Wall St. Crisis Should Be for
Neoliberalism What Fall of Berlin Wall Was for Communism
a speech by Naomi Klein at the
University of Chicago, October 1, 2008
Naomi Klein spoke at the University
of Chicago , invited by a group of faculty opposed to the creation
of an economic research center called the Milton Friedman Institute.
It has a $200 million endowment and is named after the University's
most famous economist, the leader of the neoliberal Chicago School
When Milton Friedman turned ninety, the
Bush White House held a birthday party for him to honor him, to
honor his legacy, in 2002, and everyone made speeches, including
George Bush, but there was a really good speech that was given
by Donald Rumsfeld. I have it on my website. My favorite quote
in that speech from Rumsfeld is this: he said, "Milton is
the embodiment of the truth that ideas have consequences."
So, what I want to argue here is that,
among other things, the economic chaos that we're seeing right
now on Wall Street and on Main Street and in Washington stems
from many factors, of course, but among them are the ideas of
Milton Friedman and many of his colleagues and students from this
school. Ideas have consequences.
More than that, what we are seeing with
the crash on Wall Street, I believe, should be for Friedmanism
what the fall of the Berlin Wall was for authoritarian communism:
an indictment of ideology. It cannot simply be written off as
corruption or greed, because what we have been living, since Reagan,
is a policy of liberating the forces of greed to discard the idea
of the government as regulator, of protecting citizens and consumers
from the detrimental impact of greed, ideas that, of course, gained
great currency after the market crash of 1929, but that really
what we have been living is a liberation movement, indeed the
most successful liberation movement of our time, which is the
movement by capital to liberate itself from all constraints on
So, as we say that this ideology is failing,
I beg to differ. I actually believe it has been enormously successful,
enormously successful, just not on the terms that we learn about
in University of Chicago textbooks, that I don't think the project
actually has been the development of the world and the elimination
of poverty. I think this has been a class war waged by the rich
against the poor, and I think that they won. And I think the poor
are fighting back. This should be an indictment of an ideology.
Ideas have consequences.
Now, people are enormously loyal to Milton
Friedman, for a variety of reasons and from a variety of sectors.
You know, in my cynical moments, I say Milton Friedman had a knack
for thinking profitable thoughts. He did. His thoughts were enormously
profitable. And he was rewarded. His work was rewarded. I don't
mean personally greedy. I mean that his work was supported at
the university, at think tanks, in the production of a ten-part
documentary series called Freedom to Choose, sponsored by FedEx
and Pepsi; that the corporate world has been good to Milton Friedman,
because his ideas were good for them.
But he also was clearly a tremendously
inspiring teacher, and he had a gift, like all great teachers
do, to help his students fall in love with the material. But he
also had a gift that many ideologues have, many staunch ideologues
have-and I would even use the word "fundamentalists"
have-which is the ability to help people fall in love with a perfect
imagined system, a system that seems perfect, utopian, in the
classroom, in the basement workshop, when all the numbers work
out. And he was, of course, a brilliant mathematician, which made
that all the more seductive, which made those models all the more
seductive, this perfect, elegant, all-encompassing system, the
dream of the perfect utopian market.
Now, one of the things that comes up again
and again in the writings of University of Chicago economists
of the Friedman tradition, people like Arnold Harberger, is this
appeal to nature, to a state of nature, this idea that economics
is not a political science or not a social science, but a hard
science on par with physics and chemistry. So, as we look at the
University of Chicago tradition, it isn't just about a set of
political and economic goals, like privatization, deregulation,
free trade, cuts to government spending; it's a transformation
of the field of economics from being a hybrid science that was
in dialogue with politics, with psychology, and turning it into
a hard science that you could not argue with, which is why you
would never talk to a journalist, right? Because that's, you know,
the messy, imperfect real world. It is beneath those who are appealing
to the laws of nature.
Now, these ideas in the 1950s and '60s
at this school were largely in the realm of theory. They were
academic ideas, and it was easy to fall in love with them, because
they hadn't actually been tested in the real world, where mixed
economies were the rule.
