The Rise of Disaster Capitalism

Over the past several decades, during both Republican and Democratic  administrations, many countries, including Brazil, Chile, Argentina, Bolivia, Poland, South Africa, Indonesia, Russia, China, and most recently, Iraq, underwent economic shock therapy. The populations of these countries were subjected, in varying degrees, to mass psychological manipulation and trauma brought on by the imposition of the agenda of the late economist and ‘free market’ disciple, Milton Friedman (1912-2006). Ostensibly a true believer in the textbook theory of laissez-faire capitalism, Friedman and his followers’ ideology featured a three-pronged attack: privatization of all public enterprise, deregulation, and deep cuts in social programs. Always looking for new revenue sources, large corporations eagerly embraced his teachings. The U.S. government overtly and covertly encouraged Friedman’s global meddling.

Whatever one calls Friedman’s philosophy— trickle-down, supply-side economics, globalization, free trade, the Washington Consensus, neo-liberalism (as it’s known in foreign countries), or neo-conservatism (as it’s known in the U.S.) - he and his University of Chicago associates sought to spread their gospel worldwide by capitalizing on crises and disasters, real and orchestrated. They believed that only under crisis conditions—the more shocking the crisis, the better— could a radical new system be implemented in a short period of time. To that end, some countries were invaded outright by the U.S. military while others experienced CIA-induced coups and assassinations of their democratically-elected leaders. Still others, in the throes of (relatively bloodless) revolution to transform their political system through populist reform and popular control, stood virtually helpless as their economic systems fell into the hands of Friedmanite coups.

Many countries experienced the additional psychological shock brought about by U.S.-trained death squads, the jailing of dissidents, torture, and disappeared family members. Union leaders, clergy working for social justice, artists, musicians, journalists, teachers, professors, and others became prime targets of death squad executions. Hundreds of thousands of people around the world died, and massacres were commonplace. Every country serving as a laboratory for the economic “shock treatment” experiment eventually saw the same results as corporate power ran rampant: destruction of social safety nets, huge increases in unemployment and poverty, and a disappearing middle class.

In her award-winning book, The Shock Doctrine:The Rise of Disaster Capitalism, author Naomi Klein connects the dots and documents in detail the painful truth. She deftly portrays the genesis of electric shock therapy from its origins in a laboratory setting to its conceptual transition as a “shock doctrine” of imposing corporate control on a global scale. With forensic skill, Klein finds Milton Friedman’s fingerprints at the crime scenes. She concludes, “Everywhere the Chicago School crusade has triumphed, it has created a permanent underclass of between 25 and 60 percent of the population.”

That our elected leaders provide cover for or participate in this updated terroristic foreign policy hearkens back to the 1930’s when highly-decorated Major General Smedley Butler, USMC, upon retiring after 33 years in the U.S. Marines, confessed to being a “gangster for capitalism” in his famous speech and book, War Is a Racket . In more recent times, citing ‘the national interest’, ’security concerns’, or claiming the U.S. is ’spreading democracy’, our Presidents and Congress try to convince us that they serve the nation’s interest, not the interests of transnational corporations.

In every country documented in The Shock Doctrine, as money gravitated from the pockets of the middle class and the poor to the very rich and the privatizing corporations, it became clear who the beneficiaries of Chicago School economics were. A wholesale redistribution of wealth upward was obvious. In the end, the biggest casualty would be democracy itself, as the new corporatocracy was becoming a de facto government, a merger of corporations and government, neither liberal nor conservative, but corporatist.

Pledging doctrinaire allegiance to the economic “shock treatment” theorists and their allies, the transnational corporations, one finds the usual suspects and partners—conservative think tanks, media pundits, and elected and appointed friends in governments here and around the world. The American Enterprise Institute(AEI), the Heritage Foundation, and the Cato Institute are among those who religiously spread Friedman’s theory.

According to Klein, Milton Friedman’s Chicago School mission became the “economic agenda of the neo-conservative movement.” As referenced earlier, its goals included selling off public assets so corporations could run them, cutting back social programs, and removing rules and regulations. In other words, (in the U.S.) trash the New Deal. NAFTA and similar corporate trade agreements were part of the program internationally as well as domestically.

Explaining the Chicago School’s position of influence and power, Klein notes, “The enormous benefit of having corporate views funneled through academic, or quasi-academic, institutions not only kept the Chicago School flush with donations but, in short order, spawned the global network of right-wing think tanks that would churn out the counterrevolution foot soldiers worldwide.”

