Shock Doctrine follows meltdown

Shock Doctrine follows in

wake of Wall Street meltdown

By Roger Bybee



aomi Klein, in her superb and sweeping book The Shock Doctrine, describes how political and corporate leaders across the world have used shocking, disorienting developments–whether an unexpected  natural disaster like a hurricane, a sudden military takeover, or a startling economic decline– to impose a set of regressive "free-market" policies that would be instantly rejected by the vast majority under normal circumstances.


This set of policies of wage-slashing, privatization, and deregulation, were promoted and popularized by the late economist Milton Friedman, and applied under the right-wing dictator Pinochet in Chile, Boris Yeltsin in Russia, and Li Pang in China, to name just a few.


Now the "shock doctrine"–with Americans still reeling from a dizzying sense of vertigo from the sudden collapse of Wall Street and housing values coupled with rapidly cascading job losses–is being applied vigorously in the US.  The efforts of President Obama to apply some FDR-style stimulus to the US economy are being brazenly undermined by the job-destroying strategy being pursued by much of Corporate America. These CEOs are surely hoping that they can make the radical restructuring of the economy an established fact before either Obama or progressive social movements find their bearings and respond forcefully to prevent further permanent damage to the employment base of the US.



ith a loss of 651,000 more jobs in February and the official unemployment rate soaring to 8.1%, employers are exploiting the current economic free-fall to totally abandon "whole areas of business" and relocate other production lines overseas, as the New York Times reported (3/7/09,p1A):

"These jobs aren’t coming back," John E. Silvia, chief economist at Wachovia in Charlotte, N.C. told the Times. "A lot of production either isn’t going to happen at all, or it’s going to happen somewhere other than the United States. There are going to be fewer stores, fewer factories, and fewer financial services operations. Firms are making strategic decisions that they don’t want to be in their businesses"…

"For decades, the government has reacted to downturns by handing out temporary unemployment insurance checks, relying upon the resumption of economic growth to restore the jobs lost. This time, the government needs to place a greater emphasis on retraining workers for other careers, these economists say…. "

"The decimation of employment in legacy American brands such as General Motors is a trend that’s likely to continue," said Robert E. Hall, an economist at Stanford University‘s Hoover Institution. "




But these traditional small-scale palliatives–unemployment checks and retraining– will not begin to reverse this crisis. First of all, unemployment compensation has been dramatically slashed so that it reaches a much smaller percentage of workers than in past, less severe recessions. During the 1975 recession, unemployment compensation reached 75% of the jobless and thus was a significant factor in restoring consumer demand,

However, thanks to radical cuts in unemployment compensation eligibility rammed through by the Reagan administration, only 45% of the unemployed received any UC benefits during the much more severe recession of 1982-83. The National Association of Manufacturers was delighted with the cutbacks in eligibility, crowing that under the old rules, "there was no incentive to go back to work under that program." Additionally, the federal government under Reagan began taxing unemployment benefits for the first time. To top it off, some governors–including Democratic Gov. Anthony Earl of Wisconsin, with the cooperation of some top union leaders–acceded to reduction in unemployment benefits despite jobless levels that reached as high as 19.9% in my hometown of Racine.

By 2003, the number of unemployed workers eligible benefits had fallen further from the 1982 level of 45%, down to just 41%., according to the Ohio-based group Public Policy Matters.


he other conventional  "solution" to massive job losses is job training. "Re-training for the skills of the 21st century" is one of the favorite mantras of politicians from both major parties unwilling to challenge corporate policies that have been resolutely targeted at driving down wages for all professions and shifting as many jobs as possible overseas to low-wage, high-repression nations like China and Mexico. For these politicians, proposing "re-training" is a convenient way of sidestepping a confrontation with corporations’ investment decisions, thereby endangering campaign contributions from these firms.

NY Times economics writer Louis Uchitelle’s invaluable book The Disposable American: Layoffs and Their Consequences exposes the inconvenient truth about the endlessly-hyped benefits of re-training: there are simply not enough good-paying jobs left in the US for which to retrain displaced workers. "Out of a hundred laid-off workers," writes "27 are making their old salary again, or more, and 73 are making less, or not working at all."

But even if retraining were an effective strategy, the very politicians who tout it as a solution have been unwilling to fund training in a serious way. Funding for training has plummeted from $20 billion in 1979 to just $6 billion last year (in constant dollars), according to one expert cited by the Times. These cutbacks in funding would seem to indicate that leading politicians, especially the Bush administration, were never exactly sincere in their proclaimed faith in the power of re-training.

However, American social movements–whether based in labor or the community–still seem stunned and reeling from the economic blows that have hammered working families since the Wall Street meltdown began. . Labor, for the most part, seems to be following the same  game plan it laid out before January 20: supporting the stimulus plan, fighting for health care reform, and gearing up for a major battle to re-establish the right to organize unions without risk of being fired through the Employee Free Choice Act.

All of these are sensible strategies, but none have yet tapped into the vast, seething pool of public outrage toward, for example, the $18.4 billion in bonuses shelled out to Wall Street executives who succeeded in losing vast sums of money last year. Thus far, the most imaginative response to the crisis has come from United Electrical Local 1110 workers in Chicago, who seized their about-to-be closed plant at Republic Doors and Windows and demanded that the widely-despised Bank of America pay out money from their bailout that was owed the workers vacation and severance pay. The workers’ takeover gained so much positive publicity that an environmentally-friendly firm called Serious Materials is buying the plant and rehiring the workers.

Apart from the gutsy and inventive move by the UE members in Chicago, though, the response in the streets has been muted compared to the scale of Corporate America’s incredible greed and outrageous malfeasance that led to the crisis in the first place and now, their latest round of slashing their workforces and moving jobs overseas.

America‘s CEOs apparently deeply believe in the power of the "shock doctrine" to allow them loot the economy, collect bailouts, and then keep sending more jobs off-shore. It’s high time that working people emerge from our stunned state, haul out our jumper cables by effectively targeting corporate institutions that have gouged the public, and then, like the Republic workers in Chicago, apply some major voltage of our own.

Roger Bybee edited the Racine Labor for 14 years and was active in movements to stop plant closings in southeastern Wisconsin. He has written for a variety of publications and websites, including Z,Yes!, In These Times, The Progressive, Extra!, Progressive Populist, Multinational Monitor, Dollars and Sense, American Prospect, Common Dreams, Monthly Review, and Madison‘s Isthmus, among others. His website is http://www.zcomm.org/zspace/rogerdbybee.

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