Disaster Capitalism or Capitalist Disasters?

The worst and most alarming news here is... that 9/11 and other disasters such as the BP Deepwater Horizon catastrophe are due to the normal and ordinary workings of capitalism, and specifically neoliberal policies.

by Dennis Loo
 
Naomi Klein’s much heralded Shock Doctrine: The Rise of Disaster Capitalism argues that neoliberals are consciously provoking disasters in order to justify and impose draconian market-based “solutions” as a remedy for the problems that they created in the first place.
 
To place her argument into a broader context, neoliberals’ ability to carry out these conspiracies (for that is what they are, purposeful plans executed to inflict harm upon the people) depends upon the absence of vibrant rivals to capitalism as a system and capitalist logic as a theory and philosophy: alternative economic and political models and/or Left social movements and organizations such as labor unions. Neoliberals need a clear field ideologically and politically to pull their plans off.
 
To put this in a different way, neoliberals’ objective has been to complete the counter-revolution against the gains of the 1960s’ social movements and the legacy and influence of socialism, which existed concretely in the form of the socialist camp, led by first the Soviet Union and then by China, for several decades in the twentieth century. Neoliberalism owes its inception, after all, to the work of Frederick Hayek, who began proselytizing against any form of collectivism, or placing of human needs above that of capital, in the maelstrom of the 1930-40s, when capitalism was under siege and in crisis and anti-capitalist and anti-fascist ideas were overall more popular worldwide. As I write in my new book, Globalization and the Demolition of Society:
 
Hayek’s work came during a period of enormous turmoil and struggle in history: the pivotal mid-twentieth century. The whole world was very much up for grabs as proponents of fascism, capitalism, socialism (and anarchism, particularly in Spain) were fighting fiercely to determine who would dominate and which vision for society would prevail. Hayek was explicitly opposed to collectivism.To advance his program, he convened a small 1947 conference at Mont Pelerin, Switzerland, inviting like-minded people such as University of Chicago economist Milton Friedman.The Mont Pelerin Society that emerged from that conference sought to combat socialist and quasi-socialist trends that at the time enjoyed wide appeal internationally. In the US, GOP19 party conservatives looking for an alternative to Keynesian economics turned to Friedman, Hayek, and Ayn Rand, the latter the well-known champion of ultra-individualism. (Pp. 45-46)
 
This counter-revolution led by the free marketers thus began in the realm of theory and accomplished its first seizure of state power in 1973 with General Augusto Pinochet’s fascist coup against Chilean socialist president Allende. The U.S. government backed the coup and Pinochet slaughtered five thousand Chileans within the first few days. 1973 was the endpoint of the 1960s’ era and the Pinochet/U.S. coup its historical bookend. This counter-revolution gathered steam in earnest in the imperialist citadels in the 1980s in England and the U.S. where off-shoring of production and other activities, the popularization of social Darwinism, systematically starving the public sector, ever-expanding military spending, and massive tax cuts for the wealthy have led to ever-growing budget deficits, militarized domestic life, routine violations of the rule of law, and “preventive wars” that are otherwise known according to the U.N. Charter as wars of aggression.
 
While Klein is certainly right that neoliberals have staged and are staging scenarios to impose their “solutions,” i.e., disaster capitalism, it would be more accurate still, however, to observe that the gravest disasters are not ones that capitalists are deliberately creating. Rather, the greatest catastrophes are the ones that they aren’t trying for. As Department of Defense think tank analyst Nathan Frier wrote in 2008:
 
The likeliest and most dangerous future shocks will be unconventional… Their origin is most likely to be in irregular, catastrophic, and hybrid threats of ‘purpose’ (emerging from hostile design) or threats of ‘context’ (emerging in the absence of hostile purpose or design). Of the two, the latter is both the least understood and the most dangerous. (p. 116)
 
Frier’s perspective is quite different from mine, but what is striking here is how much we share in terms of our analysis of the dangers inherent in the world situation. Frier states that the worst disasters will be the ones that bureaucracies are not foreseeing and ones that no one is deliberately trying to create. While there is a conspiracy afoot, in other words, the larger and more important story is that the very structure and logic of the system of capitalism is provoking disasters on a far grander scale than those that the capitalist class is purposefully causing (e.g., global warming). Those disasters are the inevitable product of the fundamental nature of capitalism’s relentless and all-consuming drive for profits that has been operating for some thirty years without any substantial countervailing powers to curb its appetite and natural tendencies.
 
The worst and most alarming news here, in other words, is not that 9/11 was an inside job, a grand conspiracy hatched within the highest US government echelons. It is instead that 9/11 and other disasters such as the BP Deepwater Horizon catastrophe are due to the normal and ordinary workings of capitalism, and specifically neoliberal policies. That is much more distressing than believing that 9/11 was an inside job. (p. 163)
 
A better descriptor, then, for today’s situation would be capitalist disasters rather than disaster capitalism since the latter formulation uses disasters as an adjective or modifier of the noun, capitalism, and the former treats these disasters as a product of capitalism.
 
