Her explosive new book exposes the lie
that free markets thrive on freedom. In our first exclusive extract, the No
Logo author reveals the business of exploiting disaster.
I met Jamar Perry in September 2005, at the big Red Cross shelter in Baton
Rouge, Louisiana. Dinner was being doled out by grinning young Scientologists,
and he was standing in line. I had just been busted for talking to evacuees
without a media escort and was now doing my best to blend in, a white Canadian
in a sea of African- American southerners. I dodged into the food line behind
Perry and asked him to talk to me as if we were old friends, which he kindly
did.
Born and raised in New Orleans, he'd been out of the flooded city for a week.
He and his family had waited forever for the evacuation buses; when they didn't
arrive, they had walked out in the baking sun. Finally they ended up here, a
sprawling convention centre now jammed with 2,000 cots and a mess of angry,
exhausted people being patrolled by edgy National Guard soldiers just back from
Iraq.
The news racing around the shelter that day was that the Republican Congressman
Richard Baker had told a group of lobbyists, "We finally cleaned up public
housing in New Orleans. We couldn't do it, but God did." Joseph Canizaro,
one of New Orleans' wealthiest developers, had just expressed a similar sentiment:
"I think we have a clean sheet to start again. And with that clean sheet
we have some very big opportunities." All that week Baton Rouge had been
crawling with corporate lobbyists helping to lock in those big opportunities:
lower taxes, fewer regulations, cheaper workers and a "smaller, safer city"
- which in practice meant plans to level the public housing projects. Hearing
all the talk of "fresh starts" and "clean sheets", you could
almost forget the toxic stew of rubble, chemical outflows and human remains
just a few miles down the highway.
Over at the shelter, Jamar could think of nothing else. "I really don't
see it as cleaning up the city. What I see is that a lot of people got killed
uptown. People who shouldn't have died."
He was speaking quietly, but an older man in line in front of us overheard
and whipped around. "What is wrong with these people in Baton Rouge? This
isn't an opportunity. It's a goddamned tragedy. Are they blind?" A mother
with two kids chimed in. "No, they're not blind, they're evil. They see
just fine."
One of those who saw opportunity in the floodwaters of New Orleans was the
late Milton Friedman, grand guru of unfettered capitalism and credited with
writing the rulebook for the contemporary, hyper-mobile global economy. Ninety-three
years old and in failing health, "Uncle Miltie", as he was known to
his followers, found the strength to write an op-ed for the Wall Street Journal
three months after the levees broke. "Most New Orleans schools are in ruins,"
Friedman observed, "as are the homes of the children who have attended
them. The children are now scattered all over the country. This is a tragedy.
It is also an opportunity."
Friedman's radical idea was that instead of spending a portion of the billions
of dollars in reconstruction money on rebuilding and improving New Orleans'
existing public school system, the government should provide families with vouchers,
which they could spend at private institutions.
In sharp contrast to the glacial pace with which the levees were repaired and
the electricity grid brought back online, the auctioning-off of New Orleans'
school system took place with military speed and precision. Within 19 months,
with most of the city's poor residents still in exile, New Orleans' public school
system had been almost completely replaced by privately run charter schools.
The Friedmanite American Enterprise Institute enthused that "Katrina accomplished
in a day ... what Louisiana school reformers couldn't do after years of trying".
Public school teachers, meanwhile, were calling Friedman's plan "an educational
land grab". I call these orchestrated raids on the public sphere in the
wake of catastrophic events, combined with the treatment of disasters as exciting
market opportunities, "disaster capitalism".
Privatising the school system of a mid-size American city may seem a modest
preoccupation for the man hailed as the most influential economist of the past
half century. Yet his determination to exploit the crisis in New Orleans to
advance a fundamentalist version of capitalism was also an oddly fitting farewell.
For more than three decades, Friedman and his powerful followers had been perfecting
this very strategy: waiting for a major crisis, then selling off pieces of the
state to private players while citizens were still reeling from the shock.
In one of his most influential essays, Friedman articulated contemporary capitalism's
core tactical nostrum, what I have come to understand as "the shock doctrine".
He observed that "only a crisis - actual or perceived - produces real change".
When that crisis occurs, the actions taken depend on the ideas that are lying
around. Some people stockpile canned goods and water in preparation for major
disasters; Friedmanites stockpile free-market ideas. And once a crisis has struck,
the University of Chicago professor was convinced that it was crucial to act
swiftly, to impose rapid and irreversible change before the crisis-racked society
slipped back into the "tyranny of the status quo". A variation on
Machiavelli's advice that "injuries" should be inflicted "all
at once", this is one of Friedman's most lasting legacies.
