The Shock Doctrine: The Rise of Disaster Capitalism

by Naomi Klein

The primary economic role of wars, however, was as a means to open new markets that had been sealed off and to generate postwar peacetime booms. Now wars and disaster responses are so fully privatized that they are themselves the new market; there is no need to wait until after the war for the boom—the medium is the message.

First, governments must remove all rules and regulations standing in the way of the accumulation of profits. Second, they should sell off any assets they own that corporations could be running at a profit. And third, they should dramatically cut back funding of social programs.

For the first year and a half, Pinochet faithfully followed the Chicago rules: he privatized some, though not all, state-owned companies (including several banks); he allowed cutting-edge new forms of speculative finance; he flung open the borders to foreign imports, tearing down the barriers that had long protected Chilean manufacturers; and he cut government spending by 10 percent—except the military, which received a significant increase.16 He also eliminated price controls—a radical move in a country that had been regulating the cost of necessities such as bread and cooking oil for decades. The Chicago Boys had confidently assured Pinochet that if he suddenly withdrew government involvement from these areas all at once, the “natural” laws of economics would rediscover their equilibrium, and inflation—which they viewed as a kind of economic fever indicating the presence of unhealthy organisms in the market—would magically go down. They were mistaken. In 1974, inflation reached 375 percent—the highest rate in the world and almost twice the top level under Allende.17 The cost of basics such as bread went through the roof. At the same time, Chileans were being thrown out of work because Pinochet’s experiment with “free trade” was flooding the country with cheap imports. Local businesses were closing, unable to compete, unemployment hit record levels and hunger became rampant. The Chicago School’s first laboratory was a debacle.

A few hours later, Walsh went to a meeting he had arranged with the family of a disappeared colleague. It was a trap: someone had talked under torture, and ten armed men were waiting outside the house in ambush, with orders to capture Walsh. “Bring that fucking bastard back alive, he’s mine,” Admiral Massera, one of the three junta leaders, had reportedly directed the soldiers. Walsh, whose motto was “It isn’t a crime to talk; getting arrested is the crime,” immediately pulled out his gun and began firing. He injured one of the soldiers and drew their fire; he was dead by the time the car arrived at the Navy School of Mechanics. Walsh’s body was burned and dumped in a river.

Before the terror campaign descended on Argentina, Rodolfo Walsh had written, “Nothing can stop us, neither jail nor death. Because you can’t jail or kill a whole people and because the vast majority of Argentinians … know that only the people will save the people.”17 Salvador Allende, as he watched the tanks roll in to lay siege to the presidential palace, had made one final radio address suffused with this same defiance: “I am certain that the seed we planted in the worthy consciousness of thousands and thousands of Chileans cannot be definitively uprooted,” he said, his last public words. “They have the strength; they can subjugate us, but they cannot halt social processes by either crime or force. History is ours, and the people make it.”18

The most famous human rights activists to emerge under these dangerous circumstances were the Mothers of the Plaza de Mayo, known in Argentina as the Madres. At their weekly demonstrations outside the house of government in Buenos Aires, the Madres did not dare hold up protest signs—instead they clasped photographs of their missing children with the caption ¿Dónde están? Where are they? In the place of chants, they circled silently, wearing white headscarves embroidered with their children’s names. Many of the Madres had strong political beliefs, but they were careful to present themselves as nothing more threatening to the regime than grieving mothers, desperate to know where their innocent children had been taken.s

For those living under dictatorship, the new language was essentially a code; just as musicians hid the political messages in their lyrics in sly metaphors, they were disguising their leftism in legalese—a way of engaging in politics without mentioning politics.t

A tool of the crudest kind of coercion, it crops up with great predictability whenever a local despot or a foreign occupier lacks the consent needed to rule: Marcos in the Philippines, the shah in Iran, Saddam in Iraq, the French in Algeria, the Israelis in the occupied territories, the U.S. in Iraq and Afghanistan.

The widespread abuse of prisoners is a virtually foolproof indication that politicians are trying to impose a system—whether political, religious or economic—that is rejected by large numbers of the people they are ruling. Just as ecologists define ecosystems by the presence of certain “indicator species” of plants and birds, torture is an indicator species of a regime that is engaged in a deeply anti-democratic project, even if that regime happens to have come to power through elections.

As a means of extracting information during interrogations, torture is notoriously unreliable, but as a means of terrorizing and controlling populations, nothing is quite as effective. It was for this reason that, in the fifties and sixties, many Algerians grew impatient with French liberals who expressed their moral outrage over news that their soldiers were electrocuting and water-boardi...

“The words were the same stale clichés: ever since torture had been used in Algeria there had always been the same words, the same expression of indignation, the same signatures to public protests, the same promises. This automatic routine had not abolished one set of electrodes or water-hoses; nor had it in any remotely effective way curbed the power of those who used them.”

“To protest in the name of morality against ‘excesses’ or ‘abuses’ is an error which hints at active complicity. There are no ‘abuses’ or ‘excesses’ here, simply an all-pervasive system.”

Just as there is no kind, gentle way to occupy people against their determined will, there is no peaceful way to take away from millions of citizens what they need to live with dignity—which is what the Chicago Boys were determined to do.