And churn them out, they did. Friedman and his devotees laid the worldwide groundwork that enabled their corporate benefactors/beneficiaries to use whatever means necessary—physical threats (and worse), economic sabotage, or other shocks—in order to produce the desired results.

What is shock? Klein informs us, “From Chile to China to Iraq, torture has been a silent partner in the global free-market crusade.” Citing the contents of two declassified CIA manuals, she continues, “Torture…is a set of techniques designed to put prisoners into a state of deep disorientation and shock in order to force them to make concessions against their will,” and “The shock doctrine mimics this process precisely, attempting to achieve on a mass scale what torture does one on one in the interrogation cell.” Shock can also be induced by any large catastrophe such as an earthquake or hurricane, an attack like 9/11, or an economic crisis—real or contrived.

In the seventies, Chile would experience the full force of the shocks brought on by the Washington Consensus. Populist Salvador Allende was elected president of Chile in 1970. That did not sit too well with U.S. President Richard Nixon or corporations heavily invested in Chile, including ITT and many others. U.S. government and corporate collusion and subterfuge ensued. It was later revealed that ITT Corporation “had secretly plotted with the CIA and the State Department to block Allende from being inaugurated…” and that “ITT had offered $1million in bribes to Chilean opposition forces…”

In 1973, General Augusto Pinochet and the CIA-assisted Chilean military staged a coup to seize power in Chile —no news there. It was a revelation, however, to learn that American economists were also culpable in the overthrow and death of democratically-elected President Allende. A close adviser to Gen. Pinochet was none other than Milton Friedman.

The unfettered free markets model brought neither democracy nor peace. Instead, tens of thousands were murdered and over 100,000 were tortured. Before and after the terror campaign in Chile, other Latin American nations suffered similar fates. In Argentina, for example, “an estimated thirty-thousand people had been disappeared. Many of them, like their Chilean counterparts, were thrown from planes into the muddy waters of the Rio de la Plata.”

Ford and Mercedes-Benz in Argentina allegedly engaged in attempts to eliminate union influence in their plants through practices such as the detention and torture of union representatives and, in some cases, their permanent disappearance. Ford and Mercedes claim their executives are innocent of these charges which remain in litigation.

Transnational corporations not only help orchestrate the overthrow of countries around the world and participate in torture and terror against their host country, but, Klein writes, “Argentina’s entire early-nineties shock therapy program was written in secret by JP Morgan and Citibank, two of Argentina’s largest private creditors.”

“In Brazil,” Klein reports, “several multi-nationals banded together and financed their own privatized torture squads. In mid-1969,…OBAN (an extra-legal police force) was funded…by contributions from various multi-national corporations, including Ford and General Motors.”

Indonesia’s popular President Sukarno had led his nation for about two decades when he “enraged the rich countries by protecting Indonesia’s economy, redistributing wealth and throwing out the International Monetary Fund (IMF) and the World Bank which he accused of being facades for the interests of Western multinationals.” The CIA was instructed, Klein says, to “liquidate President Sukarno…” The CIA gathered a list of leftists which came into the possession of Gen. Suharto (Sukarno’s successor via a coup in 1965). Suharto’s minions “annihilated” the leftists, and then some. “In just over a month,…possibly as many as 1 million people were killed…”

Why did Sukarno’s ousting of the IMF and the World Bank prompt such a furious response? While they exercised a different degree of economic control in Sukarno’s day, since the late eighties the IMF and the World Bank, according to Klein, have become “primary vehicles for the advancement of the corporate crusade.” Any crisis-plagued country seeking loans from the IMF has to “revamp its economy from top to bottom” along the lines of the Friedman school.

A shell game, of sorts, was the free marketers’ modus operandi in the early to mid-nineties in two distinct regions of the world. In Poland, the Solidarity movement, underground for years, became a force as the population railed against one-party Communist rule. When Solidarity came to power in 1989, the leaders who had so determinedly changed the political system were focused on implementing it. What they didn’t notice while distracted by their political efforts became only too clear once in power—the economy was in shambles. In order to get help, Solidarity abandoned its goal of worker ownership and turned to privatization and Chicago School economic shock therapy. Klein reports that in 1989 “15 percent of Poland’s population was living below the poverty line; in 2003, 59% of Poles had fallen below the line.” By 2006, Poland’s unemployment rate was 20%, “the highest in the European Union.”

