Shock Doctrine and Budget Crisis in California and Wisconsin

Only a crisis produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.
--Milton Friedman

Naomi Klein's book The Shock Doctrine: The Rise of Disaster Capitalism lays out an important argument for understanding how neoliberal reforms -- which are often incredibly unpopular -- are implemented. Because these policies generate so much resistance, Klein argues, governments are generally unable to pass them through democratic means. What they do instead is take advantage of moments of crisis -- financial collapse, military coups, even so-called natural disasters -- to push through legislation that fundamentally restructures economies in ways that benefit the rich at the expense of the poor. This is what Milton Friedman is getting at in the infamous quote above.

It's always important to remember, however, that these crises are not natural but actively produced. This is especially the case with economic crises. There is a tendency to talk about the financial crisis, for example, as if it were out of our hands. Even when the banks' illegal, manipulative, and exploitative practices are noticed and criticized, politicians across the political spectrum continue to talk about appropriate responses in terms of inevitability. There is no other choice. Our hands our tied. They love the phrase "difficult choices." In his State of the State address, California Governor Jerry Brown used the expression, and went on: "Do I like the choices we face?" he asked rhetorically. "No. I don't. But after serious study of the options left us by a $25 billion deficit, the budget I have proposed is the best I can devise." In the wake of his recent budget proposal, President Obama did the same and added a little something extra about "sacrifice." These are extremely common references, tropes of our current political discourse.

Obviously this is also the case with the "state of fiscal emergency" declared by UC President Mark Yudof and the UC regents in 2009. It was this crisis that UC officials used to justify the 32 percent tuition increase the forced through in November 2009. Far from natural or unavoidable, however, both the crisis and the tuition hike were planned and produced. Not only did those responsible for the UC's investments lose $23 billion in 2008-2009, but as Bob Meister has demonstrated convincingly the UC committed itself to raising student fees long before the so-called financial crisis hit:

To people in the financial world, it’s already obvious that UC committed itself to raise tuition and cut budgets when it decided in 2004 to secure its bonds. Most of my UC colleagues -- faculty, students and staff -- nevertheless find it unthinkable that UC would actually raise tuition and cut instruction in order to fund construction. People understand that UC wants to build. What’s unthinkable is that UC would still want to build rather than protect its programs and people when other great universities, including Harvard, indefinitely postponed new construction when their endowment income fell.

In fact, it turns out that the UC actually benefits from reductions in state funding, at least as far as its bonds and capital projects agenda are concerned. State funding cannot be used as bond collateral, but student tuition can.

Not only are current reductions in state funding a drop in the bucket of UC’s total endowment -- and nothing compared to the growing revenue of the university’s profit-generating wings -- it is also the case that UC administration has powerful motives to both collaborate with the continuing divestment of state funding and to divert its own resources from spending on instruction. . . . "I’m here today to tell you," said [UC Berkeley graduate student Annie] McClanahan, "that when students and their parents have to borrow at 8 or 10 or 14% interest so that the UC can maintain its credit rating and its ability to borrow at a .2% lower rate of interest, we the students are not only collateral, we are collateral damage."

Something similar is happening right now in Wisconsin at the state level, where the new governor has used the specter of massive deficits to attempt to destroy the state's unions. While his proposal includes some budget cuts,  what is most striking -- and most damaging -- is the attempt to eliminate or at least severely curtail the ability of public employees unions to engage in collective bargaining. Educators are obviously a huge target, and in response teachers and students across the state have staged massive walkouts and work stoppages. Once again, as Brian Beutler has shown, not only the budget crisis story but the budget crisis itself -- the entire basis of the political intervention -- is completely manufactured:

Wisconsin's new Republican governor has framed his assault on public worker's collective bargaining rights as a needed measure of fiscal austerity during tough times.

The reality is radically different. Unlike true austerity measures -- service rollbacks, furloughs, and other temporary measures that cause pain but save money -- rolling back worker's bargaining rights by itself saves almost nothing on its own. But Walker's doing it anyhow, to knock down a barrier and allow him to cut state employee benefits immediately.

Furthermore, this broadside comes less than a month after the state's fiscal bureau -- the Wisconsin equivalent of the Congressional Budget Office -- concluded that Wisconsin isn't even in need of austerity measures, and could conclude the fiscal year with a surplus. In fact, they say that the current budget shortfall is a direct result of tax cut policies Walker enacted in his first days in office.

The point, then, is not that there's no crisis, that there's nothing wrong. Rather, what's important to remember is simply that disaster capitalism and economic austerity are not a inevitable response to disaster, "natural" or otherwise. Indeed, they are not a response at all: the production of crisis is not exterior to, but a necessary component of, economic shock. The shock doctrine actively generates crisis in order to create the appearance of the accident, the natural, the unavoidable.

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More info on the Wisconsin protests is at The Burnt Bookmobile (we found our way there via occupyca). Among other things they've posted the text of a communiqué that was circulating at the takeover of the capitol building the other day:

Crisis isn’t simply what happens to us. We aren’t victims with no agency who desire a return to a capitalism that works. We understand that capitalism is working. This is what it does. But what do we do? How do we escape the order of established politics and protest and enter into resistance? How do we render the world which alienates us inoperative and become a force capable of being the contradiction that tears it apart? How shall we become the crisis?

We propose: Choose to be partisans in this war which has already started. Block the economy, strike, occupy, and sabotage.

We respond to Scott Walker, his policies, and what he represents, but we must become a force that makes all positions of power obsolete. It will then no longer matter what politicians think or do. It will only matter what we do.

[Update Sunday, 5:19pm]: I missed this yesterday. In this video, Naomi Klein discusses the shock doctrine in the context of what's happening in Wisconsin. Take a look at the video and note the underlying assumption of Klein's formulation here: "Lo and behold you have a budget crisis, you exaggerate the extent of the crisis, and you say, 'We don't have any alternative but to push through these very unpopular measures.'" What she is suggesting, in other words, is that crisis is external to these political games. Crisis just is -- what the politicians do is exaggerate it. But, as the case of Wisconsin demonstrates, crisis is made, at times in carefully calculated ways.

[Update #2, Friday 2/25]: Even Paul Krugman's on board now.