The Shock Doctrine: The Rise of Disaster Capitalism

by Naomi Klein

In the Bush administration, the war profiteers aren’t just clamoring to get access to government, they are the government; there is no distinction between the two.

He was replaced by Michael Brown, who bolted after only two years to start Michael D. Brown LLC, specializing in disaster preparedness.23 “Can I quit now?” Brown wrote in an infamous e-mail to a fellow FEMA staffer in the middle of the Hurricane Katrina disaster.24 That is pretty much the philosophy: stay in government just long enough to get an impressive title in a department handing out big contracts and to collect inside information on what will sell, then quit and sell access to your former colleagues. Public service is reduced to little more than a reconnaissance mission for future work in the disaster capitalism complex.

Wherever it has emerged over the past thirty-five years, from Santiago to Moscow to Beijing to Bush’s Washington, the alliance between a small corporate elite and a right-wing government has been written off as some sort of aberration—mafia capitalism, oligarchy capitalism and now, under Bush, “crony capitalism.” But it’s not an aberration; it is where the entire Chicago School crusade—with its triple obsessions—privatization, deregulation and union-busting—has been leading.

Rumsfeld’s and Cheney’s dogged refusals to choose between their disaster-connected holdings and their public duties were the first sign that a genuine corporatist state had arrived. There are many others.

Committee for the Liberation of Iraq,

Because they are classified as contractors, not staff, most are not subject to the same conflict-of-interest rules as elected or appointed politicians—if they are subject to any restrictions at all. The effect has been to eliminate the so-called revolving door between government and industry and put in “an archway” (as the disaster management specialist Irwin Redlener put it to me). It has allowed the disaster industries to set up shop inside the government, using the reputations of such illustrious ex-politicians as cover.

The fact that it was hard to find people in Baghdad who were interested in talking about economics was not surprising. The architects of this invasion were firm believers in the shock doctrine—they knew that while Iraqis were consumed with daily emergencies, the country could be auctioned off discreetly and the results announced as a done deal.

And in Iraq there was plenty to gain: not just the world’s third-largest proven oil reserves but territory that was one of the last remaining holdouts from the drive to build a global market based on Friedman’s vision of unfettered capitalism. After the crusade had conquered Latin America, Africa, Eastern Europe and Asia, the Arab world called out as its final frontier.

That night I thought about Claudia Acuña, the extraordinary journalist I had met in Buenos Aires two years earlier who had given me a copy of Rodolfo Walsh’s “Open Letter from a Writer to the Military Junta.” She had warned me that extreme violence has a way of preventing us from seeing the interests it serves. In a way, it had happened already to the antiwar movement. Our explanations for why the war was waged rarely went beyond one-word answers: oil, Israel, Halliburton. Most of us chose to oppose the war as an act of folly by a president who mistook himself for a king, and his British sidekick who wanted to be on the winning side of history. There was little interest in the idea that war was a rational policy choice, that the architects of the invasion had unleashed ferocious violence because they could not crack open the closed economies of the Middle East by peaceful means, that the level of terror was proportional to what was at stake.

So what was it about this part of the world, they asked, that produced terrorism? Ideologically blinded from seeing either U.S. or Israeli policies as contributing factors, let alone provocations, they identified the true cause as something else—the region’s deficit in free-market democracy.az4

Since the entire Arab world could not be conquered all at once, a single country needed to serve as the catalyst. The U.S. would invade that country and turn it into, as Thomas Friedman, chief media proselytizer of the theory, put it, “a different model in the heart of

the Arab-Muslim world,” one that in turn would set off a series of democratic /neoliberal w...

When the idea of invading an Arab country and turning it into a model state first gained currency after September 11, the names of several possible countries were floated—Iraq, Syria, Egypt and, Michael Ledeen’s preference, Iran. Iraq had a great deal to recommend it, however. In addition to its vast oil reserves, it also made a good central location for military bases now that Saudi Arabia looked less dependable, and Saddam’s use of chemical weapons on his own people made him easy to hate. Another factor, often overlooked, was that Iraq had the advantage of familiarity.

