Saturday, November 15, 2008

Reading: This time, Naomi Klein comes out in favor of shock

Shock Doctrine author Naomi Klein does not know fear. A little over a month ago she argued--at the University of Chicago, no less--that the Wall Street crash of 2009 was, for the market-worshiping economics of Milton Friedman and his disciples, the equivalent of the fall of the Berlin Wall for authoritarian communism: The death knell of a bankrupt ideology.

She's back, this time with a message that will be no less popular in the salons of the elite: A "smooth transition" from the Bush regime's economic policy is the last thing the country needs:

One thing we know for certain is that the market will react violently to anyone likely to impose serious regulation, invest in people, and cut off the free money. In short, the markets can be relied on to vote in precisely the opposite way that Americans have just voted. (A recent poll found 60% strongly favour "stricter regulations on financial institutions," while just 21% support aid to financial companies.)

There is no way to reconcile the public's vote for change with the market's foot-stomping for more of the same. Any moves to change course will be met with market shocks. The good news is that once it is clear the new rules will be applied across the board, fairly, the market will stabilise and adjust. Furthermore, the timing for this turbulence could not be better. Over the past three months, we've been shocked so often that market stability would come as more of a surprise. That gives Obama a window to disregard the calls for a seamless transition and do the hard stuff first. Few will be able to blame him for a crisis that predates him, or fault him for honouring the clearly expressed wishes of the electorate. The longer he waits, however, the more memories will fade.

Of course Obama will be blamed by the right for any shocks caused by the delayed accomplishments of deregulation fetishists in the Bush administration over the last 8 years. That's a given. Limbaugh is already calling the current situation the "Obama recession." The only difference between now and the first Bush recession, in 2002, was that they blamed that one on Clinton. Anyone but the Republicans. So Obama has very little to lose on that score--he might as well go ahead and jerk Wall Street's leash hard.

Klein's essay is going on the Readings list in the sidebar.

1 comment:

Chuck Butcher said...

I have opinions about the type of shock that would actually DO something...the problem is it's illegal.

(anonn for verfication for this post??)