After decades of struggle against apartheid in South Africa, the African National Congress (ANC) saw its candidate, Nelson Mandela, elected in 1994. So preoccupied were Mandela and the party with the peaceful political transition, that the National Party and its leader, F.W. De Klerk, sabotaged the economic transition. Naturally, the IMF and the World Bank were involved. The results: huge increases in poverty, unemployment, and homelessness, all standard fare for countries subjected to the shock doctrine.

Early nineties Russia was prime territory for shock therapists. Warning shots were fired in 1991 when Mikhail Gorbachev, a proponent of social democracy, was admonished by G7 leaders at their summit in London to, in Klein’s words, “embrace radical shock therapy,” or else. Through political maneuvering, Boris Yeltsin forced Gorbachev’s resignation and took over the reigns of government amid the dissolution of the Soviet Union. He enjoyed the backing of the U.S. government. Yeltsin administered further shocks when he ordered tanks into the streets, machine-gunning of protesters, and the attack on and torching of Parliament, an assault which resulted in 500 deaths. Yeltsin demanded absolute power. Russia had found its ‘Pinochet’. Parliament was dissolved and the Constitution was abolished. After just one year of following Chicago School ‘reforms’, the average Russian was hurting and 1/3 of the population was in poverty. But the news wasn’t all bad—Yeltsin and his family along with an elite few became rich. Klein sums up the Russian experience, “In 1989, before shock therapy, 2 million people in the Russian Federation were living in poverty…in the mid-nineties, 74 million Russians were living below the poverty line…” By 1996, 25% of Russians lived in “desperate poverty”. In Russia,…”the Communist state was simply replaced with a corporatist one…”

In 1980, the Deng Xiaoping government invited Milton Friedman to China. The Chinese leader wanted a corporate-based economy and turned to the master for guidance. Friedman’s advice must have been music to his ears—political freedoms are of no concern, unrestricted commerce is overriding. Those in power, of course, get dibs on the wealth. The authoritarian political control served the implementation of Chicago School policies well. But popular discontent was fueled by the economic shock of lower wages, higher prices, loss of benefits, and unemployment. A coalition of university students, factory workers, teachers, and others symbolized the dissatisfaction of the masses as they rallied in Tiananmen Square in 1989 in favor of democracy and against unregulated capitalism. Another major shock to the collective psyche occurred from the resulting crackdown and massacre, which drew approval from Henry Kissinger. Over a period of years, thousands of citizens were jailed, tortured, and killed. China instituted martial law, effectively stopping dissent. Multinationals, assured of a docile workforce, established themselves in China.

Probably the prime example of privatization at the point of a gun is the ’shock and awe’ U.S. invasion of Iraq in March, 2003, and the ensuing years of war and occupation. As Director of the Occupation, Paul Bremer’s “central mission” was disaster capitalism. Things were going pretty well. The social system was dismantled, public service jobs were gone, local government was virtually nonexistent, and mass unemployment prevailed. Iraq’s oil and other industries were privatized, controlled primarily by American corporations. The war itself was falling into the hands of private profiteers.

Waging perpetual wars for perpetual profits, corporations have figured out a way to generate an endless annuity, courtesy of the American taxpayer. In the first Gulf War in 1991, Klein points out, “…there was one (private) contractor for every hundred soldiers. At the start of the 2003 Iraq invasion, the ratio had jumped to one contractor for every ten soldiers. Three years into the U.S. occupation, the ratio had reached one to three. Less than a year later, with the occupation approaching its fourth year, there was one contractor for every 1.4 U.S. soldiers.”

You’ve got to hand it to George W. Bush et al who accomplished precisely what they set out to do. We should be careful not to ‘misunderestimate’ Bush. Klein expresses it clearly, “Most of us chose to oppose the war as an act of folly by a president who mistook himself for a king, and his British sidekick who wanted to be on the winning side of history. There was little interest in the idea that war was a rational policy choice, that the architects of the invasion had unleashed ferocious violence because they could not crack open the closed economies of the Middle East by peaceful means, that the level of terror was proportional to what was at stake.”

The transition to Chicago School economics does not always involve violence but it does require a crisis, sometimes real, sometimes manufactured. Lacking a real crisis, the shock doctors wondered if a contrived, phony, “pseudo-crisis” could work just as well in advancing their goals.