Iraq was not an empty space on a map; it was and remains a culture as old as civilization, with fierce anti-imperialist pride, strong Arab nationalism, deeply held faiths and a majority of the adult male population with military training. If “nation creating” was going to happen in Iraq, what exactly was supposed to become of the nation that was already there? The unspoken assumption from the beginning was that much of it would have to disappear, to clear the ground for the grand experiment—an idea that contained, at its core, the certainty of extraordinary colonialist violence.

The architects of the war surveyed the global arsenal of shock tactics and decided to go with all of them—blitzkrieg military bombardment supplemented with elaborate psychological operations, followed up with the fastest and most sweeping political and economic shock therapy program attempted anywhere, backed up, if there was any resistance, by rounding up those who resisted and subjecting them to “gloves-off” abuse.

Often, in the analyses of the war in Iraq, the conclusion is that the invasion was a “success” but the occupation was a failure. What this assessment overlooks is that the invasion and occupation were two parts of a unified strategy—the initial bombardment was designed to erase the canvas on which the model nation could be built.

Terrorists don’t try to win through direct confrontation; they attempt to break public morale with spectacular, televisual displays that at once expose their enemy’s vulnerability and their own capacity for cruelty. That was the theory behind the 9/11 attacks, just as it was the theory behind the invasion of Iraq.

radically downsize the state and privatize its assets, which meant that the looters were really just giving him a jump-start. “I thought the privatization that occurs sort of naturally when somebody took over their state vehicle, or began to drive a truck that the state used to own, was just fine,” he said. A veteran bureaucrat of the Reagan administration and a firm believer in Chicago School economics, McPherson termed the pillage a form of public sector “shrinkage.”bd30

So while Bremer may have stepped on plenty of toes, his mission never was to win Iraqi hearts and minds. Rather, it was to get the country ready for the launch of Iraq Inc. Seen in that light, his early, much-maligned decisions have an unmistakable logical coherence.

Bremer spent his first four months in Iraq almost exclusively focused on economic transformation, passing a series of laws that together make up a classic Chicago School shock therapy program. Before the invasion, Iraq’s economy had been anchored by its national oil company and by two hundred state-owned companies, which produced the staples of the Iraqi diet and the raw materials of its industry, everything from cement to paper and cooking oil. The month after he arrived in his new job, Bremer announced that the two hundred firms were going to be privatized immediately. “Getting inefficient state enterprises into private hands,” Bremer said, “is essential for Iraq’s economic recovery.”9

One law lowered Iraq’s corporate tax rate from roughly 45 percent to a flat 15 percent (straight out of the Milton Friedman playbook). Another allowed foreign companies to own 100 percent of Iraqi assets—preventing a repeat of Russia, where the prizes went to the local oligarchs. Even better, investors could take 100 percent of the profits they made in Iraq out of the country; they would not be required to reinvest, and they would not be taxed.

As in the homeland security industry, the role for government employees—even U.S. government employees—was cut to the bone. Bremer’s staff was a mere fifteen hundred people to govern a sprawling country of 25 million. By contrast, Halliburton had fifty thousand workers in the region, many of them lifelong public servants lured into the private sector by offers of better salaries.17

The weak public presence and the robust corporate one reflected the fact that the Bush cabinet was using Iraq’s reconstruction (over which it had complete control, in contrast to the federal bureaucracy back home) to implement its vision of a fully outsourced, hollow government.

The “fiasco” of Iraq is one created by a careful and faithful application of unrestrained Chicago School ideology.

What follows is an initial (and not exhaustive) account of the links between the “civil war” and the corporatist project at the heart of the invasion. It is a process of ideology boomeranging on the people who unleashed it—ideological blowback.

That ideological blindness had three concrete effects: it damaged the possibility of reconstruction by removing skilled people from their posts, it weakened the voice of secular Iraqis, and it fed the resistance with angry people. Dozens

The violence, these businessmen realize, is their only competitive edge. It is simple business logic: the more problems there are in Iraq, the harder it is for outsiders to get involved.”28

Like the lifting of all trade restrictions, Bremer’s plan to privatize Iraq’s two hundred state companies was regarded by many Iraqis as yet another U.S. act of war. Workers learned that in order to make the companies attractive to foreign investors, as many as two-thirds of them would have to lose their jobs.

