Does the Financial Crisis Discredit “Neoliberalism”?

by Will Wilkinson on October 9, 2008

Naomi Klein says it does. Or she wants it to. She thinks it discredits Milton Friedman in particular, because for Klein not a sparrow falls without Friedman’s having somehow strangled it. Hers is a tiny intellectual universe containing, on the one hand, the things she likes and, on the other, the baleful influence of Milton Friedman.

There’s a lot to say about this talk, and about Naomi Klein’s incompetence and mendacity. But let me just address this bit here:

Now, I admit to being a journalist. I admit to being an investigative journalist, a researcher, and I’m not here to argue theory. I’m here to discuss what happens in the messy real world when Milton Friedman’s ideas are put into practice, what happens to freedom, what happens to democracy, what happens to the size of government, what happens to the social structure, what happens to the relationship between politicians and big corporate players, because I think we do see patterns.

Now, the Friedmanites in this room will object to my methodology, I assure you, and I look forward to that. They will tell you, when I speak of Chile under Pinochet, Russia under Yeltsin and the Chicago Boys, China under Deng Xiaoping, or America under George W. Bush, or Iraq under Paul Bremer, that these were all distortions of Milton Friedman’s theories, that none of these actually count, when you talk about the repression and the surveillance and the expanding size of government and the intervention in the system, which is really much more like crony capitalism or corporatism than the elegant, perfectly balanced free market that came to life in those basement workshops. We’ll hear that Milton Friedman hated government interventions, that he stood up for human rights, that he was against all wars. And some of these claims, though not all of them, will be true.

But here’s the thing. Ideas have consequences. And when you leave the safety of academia and start actually issuing policy prescriptions, which was Milton Friedman’s other life—he wasn’t just an academic. He was a popular writer. He met with world leaders around the world—China, Chile, everywhere, the United States. His memoirs are a “who’s who.” So, when you leave that safety and you start issuing policy prescriptions, when you start advising heads of state, you no longer have the luxury of only being judged on how you think your ideas will affect the world. You begin having to contend with how they actually affect the world, even when that reality contradicts all of your utopian theories. So, to quote Friedman’s great intellectual nemesis, John Kenneth Galbraith, “Milton Friedman’s misfortune is that his policies have been tried.”

Wow. Here is Klein’s method. Take a famous thinker you really don’t like. See if they’ve ever had a meeting with anyone who is responsible for anything bad. Blame it on the thinker. Seriously. That seems to be about the extent of her investigative journalist rigor. You never saw Paul Bremer as a Friedman type? I guess you’re no investigative journalist.

Remember when Hugo Chavez was spotted at the UN thumbing through a copy of Noam Chomsky’s Hegemony or Survival?  We can only assume that Chavez has been busy implementing Chomsky’s ideas. Sure, it might not be what Chomsky had in mind, but when you leave the safety of academia and start issuing policy prescriptions, and heads of state read your books in public, you no longer have the luxury of only being judged on how you think your ideas will affect the world. Sure, you can say that Noam Chomsky is one of the world’s foremost defenders of a critical free press. But then why did Chomsky disciple Hugo Chavez seize control of Venezuela’s mass media? Ideas have consequences, Noam.

Do you know that Putin’s assassination of inconvenient journalists, and the invasion of Georgia, is the thought of Jeffrey Sachs in action? If you think like Naomi Klein you do!

If a world leader asked Naomi Klein for advice, do you suppose she would give it to them?

Viewing 38 Comments

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    Another excellent rebuke of Naomi Klein's ridiculosity...Will, you really should write a book that sets the record straight on capitalism and free markets, and include a chapter or two that directly destroys the ignorance of pseudo-intellectuals like Klein.
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    I wish you could have engaged the title of the post more. There really is a challenge to neoliberalism here - politically, if nothing else - and while there are people worth ridiculing, there are also people seriously considering the implications of what we are currently going through for future policy making. I'd be very interested to hear your thoughts.
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    The only way Friedman could have shaped the policies of everyone from to Deng Xiaoping to Yeltsin to Paul Bremer is if he were some Nutty Professor character, who managed change costumes, personalities, and ideologies in a snap. Here is Friedman in a larger than life , mythic incarnation, filled with confilcting and tall tales of multiple perceived beliefs (no matter if they run counter to what he actually wrote). Catch him if you can!
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    Vermando is right. The absence of rigor in Klein's argument matters less to the reactionary left than its consistency with the ridiculous Capitalism-Communism paradigm in which socialism is the rational middle ground. They love that one.
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    Take a famous thinker you really don’t like. See if they’ve ever had a meeting with anyone who is responsible for anything bad. Blame it on the thinker. Seriously.

    OK, Naomi Klein's book was stupid, but that seems a little glib. Friedman was a guy who looked pretty happy to be consider one of the spokesmen for free markets: I think that gave him some responsibility to call bullshit free market policies when he saw them, and I think he could have done more in that regard. Given his earlier associations with Chile, for example, I think strident denunciations of Pinochet's regime would have been useful, but it was a subject he chose to keep pretty quiet on.

