Naomi Klein's "shock doctrine"ㅡher idea that natural and man-made disasters have been used as pretexts to impose free market policies on countries whose people would normally reject themㅡdidn't convince completely until recenty. "Disaster capitalism" did apply in some cases, especially in southern hemisphere and transition economies. But it was not as universally valid as Klein believed, and the establishment of neoliberalism in developed economies was more a calculated implementation of a systematic and far-reaching agenda. But now Klein may see her analyses confirmed, and spectacularly, by events at the heart of developed capitalism.
The crisis in the private financial sector has, inevitably, spread to the public sector. It was impossible for governments to ignore the risk of an imminent, total collapse of the banking sector. Justifiable public anger at the banks' return to their old bad habits at the expense of the taxpayer is justified, but letting them collapse was not an option. Class solidarity and cronysm played a part in the decision to bail them out, but action was still required to save them.
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( ... ... ) The financial sector has been saved and the recession contained, but only by sweeping most of the problems under the carpet. This could easily lead to disaster in the near future.
There is a more important reason why the financial crisis was bound to spread to the public sector: the cost to national budgets of the sharp decline in economic activity and the resulting fall in tax revenues. The huge growth of budget deficits and public debt is due less to the cost of the rescue packages than to the macro-economy. There can be no easy way out and no miraculour recovery.
Nothing do do with us
As the chain of cause and effect grows longer, people lose sight of the bid picture. The banks now believe they can pretend they have settled the bill for their little excesses and blame unemployment, recession, deficits on the remote mechanisms of the macro-economy: "Very sad, but it's nothing to do with us." They don't know the meaning of the word shame and are regaining their confidence, feeling free to lecture national governments on how to run things. The huge rise in public debt is a problem, say the managers of the fixed income departments, forgetting that taxpayers money saved them from disaster.
Now that the banks are flourishing, partly because massive government support for the economy save them from a second tsunami of bad debts, they have no scruples about speculating against the governments that saved them, thereby increasing the cost of public borrowing and exacerbating the deficit problem they caused.
This is Klein's "shock". Salaried workers, already hard hit by the recession, will as taxpayers also have to foot the bill for the budgetary adjustment. Neoliberalist ideology is deftly turning to its advantage an upset that should have killed it: neoliberals advocate the dismantling of the state on an unprecedented scale, on a par with the huge increase in deficits and public debt caused by their own actions.
The "ordinary" shocks of Klein's theory were mostly external (coups, counter-revolutions or national disasters). The neoliberal agenda kicked in during the chaos that followed. But this latest shock is a product of internal factors and is being exploited by those whose behaviour should have disqualified them from action, yet are still trying to draw advantage from events. The scale of neoliberalism's discomfiture has provided a motive and a pretext for its renewal on a bigger scale. Coming back from deficits of near double-digit percentages of GDP to the 3% required by the Stability and Growth Pact will require savage custs and austerity. So we are leaving incremental reform over two decades to enter a new era of accelerated upheaval. There are some thresholds of "adjustment" where what changes is not the degree, but the nature of the adjustment.
With the financial sector confining itself to technical discussion of the risks of sovereign default and the pressures on long-term interest rates, the wider ideological apparatus (resurgent experts, media long devoted to the cause) is already doing its bit. Hardly a day goes by without a prophecy of disaster. The discussion of public debt has become a constant drone and it would be difficult to find, in recent history, a more intense and sustained manipulation of public opinion. It could be taken as an indication of the scale of the changes that are coming.
Slimming the workforce
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