- Naomi Klein is an award-winning Canadian journalist,
author, documentary filmmaker and activist. She writes a regular column
for The Nation magazine and London Guardian that's syndicated internationally
by the New York Times Syndicate that gives people worldwide access to her
work but not its own readers at home.
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- In 2004, she and her husband and co-producer Avi Lewis
released their first feature documentary - "The Take." It covered
the explosion of activism in the wake of Argentina's 2001 economic crisis.
People responded with neighborhood assemblies, barter clubs, mass movements
of the unemployed and workers taking over bankrupt companies and reopening
them under their own management.
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- Klein is also the author of three books. Her first was
"No Logo - Taking Aim at the Brand Bullies" (2000) that analyzes
the destructive forces of globalization. Next came "Fences and Windows
- Dispatches from the Front Lines of the Globalization Debate" (2002)
covering the global revolt against corporate power.
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- Her newest book just out is "The Shock Doctrine:
The Rise of Disaster Capitalism" that explodes the myth of "free
market" democracy. It shows how neoliberal Washington Consensus fundamentalism
dominates the world with America its lead exponent exploiting security
threats, terror attacks, economic meltdowns, competing ideologies, tectonic
political or economic shifts, and natural disasters to impose its will
everywhere. Wars are waged, social services cut, and freedom sacrificed
when people are too distracted, cowed or bludgeoned to object. Klein describes
a worldwide process of social and economic engineering she calls "disaster
capitalism" with torture along for the ride to reinforce the message
- no "New World Order" alternatives are tolerated.
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- "Free market" triumphalism is everywhere -
from Canada to Brazil, China to Bulgaria, Russia to South Africa, Vietnam
to Iraq. In all cases, the results are the same. People are sacrificed
for profits and Margaret Thatcher's dictum applies - "there is no
alternative."
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- "The Shock Doctrine" is a powerful tour de
force, four years of on-the-ground research in the making and well worth
the wait. In an age of corporatism partnered with corrupted political elites,
it's must reading by an author now firmly established as a major intellectual
figure on the left and champion of social justice. Naomi Klein is all that
and more. Even for those familiar with her topics, the book is stunning,
revealing, unforgetable and essential to know. This review will cover a
healthy sample of what's in store for readers in the full equisitely written
text. It's in seven parts with a concluding section. Each will be discussed
below starting with a brief introduction.
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- Introduction - Blank Is Beautiful: Three Decades of Erasing
and Remaking the World (into Hell)
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- New Orleans, post-Katrina, is a metaphor for an American-style
"New World Order" with unfettered capitalism unleashed in its
most savage form. Klein quotes Republican congressman Richard Baker telling
lobbyists: "We finally cleaned up public housing in New Orleans. We
couldn't do it but God did." And New Orleans developer Joseph Canizaro
added: "I think we have a clean sheet to start again (and take advantage
of) big opportunities." Their scheme is erasing communities and replacing
them with upscale condos and other high-profit projects on choice city
real estate at the expense of the poor mother nature forced out and government
won't allow back.
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- Enter the "grand guru" of free-wheeling capitalism,
then age 93 and in failing health. This was conservative/libertarian economist
Milton Friedman's moment that he first articulated in his 1962 book "Capitalism
and Freedom." His thesis: "only a crisis - actual or perceived
- produces real change. When a crisis occurs, the actions that are taken
depend on the ideas that are lying around....our basic function (is) to
develop alternatives to existing policies (ones Friedman rejects, and have
them ready to roll out when the) the impossible becomes politically inevitable."
Klein calls crises "democracy-free zones," and Friedman's thesis
"the shock doctrine." For New Orleans it means "permanent
reforms" like destroying public housing and issuing vouchers for privatized
schools in lieu of rebuilding public ones with government reconstruction
funds.
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- For Friedman, government's sole function is "to
protect our freedom both from (outside) enemies....and from our fellow-citizens."
It's to "preserve law and order (as well as) enforce private contracts,
(and) foster competitive markets." In his view, anything else in public
hands is socialism that for "free market" fundamentalists like
Friedman is blasphemy.
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- Until 1973, Friedman's radical doctrine stayed in his
classroom, but all that changed on an earlier September 11. Following General
Augusto Pinochet's bloody ascent to power, he had a real life laboratory
as advisor to the new Chilean dictator. His prescription came to be known
as the "Chicago School" revolution of rapid-fire economic transformation
he called "shock treatment," now known as "shock therapy."
It's an economic version of "destroy(ing) the village (and country)
to save it" from the Vietnam era and nearly as harsh.
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- Millions know its lessons, but Friedman's not their hero.
It's central tenets are structurally adjusted mass-privatizations, government
deregulation, unrestricted free market access for foreign corporations,
and deep cuts in social spending with repressive laws, harsh crackdowns
and torture along for the ride to reinforce the core tenet Reaganites call
"trickle down" and Brits call "Thatcherism."
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- Its recipients call it hell, and Klein explains why -
in Chile, Argentina, Uruguay, Bolivia, Brazil, China, Russia, the Falklands,
Poland, South Africa, Sri Lanka, New Orleans, Israel, and coming to a neocon-occupied
homeland neighborhood near you. It's "disaster capitalism" unleashed,
and business is booming. Klein cites insiders saying opportunities are
on a par with a thriving "emerging market...."the deals are even
better than the dot-com days, and the 'the security bubble' picked up the
slack when those earlier bubbles popped."
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- Reaganomics adherents are today's neoconservatives with
the "full force of the US military machine (serving their unfettered)
corporate agenda" of greed writ large. Its holy policy trinity is:
"elimination of the public sphere, total liberation for corporations
and skeletal social spending (if any at all)." But instead of lifting
all boats as promised, it's mirror opposite. It creates a powerful ruling
corporatist class partnered with corrupted political elites - "with
hazy and ever-shifting lines between the two groups." Russia got billionaire
"oligarchs," China "the princelings," Chile "the
piranhas," and America the Bush-Cheney "Pioneers."
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- Everywhere, the scheme is the same: huge public wealth
transfers to private hands, exploding public debt most often, "an
ever-widening chasm between the dazzling rich and disposable poor, and
an aggressive nationalism (like George Bush's permanent "war on terrorism"
and the world) that justifies bottomless spending on security." "Inside
the bubble" is paradise. Outside, however, is hell with "aggressive
surveillance, mass incarceration, shrinking civil liberties," a declining
standard of living, and repression and torture reinforcing the message
to non-believers.
