The Shock Doctrine Summary

The Shock Doctrine is one of the most interesting books I have ever read. The book looks at the history of shock therapy and how it dovetails with disaster capitalism to subvert the democratic wishes of the population.

It’s safe to say that this book blew my mind. I was vaguely aware of some of the history in the book, I had come across some of it while studying history, but I didn’t know about it in depth.

It’s hard to imagine but free-market economics used to be on the periphery of the debate. Keynesian economics ruled the roost and those who advocated for the free-markets, such as Milton Friedman, were outsiders.

During the economic crises of the 1970s, the free-marketers seized their opportunity and pounced. They put forward their ideas the solution to the stagflation crisis which had befallen the world.

What happened next was that the shock doctrine espoused by these economists was thrust upon countries such as Chile despite the voters there voting in a left-wing government.

Now free-market economics is dominant, the doctrine has spread to most of the globe and private companies are able to make millions more than they used to.

What The Shock Doctrine shows is the huge power these companies have and shock therapy has affected the world, often by non-democratic means.

No matter what your political affiliation, this is a fascinating book and one you should read to gain a greater understanding of the world we live in today.

The Shock Doctrine summary

Takeaway 1 – Democracy can mean nothing

One of the more shocking elements of The Shock Doctrine, concerns the case of Chile, one of the first countries to experience shock therapy.

The coup in 1973, which ousted the democratically elected socialist, Salvador Allende, resulted in widespread misery for the population.

The coup was backed by the CIA, who were worried about the impact of a well-functioning socialist country in their sphere of influence. The man they backed, General Pinochet, would be responsible for some of the most heinous crimes of the 20th century.

40,000 thousand people were imprisoned in the national stadium in the capital and Santiago and many of those were tortured, with others killed.

Following the coup, the country was opened up to foreign investment and Friedman had the opportunity to implement his free-market doctrine in the country. 

Friedman and his economists believed that allowing the market to operate without any interferences from the state, they would eventually reach a state of equilibrium.

Yet, as Klein states in the book, inflation rose to 375 percent by 1974 after the introduction of these policies, the highest rate in the world and twice what it was under Allende.

What’s worse is that this was imposed on the Chilean people despite them not voting for it. This is dangerous because it undermines democracy and in this case, it was destroyed. Pinochet developed a brutal military dictatorship in its place.

Pinochet claimed he was protecting the Chilean’s from Allende and his plot to turn Chile into a Marxist state when there’s little evidence this was the case. Instead, Chilean’s got a brutal regime and the removal of democracy.

The ideology espoused by the free-market economists from the Chicago School stated they were introducing freedom, but for who? The people or businesses?

Takeaway 2 – What happens is not inevitable

One of the key takeaways from The Shock Doctrine is that nothing is inevitable. At the time of writing in 2020, free-market economics is still in vogue today, especially in the states.

However, it’s never been so fragile. The 2008 financial crash exposed a flaw in its logic and with the Coronavirus reeking across the globe, we’ve seen the vital role the state can play in protecting citizens.

It can seem tempting to think that things are inevitable and they can’t be changed but they can. The Shock Doctrine perfectly illustrates this.

Following the end of the Second World War, Keynesian economics was the only game in town. It was seen as the best way to get the war-ravaged economies back on their feet.

And it did.

But waiting in the wings were the free-market ideologues of the Mont Pelerin Society. Despite the prevalence of Keynesianism, they still believed their day would come. The irony is that now we see this school of economics as accepted thought, in the aftermath of the war they were radicals.

If history teaches us anything it’s that nothing is inevitable. But to influence the future you need to have a plan, that’s what Friedman and his group of economists had and they have influenced the world ever since they grabbed their opportunity in the late 70s.

Takeaway 3 – Crises offer the best moment for change

One of Milton Friedman’s most famous quotes is the following: “Only a crisis actual or perceived procedures real change.”

He’s right. You can do much more in crises than you can during your normal times. Often, the public expects that exceptional measures will need to be undertaken to tackle the crisis.

This means that governments can get away with much more than they would under normal circumstances. Think of the state of emergencies that were declared during the Coronavirus pandemic.

In no other circumstance would people accept being locked up in their house only allowed to get essential goods and to exercise.

Friedman was aware that you can use crises to push through economic measures that were unpalatable because people are distracted by the crisis. This has happened multiple times in recent history.

The Asian Tigers crash in 1997 was one example, another was when Russia transitioned from Communism to Capitalism. Both times, economists espousing free-market doctrine brought in measures which shocked the economy and left many people poorer than before.

The myth that free markets have been adopted willingly and democratically is a myth. Often, they have been imposed in relation to crises in an effort to cure them. Yanis Varoufakis details what happened to Greece during the Eurozone crisis, in Adults in The Room, as another example of this line of thinking.

Would anyone accept austerity and cuts to public services in normal times? No, of course not. It’s only when crises strike that these ideas become tolerable.

Favourite quotes

  • “Its (corporatism) main characteristics are huge transfers of public wealth to private hands, often accompanied by exploding debt, an ever-widening chasm between the dazzling rich and the disposable poor and an aggressive nationalism that justifies bottomless spending on security.”
  • “This book is a challenge to the central and most cherished claim in the official story – that the triumph of deregulated capitalism has been born of freedom, that unfettered free markets go hand in hand with democracy.”
  • “The Marxists had their workers’ utopia, and the Chicagoans had their entrepreneurs’ utopia, both claiming that if they got their way, perfection and balance would follow.”
  • “As is the case with most state terror, the targeted killings served a dual purpose. First, they removed real obstacles to the project – the people most likely to fight back. Second, the fact that everyone witnessed the ‘troublemakers’ being disappeared sent an unmistakable warning to those who might be thinking of resisting, thereby eliminating future obstacles.”
  • “Nixon’s tenure was a stark lesson for Friedman. The University of Chicago professor had built a movement on the equation of capitalism and freedom, yet free people just didn’t seem to vote for politicians who followed his advice.”

The Shock Doctrine review

The Shock Doctrine summary I have just written presents a book that challenges many assumptions we hold today. It certainly challenged mine!

The core premise of the book is that the freedom we were told we would get once the free markets were unleashed hasn’t arrived.

In fact, judging by the number of financial crashes there have been since the election of Reagan in 1980, the idea that free-market would allow the economy to find an equilibrium has been discredited.

Naomi Klein does lean to the left, as do I, but that doesn’t mean the book is an outright attack on the doctrine of free markets. More an explanation of how it has a lot of downsides.

Despite all the crashes we’ve seen, in particular the 2008 crash, there seems to be little discussion of reforming a system that is in obvious need of it.

Burying our hands in the sand and pretending a slap on the wrist for those involved in financial mismanagement will fall into line is just wrong.

As we can see, when shock therapy is used in countries, it’s the ordinary citizens that often pay the price.

The Shock Doctrine is a fantastic expose of an economic system that is feted as the best way to do economics, yet seems to suffer from several flaws and calls multiple issues around the world.

More than anything this book is a plea to take a second look at free-market economics and consider, if there is not an alternative, such as the one espoused by Kate Raworth in Doughnut Economics.

It’s a brilliant and fascinating whatever your political persuasion.

Who should read The Shock Doctrine?

Anyone that has an interest in politics will find this book interesting. Depending on your political views, you may not enjoy it, but you will be challenged by the book.

If you want to get a better understanding of the world we live in, and how it’s come to pass, The Shock Doctrine, is a great guide.

It’s also a good primer on the excesses of free-market economics and neoliberal politics.