Klein’s ‘shock doctrine’ thesis & the Whitlam dismissal

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Naomi Klein’s The Shock Doctrine (2007) is one of the most widely read critical accounts of neoliberalism. Klein argues that governments have used ‘disasters’ of various kinds to implement neoliberal policies. Transformation occurs through ‘eventful temporality’, where moments of ‘coups, crisis, and shocks…usher in neoliberal policies’ transforming ‘existing modes of public administration and resource allocation’ (Krinsky 2011, p.387). Klein’s approach has also been used to understand neoliberalism and contemporary politics by others authors. In the case of Australia, for example, Antony Loewenstein’s recent book Profits of Doom (2013) extended her analysis in a number of ways and looked at asylum seeker detention as well as the overseas impacts of Australian corporations, foreign aid and trade.

Klein cites Milton Friedman’s argument that ‘only a crisis — actual or perceived — produces real change [and that when] a crisis occurs, the actions that are taken depend on the ideas that are lying around’ (Friedman 1962, p.xiv; Klein 2007, p.140). Klein views neoliberalism as the defeat of Keynesianism and the rise of corporate capitalism enacted through coups, crises and shocks, which she terms ‘disaster capitalism’. I discuss her work in greater detail in my post on the dominant narrative of neoliberalism where I ague that, like Harvey, she posits neoliberalism as a project of governments of the Right, with social democratic parties not significant in its introduction during its vanguard period, and also as a project that was implemented coercively (often through crisis and shock therapy) against the opposition of organised labour.

Yet Neoliberalism was instituted in Australia by a centre left government through a consensual social contract, a fact that cuts directly against Klein’s argument. We can further evaluate Klein’s thesis by looking at negative cases: moments when neoliberalism was not introduced but when the sort of shocks and crises Klein points to were present. Neil Davidson asks this question in regards to the different political economic trajectories of various US backed coups, comparing Indonesia in 1965 and Chile in 1973, and we could equally ask this of the Fraser Government period in Australia. If we apply Klein’s analysis to the case of Australia in the 1970s, we can see how the mere existence of economic and political crisis and an incumbent New Right government was not sufficient to result in the introduction of neoliberalism.

In 1974-5 twin crises wracked Australia. On one flank, a severe global economic crisis took hold. Conjunctural factors such as the oil shocks, stagflation and the collapse of Bretton Woods, destabilised economic growth in a period of collapsing profitability (Armstrong et al. 1984; Stilwell 1986), these developments occurring on the background of a falling global and local rate of profit (Roberts 2012; Maito 2014; Mohun 2003; Kuhn & O’Lincoln 1989). Growth collapsed and stagflation occurred – inflation and unemployment increasing simultaneously (which to that point most people thought was not possible).

On the other flank, the Governor-General John Kerr provoked the most significant political crisis in Australian history when he administratively dismissed the Whitlam Government in November 1975 (Kelly 1995; Whitlam 2006; Oakes 1976). Whitlam won elections in 1972 and 1974 but in neither parliament did he have a majority to pass legislation and budget appropriation bills in the upper house, the Senate. In October 1975 the Liberal Party opposition blocked ‘supply’ and about a month later, with no resolution to the situation, Kerr intervened sacking Whitlam and appointing Malcolm Fraser, leader of the Liberal (conservative) Party, as interim Prime Minister. There were strikes and militant demonstrations over the opposition’s blocking of supply while Whitlam was in office, and in the wake of the dismissal itself. In the nine days after the vote to defer the budget bills in the Senate, on 16 October, ‘at least 50,000 workers had attended rallies in defence of the Whitlam government and perhaps 100,000, perhaps many more, had taken strike action and lost wages — some walking out twice’ (Griffiths 1997). As soon as the dismissal was announced, tens of thousands of workers took strike action and the nation’s peak union body, the ACTU, was pressured to call a general strike (Griffiths 1997). However, the destruction of Whitlam’s authority in the sacking allowed Fraser to take advantage of the crisis and he swept to a landslide electoral victory.

But despite these concurrent ‘shocks’ — the deepest economic crisis since the Great Depression and an administrative coup against a democratically elected government — the newly elected Fraser Government did not (or could not) implement neoliberalism. The conservatives did not come to power with a coherent agenda of economic transformation, and nor did they have the support in society to drive through such a program. In the end Fraser signally failed to achieve significant reform, despite the Prime Minister, Treasurer and other leading party members being influenced by such neoliberal luminaries as Margaret Thatcher, Ayn Rand, Milton Friedman and Friedrich Hayek (the latter two visited Australia in 1975 and 1976 respectively). Contra Naomi Klein’s thesis, the presence of both a crisis and politicians committed to neoliberal ideas was not propitious for the introduction of the neoliberal project. Indeed, I would argue these factors were in fact part of the reason such a project could not be driven through in Australia at that time.