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- Klein calls the harshness "a metaphor of the shock
doctrine's underlying logic." When applied, it induces a state of
"deep disorientation," and shock to force targets "to make
concessions against their will." The "shock doctrine" works
the same way on a mass scale, and the 9/11 experience proved it. It exploded
the "familiar world" and created a period of disorientation and
regression the Bush administration jumped on abroad and at home. As Klein
put it: "Suddenly we found ourselves living in a kind of Year Zero
(with) everything we knew of the world before (now) dismissed as 'pre-9/11'
thinking." We became a "blank slate, a clean sheet of paper,"
and the administration did what was impossible before. It's how the "shock
doctrine" works: "the original disaster (terror attack, war,
hurricane, market meltdown) puts the entire population into a state of
collective shock" enabling policy manipulators to move in for the
kill to remake the world in their image and get it done before the shock
wears off.
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- Part 1 - Two Doctor Shocks - Torture and Chicago School
Fundamentalism
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- Following a crisis shock, another quickly follows. The
corporate piranhas exploit disorientation with economic "shock therapy"
along with "police, soldiers and prison interrogators" with torture
their method of choice "to build a model country (by) erasing people
and then trying to remake them from scratch."
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- Klein reviews the history of CIA's interest in torture
as a way to control the human mind. It began with the Montreal doctor they
funded to perform "bizarre experiments on his psychiatric patients
(by) keeping them asleep and in isolation for weeks, then administering
huge doses of electroshock (plus) experimental (psychedelic LSD and hallucinogen
PCP angel dust) drug cocktails."
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- The experiments were performed at McGill University's
Allan Memorial Institute by Dr. Ewen Cameron even though they clearly violated
all standards of medical ethics using human guinea pigs without their permission
with permanent damage their reward. Cameron believed by blasting the human
brain with an array of shocks, he could "unmake and erase faulty minds,
then rebuild (on a blank slate) new personalities" cleansed of their
previous nature. It was voodoo science, and it failed. His patients were
his victims, but CIA gained a wealth of knowledge it now employs with no
pangs of conscience or regard for ethics.
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- Klein traces CIA's interest in mind manipulation to a
1951 trinational meeting of intelligence agencies and academics in Montreal
when concern was that Communists could brainwash POWs to control them.
That was when the spy agency engaged Canadian researchers to learn how,
and one of them was Dr. Donald Hebb, director of psychology at McGill,
who was working on the problem. Intelligence agencies were impressed enough
with his work to fund classified sensory-deprivation experiments on volunteer
McGill students.
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- They proved intensive isolation interferes with clear
thinking enough to make people more receptive to suggestion. They were
also "formidable interrogation techniques" amounting to torture
that Hebb knew violated medical ethics. He later characterized Cameron's
work as "criminally stupid," but CIA got what it wanted - a way
to interrogate "resistant sources" in a "new age of precise,
refined torture, not the gory, inexact" kind from the Spanish Inquisition
or what Nazis and other tyrants often practiced. Cameron's experiments
with human guinea pigs built on Hebb's earlier work laying the foundation
for CIA's "two-stage psychological torture method" of sensory
deprivation followed by sensory overload. University of Wisconsin historian
Alfred McCoy in his book, "A Question of Torture" on CIA interrogation,
called it "the first real revolution in the cruel science of pain
in more than three centuries."
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- Pre-9/11, these techniques were freely used covertly
as any form of abuse or torture violates the Geneva, UN and other statutes
prohibiting these practices as well as the US Army's own Uniform Code of
Military Justice barring "cruelty" and "oppression"
of prisoners. No longer, as "On September 11, 2001, that longtime
insistence on plausible deniability went out the window" as well as
any claim this nation respects the law and rights of free people everywhere.
What once was done sub rosa or by proxy is now condoned and authorized
at the highest levels of government on the fraudulent claim of national
security to hide the real aim of social control.
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- Klein notes torture is still technically banned in the
US, but only when pain is the "equivalent in intensity to (what accompanies)
serious physical injury, such as organ failure." Simply put, anything
goes, but it's not put that way. In Iraq, it was thought "shock and
awe" would be so stunning, Iraqis "would go into a kind of suspended
animation." A second makeover Chicago School fundamentalism shock
could then be imposed on a blank post-invasion slate, and bingo, mission
accomplished. Klein notes "there was no blank slate, only rubble and
shattered, angry people" who were blasted with more shocks when they
resisted. Like Cameron and his experiments, "Iraq's shock doctors
can destroy, but they can't seem to rebuild," and the same is true
wherever these shock doctors show up.
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- Milton Friedman and the Search for a Laissez-Faire Factory
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- The epicenter of shock ideology is the University of
Chicago Economics Department. It came out of the 1950s "in the thrall"
(of a) man on a mission to fundamentally revolutionize his profession,"
and on that score Milton Friedman succeeded mightily. Friedman, now gone,
believed, markets work efficiently and best unfettered of rules, regulations,
onerous taxes, trade barriers, entrenched interests, and human interference.
Whereas Cameron believed electroshocks could restore natural health, Friedman
favored economic shock as extreme and destructive to nations as Cameron
and CIA's methods are to human minds.
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- Friedman taught this voodoo science and believed to the
end, all contrary evidence aside, it was perfect and worked. Chicago School
fundamentalism developed at a post-war time in the 1950s when leftist ideas
supporting worker rights were gaining ground. Where they "promised
(workers) freedom from bosses, citizens from dictatorship (and) countries
from colonialism," Friedman promised "individual freedom"
to choose that appealed to owners of capital who embraced him and his thinking.
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- It stood in stark contrast to what became known as "developmentalism"
or "Third World nationalism" in the post-war developing world.
Economists in it favored an "inward-oriented industrialization"
strategy to break the cycle of poverty and grow. Like Keynesians and social
democrats, they showed it worked in Latin America's Southern Cone with
leaders like Juan Peron "put(ting) their ideas into practice with
a vengeance (by) pouring public money into infrastructure projects, (providing)
local businesses generous subsidies, and keeping out foreign imports with....high
tariffs." It brought prosperity to the South and "dark days"
for Friedman, his acolytes, and free-wheeling capitalists losing out to
social progress.
