Neo-liberalism is a crisis creation machine. Can we handle what's coming next?

Neo-liberalism is a crisis creation machine. Can we handle what's coming next?

Many writers have pointed to the havoc and ruin that have accompanied the imposition of free markets across the world. Whether in Africa, Asia, Latin America or post-communist Europe, policies of wholesale privatization and structural adjustment have led to declining economic activity and social dislocation on a massive scale.

In her book, The Shock Doctrine, Naomi Klein launches a highly polemical, and persuasive, assault on free-market fundamentalism. She rips into the big-business agenda to show how economic opportunists need and promote misery and disaster, challenging us to look at world-changing events from a whole other perspective. Klein believes that neo-liberalism belongs among

"the closed, fundamentalist doctrines that cannot co-exist with other belief-systems ... The world as it is must be erased to make way for their purist invention. Rooted in biblical fantasies of great floods and great fires, it is a logic that leads ineluctably towards violence." 

She asserts that the social breakdowns that have accompanied neo-liberal economic policies are not the result of incompetence or mismanagement. They are instead integral to the free-market project, which can only advance against a background of disasters.

Klein uses torture as a metaphor, and does not claim any cause-and-effect link between its re-emergence and the rise of neo-liberal shock therapy; but she does point to some disquieting similarities. Individuals and societies have been "de-patterned" with the aim of remaking them on a better, more rational model. In each case, the experiments have failed, while inflicting lasting and often irreparable damage on those who were subjected to them. While Klein is so anxious to prove that all capitalism is bad, even, on occasion, relying on torture to get its way, she never allows for the possibility that markets can deliver beneficial results. However, anyone who has watched the Greece lurch from one crisis to another as the bureaucrats of the IMF impose cut after cut in pursuit of the holy grail of ‘stabilisation’ cannot fail to draw strong parallels with Klein’s narrative.

The neo-liberal order is an economic system that requires constant growth, while bucking almost all serious attempts at environmental regulation. As such the system naturally generates a steady stream of disasters, whether military, ecological or financial. The appetite for easy, short-term profits offered by purely speculative investment has turned the stock, currency and real estate markets into crisis-creation machines, as the Asian financial crisis, the Mexican peso crisis, the dotcom boom and bust, and critically the financial meltdown in 2008 clearly show.

This leaves neo-liberalism facing intractable problems. The Iraq war, a central example in Klein’s thesis, may have allowed another experiment in shock therapy, but has also spurred the rise of a militant terrorist state leading to untold suffering in the region. At the same time the financial crisis has reached into the American heartland as an implosion of the speculation-driven credit markets that have woven themselves throughout our economies, leading to the rise of a proto-fascist presidential candidate. It is impossible to know how these crises will develop, but it is hard to resist the suspicion that disaster capitalism is now creating disasters larger than it can handle.

Daniel Sharp, President