Now, I admit to being a journalist. I
admit to being an investigative journalist, a researcher, and
I'm not here to argue theory. I'm here to discuss what happens
in the messy real world when Milton Friedman's ideas are put into
practice, what happens to freedom, what happens to democracy,
what happens to the size of government, what happens to the social
structure, what happens to the relationship between politicians
and big corporate players, because I think we do see patterns.
Now, the Friedmanites in this room will
object to my methodology, I assure you, and I look forward to
that. They will tell you, when I speak of Chile under Pinochet,
Russia under Yeltsin and the Chicago Boys, China under Deng Xiaoping,
or America under George W. Bush, or Iraq under Paul Bremer, that
these were all distortions of Milton Friedman's theories, that
none of these actually count, when you talk about the repression
and the surveillance and the expanding size of government and
the intervention in the system, which is really much more like
crony capitalism or corporatism than the elegant, perfectly balanced
free market that came to life in those basement workshops. We'll
hear that Milton Friedman hated government interventions, that
he stood up for human rights, that he was against all wars. And
some of these claims, though not all of them, will be true.
But here's the thing. Ideas have consequences.
And when you leave the safety of academia and start actually issuing
policy prescriptions, which was Milton Friedman's other life-he
wasn't just an academic. He was a popular writer. He met with
world leaders around the world-China, Chile, everywhere, the United
States. His memoirs are a "who's who." So, when you
leave that safety and you start issuing policy prescriptions,
when you start advising heads of state, you no longer have the
luxury of only being judged on how you think your ideas will affect
the world. You begin having to contend with how they actually
affect the world, even when that reality contradicts all of your
utopian theories. So, to quote Friedman's great intellectual nemesis,
John Kenneth Galbraith, "Milton Friedman's misfortune is
that his policies have been tried."
AMY GOODMAN: Naomi Klein, author of the
bestselling book The Shock Doctrine: The Rise of Disaster Capitalism.
We'll come back to her speech at the University of Chicago in
AMY GOODMAN: We return to Naomi Klein,
bestselling author of The Shock Doctrine, talking at the University
of Chicago on Wednesday about the current economic crisis and
the legacy of Milton Friedman.
NAOMI KLEIN: This process of measuring
an elegant perfect, beautiful, inspiring ideology against a messy
reality is a painful process, and it's a process that anyone who
has tried to free themselves from the confines of fundamentalist
thinking, from ideological constraints, has faced. My grandparents,
for instance, were pretty hardcore Marxists. In the '30s and '40s,
they believed fervently in the dream of egalitarianism that the
Soviet Union represented. They had their illusions shattered by
the reality of gulags, of extreme repression, hypocrisy, Stalin's
pact with Hitler.
I bring this up, because the left has
been held accountable for the crimes committed in the name of
its extreme ideologies, and I believe that it's actually been
a very healthy process for the left, one that isn't over, that
is continuing. But I think that the process of having to examine
the unacceptable compromises that were made in the name of hard
ideology, that they are paying off in the way the left today is
being reborn and re-imagined.
You know, the most left-wing place on
the planet at the moment is, interestingly enough, the first place
where Chicago School ideology made that leap from the textbook
into the real world, and that's Latin America. And that happened
for a very specific reason, as you know. This-in the 1950s, there
was great concern at the State Department about the fact that
Latin America, then as now, as it seems to do, was moving to the
left. There was concern about what they called the "pink
economists," the rise of developmentalism, import substitution,
and, of course, socialism. And, of course, this was a concern
because it greatly affected American and European interests, because
the crux of the argument of import substitution was that countries
like Chile and Argentina, Guatemala, should stop exporting their
raw natural resources to the north and then importing expensive
processed goods to the south, that it didn't make economic sense,
that they should use the same tools of protectionism, of state
supports, that built the economies of Europe and North America.
That was that crazy radical idea, and it was unacceptable.
So, this plan was cooked up-it was between
the head of USAID's Chile office and the head of the University
of Chicago's Economics Department-to try to change the debate
in Latin America, starting in Chile, because that's where developmentalism
had gained its deepest roots. And the idea was to bring a group
of Chilean students to the University of Chicago to study under
a group of economists who were considered so extreme that they
were on the margins of the discussion in the United States, which,
of course, at the time, in the 1950s, was fully in the grips of
Keynesianism. But the idea was that there would be-this would
be a battle to the-a counterbalance to the emergence of left-wing
ideas in Latin America, that they would go home and counterbalance
the pink economists.
