March 25, 2009

Naomi Klein, Milton Friedman and Me

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On February 24, 2009, by Naomi Klein was awarded the first Warwick International Prize for Writing, for her book The Shock Doctrine. On behalf of the panel of judges, the novelist China Miéville described The Shock Doctrine as "a brilliant, provocative, outstandingly written investigation into some of the great outrages of our time."

That got my attention. Here's why. On August 26, 2008, Kurt Jacobsen reported in The Guardian about opposition to plans to set up a Milton Friedman Institute at the University of Chicago. The report included some claims that I thought were wrong. So, I replied. Here's my letter, published on August 28:

Your feature on Chicago's proposal to establish a Milton Friedman Institute of economic research (Milton Friedman gives Chicago a headache, August 26) is misinformed in some important respects.

You state: "In postwar America, Friedman's market fundamentalism was regarded as lunatic-fringe stuff." This was never the case. I learned economics in Cambridge in the late 1960s. My professors followed Keynes and Marx, but they rightly made Friedman's work part of my undergraduate syllabus. Friedman's scholarship, not his opinions, made him one of the most influential economists of the 20th century.

You state that Friedman "worked for General Pinochet". While Friedman visited Chile, he did not work for the dictator. His advice was that Chile should turn back from state control of economic life; in the long run, he argued, free markets and political freedoms go hand in hand.

Finally, you give the impression that the mission of the proposed Friedman Institute is tendentious: "The design and evaluation of economic policy requires analyses that respect the incentives of individuals and the essential role of markets in allocating goods and services ... design of public policy without regard to market alternatives has adverse social consequences." While such a statement may be infinitely qualified, few economists today would dispute the principle.

I didn't expect to get away scot-free. On August 30, The Guardian published a letter from David Waddilove of Teignmouth, Devon:

Mark Harrison (Letters, August 28) is disingenuous about the relationship of Milton Friedman to Pinochet's Chile. Neither does he mention the havoc, bloodshed and mass starvation wrought on the people and economies of, among others, Uruguay, Argentina, Russia and Iraq by the Chicago School's symbiotic relationship with sundry dictators and their personal financial gain from those relationships. Nor, of course, does he mention the benefits to US corporate power wrought by the destruction of the public sector in each country the Chicago School meddles with. It is sad to see Warwick University, once the harbinger of some radical thought, now accommodating such "free" market orthodoxies without reference to their real-life testing grounds. Naomi Klein's The Shock Doctrine should be required reading for anyone interested in what actually happened.

I didn't think of replying, but I didn't like the tone. It seemed to be all guilt by association: Chicago-Pinochet. Chicago-Harrison. Harrison-Pinochet. Harrison-Warwick. Warwick-Pinochet. It looked like I must have blood on my hands. If that was the spirit of The Shock Doctrine, I wasn't sure I wanted to read it. Still, it stuck in my mind.

Months went passed. Then, the prize went to ... Naomi Klein for The Shock Doctrine. Not just any prize, but the first biennial Warwick Prize for Writing, a major literary award endowed by a great university, one that I love and have worked and lived for over thirty years.

Maybe I had missed something.

I got hold of the book and read it. It had a big, important message that I wrestled with. I asked my colleagues what they thought about it. It turned out none of them had read it. I think that is a mistake: the book has already had a significant influence on how people see economics and economists, David Waddilove of Teignmouth being one.

After some reflection, I wrote down what I think about the book in a paper called Credibility Crunch: A Comment on The Shock Doctrine. This is how it begins:

If you think that free markets haven’t worked that well recently, it is perhaps not surprising. If you think that free markets are spread only when business executives, politicians, soldiers, technocrats, and economists join to overwhelm popular resistance by force and violence, then you may have read it first in Naomi Klein’s The Shock Doctrine.

It concludes:

For the [Warwick Prize] panel, China Miéville described The Shock Doctrine as "a brilliant, provocative, outstandingly written investigation into some of the great outrages of our time." The Shock Doctrine merits this praise, but it does not merit belief.

If you are still interested, I hope you'll look at my paper and see the reasoning that fills the gap between my opening and my conclusion.

- 9 comments by 2 or more people Not publicly viewable

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  1. An interesting paper and discussion.

