Saturday, August 1, 2009

The Shock Doctrine

I have to admit that when it comes to finance or economics, I am simply as ignorant as can be. And every time I tried to change that fact, I just failed cause I could not understand anything of what the "experts" said or wrote. As a matter of fact, the harder I tried, the more confused I got. So, I just took it for granted that my brain was just not meant to understand money matters.

Well, I am glad to announce that this has recently changed. I finally discovered that I was not getting what the (so called) "experts" said simply because it did not make any sense, and not because I was (God forbid) stupid.

So when I read the following news bulletin:

Following their recent visit to Egypt, IMF staff issued this concluding statement:

"For the medium-term, reducing fiscal vulnerabilities is be a precondition for achieving Egypt’s growth potential. Sustained high fiscal deficits and public debt could undermine investors’ confidence and put upward pressure on the yield curve, with attendant risks to government financing costs, economic activity and the exchange rate. Government plans to resume medium-term fiscal consolidation as the global economy rebounds are well-placed. The authorities are aware that a credible fiscal consolidation strategy will be crucial to support investor confidence and foster private sector-led growth. This should be supported by policy actions to: strengthen revenues through introduction of a full-fledged VAT; and increase the efficiency and control of government spending with further rationalization of subsidies and decisive progress with financial management reforms. As plans for pension and health care reforms are finalized, it would be important to ensure that the potential fiscal impact is controlled."

instead of simply shrugging my shoulders and assuming that the IMF "experts" knew what they were talking about, I honestly panicked!!

Why? Because this recipe for "boosting" Egypt's economy is nothing but the same "Washington Consensus"; a term coined by John Williamson to describe a set of ten specific economic policy prescriptions that he considered should constitute the "standard" reform package promoted for crisis-wracked developing countries by Washington DC-based institutions such as the International Monetary Fund, World Bank and the US Treasury Department who mercilessly forced those polices on people of South Africa, and the Asian Tigers following the rumored crash of the nineties.

Those set of policies are in complete sync with the "Shock Therapy" policies pioneered by Milton Friedman and his "Chicago Boys" who applied those policies in Chile, Argentina, & China. The "Berkeley Mafia" did the same thing in Indonesia. And Jeffery Sachs applied more or less the same policies in Bolivia, Poland, and then in Russia.............. (well this is all I know for now).

The good news is that the "Disaster Capitalism" policies had extremely positive results to the multinational corporations, Wall Street, the richie-rich, and most of the time, the leaders of those countries. The bad news is that the same policies came at an extremely high cost to the majority of the people of those countries.

OK, I do apologize for showing off, but I couldn't resist it.

The reason I understand world economy & finance better now is that I am currently reading "The Shock Doctrine" by Naomi Klein. This book finally confirmed what I suspected all along. To find what that is, please read this book. I am sure that you will have as many "Oh My GOD!!" moments as I did.

If you are Egyptian, then you have to read this excellent book by Naomi Klein so you can formulate an educated opinion regarding Businessmen getting into bed with the government, the on-going privatization of Egypt public sector, the reductions in subsidies, and other so called "reform" policies.

Until you do, don't be surprised if I ignore you or even pretend that I don't know you. I refuse to talk to or socialize with people who are as ignorant as I was four days ago!!


Mohamed Hanno said...

Sorry Nahoul, but 'Shock Doctrine' is not economics 101 and it can never be. It is the work of an opinionated radical journalist who is out to lobby you against certain policies and economic theories not to explain economic facts and pros and cons of certain economic measures.
It might have explained a few things but it has probably skipped many that might affect your understanding of these issues. So me wary.

nahoul said...

No need to apologize, I did admit up front that when it comes to money matters, I am hopeless.

The thing is, I'd rather be as opinionated and radical as Arundhati Roy, Tim Robbins, Seymour Hersh, and John Berger (they wrote positive reviews supporting the book); and side with the poor and obscure than be as smart as Reagan, Clinton, Bush -father & son -, Pinochet, Menem, Paz, Suharto, Zhao Ziyang, Yeltsin and side with the rich and famous.