Fraser was unable to use the political upheaval around the dismissal to advance definitive crisis resolution in the interests of the state and capital in general. This is tied up with how the social forces represented by the trade union leadership and (less directly) by the ALP itself were profoundly antagonistic to his administration. His perceived complicity in Whitlam’s unprecedented method of defeat created a political polarisation and prevented (unlike with the following ALP Hawke government) any agreement on economic management or restructuring based on wage suppression. Bob Hawke (then head of the ACTU) and his supporters pursued an agreement with the Fraser Government on economic management, but they were rebuffed by both Fraser and certain powerful ACTU affiliates — the AMWU and BWIU in particular (Bramble and Kuhn 2011, 102; Singleton 1990, 74–79). Fraser took a confrontational approach to the management of labour implementing an inflation-first approach (contributing to unemployment) and, when a brief mining boom collapsed and recession returned, a 12-month wage freeze in 1982. The unions, whose high levels of organisation and strength could not be easily defeated in the process of some kind of confrontational assault, quickly broke the wage freeze.

Unlike when Thatcher came to power, Fraser in this period faced a more powerful and confident labour movement. The unions had not yet been softened up by the experience of a social contract — as had been the case with the weakening of the British labour movement during the Wilson-Callaghan era. Rather, Fraser faced a labour movement that was able to break his attempts at wage fixation with relative ease, having maintained much of its organised social power despite the political setback represented by the 1975 removal of Whitlam. Conversely when Hawke came to power at the head of a Labor government in 1983 he was able to drive through a broad suite of neoliberal reforms in the context of a consensual social contract with the unions, and on a platform of national reconciliation rather than confrontation.

Fraser failed to cohere a political project to defeat the unions, or to implement neoliberal policies, in the same time period as Thatcher was able to. This was despite the presence of both economic and political crises. Klein is therefore incorrect to posit that once the neoliberal Right was in government and in a position to drive through neoliberal reforms it could do so in the moments of coups, shocks and crisis. It is not these factors alone that create the necessary political rupture for a political economic course change. The ability of the government of the day to cohere a hegemonic project within political society is the necessary factor in successfully implementing neoliberalism, and this is not always possible in moments of ‘shock’ if the balance of social forces isn’t favourable to the government of the day, or if the relevant political players are otherwise unable to cohere such a project. Those who plotted Whitlam’s dismissal may have imagined that a ‘shock doctrine’ style scenario would play to their advantage, but in fact Australian neoliberalism had to await a government of the Left and the tacit agreement of the labour movement for its moment in the sun.

Armstrong, P., Glyn, A. & Harrison, J., 1984. Capitalism Since World War II: The Making and Breakup of the Great Boom, London: Fontana Paperbacks.

Bramble, T. & Kuhn, R., 2011. Labor’s Conflict: Big Business, Workers and the politics of Class, Port Melbourne: Cambridge University Press.

Friedman, M., 1962. Capitalism and Freedom, Chicago: University Chicago Press.

Griffiths, P., 1997. Strike Fraser Out! The labour movement campaign against the blocking of supply and the sacking of the Whitlam Government, October-December 1975. Available at: http://www.anu.edu.au/polsci/marx/interventions/sacked.htm [Accessed April 24, 2014].

Kelly, P., 1995. November 1975: The Inside Story of Australia’s Greatest Political Crisis, St Leonards: Allen & Unwin.

Klein, N., 2007. The Shock Doctrine, Camberwell: Penguin Books.

Krinsky, J., 2011. Neoliberal Times: Intersecting Temporalities and the Neoliberalisation of New York City’s Public-Sector Labor Relations. Social Science History, 35(3), pp.381–422.

Kuhn, R. & O’Lincoln, T., 1989. Profitability and the Economic Crisis. Journal of Australian Political Economy, 25, pp.44–69.

Loewenstein, A., 2013. Profits of Doom: How Vulture Vapitalism is Swallowing the World, Melbourne: Melbourne University Press.

Maito, E.E., 2014. The Historical Transience of Capital: The Downward Trend in the Rate of Profit Since XIX Century.

Mohun, S., 2003. The Australian Rate of Profit 1965 – 2001. Journal of Australian Political Economy, 52, pp.83–112.

Oakes, L., 1976. Crash Through Or Crash: The Unmaking of a Prime Minister, Richmond: Drummond.

Roberts, M., 2012. A World Rate of Profit. In Joint AHE, IIPPE, AFEP and WAPE Conference. Available at: http://thenextrecession.files.wordpress.com/2012/07/roberts_michael-a_world_rate_of_profit.pdf [Accessed January 1, 1919].

Singleton, G., 1990. The Accord and the Australian Labour Movement, Carlton: Melbourne University Press.

Stilwell, F., 1986. The Accord…and Beyond, Leichhardt: Pluto Press Australia.

Whitlam, E.G., 2006. The Truth of the Matter, Melbourne: Melbourne University Press.

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