The Shock Doctrine (2009) - Have free market policies got ulterior motives? Naomi Klein Book [77:56]

There is some sublety here. Both camps become in fashion in certain eras, and they always go too far. So, it's pretty freakin obvious that free market ideologues have gone too far since the mid seventies, just as advocates of government spending on social programs had gone too far before that, evidenced by the famous 1970s insolvency of NYC, Cleveland, and other US cities at that time. Reagan ran against government spending. He won 44 states in 1980, and 49 states in 1984. Reagan was full of crap, but the idea that government was doing too much was a very popular message at the time.

In the early 1980s, the Volcker Fed jacked up rates very high and held them there too long, with the result that, ultimately, in 1986, other FOMC members were in open revolt("gang of four"), and Volcker resigned shortly thereafter. Most people would agree that Volcker went too far and did a lot of unnessesary damage to businesses, workers, and the rust belt. But they would also agree that inflation in the late 70s was a very serious problem that needed to be dealt with, and inflation became a non issue politically after Volcker, which indicates some degree of success.

So, you've got a problem or crisis, and action, sometimes drastic, needs to be taken. Recall that the young Spanish Republic pussy footed around too much in the mid thirties with the result that the country descended into a horrible civil war and then Fascist Francisco Franco took over and ruled for 35 years. Also, Gorbachev was not decisive enough in the last stages of the USSR, which prolonged suffering. Ultimately there was a failed coup, but he was ousted quickly thereafter. Economist Jeff Sachs advocated "shock therapy" in former communist states because there wasn't much time to reform, and political opposition can be quite stiff, since suffering can be severe, and opponents to reform can capitalize on this.

Naomi Kline complaining about financial opportunists during the last few decades is like people complaining about the Reign of Terror during the French Revolution. Was there suffering? Well, DUH!!! Did they go too far? Yes, like every one who has held power in world history. The real question is: how do you reform with the least amount of suffering in a very dynamic and imperfect world?

This isn't to say there are not famous success stories that are much studied. It seems to me that effective reform is the holy grail of political economics.

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