-
- It sprung corporate America to action by funding a legion
of think tank and Chicago School foot soldiers to change the message and
fortunes of their businesses. Friedman was their ideological leader preaching
public wealth should be in private hands, rules and regulations out the
window, accumulation of profits unrestrained, and social welfare programs
curtailed or abolished. In short - deregulate, privatize and get government
out of the business of everything besides providing security and enforcing
contracts. He also believed taxes were onerous and once said he was "in
favor of cutting (them) under any circumstances and for any excuse, for
any reason, whenever it's possible...."
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- He also said corporations should be exempt from federal
taxes claiming what they pay ends up in consumer prices that, in fact,
is pure nonsense as every marketing MBA (like this writer) learns straightaway.
The fundamental law of pricing is to charge what the market will bear,
no more or less. In other words, get all you can but no more than buyers
will pay. Soon enough they'd pay plenty in the developing world.
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- In 1953, the US declared war against "developmentalism"
with CIA's first ever coup against Mohammed Mossadegh in Iran. Another
followed the next year in Guatemala, and in both instances democratically
elected leaders were ousted because corporate interests opposed them. It
was only the beginning, and Friedman and his "Chicago Boys" soon
had a real time laboratory to prove their "capitalist utopia"
worked.
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- Salvador Allende's Popular Unity government electoral
victory in 1970 was the opportunity. Three years later he was out giving
Friedman the chance he wanted. Klein related the results in what she called
"the first Chicago School state" with others to follow. They're
all the same with "an unstoppable hurricane of mutually reinforcing
destruction and reconstruction, erasure and creation" following the
crisis. Next is unfettered economic shock therapy with torture and disappearances
awaiting resisters and anyone guilty of bad thinking. Friedman's brave
new world was beginning to roll. It's devastation is everywhere including
at home.
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- Part 2 - The First Test - The Bloody Birth of the Counterrevolution
-
- Counterrevolution began 34 years ago in Chile on another
September 11 that should have been unimaginable and had to seem surreal.
There were tanks in the streets and fighter jets attacking government buildings
in a scene all too real and deadly. It played out in Santiago and around
Chile and was just the beginning of a long nightmare. It brought General
Augusto Pinochet to power (with plenty of CIA help) who called his action
"a war," not a coup, and to reinforce his message he made it
seem like one. Blood in the streets, the presidential palace in flames,
and President Salvador Allende dead ended the most vibrant democracy in
the Americas. It was a cakewalk with "the junta's grand battle over
by mid-afternoon."
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- A state of siege was imposed followed by mass arrests,
killings and torture in a climate of fear that enveloped the country. Allende
supporters were targeted in Chile's "Caravan of Death." Chileans
paid dearly, but the Chicago Boys had their moment of triumph, and they
were ready. Rolling off the press was their detailed economic manual for
the new government called "The Brick." It was a 500 page Chicago
School shock therapy wish list. It was "the first Chicago School state,"
its first "global counterrevolution" victory, and "a genesis
of terror" in a brave new world for Chileans.
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- The economic playbook was right from Milton Friedman's
"Capitalism and Freedom" that's long on free market triumphalism
and void on its effects on real people. It was pure Friedman featuring
mass privatizations, deregulation and deep social spending cuts flavored
generously with corporate-friendly tax cuts, trade unionist crackdowns,
savage repression for non-believers, and an end to Chile's social democratic
state Friedman condemned.
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- Pinochet bought it along with a team of Chicago School
alumni called "technos." They embarked on a free market binge
with disastrous results. In the first year, inflation hit 375%, thousands
of Chileans lost jobs, the country was flooded with cheap imports, local
businesses closed and hunger grew along with public and small business
discontent in this free market "paradise." In desperation, "it
was time to call in the big guns" with Milton Friedman coming to Santiago
to reinforce his message that for things to improve they first had to get
worse. It was classic shock treatment and Chicago School baloney with Friedman
preaching patience and promising an "economic miracle" if his
prescription was followed.
-
- Pinochet agreed, and slash and burn followed with visions
of paradise at the end of the rainbow. It was pure untested fantasy, and
the results showed it. After one year of hardened shock therapy, Chile's
economy contracted 15%, unemployment rocketed to 20%, and contrary to Friedman's
rosy scenario it lasted for years with no social safety net help for desperate
Chileans.
-
- Klein notes Chile today is still cited as a model that
free market "Friedmanism" works in spite of the clear evidence
it doesn't. Growth did resume a decade later, but only after conditions
worsened. It forced Pinochet to reinstate Allende policies like renationalizing
privatized companies but not his social democratic agenda. Chileans were
left with the shambles. When the economy stabilized and rapid growth resumed
in the late 80s, poverty was 45%, but the richest 10% saw their incomes
rise by 83%. Even today, Klein notes, Chile remains one of the most unequal
societies in the world. It's shock therapy miracle shifted "wealth
to the top and shock(ed) much of the middle class out of existence."
-
- It's the way it works everywhere and a glimpse of the
future: "an urban bubble of frenetic speculation and dubious accounting
fueling superprofits and frantic consumerism, ringed by ghostly factories
and rotting infrastructure of a development past; roughly half the population
(excluded); out-of-control corruption and cronyism; (decimated) nationally
owned small and medium-sized businesses; (mass) transfer of (public) wealth
(and resources) to private hands (accompanied by) a huge (shift) of private
debts into public hands." Inside the Chilean bubble was paradise.
Outside was "The Great Depression." Bubble-benefitters reacted
with "junkie logic: Where is the next fix?"
-
- It was first across the border in other Latin American
Southern Cone countries where the "counterrevolution spread (and)
people vanish(ed)." Argentina, Brazil and Uruguay were targeted with
similar results as in Chile under juntas replacing democrats. Chicago School
fundamentalism was on a roll, and woe to the non-believers. Nations that
were developmentalism models became wastelands with decades of worker gains
lost almost overnight. Factories closed, wages fell, unemployment soared,
poverty grew severe, dissenters disappeared, and ordinary people suffered
to prove what pin-stripped academics knew after Chile went sour. Instead,
it was on to the next target.
-
- In them all, the slate was cleansed and terror unleashed,
unrestrained by national borders. Former Allende economist and diplomat
turned activist Marcos Orlando Letelier became a victim in September, 1976.