Go Naomi!!!

I am planning to read "No Logo" next.

Mohamed Hanno said...

Declaring your limited knowledge of the subject is no excuse for depending on one source/ one sided view. And it is not an Either/Or situation. The abhorrent Neoconservatism is no execuse for failed socialist policies.
Siding with Naomi and Robbins is not synonymous with siding with the poor. Many of those who side with the poor like Nasr or Chavis don't do them much good.

Mohamed Hanno said...

.....after rereading your comment I must say: WOW. Zhao Ziyang who wanted to fight corruption of the communist party and was sympathetic to chinese Tiananmen demonstrators is a supporter of the rich. So are you a Mao and Stalin fan?

nahoul said...

Come on. Unfair. That was obviously a mistake. (well I'm also not very good with Chinese names) I meant Deng Xiaoping. But I can say hello in Chinese "neee how". Can you?

And why do you have to assume that I am a fan of any leader? (Are you? Who is She/He?)

Should I go with the safe & classic Gandhi? or may be Mandela is more in these days?

I hope you don't mind, but I will stick to supporting the Wretched of the Earth. Oh no, forget I said that, please don't accuse me of supporting violence.

Now regarding my one source, this is not true. I have discovered, not too long ago, that what I assumed were multiple sources, or true debates are not. Just look at who owns the major news networks and newspapers around the world. Large corporation and tycoons like Murdoch. And who owns the Arab networks & papers now-a-days?
same same!!

So I turned to alternative sources and I found plenty.

So Naomi is just one in a long list that includes Edward Said, Rashid Khalidi, Cornel West, Noam Chomsky, Chris Hedges, Amy Goodman, John Berger, Arundhati Roy, Seymour Hersh, Robert Fisk, Andrew Becevich, Howard Zinn, Paul Findley, Vijay Prashad, Victoria Brittain, and even Bob Woodward to name a few. And yes, Ahdaf Soueif too. And yes most of them are on the left but this is needed to balance the right wing bombardment from FOX news, CNN, NY Times, WSJ, ....

As for Arabic alternative sources, I find those in some excellent blogs.

So I'm not a communist nor a socialist. I am not a big fan of theories. I just try to hear all sides then I use my good old gut-feeling to judge things.

Thank you for this "conversation".

Mohamed Hanno said...

I hope your "thank you for this convesation" is not a sign that it is time to end it.
CNN and NYTimes are right wing?'re such a radical.
The problem is, though I'm totally against what Reagan, Bush and their fellow conservatives stand for and I'm not a Milton Friedman fan, yet, I don't see much of an alternative coming from your list of 'friends'. I must admit I sympathize with them and tend to cheer them but (call me a skeptic)the poor's suffering is equally the consequence of leftist policies as it is of the right.

bosman said...

Hello Nahoul,
Well I could not stay away from this topic. I did read the book. Here is my 2 cents worth opinion. I think capitalism remains the best economic strategy. It promotes work and innovation which can sustain an economy. Sure there are people who use the cover of capitalism to promote their own political agendas. That should not push us to the extreme opposite, we know it is not successful either, but rather to revisit our controls and checks and balances to ensure that this does not happen. In my opinion two wrongs do not make a right.

nahoul said...

Dear Bosman,

Thank you for your comment.

But please tell me, did I write something that implied that i am anti-Capitalism in general? And that I am an extremist too?

I am against the Milton Friedman flavor of Capitalism but am a supporter of the Keynesian economics.

A middle ground between "laissez-faire" capitalism and socialism.

So no huge disagreement there.

nahoul said...


I did not mean to imply that it was time to end our discussion.

I guess my previous reply sums up my position, so I won't repeat what I wrote earlier here.

As for "the poor's suffering is equally the consequence of leftist policies as it is of the right." comment, I have a feeling that many people (especially the poor) would disagree, but 7afawetlak di.

Kamil said...

This is a book that should be mandatory reading to all human beings. Sadly so much is kept hidden about the realities of the injustices that are taking place in the name of humanity, justice and freedom!!!!!

It is a wake up call. Knowledge is POWER.