure that they have obtained maximum profitability in the market at the public’s expense. The Shock Doctrine brought a realisation that this pattern of asset stripping, corporate chicanery and greed inspired profit harvesting by insiders is typical of neoliberal coups around the world. In every instance, the political and economic environment was either engineered to capture financial benefit for sectional interests or those interests leveraged political, natural or economic disasters to achieve similar outcomes.

In a sense, New Zealand represents possibly the first instance of a bloodless conversion to neoliberalism in the world. This radical economic program was put in place without any public consultation and without the consent of the New Zealand people or its impact on ordinary everyday Zealanders lives. In some respects, the free market system has been a success for New Zealand, which over the past 20 years as performed better than most other Western economies apart from Australia, which was buffered by a resources boom fuelled by the growth of China. However, the social fabric of New Zealand has been severely impacted so that in 2010 it was reported that according to an OECD report the gap between New Zealand’s rich and poor had widened more than in any other developed country during the prior 20 years. The country has seen an increase in the crime and imprisonment so that in 2010New Zealand reputedly had the second highest rate of imprisonment out of 29 countries in the Western World. Childhood poverty and family violence have all worsened by the policies adopted during the last 30 years.

Although without blood, the measures instituted by the Labour party after the 1984 election were tantamount to a coup in which previously unannounced policies (commonly referred to as “Rogernomics” after Finance Minister, Roger Douglas) were rammed down the throat or the New Zealand public in short order without any consultation or the consent of the general public. The shock element was firstly related to the currency crisis that struck shortly after the election and then by the fact that the changes with a radical from a party that had up until then been associated with the union movement and socialist policies. This quashed opposition from people on the left because it was their own people who had instituted these policies and from people on the right who saw free market and deregulation policies instituted that were even more extreme than what they would have expected from the National Party. It is fair to say that the New Zealand population was effectively stunned into meekly accepting the neoliberal medicine. This shock treatment was repeated after the National Party returned to power in 1990 when another currency crisis heralded the introduction of further free market policy shifts and another wave of privatisations in a process disparagingly known to many New Zealanders as “Ruthenasia” (after incoming Finance Minister, Ruth Richardson).  At the time, the influence of the Milton Friedman and the Chicago School of Economics in all of this was largely not a factor of consideration, but in hindsight, it is hard to mistake the inspiration for the harsh medicine that was enacted on the country.

Everywhere we look these days the policy of corporatisation of government services and asset stripping the public domain is evident. In Australia, the free market tidal wave has been less radical than in New Zealand in its timing but no less effective in terms of implementing the policies gradually introduced through lobbying from US-funded and inspired “think tanks”, such as Institute of Public Affairs, to influence politicians to adopt neoliberal measures as a matter of course. This is perhaps most apparently seen in the corporatisation of the offshore imprisonment of refugees where the services are not outsourced merely once but twice. Firstly, to companies that run the camps and, secondly, to the third world client states of Nauru and Papua New Guinea that are induced through financial inducements to become parties to process. This double separation allows the Australian government to effectively disavow legal and moral accountability in the eyes of the Australian public and to some degree interested third parties, such as the United Nations. Whenever anything happens in the camps, such as a riot or suicide, the Australian government is able to point at the camp operator and absolve itself from any responsibility for review or investigation by pointing to the Nauruan or Papua New Guinean governments. The vacuity of this position was exposed when the New Zealand government offered to accept refugees from the camps, and this was rejected by the Australian government. The point being that Nauru’s and Papua New Guinea’s positions on the offer were not seen to be relevant, and the Australian government’s position was firmly revealed as the deciding factor in determining what happened to the refugees. Throughout this process, the companies providing services to the Australian government as well as Papua New Guinea and Nauru have extracted huge profits from the Australian people so that it seems that each refugee costs some A$400,000 every year to maintain the system as opposed to A$10-15,000 if they were housed in a community in Australia. The rewards provided to corporations are such that they are highly incentivised to maintain the business model so that US corporations running prisons actively lobby for harsher sentences, three strikes laws and the use of imprisonment as a matter-of-course crime prevention mechanism. The reduction of refugee numbers in the camps must be a concern to the companies, and it is not a surprise to see that the Australian Immigration Department is now using offshore facilities for imprisoning New Zealanders and others who have been found to be in violation of the good character provisions of their visas.

In European democracies, such as Greece, the threat of full on currency collapse has been effective in coercing politicians, even from the left, to comply with the programme. In the case of Greece, it is apparent that there is effectively a war on the Greek people instituted by largely German interests to asset strip the country through asset sales and reductions in the social supports that will eventually see large sections of the Greek population impoverished. While blood has not been spilt as a mechanism of shock, the outcome has been dire for many Greek people, and the social impacts have been counted in measures such as a spike in suicides and worsening health statistics, such as increases in HIV infections and intravenous drug use. This pattern of social costs arising from austerity policies has been repeated pretty much wherever they have been implemented.

Overall, The Shock Doctrine was a revelation to me because it connected all the dots of world events over the past 60 years, including the logic of the neoliberal agenda and the way that it has been applied in Western and third world countries. With varying degrees of blood, this agenda has consistently been implemented using techniques of dislocation and shock to pacify or distract populations so that they will accept policies they would not otherwise. Policies that have advantaged a select few to the disadvantage of the vast bulk of the populations affected by them. The Shock Doctrine also reminds me that we have become largely ahistorical. The mass media projects an environment of constant meaningless current events, political theatre, celebrity and sport that encourages us to focus only on the now. In forgetting the past and the lessons to be learned from it, we are doomed to forever repeat the mistakes of the previous generation and fall for much the same lies and tricks.

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