While living in Washington, he condemned Chile's "economic freedom"
for the privileged and paid with his life. Pinochet's DINA secret police
killed him and his American colleague, Ronni Moffit, by remote-detonating
a bomb planted under his driver's seat. An FBI investigation learned the
assassins entered the country under false passports with full CIA knowledge
and complicity.
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- The purging included cleansing wrong ideas and thinkers
like legendary left wing Chilean folk singer, Victor Jara. He was seized
and taken to Chile's notorious National (killing and torture) Stadium to
be reeducated. Soldiers broke his hands so he couldn't play the guitar.
Then they shot him 44 times "to make sure he couldn't inspire from....the
grave." One culture was being erased and replaced by another. As in
Nazi Germany, books were burned, newspapers and magazines shuttered, universities
occupied and strikes and political meetings banned. Trade unionists were
specially targeted as threats to the new economic order. It's leaders were
rounded up, movement members viciously attacked, and "battalions"
targeted workers in factories. They were arrested, imprisoned, tortured,
and disappeared in a sweeping reign of terror designed to crush opposition
and wrong-thinking.
-
- In Argentina, Ford Motor Company's local subsidiary was
complicit. It helped soldiers and secret police rid unionists from its
factories and supplied vehicles as well. Green Ford Falcon sedans became
the feared symbol of terror an Argentine playwright called "death-mobiles."
Many thousands kidnapped and disappeared rode off in these cars, never
to return.
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- Farmers involved in land reform struggles also were targeted
along with anyone with "a vision of society built on values other
than pure profit." It affected community worker activists, many church-connected,
who wanted social services like health care, public housing and education
the state was erasing through shock therapy and mass repression. Klein
noted while "policies attempted to excise collectivism from the culture,
inside....prisons (the practice was to) excise it from the mind and spirit."
The sickness was democratic socialism, the cure pain and suffering. Wrong-thinkers
were taught the hard way, and many paid with their lives. Chicago School
fundamentalism is harsh medicine. Its grand guru, Milton Friedman, was
unrepentant. He called it "freedom" and took his mathematical
model miracle to the grave amidst a hail of undeserved eulogies.
-
- In his memoirs before he died, his "blatant revisionism"
on Chile was shameful and disturbing. He falsely claimed Pinochet only
asked for help in 1975 when, in fact, the Chicago Boys worked with the
military before the 1973 coup, and their policies were implemented on Pinochet's
first day in power. Friedman also claimed the junta's repressive years
didn't undo Chilean democracy. In his view, it opened up "more room
for individual initiative and for a private sphere of life (offering a
greater) chance of a return to a democratic society." It was classic
convoluted Chicago School thinking. It made him famous courtesy of corporate
triumphalism, generous funding and an utter disdain for human rights and
dignity.
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- Friedman also used his 1976 Nobel lecture to argue economics
was as scientifically accurate and objective as other sciences. He failed
to mention its dark side - devastating poverty, unemployment, shuttered
factories and mass human misery and deaths in the first nation adopting
his ideology on its victimized people. Now it's everywhere and savagely
enforced in an age of corporate dominance, wars for profit and neglect
of human needs to fund them. That's Friedman's real legacy from the barrel
of a gun and called "freedom."
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- Part 3 - Surviving Democracy
-
- Chicago School dogma became known as Thatcherism in Britain,
but its prime minister wasn't an early adherent. Margaret Thatcher thought
Chilean shock therapy wasn't possible in a democracy like the UK because
voters wouldn't buy it. Three years into her first term, her approval rating
was lower than George Bush's. She was in danger of not being reelected
and didn't dare risk imposing bitter economic medicine that would sink
her chances. That is, until destiny intervened on April 2, 1982 when Argentina
invaded the British-held Falkland Islands off its coast that was unimportant
to either country except for the political hay to gain from war.
-
- Thatcher jumped at the chance to regain her footing and
"went into Churchillian battle mode," even though Argentina's
president, General Leopoldo Galtieri, wasn't Adolph Hitler. But defending
the British empire was almost as good, and it paid off. Thatcher's political
future was at stake. She revived it, more than doubled her approval rating
and henceforth was known as the "Iron Lady" that for her was
high praise, and she made the most of it.
-
- She launched a "corporatist revolution" based
on Chicago School economics she thought impossible earlier. She parlayed
her new popularity to a victory against striking coal miners in 1984 with
tactics like unleashing 8000 "truncheon-wielding" riot police
in a single confrontation. Before the strike ended, thousands of workers
were injured, but Thatcher stood firm with a clear message to other unionists.
Take what you're offered or get the same medicine.
-
- She didn't stop there, and what followed was a radical
economic agenda in a wave of state enterprise privatizations including
British Telecom, British Gas, British Airways, British Steel and others
in what Klein called "the first mass privatization auction in a Western
democracy." It proved Chicago School fundamentalism didn't need repressive
dictatorships to advance as long as "Iron Ladies" like Thatcher
were around to match the best of them, short of all out tanks in the streets
shock therapy, that is. Her eleven and a half years in power proved it,
and Britain hasn't been the same since with Labor as committed now as the
Tories.
-
- Bolivia was soon targeted as well, but in 1985 was part
a democratic wave sweeping the world. It was an election year with two
familiar figures facing off for the presidency - former dictator Hugo Banzar
and former elected president, Victor Paz Estenssoro. It was close and Banzar
thought he won so before final returns were in he named 30 year old Harvard
economist Jeffrey Sachs to help develop an anti-inflation economic plan
for the country.
-
- Sachs was part Keynsian but larger part Chicago School
adherent that made for a bad combination. He bought its orthodoxy in softer
form by supporting debt relief and generous aid along with the shock therapy
he advised Banzar to adopt as the only solution to hyperinflation.
-
- As it turned out, Banzar lost and Paz won, and while
no socialist, he was no Chicago School adherent either, or so voters thought.
Four days into his term, he charged his emergency economic team to radically
restructure the economy using shock therapy with a twist. It was much
harsher than Sachs proposed with the entire state-centered structure Paz
erected decades earlier dismantled in the first 100 days before the public
could react. In its place, food subsidies were ended, price controls lifted,
wages frozen, oil prices hiked 300%, deep government spending cuts imposed,
unrestricted imports allowed, and state-owned companies downsized as a
first step to privatizing them. It cost hundreds of thousands of full-time
jobs, pensions and safety net protections. Friedman continued to roll.
