Did China Follow The Shock Doctrine?

When China shifted its view on food subsidies this week, it was considered a major about face for a country that has been open to free trade for the last 30 years.

According to writer Naomi Klein in the conclusion of her book The Shock Doctrine: the rise of disaster capitalism, this turn is happening because China and its people are recovering from the “economic shock therapy” that the government put the people through since certain event in June 1989.

Klein says that the government used this event to push through some of the most anti-citizen-styled economic policies which were just recently corrected by the country’s new labour law that took effect on January 1st 2008. The inspiration for these policies was the economist Milton Friedman of the University of Chicago.

Friedman who advocated a pure form capitalism which was free of government intervention — and low taxes and little in the way of social services. Klein says that the only way citizens would accept a situation like this is in the wake of a major physical shock such a coup or natural disaster. The citizens would then be hit with a second economic shock in the form of Friedman’s economic policies and finally, violent physical repression would be used to ensure that those who tried to oppose the economic policies were effectively removed from society.

Klein details the history of this policy and how it was first tried in Chile with Pinochet and then through out other Latin American countries and then Indonesia with Suharto. In the late 1980s, the economic policy was pushed on Eastern European countries when they emerged from Communism. There wasn’t the same violence in Eastern Europe as in Latin America or Indonesia, but Klein seems to think that the drop in the standard of living of most of the population was just as bad. 

The final third of the book is devoted to the disaster capitalism complex, which Klein says developed mostly in the US and was able to reach its peak after 9/11 when companies such as Haliburton emerged fully prepared to help the newly established Homeland Security Department with protecting the US and the Pentagon with planning the war in Iraq.

The really reason the Bush government went to Iraq, Klein said wasn’t because of WMD or Islamofascism but instead because it wanted to use Iraq as a Middle East experiment. The Bush government wanted to open the markets of the Middle East and the easiest way they thought to do that was to destroy Iraq and remake it as a pure capitalist paradise.

The thing is you can’t completely clean the slate, people will always resist the attempts to erasing the old form and replacing it with something new. And as we know people in Iraq resisted. It didn’t help that the foreign contractors that came in such as Haliburton and Blackwater didn’t attempt to hire any Iraqis but instead brought in all their workers from abroad (something these same companies would repeat with the assistance they would give in Hurricane Katrina).

Klein concludes the book by saying that some countries are now recovering from the shock doctrine and replacing its economic theory with a component that is more beneficial to its citizens — such as the story with China I mentioned at the beginning of this piece.

In fact the opening paragraph really sums up all of the 10 or so pages that Klein writes about China in the book. China might of gotten a lot of mentions in book reviews and media interviews but it is really just a small portion of the book, but that doesn’t mean the book is not worth reading.

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11 Comments
  1. I’ve yet to read this book, it’s sat expectantly on my shelf, so thanks for the prompt. I’m wondering – your characterisation almost implies that a few years of shock to boost an economy, followed by more progressive policies with this new more robust economy, can be a beneficial thing. Do you think this is what has happened/is happening with China?

  2. Hi Chris

    I don’t know if shock therapy followed by progressive policies is always beneficial. I see the change as the Chinese government realizing that it went too far in trying to please the corporations and now they understand the only way to maintain power is to please the people a least a little bit hence the progressive policies. I am not sure every country feels the need to do the same thing especially if they have elections — elections cause you to think short-term.

    J.

  3. Profile photo of

    @John: This book is most definitely on my shortlist, as it’s been recommended repeatedly to me. All the more reason to read it now.

    For all the complaints from the West that China needs to obtain some level of *democracy*, it’s hard to argue that the CPC’s system isn’t working when you look at net results over the past 30 years since the reforms.

    Judging from what you’re saying about the shock therapy, give China another decade, and see if there’s as much to point an accusatory finger at in this country.

    It is all somewhat inline with CPC mentality, and a very generalized “Chinese mentality”, in that there is an ingrained (more so, in my experience, than in the West) idea of short-term suffering for long-term gain.

    It’s not always agreeable – but I’ve yet to see much in the way of public policy that is.

