The Shock Doctrine: The Rise of Disaster Capitalism

by Naomi Klein

The Bush administration immediately seized upon the fear generated by the attacks not only to launch the “War on Terror” but to ensure that it is an almost completely for-profit venture, a booming new industry that has breathed new life into the faltering U.S. economy.

The shock doctrine mimics this process precisely, attempting to achieve on a mass scale what torture does one on one in the interrogation cell. The clearest example was the shock of September 11, which, for millions of people, exploded “the world that is familiar” and opened up a period of deep disorientation and regression that the Bush administration expertly exploited.

“I am writing a book about shock. About how countries are shocked—by wars, terror attacks, coups d’état and natural disasters. And then how they are shocked again—by corporations and politicians who exploit the fear and disorientation of this first shock to push through economic shock therapy. And then how people who dare to resist these shock politics are, if necessary, shocked for a third time—by police, soldiers and prison interrogators.

Human rights groups point out that Guantánamo, horrifying as it is, is actually the best of the U.S.-run offshore interrogation operations, since it is open to limited monitoring by the Red Cross and lawyers. Unknown numbers of prisoners have disappeared into the network of so-called black sites around the world or been shipped by U.S. agents to foreign-run jails through extraordinary rendition.

There are few academic environments as heavily mythologized as the University of Chicago’s Economics Department in the 1950s, a place intensely conscious of itself not just as a school but as a School of Thought.

By the 1950s, Argentina had the largest middle class on the continent, and next-door Uruguay had a literacy rate of 95 percent and offered free health care for all citizens.

By Chile’s historic 1970 elections, the country had moved so far left that all three major political parties were in favor of nationalizing the country’s largest source of revenue: the copper mines then controlled by U.S. mining giants.

The theories of Milton Friedman gave him the Nobel Prize; they gave Chile General Pinochet.

Well, what is the sense of ruining my head and erasing my memory, which is my capital, and putting me out of business? It was a brilliant cure but we lost the patient. —Ernest Hemingway on his electroshock therapy, shortly before committing suicide, 1961

The crisis was the result of two main factors, both with roots in Washington financial institutions. The first was their insistence on passing on illegitimate debts accumulated under dictatorships to new democracies. The second was the Friedman-inspired decision at the U.S. Federal Reserve to allow interest rates to soar, which massively increased the size of those debts overnight.

The IMF and the World Bank did not live up to that universal vision; from the start they allocated power not on the basis of “one country, one vote,” like the UN General Assembly, but rather on the size of each country’s economy—an arrangement that gives the United States an effective veto over all major decisions, with Europe and Japan controlling most of the rest. That meant that when Reagan and Thatcher came to power in the eighties, their highly ideological administrations were essentially able to harness the two institutions for their own ends, rapidly increasing their power and turning them into the primary vehicles for the advancement of the corporatist crusade.

During the 1990s, many companies that had traditionally manufactured their own products and maintained large, stable workforces embraced what became known as the Nike model: don’t own any factories, produce your products through an intricate web of contractors and subcontractors, and pour your resources into design and marketing. Other companies opted for the alternative, Microsoft model: maintain a tight control center of shareholder/employees who perform the company’s “core competency” and outsource everything else to temps, from running the mailroom to writing code.

The idea at the heart of Rumsfeld’s forgotten speech is nothing less than the central tenet of the Bush regime: that the job of government is not to govern but to subcontract the task to the more efficient and generally superior private sector.

In the nineties, tech companies endlessly trumpeted the wonders of the borderless world and the power of information technology to topple authoritarian regimes and bring down walls. Today, inside the disaster capitalism complex, the tools of the information revolution have been flipped to serve the opposite purpose. In the process, cell phones and Web surfing have been turned into powerful tools of mass state surveillance by increasingly authoritarian regimes, with the full cooperation of privatized phone companies and search engines, whether it’s Yahoo collaborating with the Chinese government to pinpoint the location of dissidents or AT&T helping the U.S. National Security Agency to wiretap its customers without a warrant (a practice the Bush administration claims it has discontinued).

I think that’s weird and it’s nuts. To suggest that everything we do is because we’re hungry for money, I think that’s crazy. I think you need to go back to school. —George H. W. Bush in response to an accusation that his son invaded Iraq to open up new markets for U.S. companies

Saddam’s removal from power has opened vistas of opportunities for the oil giants, including ExxonMobil, Chevron, Shell and BP, all of whom have been laying the groundwork for new deals in Iraq, as well as for Halliburton, which, with its move to Dubai, is perfectly positioned to sell its energy services to all these companies.

The Bush team had failed to shock Iraqis into obedience either with Shock and Awe or with economic shock therapy. Now the shock tactics became more personal, using the Kubark interrogation manual’s unmistakable formula for inducing regression.

The Maldives, a chain of roughly two hundred inhabited islands off the coast of India, is a tourism republic in the same way that certain Central American countries used to be called banana republics. Its export product is not tropical fruit but tropical leisure, with a staggering 90 percent of the state’s revenues coming directly from beach holidays.

Seeing this resentment build, I couldn’t help wondering how long before Sri Lanka went the way of Iraq and Afghanistan, where the reconstruction looked so much like robbery that aid workers became targets. It happened shortly after I left: seventeen Sri Lankans working on tsunami relief for the international NGO Action Against Hunger were massacred in their office near the east-coast port city of Trincomelee.

Brazil, so long shackled to Washington by its enormous debt, is refusing to enter into a new agreement with the IMF. Nicaragua is negotiating to quit the fund, Venezuela has withdrawn from both the IMF and the World Bank, and even Argentina, Washington’s former “model pupil,” has been part of the trend. In his 2007 State of the Union address, President Néstor Kirchner said that the country’s foreign creditors had told him, “‘You must have an agreement with the International Fund to be able to pay the debt.’ We say to them, ‘Sirs, we are sovereign. We want to pay the debt, but no way in hell are we going to make an agreement again with the IMF.’” As a result, the IMF, supremely powerful in the eighties and nineties, is no longer a force on the continent.