-
- The results were predictable. The minimum wage never
regained its value, and two years later real wages were down 40% and average
per capita income dropped from $845 in 1985 to $789 in 1987. As in other
shock therapy countries, a small elite got richer while the great majority
of Bolivians lost out with campesinos faring worst. In 1987, they earned
on average $140 a year, or less than one-fifth the nation's declining average
income.
-
- Bolivian misery gave Sachs star status for the country's
"Miracle." It launched his new career and brought him to Argentina,
Peru, Brazil, Ecuador, Venezuela and Russia later on plus a best-selling
book and three-part PBS "success story" series. The only problem
was it wasn't true. President Paz had no mandate for shock therapy, and
many workers were predictably furious at his betrayal. They went on strike
and Paz's response made Margaret Thatcher's earlier action against striking
coal miners seem tame by comparison. Tanks rolled in the streets, and riot
police raided union halls, a university and factories. Hundreds of arrests
followed, including the top 200 union leaders, and oppositional politics
was banned. The siege lasted three months during the decisive shock therapy
period with more repression and Chicago School medicine later.
-
- It showed shock therapy needs harsh authoritarian rule
backing with Bolivia's pin-stripped politicians, economists and bureaucrats
administering it, not uniformed soldiers as in Chile. Paz's democratic
victory was illusory like others when leaders renege on promises and sacrifice
them on the alter of Chicago School orthodoxy.
-
- Argentina was another "textbook case." In the
post-Falklands War period, it was burdened with billions in odious debt
Washington insisted be serviced and paid. It was far more onerous after
the (Paul) "Volker Shock" when the US Federal Reserve Chairman
hiked interest rates up to 21% in the early-mid 1980s to fight inflation,
so he said. It was painful in the US and disastrous for developing countries
turning their debt burdens into crises. New loans were needed to pay off
old ones, and the debt spiral was born afflicting nations then and still
today. That was the whole idea, or at least one of them.
-
- Argentina, Brazil and other countries had another option
they didn't take - defaulting on debt so great it was unrepayable. As Klein
put it: "Understandably (new democracies were) unwilling to go to
war with Washington (and the international lending agencies it controls
so they) had little choice but to play by Washington's rules (and) in the
early eighties (they) got a great deal stricter....It was the dawn of the
era of 'structural adjustment' - otherwise known as the dictatorship of
debt."
-
- In the 1980s, Chicago School economists colonized the
IMF and World Bank to advance their corporatist crusade. Economist John
Williamson named it "the Washington Consensus" that stuck ever
since. It consisted of core economic policies both institutions consider
essential for economic health according to their orthodoxy. We know them
well: all "state enterprises ....privatized (and) barriers impeding
entry of foreign firms....abolished." There was more that together
was classic Friedman dogma: privatization, deregulation, unrestricted free
trade (never called fair), and deep cuts in government spending except
for security.
-
- Indebted developing countries learned shock doctrine
101 the hard way. Getting aid meant accepting Washington Consensus rules
- the whole package. So to save their countries, they had to "sell
(them) off." Klein calls Argentina the "model student" in
the 1990s under leaders like Carlos Menem. Appointing Domingo Cavallo economy
minister signaled he bought the corporatist package. But as Klein points
out: "Argentina was not unique (and by 1999) Chicago School alumni
included more than twenty-five government ministers and more than a dozen
central bank presidents from Israel to Costa Rica."
-
- Shock therapy was on a role that in Argentina turned
into a textbook case of therapeutically induced disaster. What Time magazine
in 1992 called "Menem's Miracle" became Menem's Mirage when the
economy collapsed in 2001, and Argentina did the unthinkable with Menem
gone and a new president in power. It defaulted on an $805 million debt
to the World Bank. It should have ended the neoliberal experiment, but
instead it spread. Economic crises fueled it, and when old ones ebbed "even
more cataclysmic ones appear(ed): tsunamis, hurricanes, wars and terrorist
attacks. Disaster capitalism was taking shape" with shock therapy
its tool of choice.
-
- Part 4 - Lost in Transition: Slamming the Door on History
-
- Before the Berlin Wall fell, Lech Walesa became a labor
hero in Poland and the West by defying the Moscow-controlled government
and getting away with it. Solidarnosc (Solidarity) spread from its Gdansk
roots to the country's mines, shipyards and factories and within a year
had 10 million members. They won the right to bargain but wanted more.
They aspired to take over the state and institute their own alternative
economic and political program. It's radical centerpiece was to transform
huge state-run companies into worker-run cooperatives so Solidarity members
could be empowered in their own "socialized enterprise."
-
- Walesa objected, lost the debate, and he feared what
then happened. The Jaruzelski government declared martial law, sent tanks
to the streets and rounded up thousands of Solidarity members. By the late
80s, the crackdown subsided, the economy was in free fall, workers again
struck and Mikhail Gorbachev's reformist government was in power in Moscow.
Solidarity was legalized, a Citizens' Committee Solidarity wing was formed,
its members stood in snap elections and won effective control of the government
capturing 260 parliamentary seats.
-
- It should have been the best of times, but with the economy
in trouble, Poland needed aid including debt relief. With Chicago School
alumni running IMF, none was offered except under Washington Consensus
rules, take it or leave it. Enter Jeffrey Sach, the shock doc, with an
even harsher plan than imposed on Bolivia. It included an immediate end
to price controls, slashing subsidies, and privatizing mines, shipyards
and factories. It short, it ran directly counter to Solidarity's aim for
worker-run industry.
-
- Sachs promised Solidarity Poland could become like France
or Germany under his plan. By swallowing shock therapy medicine first,
taking the pain, the patient would end up cured and healthy - if he was
right. After debate, the verdict was in and the treatment bought with predictable
results. Sachs promised "momentary dislocations" but delivered
a full-blown depression. Industrial production plummeted 30% after two
years of "reforms." Unemployment skyrocketed, and in 1993 hit
25% in some areas. It's still chronic today with recent World Bank figures
pegging it at around 20%, the highest in the European Union. For young
people, it's even worse with 40% of workers under 24 unemployed.
-
- Most alarming is the number of people in poverty. From
a 15% level in 1989, it rose to a startling 59% in 2003. Incredibly, the
country, like Chile, is still cited as a free market reform model. It's
pure myth, angry Poles know it, but reports in the West ignore them as
they do shocked victims everywhere.
