NAOMI KLEIN: This process of measuring an elegant perfect, beautiful, inspiring ideology against a messy reality is a painful process, and it’s a process that anyone who has tried to free themselves from the confines of fundamentalist thinking, from ideological constraints, has faced. My grandparents, for instance, were pretty hardcore Marxists. In the ’30s and ’40s, they believed fervently in the dream of egalitarianism that the Soviet Union represented. They had their illusions shattered by the reality of gulags, of extreme repression, hypocrisy, Stalin’s pact with Hitler.
I bring this up, because the left has been held accountable for the crimes committed in the name of its extreme ideologies, and I believe that it’s actually been a very healthy process for the left, one that isn’t over, that is continuing. But I think that the process of having to examine the unacceptable compromises that were made in the name of hard ideology, that they are paying off in the way the left today is being reborn and re-imagined.
You know, the most left-wing place on the planet at the moment is, interestingly enough, the first place where Chicago School ideology made that leap from the textbook into the real world, and that’s Latin America. And that happened for a very specific reason, as you know. This—in the 1950s, there was great concern at the State Department about the fact that Latin America, then as now, as it seems to do, was moving to the left. There was concern about what they called the “pink economists,” the rise of developmentalism, import substitution, and, of course, socialism. And, of course, this was a concern because it greatly affected American and European interests, because the crux of the argument of import substitution was that countries like Chile and Argentina, Guatemala, should stop exporting their raw natural resources to the north and then importing expensive processed goods to the south, that it didn’t make economic sense, that they should use the same tools of protectionism, of state supports, that built the economies of Europe and North America. That was that crazy radical idea, and it was unacceptable.
So, this plan was cooked up—it was between the head of USAID’s Chile office and the head of the University of Chicago’s Economics Department—to try to change the debate in Latin America, starting in Chile, because that’s where developmentalism had gained its deepest roots. And the idea was to bring a group of Chilean students to the University of Chicago to study under a group of economists who were considered so extreme that they were on the margins of the discussion in the United States, which, of course, at the time, in the 1950s, was fully in the grips of Keynesianism. But the idea was that there would be—this would be a battle to the—a counterbalance to the emergence of left-wing ideas in Latin America, that they would go home and counterbalance the pink economists.
And so, the Chicago Boys were born. And it was considered a success, and the Ford Foundation got in on the funding. And hundreds and hundreds of Latin American students, on full scholarships, came to the University of Chicago in the 1950s and ’60s to study here to try to engage in what Juan Gabriel Valdes, Chile’s foreign minister after the dictatorship finally ended, described as a project of deliberate ideological transfer, taking these extreme-right ideas, that were seen as marginal even in the United States, and transplanting them to Latin America. That was his phrase—that is his phrase.
But today, we see that these ideas are reemerging in Latin America. They were suppressed with force, overthrown with military coups, and then Chile and Argentina, Uruguay and Brazil all became, to varying degrees, laboratories for the ideas that were taught in the classrooms of the University of Chicago. But now, because there was never a democratic consent for this, the ideas are reemerging.
But one of the things that’s interesting about the new left in Latin America is that democracy is at the very center. And, you know, the first thing that Rafael Correa did when he was elected president of Ecuador, for instance—well, the first thing he did was give an interview. They said, “What can we expect of your economic program?” He said, “Well, let’s put it this way: I’m no fan of Milton Friedman’s.” And then he called a constituent assembly. He created an incredibly open political process to rewrite the country’s constitution. And that’s what happened in Bolivia, and that’s what’s happened in many Latin American countries, because democracy is being put at the center of these projects, because there has been a learning process of looking at the mistakes that the left has made in the past, the ends-justify-the-means mistakes.
So, I think all ideologies should be held accountable for the crimes committed in their names. I think it makes us better. Now, of course, there are still those on the far left who will insist that all of those crimes were just an aberration—Mao, Stalin, Pol Pot; reality is annoying—and they retreat into their sacred texts. We all know who I’m talking about.
