In other words, in practically every instance, neoliberalism found a middle class that was disenchanted with the Keynesian or developmental state or felt threatened by the left, or both.

The Construction of Hegemony

     This is why to counter Stiglitz’ suggestion that she operates with a conspiracy paradigm, Klein’s instrumentalist account must be supplemented with David Harvey’s notion of the “construction of hegemony,” a process by which the elite creates a consensus among the subordinate classes in support of a neoliberal project that principally serves its interests. (David Harvey, A Brief History of Neoliberalism [Oxford: Oxford University Press, 2005])

     In the case of the UK, it was not so much the jingoistic atmosphere of the Falklands War as the ideological captivation of the middle class by a conservative leader adept at evoking the themes of freedom, the individual, and property that was the tipping point towards neoliberal reform. Thatcher was an expert at promoting what Harvey calls a “seductive possessive individualism” and she “forged consent through the cultivation of a middle class that relished the joys of homeownership, private property, individualism, and the liberation of entrepreneurial opportunities.”

     The construction of consent was the main avenue to hegemony in the United States, where neoliberals deftly connected their free market program to the agenda of a middle class-based coalition that was propelled by resentment against minorities that were allegedly coddled by liberal democrats and by an inflamed attachment to religious values that were seen as being under attack from the left. “Not for the first time,” says Harvey, speaking of the ascendancy of the Republicans under Reagan, “nor, it is feared, for the last time in history has a social group voted against its material, economic, and class interests for cultural, nationalist, and religious reasons.”

     Even some blue-collar workers were in danger of being coopted: “Greater freedom and liberty of action in the labor market could be touted as a virtue for capital and labor alike, and here, too, it was not hard to integrate neo-liberal values into the ‘common sense’ of the work force.”

     Neoliberalism, in fact, became so “commonsensical” that even where social democratic parties have come to power, displacing the traditional conservative parties of neoliberalism, as they have in Britain, Chile, and the United States, they have not dared to reassemble the interventionist liberal state and have made it a point to pay homage to the “magic of the market.” Indeed, it has not been conservatives but social democrats such as the Blairites in Britain, the Clintonites in the United States, and the Socialist-led Concertacion government in Chile, with their rhetoric about “market-oriented social policies,” that have consolidated the neoliberal economic regime.

Crisis of the Keynesian State

     The book’s most important contribution is its theory of “disaster capitalism.” But to fully appreciate Klein’s insight, it is important to go back to the roots of the crisis of the Keynesian state and the developmental state in the 1970’s that she glosses over. This crisis, which paved the way for the neoliberal ascendancy, had its origins in what economists have called the crisis of overaccumulation or overproduction.

     The golden period of postwar growth globally that skirted major crises for nearly 25 years was due to the massive creation of effective demand via rising wages for labor in the North, the reconstruction of Europe and Japan, and the import-substituting industrialization in Latin America and other parts of the South. This dynamic period came to a close in the mid-seventies, with stagnation setting in, owing to global productive capacity outrunning global demand, which was constrained by continuing deep inequalities in income distribution.

     According to the calculations of Angus Maddison, the premier expert on historical statistical trends, the annual rate of growth of global gross domestic product (GDP) fell from 4.9% in what is now regarded as the golden age of the post-World War II Bretton Woods system, 1950-73, to 3% in 1973-89, a drop of 39%.
     These figures reflected the wrenching combination of stagnation and inflation in the North, the crisis of import substitution industrialization in the South, and erosion of profit margins all around. For global capital, neoliberal policies, which included redistribution of income towards the top via tax cuts for the rich, deregulation, and an assault on organized labor, were one escape route from the crisis of overproduction. Another was corporate-driven globalization, which opened up markets in the developing world and moved capital from high-wage to low-wage areas.