-
- They didn't ignore "the shock of Tiananmen Square,"
but didn't report it accurately either. In the early 1980s, Deng Xiaoping
was transforming his country economically while keeping rigid political
control including iron-fisted repression when needed. Democracy was nowhere
in sight nor is it now. While many of Deng's reforms were successful and
popular, others in the late 80s weren't, and it provoked deep anger in
the cities by people most affected. Price controls were lifted, corruption
and nepotism was rampant, freedom minimal, job security eliminated, unemployment
soared, and deep inequalities grew between "winners and losers in
the new China."
-
- It came to a head with mass protests in 1989 in Tiananmen
Square that Western reports characterized as a clash between old-guard
Communist authoritarians and idealistic students wanting western-style
democracy. It was pure propaganda. The protests were massive and threatened
the government, but democracy wasn't the issue. It was popular discontent
from wrenching economic change raising prices, lowering wages, and causing
"a crisis of layoffs and unemployment." Protesters weren't against
economic reform. They were against the Chicago School version of it, but
their efforts were costly.
-
- Deng declared martial law May 20, tanks rolled in the
square, indiscriminate shooting took place, and when it ended thousands
were dead, many more thousands injured, and still more thousands hunted
down, arrested, jailed, some tortured, and hundreds likely executed. Shock
therapy rolled in China as in Chile - through the barrel of a gun and raw
state terror. Following the crackdown, China opened to foreign investment,
joined the WTO, and turned the country into the world's largest low wage
sweatshop for Wal-Mart's "Always Low Prices."
-
- For foreign investors and party apparatchiks, it was
a win-win arrangement with Klein citing a 2006 study showing 90% of China's
billionaires to be Communist Party officials. About 2900 "party scions"
(called "the princelings") control $260 billion, and Klein notes
the "stark similarity between (China's authoritarian rule) and Chicago
School capitalism - a shared willingness to disappear opponents, blank
the slate of all resistance and begin anew" using shock and fear to
transform countries into free market paradises for the privileged.
-
- The Tragedy of South Africa's "Democracy Born in
Chains"
-
- Klein quotes Nelson Mandela in January, 1990 (two weeks
before he was freed) in a note to his supporters from prison saying: "The
nationalisation of the mines, banks and monopoly industries is the policy
of the ANC (and changing) our views....is inconceivable. Black economic
empowerment is a goal we fully support and encourage, but in our situation
state control of certain sectors of the economy is unavoidable." That
belief became ANC policy in 1955 in its Freedom Charter. The liberation
struggle wasn't just about a political system but an economic one as well.
White workers in mines earned 10 times more than blacks, and large industrialists
worked with the military to enforce order and disappear dissenters.
-
- Once apartheid ended, a new way was possible, and Mandela
seemed poised to lead it. The ANC had "a unique opportunity to reject
the free market orthodoxy of the day" and choose a "third path
between Communism and capitalism." ANC candidates swept the 1994 elections
and Mandela became president at a time South Africa surpassed Brazil as
the most unequal society in the world. Negotiations were held with the
ruling National Party, and a peaceful handover was achieved but not without
"prevent(ing) South Africa's apartheid-era rulers from wreaking havoc
on their way out the door."
-
- Negotiations took place on two parallel tracks - political
and economic. Mandela and his chief negotiator, Cyril Ramaphosa, "won
on almost every count" politically. But along side it, economic negotiations
were held with the country's current president, Thabo Mbeki, in charge
with the outcome in the end far different. With ANC leaders preoccupied
with controlling Parliament, the former white supremacist government and
industrialists were determined to safeguard their wealth, and they succeeded
by assuring Washington Consensus policies would be instituted when political
power changed hands.
-
- ANC economists and lawyers were outfoxed or outgunned
by the opposition, IMF, World Bank, GATT and power of big capital against
inexperienced politicians and technocrats who ended up losers. Black officials
controlled the government, but discovered the real power was elsewhere.
As Klein put it: "The bottom line was that South Africa was free but
simultaneously captured." The leadership mistakenly thought once firmly
in power they could undo earlier made transition compromises.
-
- They couldn't or didn't for the same reasons other developing
countries accept free market rules. Adopt them or be punished by the market
as Mandela learned when he was freed. The South African stock market collapsed
in panic, and the country's currency (the rand) dropped by 10%. He acknowledged
the problem later on saying it's "impossible for countries....to decide
economic policy without regard to the likely response of these markets."
It's too bad he didn't know how Hugo Chavez managed after 1999 (oil aside).
He achieved what Mandela reneged on, and Venezuela's economy is booming.
Had he and ANC officials stood their ground early on, South Africa (with
its mineral riches) might have done the same thing - had a growth economy
in a socially democratic state and a model for its neighbors.
-
- They didn't, black South Africans lost out, Mandela's
legacy is tainted, and a key factor was current president Thabo Mbeki.
He spent spent years studying in exile in England during the apartheid
years during which time "he was breathing in the fumes of Thatcherism."
He became the ANC's free market tutor, believed in market fundamentalism,
and its prescription was "growth and more growth." It meant neoliberal
shock therapy with the full Friedman package Mbeki supported. He later
professed: "Just call me a Thatcherite," and Mandela told journalist
John Pilger the same thing in retirement saying: "....you can call
it Thatcherite but, for this country, privatization is the fundamental
policy."
-
- After over a decade of that agenda (1994 - 06), Klein
highlighted the toll showing conditions today much worse than under apartheid,
and ANC's leadership responsible:
-
- -- the number of people living on less than $1 a day
doubled from two to four million;
-
- -- the unemployment rate more than doubled to 48% from
1991 - 2002;
-
- -- only 5000 of 35 million black South Africans earn
over $60,000 a year;
-
- -- the ANC government build 1.8 million homes while two
million South Africans lost theirs;
-
- -- nearly one million South Africans were evicted from
farms in the first decade of democracy; as a result, the shack dweller
population grew by 50%, and in 2006, 25% of South Africans lived in them
with no running water or electricity. And there's more:
-
- -- the HIV/AIDS infection rate is about 20%, and the
Mbeki government shamefully denied the severity of the crisis and did little
to alleviate it; it's been a major reason why average life expectancy in
the country declined by 13 years since 1990;
-
- -- 40% of schools have no electricity;
-
- -- 25% of people have no access to clean water and most
who do can't afford the cost; and
-
- -- 60% of people have inadequate sanitation, and 40%
no telephones.