    I think the Chomsky example is actually pretty telling here, because he does a lot more than printing books that Chavez may or may not choose to read - he talks a lot about how Latin America, Venezuela included is taking some giant steps towards setting up "genuine democracy." He also says he's worried about some of the tendencies towards centralization fo authority, but he tends to make less of that. And for folks of a left libertarian persuasion, that makes Chavez more credible.

    Insofar as you find what's happening in Venezuela overall objectionable, it's not unreasonable to take a swipe at Chomsky for doing the wrong thing. But the same rules apply to Friedman.
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    Klein's powers of exposition may be limited, but the view that she seems trying to articulate is less absurd than you suggest in your post. You are, I believe, a big fan of Robert Nozick's. If you flip through the pages of The Examined Life you'll find an essay, 'The Ideal and the Actual', that defends a position which is not that different from Klein's. Here's an excerpt:
    The capitalist ideal of free and voluntary exchange, producers competing to serve consumer needs in the market, individuals following their own bent without outside coercive interference, nations relating as cooperating parties in trade, each individual receiving what others who have earned it choose to bestow for service, no sacrifice imposed on some by others, has been coupled with and provided a cover for other things: international predation, companies bribing governments abroad or at home for special privileges which enable them to avoid competition and exploit their specially granted position, the propping up of autocratic regimes—ones often based upon torture—that countenance this delimited private market, wars for the gaining of resources or market territories, the domination of workers by supervisors or employers, companies keeping secret some injurious effects of their products or manufacturing processes, etc.

    Incidentally, how many readers of this blog would have dismissed the quote above as a leftist rant had the identity (and hence the libertarian credentials) of its author not been revealed in advance?
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    Capitalism has been a cover for: "international predation, companies bribing governments abroad or at home for special privileges which enable them to avoid competition and exploit their specially granted position, the propping up of autocratic regimes—ones often based upon torture—that countenance this delimited private market, wars for the gaining of resources or market territories, the domination of workers by supervisors or employers, companies keeping secret some injurious effects of their products or manufacturing processes, etc."

    This is akin to arguments that all wars are based on religion. Utter nonsense. Can you please think all the concepts/philosophies/things/ideas (unicorns?) that have not been used as cover for great injustices and suffer?

    Now, either choose to repudiate everything not on that list or ditch this tired story.

    Capitalism exists in the world of man. Along with government, democracy, love, kinship, religion, and all sorts of other "ideals" that are claimed (and indeed often believed) in cover of horrible atrocities.

    Central governments have stacked up millions of bodies to their names in less than a century. Yet its "neoliberalism" that's been discredited by its implementation in the "actual?"

    Too bad Friedman's ideas were there to mess up the grand plans of Deng, Pinochet, and Bush!

    What exactly would have been different? I don't know! Maybe Deng would have been a little more like Mao (err...). Maybe Pinochet would have spent less time stabilizing the economy and more time doing other things he enjoyed (err....)

    And we all know that ONLY if it weren't for the fierce free market ideology of Pres. George W. Bush, America would be riding high on the hog.

    That is CLEARLY what has undermined his Presidency.

    [climbs back out of sar-chasm]
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    I wonder how the world would have looked without Friedman. On the other hand, I don't think the world would want to find out.
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    "Incidentally, how many readers of this blog would have dismissed the quote above as a leftist rant had the identity (and hence the libertarian credentials) of its author not been revealed in advance?"

    Well, it struck me as uncontroversially and straightforwardly libertarian. If it had been written by Trotsky, I would still have appluaded it.
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    I wonder if the many counter-examples of highly liberal economies coupled with relatively non-interventionist foreign policies and good humanitarian records mean anything to Klein. She might claim these nations are less "Friedmanite" than America, or perhaps that their transformation from Jekyll to Hyde is more gradual, but Ireland is not exactly a neoconservative empire yet.
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    The easy deconstruction of your critique of Kleins well made points is simple. I simply ask you where Neoliberalism exist successfully in the world. It doesn't and that's her point.

    I think a big point Klein makes and you all miss is not that Freidman's ideas weren't truly tried so you can't say they failed. The point is that whenever they are tried they devolve into cronyism and all the crap we've seen ever since this.


    Neoliberalism is not a foundation on which to build either democracy or competitive markets. It's radioactive as a political philosophy and will always decay into a Great Depression or whatever it is we have before us now.

    You guys are like little kids standing over a broken vase with a baseball bat in your hands trying quickly to think of an excuse as you hear mothers footsteps coming nearer.
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    Where does democracy exist successfully in the world? What are you standards for success?

    And most importantly, what would you say to a monarchist who asked, two to three hundred years ago, where democracy exists (successfully or not) in the world? Would you consider this a decisive argument against democracy?
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    Could you define "neoliberalism" for us, muirgeo?

    Are you conflating the economic term (aka "liberalism") with the foreign policy term, which has no actual relation to the economics?

    The idea that liberal economics (in the classical sense of liberal, not "progressive") somehow is not a basis for competitive markets and always leads to a Great Depression or equivalent is not one that stands automatically without support.

    (Free markets with no government-made monopolies (that is, the sort prescribed by liberal economics) are not "competitive"? Really? That's going to be tough, isn't it? Purely from the theoretical level, hasn't that idea had holes below its waterline since before 1950?)

