At some point in history, and I am not certain when specifically, conservatives became the economic go-to gurus. Their beliefs are economically incorrect. Their policies focus on maximizing profit, regardless of who they trample on along the way, using faulty logic and opinion to convince themselves and believers.
Naomi Klein‘s The Shock Doctrine exposes Milton Friedman and the Chicago School of Economics role in economic disasters,
For more than three decades, Friedman and his powerful followers had been perfecting this very strategy: waiting for a major crisis, then selling off pieces of the state to private players while citizens were still reeling from the shock.
In one of his most influential essays, Friedman articulated contemporary capitalism’s core tactical nostrum, what I have come to understand as “the shock doctrine”. He observed that “only a crisis – actual or perceived – produces real change”. When that crisis occurs, the actions taken depend on the ideas that are lying around. Some people stockpile canned goods and water in preparation for major disasters; Friedmanites stockpile free-market ideas. And once a crisis has struck, the University of Chicago professor was convinced that it was crucial to act swiftly, to impose rapid and irreversible change before the crisis-racked society slipped back into the “tyranny of the status quo”. A variation on Machiavelli’s advice that “injuries” should be inflicted “all at once”, this is one of Friedman’s most lasting legacies.
Actual OR perceived? Wait, this is when it gets gnarly.
Friedman first learned how to exploit a shock or crisis in the mid-70s, when he advised the dictator General Augusto Pinochet. Not only were Chileans in a state of shock after Pinochet’s violent coup, but the country was also traumatized by hyperinflation. Friedman advised Pinochet to impose a rapid-fire transformation of the economy – tax cuts, free trade, privatized services, cuts to social spending and deregulation.
It was the most extreme capitalist makeover ever attempted anywhere, and it became known as a “Chicago School” revolution, as so many of Pinochet’s economists had studied under Friedman there. Friedman coined a phrase for this painful tactic: economic “shock treatment”. In the decades since, whenever governments have imposed sweeping free-market programs, the all-at-once shock treatment, or “shock therapy”, has been the method of choice.
Klein spent time investigating economic “shocks” in the beginning of the Iraq invasion.
I reported from Baghdad on Washington’s failed attempts to follow “shock and awe” with shock therapy – mass privatization, complete free trade, a 15% flat tax, a dramatically downsized government. Afterwards I traveled to Sri Lanka, several months after the devastating 2004 tsunami, and witnessed another version of the same maneuver: foreign investors and international lenders had teamed up to use the atmosphere of panic to hand the entire beautiful coastline over to entrepreneurs who quickly built large resorts, blocking hundreds of thousands of fishing people from rebuilding their villages. By the time Hurricane Katrina hit New Orleans, it was clear that this was now the preferred method of advancing corporate goals: using moments of collective trauma to engage in radical social and economic engineering.
She goes on to say,
As I dug deeper into the history of how this market model had swept the globe, I discovered that the idea of exploiting crisis and disaster has been the modus operandi of Friedman’s movement from the very beginning – this fundamentalist form of capitalism has always needed disasters to advance. What was happening in Iraq and New Orleans was not a post-September 11 invention. Rather, these bold experiments in crisis exploitation were the culmination of three decades of strict adherence to the shock doctrine.
Seen through the lens of this doctrine, the past 35 years look very different. Some of the most infamous human rights violations of this era, which have tended to be viewed as sadistic acts carried out by anti-democratic regimes, were in fact either committed with the intent of terrorising the public or actively harnessed to prepare the ground for radical free-market “reforms”. In China in 1989, it was the shock of the Tiananmen Square massacre and the arrests of tens of thousands that freed the Communist party to convert much of the country into a sprawling export zone, staffed with workers too terrified to demand their rights. The Falklands war in 1982 served a similar purpose for Margaret Thatcher: the disorder resulting from the war allowed her to crush the striking miners and to launch the first privatisation frenzy in a western democracy.
The bottom line is that, for economic shock therapy to be applied without restraint, some sort of additional collective trauma has always been required. Friedman’s economic model is capable of being partially imposed under democracy – the US under Reagan being the best example – but for the vision to be implemented in its complete form, authoritarian or quasi-authoritarian conditions are required.
Until recently, these conditions did not exist in the US. What happened on September 11 2001 is that an ideology hatched in American universities and fortified in Washington institutions finally had its chance to come home. The Bush administration, packed with Friedman’s disciples, including his close friend Donald Rumsfeld,
(Rumsfeld attended seminars at the University of Chicago, an experience he credits with introducing him to the economist Milton Friedman and the Chicago School of Economics.)
seized upon the fear generated to launch the “war on terror” and to ensure that it is an almost completely for-profit venture, a booming new industry that has breathed new life into the faltering US economy. Best understood as a “disaster capitalism complex”, it is a global war fought on every level by private companies whose involvement is paid for with public money, with the unending mandate of protecting the US homeland in perpetuity while eliminating all “evil” abroad.
In a few short years, the complex has already expanded its market reach from fighting terrorism to international peacekeeping, to municipal policing, to responding to increasingly frequent natural disasters. The ultimate goal for the corporations at the centre of the complex is to bring the model of for-profit government, which advances so rapidly in extraordinary circumstances, into the ordinary functioning of the state – in effect, to privatise the government.
In scale, the disaster capitalism complex is on a par with the “emerging market” and IT booms of the 90s. It is dominated by US firms, but is global, with British companies bringing their experience in security cameras, Israeli firms their expertise in building hi-tech fences and walls. Combined with soaring insurance industry profits as well as super profits for the oil industry, the disaster economy may well have saved the world market from the full-blown recession it was facing on the eve of 9/11.