-
- "Freedom" for these people and all black South
Africans came at a high price, and no efforts are being made to ameliorate
it. Political empowerment was traded for economic apartheid under Chicago
School fundamentalist rules. Klein observed: "Never before had a government-in-waiting
been so seduced by the international community." If China, Vietnam
and even Russia saw "the neoliberal light," Mandela was told,
how could South Africa resist it. The ANC leadership might have (and Mandela
had the credentials to lead them) had they examined the wreckage around
the world in Friedman-seduced countries. Instead, they took the easy way
out and surrendered.
-
- Russia Chooses "the Pinochet Option"
-
- The man who ignited political and social change in Russia
wasn't around long enough to lead it. Mikhail Gorbachev became head of
the Soviet Union's Communist Party in March, 1985, believing the economy
stalled and needed change. His solution became glasnost (liberalizing opening
up) and perestroika (reconstruction), and Soviet Russia would never be
the same again. By the early 1990s the press was freed, the constitutional
court was independent, and elections were held for Russia's parliament,
local councils, president and vice-president. In addition, Gorbachev favored
a Scandinavian-style social democracy combining free market capitalism
with strong social safety net protections. He hoped to build "a socialist
beacon for all mankind." He never got the chance.
-
- While still in office at the 1991 G7 meeting in London,
his fellow heads of state delivered a free market message Chicago School-style.
Later, the IMF, World Bank and other international lending agencies reinforced
it - Soviet-era debts must be honored and aid depended on adopting strict
shock therapy rules. The Soviet Union soon dissolved, Gorbachev was out,
Boris Yeltsin became Russia's president, and Chicago School fundamentalism
was adopted as needed "reform." Klein calls what happened next
"one of the greatest crimes committed against a democracy (in peacetime)
in modern history."
-
- Yeltsin assembled a team of Chicago School ideologues
to remake the economy. Jeffrey Sachs showed up, too, with other US-funded
transition experts to help write privatization decrees, launch a New York-style
stock exchange, and craft a total radical economic makeover for a country
long used to central planning. Only one thing stood in the way - democracy,
and a parliament able to vote down what Yeltsin's team designed. A clash
of wills drew closer in the spring of 1993 when parliament's budget diverged
from IMF demands for strict austerity. Yeltsin reacted with the "Pinochet
option." He issued decree 1400 dissolving parliament and abolishing
the constitution. Two days later, parliament voted 636 - 2 to impeach him,
and battle lines were drawn.
-
- Yeltsin sent troops to surround parliament and cut off
power, heat and phone lines. The army backed him and he pressed on. He
then proceeded to dissolve all city and regional councils in the country.
Then, on October 4, 1993, he ordered the army to storm the parliament,
set it ablaze and "defend Russia's new capitalist economy from the
grave threat of democracy." The assault took about 500 lives, wounded
nearly 1000 others with the enthusiastic support from the West in headlines
like the Washington Post proclaiming "Victory Seen for Democracy"
in Russia. Some democracy.
-
- Yeltsin now had unchecked dictatorial power, the West
had its man in Moscow, and shock therapy had an open field to inflict wreckage
on Russia's people who didn't know what him them as it unfolded. A corporatist
state replaced a communist one, and its apparatchiks were winners along
with a handful of western mutual fund managers who made "dizzying
returns investing in newly privatized Russian companies." In addition,
"a clique of nouveaux billionaires" (17 in all called "the
oligarchs") were empowered to strip mine the country of its wealth
and ship profits offshore at the rate of $2 billion a month.
-
- As a result, Yeltsin's popularity plunged so he did what
all desperate leaders do to hold power with the next election to worry
about. He began a war in 1994 in the breakaway Chechen republic killing
100,000 civilians by the late 90s. Elections were held in 1996, and Yeltsin
won by overcoming his low approval ratings with huge oligarch-funding and
near-total control of television coverage. He then quietly handed power
to Vladimir Putin on December 31, 1999 without an election but with the
stipulation he was exempt from criminal prosecution. His legacy was devastating
with Klein noting "never have so many lost so much in so short a time."
When Russia's 1998 financial crisis hit:
-
- -- 80% of Russia's farmers were bankrupt;
-
- -- around 70,000 states factories had closed;
-
- -- an "epidemic" of unemployment raged;
-
- -- before shock therapy in 1989, two million Russians
lived in poverty on less than $4 a day; by the mid-90s, the World Bank
estimated 74 million were impoverished and by 1996 conditions for 25% (almost
37 million) Russians were "desperate" and the country's underclass
remained permanent;
-
- -- Russians drink twice as much now as before; painkilling
and hard drug use increased 900%, and HIV/AIDS threatens to become epidemic
with a 20-fold jump in infections since 1995; suicides are also rising,
and violent crime increased more than fourfold; and
-
- -- Russia's population is declining by 700,000 a year
with capitalism having already having killed off 10% of it as one more
example of free market-inflicted disaster. That's the brave new world disease
spreading everywhere with another scorched-earth stop below. Friedman called
it "freedom."
-
- The Looting of Asia
-
- In the summer of 1997, economic crisis hit Asia from
no apparent cause beyond rumors the Thai bhat was in trouble, and Thailand
didn't have enough dollars to back it. Hot money in became an electronic
stampede out with "Asian Contagion" unleashed and heading for
Indonesia, South Korea and other so-called Asian Tiger countries that were
fast-growth miracles until they crashed together with the plight of one
affecting the others. It then got worse and spread to Latin America and
Russia with US markets also affected briefly in 1997 and then again with
a severe jolt in the summer of 1998.
-
- The 1997 Asian panic was crippling with $600 billion
in stock market wealth taking decades to build wiped out in a year. Klein
notes "a classic fear cycle" ignited the crisis that might have
been contained by the same type "quick, decisive loan" rescue
package offered Mexico in 1994 in their so-called Tequila Crisis. It would
have been a strong signal to markets the US Treasury and international
lending agencies wouldn't let the Asian Tigers fail. No help came, and
the message instead was: "Don't help Asia." Why? Because "Asia's
catastrophe was an opportunity (for predatory western corporations and
vulture investors) in disguise."