Friedman first learned how to exploit a shock or crisis in the mid-70s, when
he advised the dictator General Augusto Pinochet. Not only were Chileans in
a state of shock after Pinochet's violent coup, but the country was also traumatised
by hyperinflation. Friedman advised Pinochet to impose a rapid-fire transformation
of the economy - tax cuts, free trade, privatised services, cuts to social spending
and deregulation.
It was the most extreme capitalist makeover ever attempted anywhere, and it
became known as a "Chicago School" revolution, as so many of Pinochet's
economists had studied under Friedman there. Friedman coined a phrase for this
painful tactic: economic "shock treatment". In the decades since,
whenever governments have imposed sweeping free-market programs, the all-at-once
shock treatment, or "shock therapy", has been the method of choice.
I started researching the free market's dependence on the power of shock four
years ago, during the early days of the occupation of Iraq. I reported from
Baghdad on Washington's failed attempts to follow "shock and awe"
with shock therapy - mass privatisation, complete free trade, a 15% flat tax,
a dramatically downsized government. Afterwards I travelled to Sri Lanka, several
months after the devastating 2004 tsunami, and witnessed another version of
the same manoeuvre: foreign investors and international lenders had teamed up
to use the atmosphere of panic to hand the entire beautiful coastline over to
entrepreneurs who quickly built large resorts, blocking hundreds of thousands
of fishing people from rebuilding their villages. By the time Hurricane Katrina
hit New Orleans, it was clear that this was now the preferred method of advancing
corporate goals: using moments of collective trauma to engage in radical social
and economic engineering. Most people who survive a disaster want the opposite
of a clean slate: they want to salvage whatever they can and begin repairing
what was not destroyed. "When I rebuild the city I feel like I'm rebuilding
myself," said Cassandra Andrews, a resident of New Orleans' heavily damaged
Lower Ninth Ward, as she cleared away debris after the storm. But disaster capitalists
have no interest in repairing what once was. In Iraq, Sri Lanka and New Orleans,
the process deceptively called "reconstruction" began with finishing
the job of the original disaster by erasing what was left of the public sphere.
When I began this research into the intersection between super-profits and
mega-disasters, I thought I was witnessing a fundamental change in the way the
drive to "liberate" markets was advancing around the world. Having
been part of the movement against ballooning corporate power that made its global
debut in Seattle in 1999, I was accustomed to seeing business-friendly policies
imposed through arm-twisting at WTO summits, or as the conditions attached to
loans from the IMF.
As I dug deeper into the history of how this market model had swept the globe,
I discovered that the idea of exploiting crisis and disaster has been the modus
operandi of Friedman's movement from the very beginning - this fundamentalist
form of capitalism has always needed disasters to advance. What was happening
in Iraq and New Orleans was not a post-September 11 invention. Rather, these
bold experiments in crisis exploitation were the culmination of three decades
of strict adherence to the shock doctrine.
Seen through the lens of this doctrine, the past 35 years look very different.
Some of the most infamous human rights violations of this era, which have tended
to be viewed as sadistic acts carried out by anti-democratic regimes, were in
fact either committed with the intent of terrorising the public or actively
harnessed to prepare the ground for radical free-market "reforms".
In China in 1989, it was the shock of the Tiananmen Square massacre and the
arrests of tens of thousands that freed the Communist party to convert much
of the country into a sprawling export zone, staffed with workers too terrified
to demand their rights. The Falklands war in 1982 served a similar purpose for
Margaret Thatcher: the disorder resulting from the war allowed her to crush
the striking miners and to launch the first privatisation frenzy in a western
democracy.
The bottom line is that, for economic shock therapy to be applied without restraint,
some sort of additional collective trauma has always been required. Friedman's
economic model is capable of being partially imposed under democracy - the US
under Reagan being the best example - but for the vision to be implemented in
its complete form, authoritarian or quasi-authoritarian conditions are required.
Until recently, these conditions did not exist in the US. What happened on
September 11 2001 is that an ideology hatched in American universities and fortified
in Washington institutions finally had its chance to come home. The Bush administration,
packed with Friedman's disciples, including his close friend Donald Rumsfeld,
seized upon the fear generated to launch the "war on terror" and to
ensure that it is an almost completely for-profit venture, a booming new industry
that has breathed new life into the faltering US economy. Best understood as
a "disaster capitalism complex", it is a global war fought on every
level by private companies whose involvement is paid for with public money,
with the unending mandate of protecting the US homeland in perpetuity while
eliminating all "evil" abroad.