But lately, particularly just in the past few months, I have noticed something similar happening on the far libertarian right, at places like the Cato Institute and the Reason Foundation. It’s a kind of a panic, and it comes from the fact that the Bush administration adapted—adopted so much of their rhetoric, the fusing of free markets and free people, the championing of so many of their pet policies. But, of course, Bush is the worst thing that has ever happened to believers in this ideology, because while parroting the talking points of Friedmanism, he has overseen an explosion of crony capitalism, that they treat governing as a conveyor belt or an ATM machine, where private corporations make withdrawals of the government in the form of no-bid contracts and then pay back government in the form of campaign contributions. And we’re seeing this more and more. The Bush administration is a nightmare for these guys—the explosion of the debt and now, of course, these massive bailouts.
So, what we see from the ideologues of the far right—by far right, I mean the far economic right—frantically distancing themselves and retreating to their sacred texts: The Road to Serfdom, Capitalism and Freedom, Free to Choose. So that’s why I’ve taken to calling them right-wing Trotskyists, because they have this—and mostly because it annoys them, but also because they have the same sort of frozen-in-time quality. You know, it’s not, you know, 1917, but it’s definitely 1982. Now, the left-wing Trots don’t have very much money, as you know. They make their money selling newspapers outside of events like this. The right-wing Trots have a lot of money. They build think tanks in Washington, D.C., and they want to build a $200 million Milton Friedman Institute at the University of Chicago.
Now, this brings up an interesting point. It’s an interesting point about the think tanks, in general, which has to do with the fact that it does seem to take so much corporate welfare to keep these ideas alive, which would seem to be a contradiction of the core principle of free market ideology—I mean, and particularly now, in the context of the Milton Friedman Institute. I mean, I could see it in the ’90s, but now, is the world really clamoring for this? Is there really a demand that you are supplying here? Really?
I think this points to a larger issue, and this comes up—has come up for me again and again in talking about this ideology, this ideological campaign. You know, is it—is it really fueled by true belief, and—or is it just fueled by greed? Because it’s not—the thoughts are so very profitable. So they are distinctive in that way, distinctive from other ideologies. And, of course, you know, certainly we know that religion has been a great economic partner in imperialism. I mean, this isn’t an entirely new phenomenon. But this is a question that comes up a lot. And I think it’s very difficult to answer, and it’s clear, certainly at this school, that much of it is fueled by belief, by true belief, by falling in love with those elegant systems.
But I think we also need to look particularly at this moment, who this ideology benefits directly economically, keeping it alive in this moment, and how, even in this moment, when everybody is saying, you know, this is the end of market fundamentalism, because we’re seeing this betrayal of the basic tenets of the non-interventionist government by the Bush administration—you know, I believe this is a myth and that the ideology has just gone dormant, because it’s ceased to be useful. But it will come roaring back, and I’ll talk a little bit more about that.
But, you know, I was interested that yesterday the Heritage Foundation, which has always been a staunch Friedmanite think tank, that they came out in favor of the bailout. They came out in favor of the bailout; they said it was vital. And what’s interesting about that is, of course, the bailout is creating a crisis in the economic—in the public sphere. It’s taking a private crisis, a crisis on Wall Street, which of course isn’t restricted to Wall Street, and it will affect everyone, but it is moving it, moving those bad debts, onto the public books.
And now the Bush administration has already left the next administration, whoever it is, with an economic crisis on their hands, but with this proposed transfer, they’re dramatically increasing that crisis. So, we can count, I would argue, on the Heritage Foundation refinding their faith, refinding their faith when it becomes necessary and useful to once again argue that the way to revive the American economy is to cut taxes, cut regulation, to stimulate the economy—and, by the way, we can’t afford Social Security; we’re going to have to privatize it, because we’ve got this terrible debt and deficit on our hands. So, the ideology is far from dead, and what we are, I think, seeing with this proposed monument to Friedmanism is really a way of entrenching it and making sure that it is always available to come back, to come roaring back.
So, I said I would talk a little bit about Friedmanism and the links to the current crisis. And, you know, it’s pretty direct. Milton Friedman is pretty much accepted as the godfather of deregulation. And this was—this ideology was the rationale for turning the financial sector into the casino that we see today. You know, Milton Friedman was clear about this. He believed that “history took a wrong turn,” and that’s a quote; it’s a quote from a letter he wrote to Augusto Pinochet. He said, “History took a wrong turn in your country, as well as mine.” And he was referring to the responses to the Great Depression. In Chile, it was the rise of import substitution and developmentalism. But in the United States, he was of course referring to the New Deal.