-
- Asian Tigers grew by protecting their markets and barring
foreign companies from ownership of land or national firms. They also restricted
imports from the West and Japan and instead built up their own domestic
markets. Western predators wanted unfettered entry to the region with the
right to scoop up the best Asian companies but needed a way to do it. Now
they had it from an event Klein calls "the fall of a second Berlin
Wall," as important to western capital as the first one.
-
- Enter the IMF with crisis-struck Asian countries too
sick to resist it. They needed help, and the lending agency had plenty
to offer on similar terms as to previous crisis recipients. With economies
in trouble and empty treasuries, the Tigers got no choice. First, they
had to remove all "trade and investment protectionism and activist
state intervention that were the key ingredients of the Asian miracle."
IMF also demanded big spending cuts, "flexible" workforces (meaning
mass layoffs and constrained wages and benefits), privatized basic services,
and the rest of the package they demand for loans.
-
- The regional toll was devastating with the International
Labor Organization estimating 24 million lost jobs along with "what
was so remarkable about the region's 'miracle' in the first place: its
large and growing middle class." In addition, 20 million people fell
into the "planned misery" of poverty, reversing an earlier trend
reducing it. Women and children suffered most with families selling daughters
to human sex traffickers to survive as child prostitution had a new growth
market.
-
- So did Wall Street as IMF structural adjustments put
"pretty much everything in Asia....up for sale" in the affected
countries. The more markets panicked, the lower asking prices became, and
the more pressured hurting companies were to sell out for what they could
get or face bankruptcy. It was a bonanza for buyers, and major deals went
through in a great fire sale at bargain prices. Asia became hugely transformed
with hundreds of local brands replaced by western transnational ones. The
New York Times called it "the world's biggest going-out-of-business
sale." It also became an early glimpse of post-9/11 disaster capitalism
- a way for corporate predators to exploit crises in what's become common
practice in the age of "terror" creating opportunities galore
and big profits for well-connected firms.
-
- Klein notes the Asian crisis never ended as desparation
took root after 24 million people lost jobs in two years. No nation handles
that, and the fallout can be unpredictable. It led to a rise in religious
extremism in Indonesia and Thailand and "the explosive growth in the
child sex trade." Unemployment is still high and layoffs continue
with new foreign owners demanding higher profits with jobs disappearing
to provide them.
-
- Eventually things settle down but never to where they
once were. Throwing people overboard, displacing small farmers and business
owners and crushing unions means those affected stay that way. "They
end up in slums, now home to one billion people (and rising); they end
up in brothels or in cargo ship containers. They are the disinherited (or
what) German poet Rainer Maria Rilke (called) 'ones to whom neither the
past nor the future belongs.' " They're the human wreckage left behind
by countries swallowing Chicago School economic medicine. Its promised
miracle is people-poison but not for vulture investors thriving on it.
Disaster capitalism is on a roll, and its growth market potential is unlimited
and guaranteed to continue unless mass public outrage stops it as one day
it will.
-
- Part 5 - The Rise of the Disaster Capitalism Complex
-
-
- Shock Therapy in the USA
-
- Richard Nixon knew before the rest of us that Donald
Rumsfeld is "a ruthless little bastard." He also has a knack
for making enemies even inside the Pentagon he ran as Defense Secretary.
He planned to "reinvent warfare for the twenty-first century (making
it) more psychological than physical, more spectacle than struggle, and
far more profitable" than ever before. Talk aside, he wanted to revolutionize
the military by running it like the corporate world, and that meant using
methods like outsourcing and branding. His idea was for fewer full-time
troops, more as-needed ones from the Reserves and National Guard, and a
lot of backup help from private contractors like Blackwater USA for security
and Halliburton for a range of functions unrelated to soldiering. He wanted
less staff and more tax dollars diverted to private companies. The Pentagon
brass wasn't pleased, but Rumsfeld was boss and Dick Cheney backed him.
-
- Klein calls them both "proto-disaster capitalists"
who practice "the central tenet of the Bush regime (that) the job
of government is not to govern but to subcontract." The privatization
mania was kick-started in the Reagan era, but Bill Clinton bought it as
well. Now the feeling is anything government can do, private business can
do better so let them. That means fire departments, prisons, public schools,
public health, data management, border control and even parts of the military.
As Klein explained: "crisis-exploiting methods....honed over the previous
three decades would be used to (privatize) the infrastructure of disaster
creation and....response. Friedman's crisis theory was going postmodern
(to create a) privatized police state" by auctioning it off.
-
- "Then came 9/11, and the idea of hollowing out government
seemed opposite of what a frightened public wanted - a strong central government
to protect them. Bush promised it in speeches, but "his inner circle
had no intention of converting to Keynesianism." September 11 security
failures only reinforced their belief that private firms could handle the
challenge better than government, and that meant transferring hundreds
of billions of public dollars to corporate pockets. The Bush administration
exploited shock and fear "to push through its radical vision of a
hollow government in which everything from war fighting to disaster response
was a for-profit venture."
-
- Mass disorientation post-9/11 provided the opportunity,
and the "war on terror" became a "bold evolution of shock
therapy....built to be private from the start" to capitalize on it.
It came in two stages. First, policing, surveillance, detention and war-making
powers of the executive were dramatically increased though nothing in the
Constitution permits it. Then, the whole package, including occupation
and "reconstruction," was outsourced to well-connected private
firms that responded with generous campaign funds to keep the mutually
reinforcing daisy chain humming. Using the ploy of fighting "terrorism,"
the homeland disaster capitalism complex emerged as a full-blown new economy
and what Klein calls "a virtual fourth branch of government."
-
- The Bush administration's idea of government, with security
as one function, wasn't to provide it but to buy it at cost-plus market
prices with lots of latitude for the plus. Just as the internet launched
the dot-com bubble, from 9/11 emerged the disaster capitalism one, and
it was off to the races "in an ad hoc....chaotic fashion."
-
- Fighting "terrorism" is big business, and one
of the first opportunities was the market for surveillance cameras with
30 million of them installed in the US, billions of hours of footage, analytic
software to scan it, digital image enhancement to help it, and information
management and data mining technology to handle all data government collects
on everyone and everything. September 11 unlocked the potential, a huge
new growth market was created, and protection from terror became more important
than big brother watching. In six short years, an industry that barely
existed is now much larger than Hollywood or the music business, and its
potential looks limitless.
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