And so, the Chicago Boys were born. And
it was considered a success, and the Ford Foundation got in on
the funding. And hundreds and hundreds of Latin American students,
on full scholarships, came to the University of Chicago in the
1950s and '60s to study here to try to engage in what Juan Gabriel
Valdes, Chile's foreign minister after the dictatorship finally
ended, described as a project of deliberate ideological transfer,
taking these extreme-right ideas, that were seen as marginal even
in the United States, and transplanting them to Latin America.
That was his phrase-that is his phrase.
But today, we see that these ideas are
reemerging in Latin America. They were suppressed with force,
overthrown with military coups, and then Chile and Argentina,
Uruguay and Brazil all became, to varying degrees, laboratories
for the ideas that were taught in the classrooms of the University
of Chicago. But now, because there was never a democratic consent
for this, the ideas are reemerging.
But one of the things that's interesting
about the new left in Latin America is that democracy is at the
very center. And, you know, the first thing that Rafael Correa
did when he was elected president of Ecuador, for instance-well,
the first thing he did was give an interview. They said, "What
can we expect of your economic program?" He said, "Well,
let's put it this way: I'm no fan of Milton Friedman's."
And then he called a constituent assembly. He created an incredibly
open political process to rewrite the country's constitution.
And that's what happened in Bolivia, and that's what's happened
in many Latin American countries, because democracy is being put
at the center of these projects, because there has been a learning
process of looking at the mistakes that the left has made in the
past, the ends-justify-the-means mistakes.
So, I think all ideologies should be held
accountable for the crimes committed in their names. I think it
makes us better. Now, of course, there are still those on the
far left who will insist that all of those crimes were just an
aberration-Mao, Stalin, Pol Pot; reality is annoying-and they
retreat into their sacred texts. We all know who I'm talking about.
But lately, particularly just in the past
few months, I have noticed something similar happening on the
far libertarian right, at places like the Cato Institute and the
Reason Foundation. It's a kind of a panic, and it comes from the
fact that the Bush administration adapted-adopted so much of their
rhetoric, the fusing of free markets and free people, the championing
of so many of their pet policies. But, of course, Bush is the
worst thing that has ever happened to believers in this ideology,
because while parroting the talking points of Friedmanism, he
has overseen an explosion of crony capitalism, that they treat
governing as a conveyor belt or an ATM machine, where private
corporations make withdrawals of the government in the form of
no-bid contracts and then pay back government in the form of campaign
contributions. And we're seeing this more and more. The Bush administration
is a nightmare for these guys-the explosion of the debt and now,
of course, these massive bailouts.
So, what we see from the ideologues of
the far right-by far right, I mean the far economic right-frantically
distancing themselves and retreating to their sacred texts: The
Road to Serfdom, Capitalism and Freedom, Free to Choose. So that's
why I've taken to calling them right-wing Trotskyists, because
they have this-and mostly because it annoys them, but also because
they have the same sort of frozen-in-time quality. You know, it's
not, you know, 1917, but it's definitely 1982. Now, the left-wing
Trots don't have very much money, as you know. They make their
money selling newspapers outside of events like this. The right-wing
Trots have a lot of money. They build think tanks in Washington,
D.C., and they want to build a $200 million Milton Friedman Institute
at the University of Chicago.
Now, this brings up an interesting point.
It's an interesting point about the think tanks, in general, which
has to do with the fact that it does seem to take so much corporate
welfare to keep these ideas alive, which would seem to be a contradiction
of the core principle of free market ideology-I mean, and particularly
now, in the context of the Milton Friedman Institute. I mean,
I could see it in the '90s, but now, is the world really clamoring
for this? Is there really a demand that you are supplying here?
I think this points to a larger issue,
and this comes up-has come up for me again and again in talking
about this ideology, this ideological campaign. You know, is it-is
it really fueled by true belief, and-or is it just fueled by greed?
Because it's not-the thoughts are so very profitable. So they
are distinctive in that way, distinctive from other ideologies.