    The distinction between journalist and academic is one to ponder on in this context. Both are required to validate, substantiate and provide evidence but that’s about all they have in common. When one puts on the clothes of the other what is the impact? Especially important in an age where conspiracy and evil forces are seen at every opportunity and the value of expertise and research are reducing in comparison to polemic and simplistic argument to the exclusion of all else.

    Not that I accuse Klein of simplistic argument – wouldn’t have won the award if that were the case.

    27 Mar 2009, 09:17

  2. Mark Harrison

    Think of it like this. Human beings have evolved a capacity to impose meaning on the patterns we see around us: in the stars, the weather, animal behaviour, numbers, lives, stories. The ability to find and exploit these meanings in practice is what we call creativity—artistic, scientific, technological.

    Because creativity is so valuable, we look for patterns and impose meanings all the time. Sometimes, we impose meaning event when the patterns we are looking at are truly random (e.g. the constellations) or misleading because of the presence of some confounding factor.

    Because overinterpretation and mistakes have a social cost, most societies have evolved minorities of people whose job is not to be carried away but to be sceptical and contrarian and reject false meanings. They are the people who complain, for example, that “mumbo jumbo is taking over the world.”

    In our society, journalists have the job of putting meaning on events in a way that we call reporting on “stories.” That is what Naomi Klein has done in The Shock Doctrine. Empirical scientists (including social scientists) have the job of calling out when the events are truly random or the pattern is misleading.

    There is some crossover, of course; some journalists like Ben Goldacre chase “Bad Science.” Some academics are suckers. But calling out randomness and false patterns is what I have tried to do in my comment.

    I wrote about this subject some years ago (just after 9/11), in a short unpublished paper called The War Against Terrorism: Type I versus Type II Errors.

    27 Mar 2009, 12:44

  3. himmelwerft

    I wanted to highlight one of your criticisms of Klein: you took Russia’s demographic trends as an example of erroneous dataset interpretation, and even said “Death rates were on a rising trend long before the transition to a market economy, however, making the transition an unlikely cause.”.

    Don’t you think that statement is quite ambitious itself, and not exactly correct? For example, the rising death trends in the 1970s corresponded to the alcoholization of the nation; and indeed, male and female life expectancy graphs and their difference highlight it as one of the key causes (not to mention many demographic studies concerning with the effects of Russia’s and USSR’s alcohololization):
    Life Expectancy for Males and Females

    But the sharp drop after 1991 is not exactly similar to the slow decline after the 1960; neither is the alcohol problem and other demographic stress examined which overall contributed to the 1990s democide in the CIS – namely, the local conflicts in the post-Soviet space (~500,000 dead, IIRC), poverty, and finally the yet stronger alcoholization, wide spread of smoking and finally AIDS and other healthcare stress issues (and the collapse of Soviet healthcare funding). In fact, if the rise in the 1980s is explained by Andropov’s and Gorbachov’s tighter measures against alcoholism, culminating in the ban, why should we assume that without a collapse of the USSR this ban would likewise have ended by 1995, resulting in the same decline?

    The abrupt fall after 1991 is clearly in some part, and quite possibly in a very major part, due to the economic, social and political collapse of the USSR. This was also recently investigated by the Lancet demographers who concluded that the privatization, work bankrupcies and stress on the males likewise connected to the USSR collapse were a reason for over a million excess deaths in Eastern Europe. ( Lancet study in BBC News )

    Note the following graph:

    Klein has something more speaking for her than mere selective bias, the privatization was clearly a large factor, possibly the key one. You are criticizing Klein for not looking at the slow decline slope in the 1960s, but at the same time you deny the impact of the collapse and the privatization on the life expectancy overall, despite there being a very clear downward shock spike unlike anything observed in Soviet times?

    15 Jun 2009, 06:22

  4. Mark Harrison

    Thank you. I agree that it is a complicated matter, but I do believe it is more complex than as rendered by Klein (and I used this case as an example of the importance of recognising the economic trends already at work prior to intervention). I was aware of the Lancet study; in fact, I commented on it critically in a footnote to the paper. My point was (and is) that it cannot be right to ascribe the entire increase in Soviet mortality after 1991 to transition-related policies. There was probably some effect. Brainerd and Culyer (in the Journal of Economic Perspectives 19:1, 2005) carried out a careful investigation of a number of factors including most of those you mention and some others. They concluded that a quarter of the increase in mortality could be attributed to alcohol consumption, a quarter to transtion-induced stress, and the rest remained unexplained. Contrary to first impressions, public health factors did not seem to be important. Anyway, there is plenty of room for further investigation.