In the torrent of words written in eulogy to Milton Friedman, the role of shocks and crises to advance his world view received barely a mention. Instead, the economist’s passing, in November 2006, provided an occasion for a retelling of the official story of how his brand of radical capitalism became government orthodoxy in almost every corner of the globe. It is a fairytale history, scrubbed clean of the violence so intimately entwined with this crusade.
That fairytale history is exactly the problem. Conservatives today forgot how terrible Reaganomics was to the middle class. Freidman’s economics became the pull-yourself-up-by-your-bootstraps bullshit ideology that Conservatives cling to today. They fail to recognize the failures of their economic thinking. To most non baby-boomers with a rational understanding of economics and politics, this is a no-brainer.
Which brings me to the reason why we are discussing this to begin with…
As of 01 December 2010, the federal extension of unemployment insurance benefits has expired. This means that nearly 800,000 jobless workers will get no longer receive unemployment benefits by 04 December 2010, and about 2 million by Christmas.
The Slate‘s Annie Lowrey has this to say about it,
The economics of the unemployment benefits are pretty straightforward: They cost something, but they help the recovery along.
Republicans’ first line of argument against extending the benefits is that they’re not paid for. Sen. Mark Kirk of Illinois, a Republican newly sworn into Obama’s former seat, explained the party line on Fox News this week. Asked an interviewer: “The first thing you’re talking about is deficit reduction and spending. Does that mean that right now … you’d be against extending the unemployment insurance?”
“That’s right,” Kirk answered. “You could extend it if you found a way to pay for it. And I voted for that in the past. But these proposals to extend unemployment insurance by just adding it to the deficit are misguided.”
This seems to be standard Conservative not backed by fact opinion,
Rep. John Shadegg of Arizona went further, speaking with Mike Barnicle on MSNBC. Shadegg at first repeated Kirk’s line: He’s fine with unemployment benefits as long as they do not add to the deficit. Then Barnicle questioned the validity of the position, given that Shadegg supports giving a $700 billion tax break to the wealthiest Americans without paying for it. Barnicle also argued that unemployment insurance provides an “immediate benefit” to the economy, unlike tax cuts for the rich.
“No!” Shadegg said. “Unemployed people hire people? Really? I didn’t know that.” He continued: “The truth is the unemployed will spend as little of that money as they possibly can.”
Trickle down economics. Remember that? If not that’s ok, Reagan probably didn’t remember it either. Ahhh, thanks Ronnie.
Actually, most economists—make that all economists—disagree with Shadegg. Give an unemployed person a dollar, and she tends to spend it, because she needs to. (By definition, she has no other source of income.) Give a rich person a dollar via a tax break, she tends to save it. (By definition, she has a lot of other assets.) Mark Zandi, chief economist at Moody’s, has found that $1 in unemployment benefits generates $1.61 in economic activity. (That’s the second most-stimulative form of government spending, behind food stamps.) A dollar in tax cuts—not just to the rich, but to everyone—generates about 32 cents.
Thus, in economic terms, the loss of benefits is not good. There is a cost to having generous or long unemployment benefits: They do not come cheap to the government and do tend to lengthen the time it takes for a worker to find a new job. But given the way the jobs crisis is weighing on the recovery, most economists, save for the most conservative, say the benefits outweigh the costs.
On a human scale, too, the lapse is a catastrophe. Recipients expecting as many as 99 weeks of insurance payments will receive as few as 26—often too short a time to find work, given that 15 million Americans remain jobless, employers have only just started picking up hiring again, and there are more than four workers competing for every job. The benefits themselves are not particularly generous anyway, providing an average of about $300 a week, from about $120 in Puerto Rico to $420 in Hawaii. It’s enough to keep a family’s head above water (but not above the poverty line, in most cases).
Is there hope?
Democrats hope that they can squeeze an unemployment extension through by tying the benefits to the Bush tax cuts: Republicans either vote for the unemployment insurance extension along with the tax-cut extension, or every American gets a tax hike. But the possibility that the extra weeks of benefits will not come to a vote, and no American will receive more than 26 weeks from now on, remains present.
According to an expert I personally spoke to in Oregon regarding unemployment, she mentioned that before the Great Recession, it took an average of 2-4 months to find a job. Now that we are in the Great Recession, the time to find unemployment is now roughly 6 months. 26 weeks of unemployment insurance benefits would barely give you enough time to find a job, if you were so lucky to fall within the average.
What would happen then, in the year after Austerity Christmas? Last summer, unemployment insurance lapsed for 2.5 million recipients during a similar congressional fight over deficit spending. Larry Summers, head of the National Economic Council, says that lapse shaved 100,000 jobs off the economy. In 2011, according to the congressional Joint Economic Committee, the loss could be 10 times greater.
Sounds like a Shock and Awe Crisis for the states… wouldn’t Uncle Milton be so proud?
“Prematurely ending the federal unemployment insurance benefits program would drain the economy of $80 billion in purchasing power and result in the loss of over one million jobs over the next year,” a Joint Economic Committee report on the matter notes. “Economic growth will be reduced by as much as 0.4 percentage points between December 2010 and February 2011. In short, a failure to extend the unemployment insurance program could hamper the fragile recovery.”
Momentary gains for few with catastrophic losses for many. The Greatest Generation gave birth to the Greediest Generation. Conservative Baby Boomers have marginalized and sold out all future generations for their own advancement. The Greediest Generation wants and expects everybody else to sacrifice, on the condition that they do not.