And, of course, you know, certainly we know that religion has
been a great economic partner in imperialism. I mean, this isn't
an entirely new phenomenon. But this is a question that comes
up a lot. And I think it's very difficult to answer, and it's
clear, certainly at this school, that much of it is fueled by
belief, by true belief, by falling in love with those elegant
But I think we also need to look particularly
at this moment, who this ideology benefits directly economically,
keeping it alive in this moment, and how, even in this moment,
when everybody is saying, you know, this is the end of market
fundamentalism, because we're seeing this betrayal of the basic
tenets of the non-interventionist government by the Bush administration-you
know, I believe this is a myth and that the ideology has just
gone dormant, because it's ceased to be useful. But it will come
roaring back, and I'll talk a little bit more about that.
But, you know, I was interested that yesterday
the Heritage Foundation, which has always been a staunch Friedmanite
think tank, that they came out in favor of the bailout. They came
out in favor of the bailout; they said it was vital. And what's
interesting about that is, of course, the bailout is creating
a crisis in the economic-in the public sphere. It's taking a private
crisis, a crisis on Wall Street, which of course isn't restricted
to Wall Street, and it will affect everyone, but it is moving
it, moving those bad debts, onto the public books.
And now the Bush administration has already
left the next administration, whoever it is, with an economic
crisis on their hands, but with this proposed transfer, they're
dramatically increasing that crisis. So, we can count, I would
argue, on the Heritage Foundation refinding their faith, refinding
their faith when it becomes necessary and useful to once again
argue that the way to revive the American economy is to cut taxes,
cut regulation, to stimulate the economy-and, by the way, we can't
afford Social Security; we're going to have to privatize it, because
we've got this terrible debt and deficit on our hands. So, the
ideology is far from dead, and what we are, I think, seeing with
this proposed monument to Friedmanism is really a way of entrenching
it and making sure that it is always available to come back, to
come roaring back.
So, I said I would talk a little bit about
Friedmanism and the links to the current crisis. And, you know,
it's pretty direct. Milton Friedman is pretty much accepted as
the godfather of deregulation. And this was-this ideology was
the rationale for turning the financial sector into the casino
that we see today. You know, Milton Friedman was clear about this.
He believed that "history took a wrong turn," and that's
a quote; it's a quote from a letter he wrote to Augusto Pinochet.
He said, "History took a wrong turn in your country, as well
as mine." And he was referring to the responses to the Great
Depression. In Chile, it was the rise of import substitution and
developmentalism. But in the United States, he was of course referring
to the New Deal.
And I think that the Chicago School of
Economics is properly understood as a counterrevolution against
the New Deal, against regulations like Glass-Steagall, that was
put in place in 1934 after having seen people lose their life
savings to the market crash, and it was a firewall, a very simple,
sensible law that said if you want to be an investment bank, if
you want to gamble, gamble with your investors' money, but the
government isn't going to help you because it's your own risk.
You can fail. And if you want to be a commercial bank, then we
will help you. We will offer insurance to make sure that those
savings are safe, but you have to restrict the risks that you
take. You cannot gamble. You cannot be an investment bank. And
a firewall was put up between investment banks and consumer banks.
And now we look at the way in which this
crisis is supposedly being solved, and what we see, actually,
is a wave of mergers in the banking sector, a wave of mergers
with the banks getting bigger and bigger until ultimately-you
know, the Financial Times was predicting today that eventually
the United States will have three big banks, just like Japan does.
That's where it's heading. And, of course, all of those banks
will be too big to fail. So they all have this implicit guarantee;
it's not just Fannie and Freddie. It's any function that is too
important to fail has this implicit guarantee.
Phil Gramm is the person, you know, on
the legislative side who did the most to create the legislative
context for what we're seeing right now in the financial sector.
You know, I think everyone knows that Phil Gramm, most famously,
recently is the one who said that America was in a mental recession
and a bunch of whiners and all of that. And so, he's not officially
an adviser to McCain, but there is talk that if he were to win
the elections, he would be Treasury Secretary. You know, I point-I
bring him up because Phil Gramm was a Milton Friedman fanatic.