In a few short years, the complex has already expanded its market reach from
fighting terrorism to international peacekeeping, to municipal policing, to
responding to increasingly frequent natural disasters. The ultimate goal for
the corporations at the centre of the complex is to bring the model of for-profit
government, which advances so rapidly in extraordinary circumstances, into the
ordinary functioning of the state - in effect, to privatise the government.
In scale, the disaster capitalism complex is on a par with the "emerging
market" and IT booms of the 90s. It is dominated by US firms, but is global,
with British companies bringing their experience in security cameras, Israeli
firms their expertise in building hi-tech fences and walls. Combined with soaring
insurance industry profits as well as super profits for the oil industry, the
disaster economy may well have saved the world market from the full-blown recession
it was facing on the eve of 9/11.
In the torrent of words written in eulogy to Milton Friedman, the role of shocks
and crises to advance his world view received barely a mention. Instead, the
economist's passing, in November 2006, provided an occasion for a retelling
of the official story of how his brand of radical capitalism became government
orthodoxy in almost every corner of the globe. It is a fairytale history, scrubbed
clean of the violence so intimately entwined with this crusade.
It is time for this to change. Since the collapse of the Soviet Union, there
has been a powerful reckoning with the crimes committed in the name of communism.
But what of the crusade to liberate world markets?
I am not arguing that all forms of market systems require large-scale violence.
It is eminently possible to have a market-based economy that demands no such
brutality or ideological purity. A free market in consumer products can coexist
with free public health care, with public schools, with a large segment of the
economy - such as a national oil company - held in state hands. It's equally
possible to require corporations to pay decent wages, to respect the right of
workers to form unions, and for governments to tax and redistribute wealth so
that the sharp inequalities that mark the corporatist state are reduced. Markets
need not be fundamentalist.
John Maynard Keynes proposed just that kind of mixed, regulated economy after
the Great Depression. It was that system of compromises, checks and balances
that Friedman's counter-revolution was launched to dismantle in country after
country. Seen in that light, Chicago School capitalism has something in common
with other fundamentalist ideologies: the signature desire for unattainable
purity.
This desire for godlike powers of creation is precisely why free-market ideologues
are so drawn to crises and disasters. Non-apocalyptic reality is simply not
hospitable to their ambitions. For 35 years, what has animated Friedman's counter-revolution
is an attraction to a kind of freedom available only in times of cataclysmic
change - when people, with their stubborn habits and insistent demands, are
blasted out of the way - moments when democracy seems a practical impossibility.
Believers in the shock doctrine are convinced that only a great rupture - a
flood, a war, a terrorist attack - can generate the kind of vast, clean canvases
they crave. It is in these malleable moments, when we are psychologically unmoored
and physically uprooted, that these artists of the real plunge in their hands
and begin their work of remaking the world.
Torture: The Other Shock Treatment
From Chile to China to Iraq, torture has been a silent partner in the global
free-market crusade. Chile's coup featured three distinct forms of shock, a
recipe that would re-emerge three decades later in Iraq. The shock of the coup
prepared the ground for economic shock therapy; the shock of the torture chamber
terrorized anyone thinking of standing in the way of the economic shocks.
But torture is more than a tool used to enforce unwanted policies on rebellious
peoples; it is also a metaphor of the shock doctrine's underlying logic. Torture,
or in CIA parlance, "coercive interrogation", is a set of techniques
developed by scientists and designed to put prisoners into a state of deep disorientation.
Declassified CIA manuals explain how to break "resistant sources":
create violent ruptures between prisoners and their ability to make sense of
the world around them. First, the senses are starved (with hoods, earplugs,
shackles), then the body is bombarded with overwhelming stimulation (strobe
lights, blaring music, beatings). The goal of this "softening-up"
stage is to provoke a kind of hurricane in the mind, and it is in that state
of shock that most prisoners give their interrogators whatever they want.
The shock doctrine mimics this process precisely. The original disaster - the
coup, the terrorist attack, the market meltdown - puts the entire population
into a state of collective shock. The falling bombs, the bursts of terror, the
pounding winds serve to soften up whole societies. Like the terrorised prisoner
who gives up the names of comrades and renounces his faith, shocked societies
often give up things they would otherwise fiercely protect.
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This is an edited extract from The Shock Doctrine: The Rise of Disaster
Capitalism by Naomi Klein.
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