  4. @Ryan

    I definitely agree with you there. I think that’s one reason China is not covered very heavily in the book since they have turned away from the Shock Doctrine in recent years. The more disastrous case is Iraq, which as Klein shows is really about the US trying to open the markets of the Middle East and for its companies to get richer off the poverty of another country.

    J.

  5. Hi John,

    Is it fair to compare the move to greater liberalization and free markets in China post 1989 with the move toward fascism in America?

    Iraq does nothing for the cause of capitalism, nor for America as a whole – it benefits a small subset of corporations with enormous influence, the military-industrial complex – that’s not an example of shock capitalism, it is a case of shock fascism, and would create a fascist paradise, not a ‘capitalist paradise’.

    America as a whole is much worse off because of the war, even if you just look at the economic costs and ignore the massive human suffering and possible future blowback. But this has nothing to do with capitalism.

    Friedman offered no such thing as a pure form of capitalism or free markets. See Milton Friedman Unraveled for more, but is it fair to call centralization and complete control of the money supply, an important plank of the communist manifesto, part of free markets or capitalism?

    As to China’s labor law – as much as it provides protections to bodily harm and fraud by employers (lying, not paying wages, etc), it will do good.

    But minimum wage & lifetime labor provisions will only help some at the expense of others. The same is true of the food subsidies. See chapters 11, 19, and 20 of Economics in One Lesson for the reasons why (the unseen and unintended consequences).

    Naomi seems very much to be confusing capitalism with corporatism and fascism, while ignoring the real positive growth that has occurred in China and Chile. The real growth that did occur (which the numbers may not at all accurately catch) was thanks to capitalism. That’s not to say that China and Chile are purely capitalist countries… far from it – and the US certainly isn’t.

  6. Hi Jeremy

    Have you read the book? Because Naomi Klein does say that Freidman’s theories in practice are corporatist and fascist. I haven’t read any of the other books on Friedman, I was simply reviewing Klein’s view of him.

    J.

  7. Hi John,

    I actually agree that some of his theories are corporatist and fascist, but for reasons that are far different than the ones that Naomi gives.

    I didn’t read the book, but had read this pdf (20 pages), which goes into great deal defending Friedman and arguing directly against many of Naomi’s points and evidence:

    The Klein Doctrine: The Rise of Disaster Polemics

    I’d read the book if I had access to it just to see how Naomi presents her arguments. If only there were a Barnes & Noble somewhere around here…

  8. I’ve read this book and it is hands down the WORST book ever written. If you feel like subjecting yourself to chapters on irrelevant information (she spends much to long expounding on the history of the U.S.’s methods of torture, which, while an interesting subject, has nothing to do with her book and does not expand on the subject matter), long-drawn conclusions based on nothing but Klein’s speculations, and quotes both mis-quoted and taken out of context (she’s worse than the GOP) then this book is for you. Otherwise, save yourself the money and go try to discuss economic theory with a 5 year-old. Trust me, it will be a lot easier.
    Oh also, she frames the Tian An Men protests around a context of a population frustrated with the introduction of capitalism… she really needs to study up on her history.

  9. @Jeremy, I’m not surprised that the Cato Institute is anti-Klein since Klein is anti-Cato. She describes herself as a journalist, but she is really a columnist and a left-wing one at that (she is also a major advocate for fair trade, workers rights and citizenship-run democracies). While I enjoy her work, she writes with a thesis that she sets out to prove. This is by no means a balanced account and especially since Klein is not an economist so of her economic arguments may have faults in them.

    BTW, Amazon delivers to China you can always order it from them.

    @Jo: Sorry you didn’t enjoy the book. I think Klein does a very good job of showing how US torture techniques were used by oppressive regimes complemented by US economic theory, but the connection does take a few chapters to build up to that connection. Those wishing to read the Shock Doctrine should know that it is long — 466 pages plus notes — so set aside some time to read it.

  10. Hi,
    I’m in China right now and would like to find a Chinese copy of the book for my friend. Does anyone know if one can be found in China? I know the book is published in Taiwan in Chinese.

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