I think you know this. In 1999, the same year that he led the
charge to strike down Glass-Steagall, he also-Phil Gramm-pressed
Congress to get the Medal of Honor for Friedman. When he ran in
the-when he made his 1996 presidential run, McCain was the co-chair
of his campaign. Phil Gramm was asked, "If you had to rely
on a single person as your foremost economic policy adviser, who
would it be?" And he replied, "Dr. Milton Friedman."
So we see the connections between deregulation and Friedmanism.
I also think there's something else at
play in the kind of politicians that are attracted to this particular
ideology. You know, Reagan was the first really to embrace it,
and Nixon was the great disappointment to Friedman. I'm sure you
all know that. You know, he writes in his memoir that when Nixon
was elected, he was euphoric. I mean, he couldn't imagine an American
president more closely aligned ideologically than Richard Nixon.
But Richard Nixon insisted on governing, and he wanted to win
elections, and he imposed wage and price controls. And Milton
Friedman sort of had a bit of a temper tantrum and declared him
the most socialist president in modern American history. But,
you know, it was-so it was really Reagan who campaigned, you know,
with his copy of Capitalism and Freedom on the campaign trail,
who was the first person to really put Friedmanism into practice.
And I raise this because, you know, one
of the things that we hear about McCain is that he doesn't really
know about economics, and so I think that makes us inclined not
to take his economic ideas seriously, not to think he would be
a really serious economic force. I think just the opposite. And
I think if you look at his campaign platform, you see just the
opposite. He wants to privatize Social Security. He is saying
that in the first 100 days they'll look at every single government
program, and they will either reform it or shut it down if it
is not serving taxpayers. I mean, they are talking about a sort
of hundred-day economic shock therapy period. And I think it's
the fact that he doesn't know about economics, and that Sarah
Palin, I suspect, knows a little less, that actually makes them
And I don't-you know, I don't think it
is-not to be too flippant-I'm sure that I've, you know, offended
everyone, so I may as well just say bad things about Ronald Reagan-but
I do think that, you know, that it isn't a coincidence that, you
know, a movie star president champions these ideas, or a body-builder
governor, you know, who says, "Dr. Friedman changed my life"-I
don't know if you've seen Arnold Schwarzenegger's introductions
to Freedom to Choose, but they're good. You should. YouTube them.
But the appeal of these ideas, I think, to politicians who are
actually in over their head on economics-and, by the way, this
goes for military dictators, too, like Pinochet-who get control
over a country and are totally clueless about how to run an economy,
is that it lets them off the hook completely. It says government
is the problem, not the solution. Leave it to the market. Laissez-faire.
Don't do anything. Just undo. Get out of the way. Leave it to
AMY GOODMAN: Naomi Klein is author of
The Shock Doctrine: The Rise of Disaster Capitalism, speaking
at the University of Chicago against the naming of the economics
institute there after its most famous economist, Milton Friedman.
We'll come back to the conclusion of her address in a minute.
AMY GOODMAN: We go back to the final portion
of Naomi Klein's address at the University of Chicago last week,
invited by a faculty group opposed to the creation of a $200 million
Milton Friedman Institute, a research center honoring the ideals
of the late Chicago School economist.
NAOMI KLEIN: This crisis moment, of course,
is going to play out in a lot of different ways. And, you know,
the other major contribution-another major contribution of Friedmanism
to the policy framework is not just deregulation, but privatization,
of everything. And, you know, in Capitalism and Freedom, he lays
out his wish list, everything from the post office to national
parks. So I think it's interesting to think about how this crisis
will effect future plans for privatization.
And, in fact, it already is, because the
next big bubble-and, by the way, this idea of bubbles is intimately
connected to the idea of governments who think that their role
is simply to create the context for maximum profit seeking-I mean,
that you just get out of the way; anything that makes money is
good, even if, you know, it's entirely divorced from the real
economy, if it inflates-your GDP is still going up. And the next
big bubble-they went from dotcom to housing-is projected to be
The crisis, you know-and this is where
Friedmanism becomes a kind of a self-fulfilling prophecy, because
you neglect the public sphere and-because you have tax cuts and
because you've derided the public sphere, and we certainly saw
this in New Orleans during Hurricane Katrina, which was not a
natural disaster; it was a disaster borne of a collision between
heavy weather and a weak infrastructure. But then, that was used
to rationalize really just erasing the public sphere altogether,
closing Charity Hospital, the only hospital that treats the uninsured
in New Orleans, closing down the public housing projects. Richard
Baker, Republican congressman, said, "We couldn't clean out
the housing projects, but God did."