    17 Jun 2009, 20:21

  5. himmelwerft

    > They concluded that a quarter of the increase in mortality could be attributed to alcohol consumption
    This is interesting, I would also note that there are studies (in Russian) which show that the end of the state monopoly on spiritus production (and thus the end of GOST standard control over spiritus production) had adverse effects for quality of hard liquors, making them often more toxic. The crisis also was clearly increasing the alcohol consumption, so I’m not sure it’s fair to separate the two as if they were different factors?

    Production (1) and sales (2) of vodka, RSFSR and RF, million decaliter

    Production (1) and sales (2) of beer, RSFSR and RF, million decaliter

    Graphs from a statistical almanac White Book of Economic Reform in Russia 1991—2001

    > Contrary to first impressions, public health factors did not seem to be important.
    This is very surprising. I will have to look into this study. Everything around me and personal experience indicates the healthcare collapse had profound effects, but I guess there might be more factors at play.

    18 Jun 2009, 09:24

  6. Mark Harrison

    The argument of Brainerd and Culyer that the Soviet public health collapse did not significantly cause the increase in mortality is based partly on observations that deaths following (a) stroke and (b) child birth did not increase, and partly on the lack of performance of health spending indicators in a cross-country mortality regression compared with other independent variables.

    18 Jun 2009, 11:50

  7. himmelwerft

    Thankfully their study is in open access, so I read it. In their paper, Culyer and Brainerd note that circulatory diseases hold the greatest weight amongst all mortality rise factors and they also break down their study into the study of acute and routine care for those particular diseases, but the latter is examined casually and only in the aspect of medication. The study does show in a decisive manner that the acute care (measured by post-stroke and post-childbirth outcomes) is not a significant reason, but it doesn’t really get into all the nuts and bolts of routine care, and they do note the difficulty of assessment on using mere RLMS data even for medications:
    “The situation with preventive medications is more difficult to assess. The Russian Longitudinal Monitoring Survey indicates whether a person takes “any medication,” but not the type of medication. Still, use of “any medication” did not decline in Russia; in both 1993 and 2000, about 38 percent of Russian adults reported taking any medication. There is no broad-scale evidence that preventive care of this sort decreased.”
    There are also some cultural practices which were becoming more widespread in the 1980s (such as giving a person who may have died from other diseases “heart stroke” as a death reason in the documents), though the statistical significance of such anecdotal evidence is dubious. Finally, there are unevaluated dependencies in their study – dependencies between healthcare system and external deaths due to worse care (i.e. some part of the external reasons of mortality rise could’ve been prevented), and dependencies between the healthcare system and routine care, which includes not just daily medication, but visits to the doctor, et cetera. The problem of hospital closures and doctor hour reductions, and privatization of some services, might have impacted the ability of people to get care preventively. They also note: “Anecdotal evidence indicates that while modern drugs are prescribed for conditions such as cardiovascular disease, many patients cannot afford to purchase them (Reiss et al., 1996).” There is quite an indication that medication availability dramatically fell, not due to the hospital system but due to the collapse of pharmacology

    The graph shows synthetic medicines, vitamin and anti-biotic production dynamic in Russia. This is a factor that should be impacting the availability of medicines to people – the RLMS study had only a question of taking “any medicine” without type.

    Thanks for the interesting discussion, and a thumbs up to the mortality study, I try to keep up on what is coming out in socio-demographic studies of post-Soviet space but sometimes miss the most interesting things.

    18 Jun 2009, 15:21

  8. Mark Harrison

    Thanks. It’s an open question, then.

    18 Jun 2009, 15:34

  9. david waddilove longer of teignmouth but thanks for your comments (i think)...not sure i was trying to play guilt be association though…

    08 Feb 2012, 10:19

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I am a professor in the Department of Economics at the University of Warwick. I am also a research associate of Warwick’s Centre on Competitive Advantage in the Global Economy, and of the Centre for Russian, European, and Eurasian Studies at the University of Birmingham. My research is on Russian and international economic history; I am interested in economic aspects of bureaucracy, dictatorship, defence, and warfare. My most recent book is One Day We Will Live Without Fear: Everyday Lives Under the Soviet Police State (Hoover Institution Press, 2016).

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