The answer was found in Canada in the nineties. Large banks and corporations funded think tanks that promoted the idea of an impending financial crisis. TV and newspapers aided the shock therapists’ con job. Convinced there were no other options, Canada’s Liberal Party succumbed, cutting funding for health care and other social programs. Only after the cuts were official did Canadians learn that their economic crisis was contrived.

The United States was not completely spared from the consequences of native son Milton Friedman’s policies. In the eighties and nineties, Democratic and Republican presidents, as well as state and local governments, succumbed to creeping privatization including the selling or outsourcing of public assets such as water, electricity, and highway management, to name a few. More unfinished business lies ahead. The privatizers covet the acquisition of Social Security, public schools, prisons, fire and police departments and other functions of government.

A good example of corporatizing government functions is Lockheed Martin, known to most of us as a weapons contractor. When the Cold War ended in the mid-nineties, the corporation, looking to extend its tentacles into other sources of government largess, quietly assumed the role of performing government functions such as cutting Social Security checks, totaling taxes, sorting mail, and monitoring air traffic. Lockheed Martin was not alone. Other weapons manufacturers were on the gravy train, too.

When it comes to finding disaster capitalists in government, the George W. Bush administration, teeming with Friedman pals and adherents, takes the cake. They were ready, willing, and able to capitalize on our nation’s horrifying disaster, the attacks of 9/11/01. What a wealth of opportunity that tragedy provided!

The War on Terror, by its nature an endless venture, is a cash cow producing an economic windfall in the billions of dollars. It spawned the “disaster capitalism complex”. The new $200 billion Department of Homeland Security afforded a feeding frenzy at the government trough as did privatized war and disaster reconstruction. The reach of privatization extended to outsourced police and surveillance as well as a Halliburton detention facility at Guantanamo.

Hurricane Katrina, a more localized event, supplied the necessary crisis frame for privatizing the public schools of New Orleans and committing other acts of corporate greed and opportunism in the face of poverty and loss.

And speaking of opportunism, it is appropriate to mention the revolving door between government and corporate employment and some of the individuals involved: Dick Cheney (U.S. vice president and other posts) of Halliburton; Tom Ridge (Dept. of Homeland Security) of Ridge Global and Lucent; Richard Clarke (counterterrorism-Clinton and Bush) of Good Harbor Consulting; James Woolsey (CIA chief until 1995) of Paladin Capital Group and Booz Allen; Joe Allbough (FEMA head on 9/11) of New Bridge Strategies; Michael (Brownie) Brown (FEMA during Katrina) of Michael D. Brown,LLC. Additional familiar ‘revolvers’ include James Baker, Paul Bremer, Richard Perle, and Henry Kissinger among so many others.

There seems no end to the ways that disaster capitalists enrich themselves by playing on fear and misfortune. While their mouths disparage government as incapable of solving problems, their hands are in the government coffers. They could not survive without sucking at the government teat. Though disaster capitalism has a foothold in the U.S., it hasn’t yet triumphed. Mostly outside their current grasp lie big prizes like Social Security and public education. The complete privatization of Medicare has not yet occurred, though the effort has begun.Some highway (turnpike) and water systems have fallen victim to privatization. Efforts must continue to bring them back into the public fold, and we must be ever-vigilant to prevent future assaults on the public commons.

If you subscribe to the notion that ignorance is bliss and you wish to remain in a blissful state, Naomi Klein’s: The Shock Doctrine:The Rise of Disaster Capitalism is not for you. Klein demands that readers confront some very unsettling realities. If, on the other hand, you believe that knowledge is power or, at the very least, knowledge is preferable to ignorance, The Shock Doctrine offers a rich, penetrating, eye-opening treatise on the corporate grab for resources and markets, with government assistance, of course, and the lengths to which they will go to achieve their ends. It shines a much-needed light on the role of economics/economists in the American foreign policy saga of the past several decades and their inroads into domestic policy as well.

The book prepares you to be an observant citizen who can recognize disaster capitalism when you see it unfolding and actively oppose it. The temptation to feel elation by the inauguration of President Obama must be tempered by the inability of past presidents to transcend the Washington Consensus and resist its pull. Given that Obama’s advisers include IMF and World Bank types like Timothy Geithner and Lawrence Summers, hope must be accompanied by watchfulness.

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