In Naomi Klein's The Shock Doctrine, she explains how an influential group of academics from the Chicago Business School developed a neo-liberal framework to foster free market capitalism. The doctrine was trialled across South America in the 1970s and Klein describes how the Pinochet regime in Chile used brutal force to implement the experiment. The Shock Doctrine involves privatising national assets, dismantling regulation and cutting state spending.
Later the doctrine was applied to post-Apartheid South Africa, Poland, Russia and former states of the Soviet Union. The Thatcher regime applied the same techniques but stopped short of full implementation because of reluctance to use military force although the miners strike came close to providing the excuse. Margaret Thatcher was clearly an admirer of Pinochet, giving him sanctuary in the UK when the Chilean people demanded justice for his crimes.
In spite of the obvious shortcomings of the Chicago Boys' dogma, it continues to be applied today as the Troika (EU, IMF and ECB) negotiates with Greece to privatise national assets for the benefit of international bankers and oligarchs.
Which brings us to Cyprus, a small Greek island in the eastern Mediterranean with untapped hydrocarbon reserves and, until recently, a thriving tourist industry. Cyprus has also emerged as a key offshore banking (aka. tax avoidance) centre patronised by Russian oligarchs who were beneficiaries of the rape of the ex-Soviet state. In Cyprus, resident Russian gangsters demand protection money from bar and restaurant owners on the island under the threat of death. Intimidation of local business people into giving up control of their bars and restaurants allows gangsters to launder money and cement their influence on the island. Even before the financial crisis the Greek island idyll was evaporating in Cyprus and the way of life under threat.
The banking crisis in Cyprus has little to do with the island economy itself but is fallout from the Greek banking system in which Cypriot banks hold assets. In the current turmoil, Cyprus is caught between the rock of the Troika and the hard place of Russian interests. Both are playing hardball to get their hands on Cyprus's assets (including gas and oil).
In these circumstances, all prescriptions are fraught with danger but Cyprus should bail from the EU, create its own money and take full control of their strategic assets for the benefit of all the people, following principles suggested in the paper for the Coalition for Economic Justice referred to yesterday. Cypriots are fortunate that they grow much of their own food which gives them freedom to act independently. The danger is that neither international bankers nor Russian oligarchs will allow Cyprus to do so; military intervention would surely follow. And of course there is the added uncertainty of Turkey which still controls northern Cyprus.
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