Financialization 

      A third was what Robert Brenner and others have called “financialization,” or the channeling of investment towards financial speculation, where much greater returns were to be derived than in industry, where profits were largely stagnant. Feverish speculation triggered the proliferation of novel sophisticated speculative instruments like derivatives that escaped monitoring and regulation. Finance capital also forced the elimination of capital controls, the result being the rapid globalization of speculative capital to take advantage of differentials in interest and foreign exchange rates in different capital markets.      These volatile movements, the result of capital’s liberation from the fetters of the post-war Bretton Woods financial system, was one source of instability. What was fundamentally problematic with speculative finance, however, was that it boiled down to an effort to squeeze more “value” out of already created value instead of creating new value since the latter option was precluded by the problem of overproduction in the real economy. But the divergence between momentary financial indicators like stock prices and real values can only proceed to a point before reality bites back and enforces a “correction,” like the recent collapse of stocks tied up in myriad Byzantine ways to overvalued subprime mortgages. Corrections or crises have become more frequent in the neoliberal era, with one Brookings study counting about 100 over the last 30 years. At any rate, neoliberal policies, globalization, and financialization, while restoring and strengthening elite power by redistributing income from the bottom to the top, have not been effective in reinvigorating global capital accumulation. Its actual record, Harvey points out, “turns out to be nothing short of dismal.” Aggregate annual global growth rates came to 1.4% in the 1980s and 1.1% in the 1990s, compared to 3.5% in the 1960s and 2.4% in the 1970s.

Disaster Capitalism

     It is this fundamental failure of finance-driven capitalism to reignite vigorous capital accumulation that allows us to fully appreciate Klein’s theory of disaster capitalism and David Harvey’s closely related notion of “accumulation by dispossession.” Both may be seen as the latest desperate effort of an increasingly sputtering capitalist machine’s effort to surmount the persistent and deepening crisis of overproduction.
     In the last few years, stagnation or weak growth has marked most areas of the world economy, with the exception of China and India. U.S. growth has been higher than that of sclerotic Europe, but it has been largely illusory, being largely the result of middle-class spending fuelled by massive credit from China and East Asia. China has to lend to the United States to keep up demand for its cheap-labor based export-industrial sector, but the expansion of its production has itself contributed mightily to the overcapacity, overproduction, and shrinking profitability plaguing the whole global system. Even the International Monetary Fund (IMF) has recognized that the world is skating on thin ice, which could break should American consumers rein in their debt-driven spending, as they now seem to be doing.       In its efforts to surmount the crisis, capitalism has increasingly supplemented, if not supplanted accumulation through production with accumulation through dispossession, or the expropriation of already created wealth or sources of wealth akin to the process of primitive accumulation that marked early capitalism in the 14^th to the 17^th centuries. Accumulation by dispossession involves an acceleration of the privatization and commodification of the commons, which includes not only land but also the environment and knowledge. Millions of peasants and indigenous peoples are displaced from the soil as private property supplants common property or communal regimes, often with the active support of institutions like the World Bank and the Asian Development Bank. Seeds, the end-result of eons of interaction between nature and human communities, are now privatized through mechanisms such as the Trade Related Intellectual Property Rights Agreement (TRIPs), which has also dampened technological development in the South owing to fear of infringing on the patents of northern corporations.

