Thursday, July 17, 2008

Shockingly doctrinaire

Naomi Klein, whose works I have never read, has always come across to me as a misguided, but ultimately well-intentioned individual. Yesterday, while flying home (to London) from visiting my parents in Milan, I had the occasion of reading a long but excellent review of Klein's latest book, The Shock Doctrine, which has changed my mind. This truly devastating review, by Cato Institute senior fellow Johan Norberg, really deserves to be read in full. Here is part of the executive summary:
Klein's analysis is hopelessly flawed at virtually every level. Friedman's own words reveal him to be an advocate of peace, democracy, and individual rights. He argued that gradual economic reforms were often preferable to swift ones and that the public should be fully informed about them, the better to prepare themselves in advance. Further, Friedman condemned the Pinochet regime and opposed the war in Iraq.
Klein's historical examples also fall apart under scrutiny. For example, Klein alleges that the Tiananmen Square crackdown was intended to crush opposition to pro-market reforms, when in fact it caused liberalization to stall for years. She also argues that Thatcher used the Falklands War as cover for her unpopular economic policies, when actually those economic policies and their results enjoyed strong public support.
Norberg meticulously deconstructs Klein's arguments and provides sources for all his claims. Additionally he wisely goes out of his way not to impugn Klein's character or intentions, even when it strains credulity to think that the blatant inaccuracies of the book could have been unintentional. Here is a video interview in which he summarises his defence of Milton Friedman:
However, in his review Norberg not only shows that Klein is misrepresenting Milton Friedman's positions, but develops a convincing case that the mechanism which she falsely accuses Friedman of supporting, doesn't actually work in the real world:
Even though Klein is wrong about Friedman, she could be right about her broader thesis that it is easier to liberalize in times of crisis, and that there is a close connection between economic liberalization and violence and dictatorships. She gives examples of dictatorships that have liberalized the economy, like Chile and China, but she also makes a metaphorical case about the relationship between "shock therapy" in economics and electrical shocks as a means of torture. The connection is that they are both used to erase the past and create something new—torture is "a metaphor of the shock doctrine's underlying logic."
Hidden in Klein's word games is a real argument—the fact that several dictatorships have liberalized their economies in recent years and that some of these have also tortured their opponents. But how strong is this connection? If we look at the Fraser Institute's Economic Freedom of the World statistics (EFW), we find only four economies about which we have data that haven't liberalized at all since 1980. All the others have. Obviously this also means that we will see economic liberalization even in brutal dictatorships, just as in peaceful democracies.
Klein relies on her personal interpretation of anecdotes and examples and never tries to supply broad, statistical evidence for her case. It's an understandable omission, because the data don't support her argument. There is a very strong correlation between economic freedom on the one hand and political rights and civil liberties on the other. The quarter of countries with the most economic freedom score 1.8 on average in Freedom House's measure of political rights (1 = most free, 7 = least); the second freest quarter gets 2.0; the third; 3.4, and the least economically free quarter of countries gets 4.4. On average, the economically freest quarter is more democratic than Taiwan, and the least economically free quarter is less democratic than Nigeria.
This thread is developed further in the review, to devastating effect. It really does make one wonder how this book has been accorded so much respect and praise. Or as Norberg concludes "It is probably not a coincidence that there are blurbs from four fiction writers on the back of the book."