Milton Friedman-and I start the book with
this story-wrote a piece; it was one of his last pieces of writing,
his last major policy recommendation. He wrote a piece for the
Wall Street Journal, saying that it was an opportunity, the fact
that parents and teachers and children were scattered across the
United States after Hurricane Katrina, an opportunity to radically
remake the education system. Now, that-and, of course, turned
into a voucher system.
Now, that neglect of public sphere that
we saw in New Orleans is, of course, a national crisis. The American
Society of Civil Engineers estimates that there is a deficit,
an infrastructure deficit of between $1.5 trillion and $2 trillion,
just to bring the roads and bridges up to safety standards. And
the solution, up until very recently, that was being held up,
was public-private partnerships, was privatization of essential
infrastructure. You know this in Chicago, because the airport
is one of the ones on the block.
But one interesting thing that happened
today is that the biggest-the biggest test case for infrastructure
privatization is the Pennsylvania Turnpike, which was on the verge
of being handed over to a consortium of private companies on a
seventy-five-year lease, and that deal fell through today. And
I think part of the reason why it fell through is because one
of the companies leading the consortium was Citigroup. And the
idea of putting more essential services, more things that are
far too important to fail, in the hands of the same people that
have made such a mess of the financial sector suddenly seems like
insanity. But on the other hand, the economic pressures on states,
on the federal government, is only going to increase, right? Because
it seems inevitable that those private debts are going to be transferred
onto the public books. So, nothing can be taken for granted in
The other way where we-the other place
where I think we see the legacy of Friedmanism in this moment
is in the backlash to the Wall Street bailout, the backlash that
essentially killed the bill in Congress, although it's clear that
it's going to be revived. People got very, very frightened yesterday
when the stock market had its worst day, and they called their
Congress people with another message. And I just want to say,
on that front, that it's easy to conclude from that that people
are just untrustworthy, and they shouldn't really have a say in
the economy, which is, I think, probably what Milton Friedman
would say. And this was part of the impulse toward specialization
and treating everything economic as hard science, because that
means, you know that it's out of reach of democracy. It's not
subject to any debate; these are hard rules.
Now, I think that the sort of volatility
we've seen on the-in the markets the past few days is at least
partially the result of the incredible recklessness of the Bush
administration in dangling a $700 billion bailout, just free money,
saying we're going to do this, before they had any guarantee that
they were going to be able to do it. So, of course, the stock
market rallies at the prospect of free money. Why wouldn't it?
And then, when it falls through, of course, it dips. And I'm not
saying this is all planned, but this sort of rollercoaster we've
been on has just been part of this pattern of incredibly poor
management, poor government, that infuses every aspect of this
And this, of course, is also part of the
ideology, because the Bush administration, far from being an aberration,
is really the culmination of the idea that government is the problem,
not the solution. I think they really believe that and totally
abdicate it, their responsibility to manage, to govern. The popping
of the housing bubble was a surprise to no one. But the only preparation
was a two-and-a-half-page plan presented by Henry Paulson that
said, "Give me $700 billion, and don't ask any questions."
That is not preparing, right? This was laissez-faire in action,
a really scary kind of laissez-faire.
But the anger is, of course-the anger
at Wall Street, this sort of-you know, there was a vindictive
quality to a lot of what the Congress people heard from their
constituents: "Why should we bail them out? Look at what
they've done to us." And it was Main Street versus Wall Street.
And this is-you know, this is another failure of Friedmanism,
because the idea of the ownership society was that class-consciousness
was supposed to disappear, right? Because union members were not
going to think of themselves as workers, because everybody owned
a piece of the stock market, and everybody was going to have a
mortgage, so they would think like owners, they would think like
bosses, they would think like landlords, not like tenants, not
like workers. Class is suddenly back in America, with a vengeance,
and it is the result of this class war that was waged from this
Now, interestingly, there is another Chicago
boy, and Barack Obama is responding to the market crisis by turning
his campaign really into a referendum; though he wouldn't call
it a referendum on Friedmanism, he seems to be turning it into
a referendum on Friedmanism. He's saying that essentially what
we're seeing on Wall Street is the culmination of an ideology
of deregulation and trickle-down economics-give a lot at the top
and wait for it to trickle down to the people at the bottom-and
that is precisely what has failed. And what's interesting is that
the more he says that, the higher his ratings go in the polls.
