Nor did markets prepare us well for soaring oil and food prices. Of course, neither sector is an example of free-market economics, but that is partly the point: free-market rhetoric has been used selectively – embraced when it serves special interests and discarded when it does not.
Perhaps one of the few virtues of George W. Bush’s administration is that the gap between rhetoric and reality is narrower than it was under Ronald Reagan. For all Reagan’s free-trade rhetoric, he freely imposed trade restrictions, including the notorious “voluntary” export restraints on automobiles.
Bush’s policies have been worse, but the extent to which he has openly served America’s military-industrial complex has been more naked.
The trouble with this is that Stiglitz - an eminent and brilliant intellectual - falls for the "the problem with free markets is that they're not free" fallacy. Free-market economists are *not* arguing for the status quo. Once we accept that substantial distortions to a free economy are in place, that there's a divergence between political rhetorical and actual policy, that we don't wish to commit the nirvana fallacy - then WHAT ARE WE ARGUING ABOUT? Stiglitz ends up like Klein by blaming the military-industrial complex on free markets. Surely we all realise this is nonsense?
He does not name the countries. Is Chile supposed to be a loser? Or does he have the more corrupt Latin American states in mind? How about Ireland or for that matter the economic policies of Mrs. Thatcher? Was it a mistake for so many states to drop communism? How many African nations -- the real losers -- have adopted neo-liberal policies? Do Singapore and Hong Kong count?
Let's not forget that over the last 20 years we've seen a social transformation unprecendeted in human history. Hundreds of millions of people have been liberated from dictatorship into liberal democracy, and all with an astonishing lack of violence and disruption. If we list countries that adopted shock therapy - Poland, Czech Republic, Estonia, Lithuania, Latvis (nb. not Russia) - is anyone arguing that they should have taken a more gradualist path (such as Turkmenistan, Belarus or Uzbekistan?). Stiglitz does, but do you really buy that?
That’s why it’s important to do serious work on possible policy reforms that aren’t politically feasible in the current climate. A brief “policy window” just might open up, and if you’re ready with a good idea, you might be the first one to jump through.
I have an article forthcoming in Constitutional Political Economy that addresses this very point. It is one of the chapters of my dissertation, and the basic argument is that:
At the constitutional level, ideas are a pre-analytic cognitive act that predetermine and dictate the direction of vested interests. Epistemic communities (in contrast to interest groups) disseminate ideas and have the capacity to seize constitutional moments and enact radical policy reform. This process is underpinned by radical uncertainty, and rests upon a capital structure of epistemic choice.
Having reflected on my previous criticisms of Naomi Klein (here and here), I would like to praise her for something - her journalism. In my book, I try to demonstrate that market fundamentalists were a long way from the policy table during transition. Indeed the countries that did engage in the most radical changes were down chiefly to domestic policy champions, rather than Western institutions. But my account is not definitive. Klein does a great job at shining a light on this topic, and fills in more of the historical record than an academic interested in comparative systems ever could. If read together, I think I illuminate the historical record better than she does. But once the heavily-marketed PR circus leaves the town is there anyone left willing to listen?