The Chicago Boys’ first adventure in the seventies should have served as a warning to humanity: theirs are dangerous ideas. By failing to hold the ideology accountable for the crimes committed in its first laboratory, this subculture of unrepentant ideologues was given immunity, freed to scour the world for its next conquest. These days, we are once again living in an era of corporatist massacres, with countries suffering tremendous military violence alongside organized attempts to remake them into model “free market” economies; disappearances and torture are back with a vengeance. And once again the goals of building free markets, and the need for such brutality, are treated as entirely unrelated.

Leftists in the developing world have long argued that genuine democracy, with fair rules preventing corporations from buying elections, would necessarily result in governments committed to the redistribution of wealth. The logic is simple enough: in these countries, there are far more poor people than rich ones. Policies that directly redistribute land and raise wages, not trickle-down economics, are in the clear self-interest of a poor majority. Give all citizens the vote and a reasonably fair process, and they will elect the politicians who appear most likely to deliver jobs and land, not more free-market promises.

“Votes are more equally distributed than income … . Voters with incomes at the median or below gain by transferring income to themselves.” Meltzer described this reaction as “part of the cost of democratic government and political freedom” but said that “the Friedmans [Milton and his wife, Rose] swam against this strong current. They could not stop or reverse it, but they influenced far more than most the ways in which people and politicians think and act.”14

It was in 1982 that Milton Friedman wrote the highly influential passage that best summarizes the shock doctrine: “Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.”

Crises are, in a way, democracy-free zones—gaps in politics as usual when the need for consent and consensus do not seem to apply.

The idea that market crashes can act as catalysts for revolutionary change has a long history on the far left, most notably in the Bolshevik theory that hyperinflation, by destroying the value of money, takes the masses one step closer to the destruction of capitalism itself.35 This theory explains why a certain breed of sectarian leftist is forever calculating the exact conditions under which capitalism will reach “the crisis,” much as evangelical Christians calibrate signs of the coming Rapture. In the mid-eighties, this Communist idea began to experience a powerful revival, picked up by Chicago School economists who argued that just as market crashes could precipitate left-wing revolutions, so too could they be used to spark right-wing counterrevolutions, a theory that became known as “the crisis hypothesis.” 36

Sachs liked to quote Keynes’s warning that “there is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction.”5 He shared Keynes’s view that it was the sacred duty of economists to suppress those forces of destruction at all costs. “The thing I got from Keynes,” Sachs says, “was this deep sadness and sense of risk that things can go completely awry. And how incredibly stupid it was of us to leave Germany in a state of disrepair.”

If she had the process to do over again, Sooka said, “I would do it completely differently. I would look at the systems of apartheid—I would look at the question of land, I would certainly look at the role of multinationals, I would look at the role of the mining industry very, very closely because I think that’s the real sickness of South Africa … . I would look at the systematic effects of the policies of apartheid, and I would devote only one hearing to torture because I think when you focus on torture and you don’t look at what it was serving, that’s when you start to do a revision of the real history.”

If Agresto had read a book or two, he might have thought twice about the need to erase everything and start over. He could have learned, for instance, that before the sanctions strangled the country, Iraq had the best education system in the region, with the highest literacy rates in the Arab world—in 1985, 89 percent of Iraqis were literate. By contrast, in Agresto’s home state of New Mexico, 46 percent of the population is functionally illiterate, and 20 percent are unable do “basic math to determine the total on a sales receipt.”be32 Yet Agresto was so convinced of the superiority of American systems that he seemed unable to entertain the possibility that Iraqis might want to salvage and protect their own culture and that they might feel its destruction as a wrenching loss. This neocolonialist blindness is a running theme in the War on Terror.

As the political scientist Michael Wolfe puts it, “Conservatives cannot govern well for the same reason that vegetarians cannot prepare a world-class boeuf bourguignon: If you believe that what you are called upon to do is wrong, you are unlikely to do it very well.” He adds, “As a way of governing, conservatism is another name for disaster.”

In Iraq, the lucky get Kevlar, the rest get prayer beads.

The truth is at once less sinister and more dangerous. An economic system that requires constant growth, while bucking almost all serious attempts at environmental regulation, generates a steady stream of disasters all on its own, whether military, ecological or financial. The appetite for easy, short-term profits offered by purely speculative investment has turned the stock, currency and real estate markets into crisis-creation machines, as the Asian financial crisis, the Mexican peso crisis and the dot-com collapse all demonstrate.

Given the boiling temperatures, both climatic and political, future disasters need not be cooked up in dark conspiracies. All indications are that simply by staying the current course, they will keep coming with ever more ferocious intensity. Disaster generation can therefore be left to the market’s invisible hand. This is one area in which it actually delivers.

As analysts struggle to understand the Davos Dilemma, a new consensus is emerging. It is not that the market has become immune to instability, at least not exactly. It is that a steady flow of disasters is now so expected that the ever-adaptable market has changed to fit this new status quo—instability is the new stability.

Memory, both individual and collective, turns out to be the greatest shock absorber of all.

The best way to recover from helplessness turns out to be helping—having the right to be part of a communal recovery.

Unlike the fantasy of the Rapture, the apocalyptic erasure that allows the ethereal escape of true believers, local people’s renewal movements begin from the premise that there is no escape from the substantial messes we have created and that there has already been enough erasure—of history, of culture, of memory.