So I think we can see a couple of scenarios
for the future. One, McCain wins, and it's economic shock therapy.
You know, the thesis of The Shock Doctrine is that we've been
sold a fairy tale about how these radical policies have swept
the globe, that they haven't swept the globe on the backs of freedom
and democracy, but they have needed shocks, they have needed crises,
they have needed states of emergencies. It doesn't necessarily
have to be an outright military coup, which are the conditions
in which this ideology had its first laboratories. It can just
be a bad-enough economic crisis, a bad-enough hyperinflation crisis,
in an electoral democracy that allows politicians to say, "Sorry
about everything we said during the campaign. Sorry about the
usual ways in which we make decisions, debate discussion. We're
going to have to haul up, form an emergency economic team and
impose shock therapy," usually with the help of the International
Monetary Fund and the World Bank.
Milton Friedman understood the utility
of crisis. And this is a quote-you know, I use it a lot, but I'll
use it now again, because I think it's important-which he has
at the beginning of the 1982 edition of Capitalism and Freedom:
"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
Now, because I've been studying the utility
of crisis for this free market project, which I consider to be
very anti-democratic, it's really attuned me to looking for the
ideas that are lying around. And I've been paying really close
attention to people like Grover Norquist, Newt Gingrich, the Republican
Study Committee, these past few weeks. And I have an "ideas
lying around" file, which are the ideas that they are floating
right now in the midst of this economic crisis. And a lot of them
are familiar, but the point is is that they're being repackaged
now as the way out of this economic crisis. So, it's suspending
the capital gains tax, getting rid of the post-Enron regulations,
getting rid of mark-to-market accounting. In other words, more
deregulation and less money in the public coffers. And it is interesting
that the way in which this bill-the way the senators were trying
to get the bailout bill through the Senate, after it had failed
to go through Congress, was by adding tax cuts, a package of $118
billion worth of tax cuts. Some of them are good, some of them
are not. But it's a deepening of this crisis.
So, we know that the crisis is coming,
and the question is, how are we going to respond? I think there
needs to be better ideas lying around. I think the Milton Friedman
Institute is about keeping the same old ideas that have been recycled
so many times, that actually make these public crises worse, making
sure that they are the ones that are ready and available whenever
the next crisis hits. I think that is what-at its core, that's
what so many of the right-wing think tanks are for, and that's
what the Institute is for. And I think that is a waste of the
fine minds at this university. I think it is a waste of your minds,
your creativity, because all of these crises-climate change, the
casino that is contemporary capitalism-all of these crises do
demand answers, do demand actions. They are messages, telling
us that the system is broken. And instead of actual solutions,
we're throwing ideology, very profitable ideology, at these problems.
So we need better ideas lying around.
We need better ideas responding to what
a Barack Obama presidency would absolutely face. As soon as he
comes to office, "Yes, you can" turns into "No,
you can't; we're broke." No green jobs, no alternative energy,
no healthcare for everyone. You know, his plan for-to give healthcare
to every child in America costs $80 billion. Bailing out AIG cost
$85 billion. They're spending that money. They're spending those
promises. So, the people who are going to say, "No, you can't,"
who are going to use this crisis to shut down hope, to shut down
possibility, are ready.
And I think it would be so wonderful to
have the brilliant young economists of the University of Chicago-I
don't know if any of them bothered to come out tonight-but to
have your minds at work meeting this crisis. We need you. We need
open minds. We need flexible minds, as creative as possible. The
Milton Friedman Institute, in its name and essence, is about trying
to recapture a moment of ideological certainty that has long passed.
It has long passed because reality has intervened. It was fun
when it was all abstract. It was fun when it was all in the realm
of promise and possibility. But we are well past that. Please,
don't retreat into your sacred texts. Join us in the real world.