Covid-19 and 'disaster capitalism'

ARTICLE: Shock and awe are actions that create fears, dangers, and destruction that are incomprehensible to the people at large, specific elements/sectors of the threat society, or the leadership. Nature in the form of tornadoes, hurricanes, earth-quakes, floods, uncontrolled fires, famine, and disease can engender Shock and Awe. - Shock and Awe: Achieving Rapid Dominance, the military doctrine for the US war on Iraq

Just like individuals, the majorities in countries - the custodian of democracies - are unable to protect their interests in a state of 'shock and awe'. This makes them all the more vulnerable to vested interest groups or those who want to profit from such acute misery. Covid-19 is one such shock, the like of which is difficult to find at least in the past one century. Not only is the pandemic a health sector shock, it also constitutes a severe economic crisis for the entire world.

On the political front, the otherwise marginalized political parties are clawing their way to mainstream on the wings of xenophobia and ultra-nationalism. On the economic front, economic interest groups are looking to make use of this time of 'great vulnerability' to maximize their own profits on the basis of ideas, which Milton Friedman described as 'lying around'.

According to Friedman, "Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable."

Hence the governments - especially in developing countries - are feeling the pressure of fighting both coronavirus and protect the rising waves of poor, unemployed, and vulnerable masses. Most of the governments were already weak in terms of governance, planning and overall preparedness. This vulnerability of both the elected and the electorate leaves the door suddenly wide open for all those ideas lying around, which were otherwise harmful to the long-term interest of both of them.

Noted global intellectual Naomi Klein identifies this situation of shock, as for instance in this case caused by Covid-19, as an opportunity for 'disaster capitalism' to slide in. She defined this in her (2007) book "The shock doctrine: the rise of disaster capitalism" this as: "For Milton Freidman... the state's sole functions were 'to protect our freedom both from the enemies outside our gates and from our fellow-citizens: to preserve law and order, to enforce contracts, to foster competitive markets.' In other words, to supply the police and the soldiers - anything else, including providing free education, was an unfair interference in the market... . I call these orchestrated raids on the public sphere in the wake of catastrophic events, combined with the treatment of disasters as exciting market opportunities, 'disaster capitalism'."

Ever since prime minister Imran Khan took office, there has been a call from many Neoliberalism-inclined 'Chicago boys' in his cabinet - ministers, advisors and special assistants: have been trying to reduce the sphere of government to the basic minimum, highlighting this in turn as the panacea for most economic issues. For instance, they, in the case of wheat or sugar crisis underscore the need for reducing the footprints of the government so that market forces alone determine what to do. Similarly, rather than trying to resolve the circular debt crisis in the energy sector or bringing about improvement in state-owned enterprises (SOEs) through good governance and incentive structures, their standard answer is: privatisation.

The PM appears to be resisting such moves. Yet the current shock should alert the PM, as 'lying around' ideas may make a comeback. They generally did from the times of colonization to post-colonization under these shock-like situations. Political-economic elites manipulate markets to their advantage in the absence of a strong government presence through the use of neoliberal economics; which work quite well with their design to make abnormal profits by artificially controlling supply chains, and information asymmetries to which they are privy as a consequence of their inordinate wealth and power. In an opportunistic way, they seek to reduce the presence of a government to the minimum in the window of opportunity created by this shock.

The prime minister must be aware of the fact that the world has suffered immensely from the ravages of outright privatizations and liberalizations - from the fiasco in Chile under General Pinochet, who had similar set of 'Chicago boys'' presence in his cabinet, to the miseries inflicted upon general public by K-Electric in the local sense. He must be aware of the reasons behind the rise in the number of developing countries becoming prolonged users of IMF resources, the East Asian Crisis and the Global Financial Crisis. The question is why he is not understanding the risk of thrusting upon him these 'lying around' ideas. The PM should not become a victim of 'disaster capitalism'.

Already, there is a sudden build-up in the wake of the pandemic shock to privatize Pakistan Steel Mills. The general idea developing in the world, for around a decade, has been to move towards greater retention of SOEs in the public sector but the sudden shock has strengthened the vested interest groups to use the neoliberal tools to thwart such thinking in this great vulnerability of governments and peoples. Surprisingly, the same group of people has also started to push for greater devolution. While devolution of power and resources should reach the lowest tiers of governance, a healthy balance needs to be reached so that private sector is not left with a too weak government which they desire through 'disaster capitalism'. A woefully weak government cannot protect the welfare and interests of the people from the profit-over-people designs of these vested interest groups.

Instead the PM should check the naivety to such vested interests or interest groups of the 'Chicago boys' in his cabinet. The PM should understand the sensitivity of the crisis in terms of the dangers it brings forth in the shape of 'disaster capitalism'. He must not take a leaf out of Friedman's book 'Capitalism and Freedom' as was once done by the then US President Ronald Reagan who gave a lot of space to the Neoliberal thought process to take roots in US's economy which resulted in the shape of rising income inequality and weak supervision of the financial sector. He must listen to Naomi Klein who, for example, argues in her same book: "The 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. Instead... this fundamentalist form of capitalism has consistently been midwifed by the most brutal forms of coercion, inflicted on the collective body politic as well as on countless individual bodies. The history of contemporary free market - better understood as the rise of capitalism - was written in shocks... I am not arguing that all forms of market systems are inherently violent. It is eminently possible to have a market-based economy that requires no such brutality and demands no such ideological purity."

(The writer holds PhD in Economics from the University of Barcelona; he previously worked at International Monetary Fund) He tweets@omerjaved7

Copyright Business Recorder, 2020