The subordination of public safety and the public welfare to the dictates of profit guarantee two outcomes: huge profits for big capital and periodic disasters for the people. It is in the very nature of neoliberal policies that these two consequences will continue. That is because it is not profitable to ensure that all [products and processes such as] hamburger meat is safe. It is cheaper to allow some pathogens [, failures, and preventable accidents] to be marketed [and occur] on a regular basis. It costs much less money to pay lawsuit claims for incidents in which people die or are made deathly ill and left with lasting, as in Stephanie Smith’s case, paralysis [and in grand disasters such as the BP oil catastrophe] than it does to prevent those incidents from happening in the first place.
 
This was the very logic that Ford Motor Company employed with their infamous 1970s Pinto. It would have only cost them, as they calculated, $6 per car to fix the defect that caused Pintos to explode into flames upon certain kinds of impact. But it would cost less to pay for property damage and the loss of what they estimated would be a few hundred lives than to pay the $6 per car, since millions of cars had the defect. So what did Ford do? Ford executives did not fix the defect. As it turned out, Ford’s estimate of the numbers who would die was low. Twelve hundred people perished. When the case went to trial the “smoking gun” memo showing Ford executives’ “better idea” not to fix this deadly defect was prohibited by the judge from being entered into evidence. (p. 165)
 
What was notable in the 1970s as a particularly egregious example of corporate malfeasance in Ford’s Pinto is now the norm in the financial sector and more broadly throughout the corporate world. As I write in my book:
 
L. Randall Wray, Professor of Economics at University of Missouri, Kansas City, provides a broader analysis of the underlying structural problems at work:
 
“[F]inancialization” of the economies concurrently meant both “globalization” as well as rising inequality. The weight of finance moved away from institutions—that were guided by a culture of developing relations with customers—toward “markets” (the “originate to distribute” model of securitizing pools of mortgages is a good example). This virtually eliminated underwriting (assessing credit worthiness of customers) and also favored the “short view” (immediate profits) of traders (you are only as good as your last trade) over the long view of financial institutions that hold loans.
In addition, the philosophy of “maximization of total shareholder returns” as well as the transition away from partnerships in investment banking toward public holdings promoted pump and dump schemes to increase the value of stock options that rewarded CEOs and traders.
 
A “trader mentality” triumphed, that encouraged practices based on the “zero sum” approach: in every trade there is a winner and a loser. As practiced, the bank would be the winner and the customer would be duped.
 
This transformation helps to explain why fraud became rampant as normal business practice. Competition among traders and top management to beat average returns led to ever lower underwriting standards to increase the volume of trades—with fees booked on each one—and with strong incentives to “cook the books” (record false accounting profits). Once accounting fraud is underway, there is a strong incentive to engage in ever more audacious fraud to cover the previous crimes. In the end, the US financial system (and perhaps many others) became nothing but a massive criminal conspiracy to defraud borrowers. . . .
 
Chilling words. Professor Wray does not explain why the weight of finance capital moved towards “markets.” To answer that question very succinctly, finance capital’s dominance reflects the natural flow of capital into the areas where the quickest and biggest profits can be made. For a system premised on the pursuit of profit, this shift to financialization and what Wray describes as a “massive criminal conspiracy” are to be expected.
 
Short-term logic trumps any long-term logic; profits made today override any serious considerations of longer time horizons. Arguing as some do that finance capital’s focus on short-term gains is jeopardizing the system’s long-term stability and viability misses the point. The system can only be governed, so long as it continues to be the system in place and is not replaced by a different system, by profit. Doing what is best for it in the long run is not how the system operates. (Pp. 173-174)
 
This last point needs underscoring because it goes against what people are accustomed to thinking. We tend to shrink from really scary prospective realities for emotional reasons. Coming to grips with these realities thus requires that we follow the chain of reasoning very carefully and draw the appropriate conclusions in the face of our natural reluctance to see clearly really bad news.
 
That neoliberalism spawns disasters on both the global and the personal level as part of its essential nature is a feature of several different factors which I explore in my book. For the purposes of this essay let me focus on just one of these factors. Because of deregulation, corporations are now expected to be self-monitoring. The logic of profit means corporations don't self-monitor and corporations would prefer to spend money on lawsuit claims and be bailed out in major disasters (e.g., the Deepwater Horizon oil disaster or the financial crisis of 2008) by the government, the tax paying public, and insurance companies, than on preventive measures. If you are driven by bottom-line logic, then this only makes sense. Only if you are concerned about other matters such as people's welfare and protecting the environment would you act differently and from the standpoint of capital, those matters are externalities (i.e., irrelevant). Even the bad publicity that you might receive from a disaster is not as expensive overall as what it would cost you if you were spending money on prevention consistently. Moreover, capital's time horizon for making these kinds of decisions is very short-term.
 
Coming to grips with these ineluctable realities is being expressed in the streets today around the world and in more than 1300 locations in the U.S. where occupations have broken out in response to the predations, the utter ruthless indifference to the people and the planet’s welfare, and the ever deepening insecurities that neoliberalism has wrought. People are grappling for answers. This is a wonderful and extremely welcome movement. Different expressions and dimensions to these problems of capital I explore in Globalization and the Demolition of Society, especially in Chapter Three and Four. If we are to wrest a different future from the horrors that we see unfolding before our very eyes in real time, then we have to read deeply, think deeply, and discuss and debate these matters extensively.