    Please to make any sort of argument for your claim. (I'd especially like an explanation of how a liberal economy is one that's not a foundation on which to build democracy. Is this a novel redefinition of the terms?)

    (Especially given your example of the US since Reagan, since the US is not exactly an unbridled free market economy and never has been.)
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    No, no, Mr. Wilkinson, your insinuation that these paragraphs are useless is quite wrong. To the contrary, they teach us, through vivid example, that Naomi Klien has no sense of irony. Perhaps this piece is really a kind of performance art -- how one otherwise could take Klein's worldview seriously (as Klein presumably does) and simoultaneously argue that ideas should be judged not by their own merits, but rather by the actions of third parties who claim to believe in them is beyond me. Blah blah blah corrupt third-world dictatorships blah blah blah.

    Oh, and some while back, you asked what book I'd recommend banning assuming I had to choose one. I don't have a book, but I hereby propose banning "neoliberalism." As near as I can tell, it doesn't actually refer to any particular doctrine or set of doctrines, but rather to non-specific dark and conspiratorial aspects of international finance. Likewise with "neoconservative" when not used to describe aging Trotskyites who came to believe in a kind of reverse capitalist Leninism and their intellectual descendants.
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    You neglect the very real role that the University of Chicago economics department played in the training of more than twenty economists who would later take on various positions in the Chilean government in the 1970s and 80s. This history--the creation of the so-called "Chicago Boys"—has been well documented. You're certainly welcome to challenge the extent of Friedman's _direct_ influence on the Chilean economy--but the idea that there _is_ a causal line running from Friedman to economic policymaking in Chile seems indisputable, in a way that goes far beyond an analogy with Chavez's interest in Chomsky.
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    "And most importantly, what would you say to a monarchist who asked, two to three hundred years ago, where democracy exists (successfully or not) in the world? Would you consider this a decisive argument against democracy?"
    Micha


    King George the 3rd I believe asked just that question. The American revolutionaries showed him the answer. They said we don't like your system of private property that results in ownership by a few and servitude of the many. And successful social democracies of the developed world have followed allowing a flourishing of the human condition but indeed with much refinement still needed as the Monarchs are not totally defeated.

    Libertrainism WAS the state of the world... feudal systems were the obvious end result. it's an old refuted concept of stagnation and despair. And of little liberty. Social democracies do exist successfully all over the world and they maximize liberty as much as can be exppected when sharing among millions.
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    King George the 3rd I believe asked just that question. The American revolutionaries showed him the answer.


    So then you agree that the nonexistence of a system is not an argument against the desirability of that system?

    They said we don't like your system of private property that results in ownership by a few and servitude of the many.


    So you are saying that the American revolution was a rejection of private property in favor of social democracy? Do you have any evidence to support this peculiar view?

    And successful social democracies of the developed world have followed allowing a flourishing of the human condition but indeed with much refinement still needed as the Monarchs are not totally defeated.


    Which countries, specifically, are the successful social democracies you admire, and which countries, specifically, are the unsuccessful neoliberal ones you despise?

    Libertrainism WAS the state of the world... feudal systems were the obvious end result.


    Which countries, specifically, would you describe as being libertarian, historically?

    Social democracies do exist successfully all over the world and they maximize liberty as much as can be exppected when sharing among millions.


    Why only millions and not billions? What makes you think it's okay to force some people to share while excluding billions of others from sharing in the system you favor?
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    'Why only millions and not billions? What makes you think it's okay to force some people to share while excluding billions of others from sharing in the system you favor?'

    Because policy is the realm of states, and states are generally in the millions of people, no-one suggested changing the prevailing world order.

    Successful social democracies lets see, Sweden, Norway, Finland? It depends how you measure success. If you measure it as per capita GDP then maybe, If you equate it to the levels of social mobility then probably.If you measure it on happiness it depends which study you use.

    Failed libertarian/ liberal/ whatever you want to call it. USA, Iceland.

    But enough semantics, the point is there is a real challenge to the Neoliberal consensus with the failure of deregulated/less regulated financial systems. This article doesnt address that point, rather its just a tirade against some pop-left thinker who doesnt really know what shes talking about. Will, can you please adress the actual issue, how will liberal financial systems survive or change given the current situation? What implications does the financial meltdown have for other areas where markets have replaced government policy?
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    Question: Did anyone ever mention Iceland as an example of failed libertarianism/neoliberalism prior to two weeks ago? I know very little about contemporary Iceland, but this citation seems suspicious and all too convenient.
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    Icelands been having problems for at least the last year, the last 2 weeks have just pushed it over the edge.
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    "no-one suggested changing the prevailing world order"

    I am aware if this. My question is: why not? What makes it just to force millions to share with you while excluding billions from sharing with you? Telling me that's just the way things are isn't responsive to whether things should be that way. Surely poor people living in the undeveloped world would benefit much more from our coerced generosity than poor people living in the developed world.

    Is it actually the case that Sweden, Norway, Finland have more regulated financial systems than the U.S. and Iceland? I recall them having