And I think that the Chicago School of Economics is properly understood as a counterrevolution against the New Deal, against regulations like Glass-Steagall, that was put in place in 1934 after having seen people lose their life savings to the market crash, and it was a firewall, a very simple, sensible law that said if you want to be an investment bank, if you want to gamble, gamble with your investors’ money, but the government isn’t going to help you because it’s your own risk. You can fail. And if you want to be a commercial bank, then we will help you. We will offer insurance to make sure that those savings are safe, but you have to restrict the risks that you take. You cannot gamble. You cannot be an investment bank. And a firewall was put up between investment banks and consumer banks.
And now we look at the way in which this crisis is supposedly being solved, and what we see, actually, is a wave of mergers in the banking sector, a wave of mergers with the banks getting bigger and bigger until ultimately—you know, the Financial Times was predicting today that eventually the United States will have three big banks, just like Japan does. That’s where it’s heading. And, of course, all of those banks will be too big to fail. So they all have this implicit guarantee; it’s not just Fannie and Freddie. It’s any function that is too important to fail has this implicit guarantee.
Phil Gramm is the person, you know, on the legislative side who did the most to create the legislative context for what we’re seeing right now in the financial sector. You know, I think everyone knows that Phil Gramm, most famously, recently is the one who said that America was in a mental recession and a bunch of whiners and all of that. And so, he’s not officially an adviser to McCain, but there is talk that if he were to win the elections, he would be Treasury Secretary. You know, I point—I bring him up because Phil Gramm was a Milton Friedman fanatic. I think you know this. In 1999, the same year that he led the charge to strike down Glass-Steagall, he also—Phil Gramm—pressed Congress to get the Medal of Honor for Friedman. When he ran in the—when he made his 1996 presidential run, McCain was the co-chair of his campaign. Phil Gramm was asked, “If you had to rely on a single person as your foremost economic policy adviser, who would it be?” And he replied, “Dr. Milton Friedman.” So we see the connections between deregulation and Friedmanism.
I also think there’s something else at play in the kind of politicians that are attracted to this particular ideology. You know, Reagan was the first really to embrace it, and Nixon was the great disappointment to Friedman. I’m sure you all know that. You know, he writes in his memoir that when Nixon was elected, he was euphoric. I mean, he couldn’t imagine an American president more closely aligned ideologically than Richard Nixon. But Richard Nixon insisted on governing, and he wanted to win elections, and he imposed wage and price controls. And Milton Friedman sort of had a bit of a temper tantrum and declared him the most socialist president in modern American history. But, you know, it was—so it was really Reagan who campaigned, you know, with his copy of Capitalism and Freedom on the campaign trail, who was the first person to really put Friedmanism into practice.
And I raise this because, you know, one of the things that we hear about McCain is that he doesn’t really know about economics, and so I think that makes us inclined not to take his economic ideas seriously, not to think he would be a really serious economic force. I think just the opposite. And I think if you look at his campaign platform, you see just the opposite. He wants to privatize Social Security. He is saying that in the first 100 days they’ll look at every single government program, and they will either reform it or shut it down if it is not serving taxpayers. I mean, they are talking about a sort of hundred-day economic shock therapy period. And I think it’s the fact that he doesn’t know about economics, and that Sarah Palin, I suspect, knows a little less, that actually makes them so dangerous.
And I don’t—you know, I don’t think it is—not to be too flippant—I’m sure that I’ve, you know, offended everyone, so I may as well just say bad things about Ronald Reagan—but I do think that, you know, that it isn’t a coincidence that, you know, a movie star president champions these ideas, or a body-builder governor, you know, who says, “Dr. Friedman changed my life”—I don’t know if you’ve seen Arnold Schwarzenegger’s introductions to Freedom to Choose, but they’re good. You should. YouTube them. But the appeal of these ideas, I think, to politicians who are actually in over their head on economics—and, by the way, this goes for military dictators, too, like Pinochet—who get control over a country and are totally clueless about how to run an economy, is that it lets them off the hook completely. It says government is the problem, not the solution. Leave it to the market. Laissez-faire. Don’t do anything. Just undo. Get out of the way. Leave it to us.