Contracting Out the War on Terror  

      A key mechanism for accumulation by dispossession is the accelerated privatization of hitherto public or state assets, which is what disaster capitalism is all about. Disaster capitalism is the Bush administration’s central contribution to neoliberalism. Its key feature is the parceling out to the private sector of the “core” functions of security, defense, and infrastructure that Adam Smith himself thought had to be left to the state. Through the “war on terror,” Klein writes, the Bush administration brought about: “The creation of the disaster capitalism complex—a full-fledged new economy in homeland security, privatized war and disaster reconstruction tasked with nothing less than building and running a privatized security state, both at home and abroad. The economic stimulus of this sweeping initiative proved enough to pick up the slack where globalization and the dot-com booms had left off. Just as the Internet launched the dot-com bubble, 9/11 launched the disaster capitalism bubble…It was the pinnacle of the counter-revolution launched by Friedman. For decades, the market had been feeding off the appendages of the state; now it would devour the core.”      In the disaster capitalism paradigm, the state serves as the engine of capital accumulation — that is, it raises capital via taxes, then transfers it to private contractors that take over its core functions, from defense to incarceration to the provision of infrastructure. Security provision becomes the new growth industry, incorporating but going beyond the old military-industrial complex. Disaster, either of the natural kind like Katrina or the socially created kind like Iraq, is seen as opportunity in several ways. It creates demand for a commodity, that is, for security or reconstruction. By taking advantage of natural disasters, it provides the opportunity to alter the physical landscape and “add value” to it, by sweeping away “value-deprived” poor communities and converting the land to upscale commercial or residential real estate, as in post-Katrina New Orleans.
     Finally, as in Iraq, war becomes the instrument to erase the old interventionist state and create from scratch the ideal neoliberal government whose key function is to delegate its own functions to private contractors, like the engineering firm Bechtel or the notorious private security firm Blackwater. “In Iraq,” Klein writes, “there was not a single governmental function that was considered so “core” that it could not be handed to a contractor, preferably one who provided the Republican Party with financial contributions or Christian footsoldiers during elections campaigns. The usual Bush motto governed all aspects of the foreign forces’ involvement in Iraq: if a task could be performed by a private entity, it must be.”

      The problem, of course, is that disaster capitalism is so brazenly anti-people that even dressed up in the rhetoric of freedom, entrepreneurship, and efficiency, it cannot win over people in the way early neoliberal ideology was able to captivate the middle classes in the era of Reagan and Thatcher. Reading Klein’s chilling account, one wonders how Paul Bremer, the head of the Coalition Provisional Authority, could not have realized that the decrees he made which had the effect of making Iraqi youth a surplus population in a society where the state functioned mainly to enrich foreign contractors would turn them into insurgents. Disaster capitalism and accumulation by dispossession represent a capitalist order that no longer seeks ideological hegemony but seeks to impose itself through pure force. This is not sustainable.

 Klein Past versus Klein Present       So here’s the inevitable question: which is the better book, No Logo or The Shock Doctrine? This is not an easy choice, but I would land on the side of No Logo. Let me explain. The critical edge, analytical sharpness, and passion of No Logo are to be found in The Shock Doctrine as well. But there is something different about the writing. In a review I did for Yes! in 2001, I wrote: “No Logo is compelling, but it’s not an easy read. Reading Klein is like serving alongside a skilled commander who relentlessly probes the enemy’s many defenses to locate the principal point of vulnerability. And just when the reader thinks Klein has identified the key to the defense, she reveals that this is only one episode in unraveling the dynamics of contemporary capitalism. This is deconstructive writing at its best, the product of a first-rate, restless mind that is not satisfied with drawing a solitary insight or two from her material.” Reading The Shock Doctrine is a different experience. You don’t need to work. You’re like a tourist being guided on a well-lit path where there are few surprises. I much prefer the discourse of No Logo, and I certainly do not relish being subjected at the very beginning to a literary shock treatment that has no other purpose but to prod me to read further. That flaw—and the change in style–I prefer to attribute not so much to the Toronto-based Klein but to the New York School of publishing, which, like Hollywood, much prefers an in-your-face approach to a more allusive, more indirect, less predictable but ultimately more enlightening discourse.  

Walden Bello is currently a Distinguished Visiting Professor at St. Mary’s University in Halifax, Canada. Bello is also a senior analyst at the Bangkok-based institute Focus on the Global South and professor of sociology at the University of the Philippines at Diliman. He is the author of Walden Bello Presents Ho Chi Minh (London: Verso, 2007), Dilemmas of Domination (New York: Metropolitan Books, 2005) and Deglobalization (London: Zed, 2002).