At the end of our meeting, I asked Mahmud what would happen if the plant was sold despite their objections. “There are two choices,” he said, smiling kindly. “Either we will set the factory on fire and let the flames devour it to the ground, or we will blow ourselves up inside it. But it will not be privatized.” It was an early warning—one of many—that the Bush team had definitely overestimated its ability to shock Iraqis into submission.

Thanks to their rejections of all things “statist,” the occupation authority running out of the Green Zone was far too understaffed and underresourced to pull off its own ambitious plans—especially

As The Washington Post’s Rajiv Chandrasekaran revealed, the CPA was such a skeletal organization that it had just three people assigned to the enormous task of privatizing Iraq’s state-owned factories. “Don’t bother starting,” the three lonely staffers were counseled by a delegation from East Germany—which, when it sold off its state assets, had assigned eight thousand people to the project.29 In short, the CPA was itself too privatized to privatize Iraq.

So whether they were twenty-two-year-old Dick Cheney interns or sixtysomething university presidents, they shared a cultural antipathy to government and governing that, while invaluable for the dismantling of social security and the public education system back home, had little use when the job was actually to build up public institutions that had been destroyed.

When tens of thousands of foreign workers poured across Iraq’s borders to take up jobs with foreign contractors, it was seen as an extension of the invasion. Rather than reconstruction, this was destruction in a different guise—the wholesale wiping out of the country’s industry, which had been a powerful source of national pride, one that cut across sectarian lines.

Only fifteen thousand Iraqis were hired to work for the U.S.-funded reconstruction during Bremer’s tenure, a staggeringly low figure.34

“The economy is the number-one reason for the terrorism and the lack of security.”

Much of the violence took direct aim at the foreign-run occupation, its projects and its workers.

Parsons was handed $186 million to build 142 health clinics. Only 6 were ever completed. Even

It claimed that the CPA was not part of the U.S. government, and therefore not subject to its laws, including the False Claims Act. The implications of this defense were enormous: the Bush administration had indemnified U.S. corporations working in Iraq from any liability under Iraqi laws; if the CPA wasn’t subject to U.S. law either, it meant that the contractors weren’t subject to any law at all—U.S. or Iraqi.

The catastrophic failure to reconstruct also shared direct responsibility for the most lethal form of blowback—the dangerous rise of religious fundamentalism and sectarian conflict. When the occupation proved unable to provide the most basic services, including security, the mosques and local militias filled the vacuum. The young Shia cleric Moqtada al-Sadr proved particularly adept at exposing the failures of Bremer’s privatized reconstruction by running his own shadow reconstruction in Shia slums from Baghdad to Basra, earning himself a devoted following.

Funded through donations to mosques, and perhaps later with help from Iran, the centers dispatched electricians to fix power and phone lines, organized local garbage collection, set up emergency generators, ran blood drives and directed traffic. “I found a vacuum, and no one filled the vacuum,” al-Sadr said in the early days of the occupation, adding,

“What I can do, I do.”42 He also took the young men who saw no jobs and no hope in Bremer’s Iraq, dressed them in black and armed them with rusty Kalashnikovs. The result was the Mahdi Army, now one of the most brutal forces in Iraqi’s sectarian battles. These militias are corporatism’s legacy too: if the reconstruction had provided jobs, security and services to Ira...

around them were furious people, increasingly turning to religious fundamentalism because it’s the only source of power in a hollowed-out state. Like

Free trade, he wrote, has led to “the creation of unprecedented wealth,” but it has “immediate negative consequences for many.” It “requires laying off workers. And opening markets to foreign trade puts enormous pressure on traditional retailers and trade monopolies.” All these changes lead to “growing income gaps and social tensions,” which in turn can lead to a range of attacks on U.S. firms, including terrorist attacks.3

They were banking, in other words, on the power of shock. The guiding assumption of Iraq’s military and economic shock therapists, best articulated by the former deputy secretary of state Richard Armitage, was that Iraqis would be so stunned by U.S. firepower, and so relieved to be rid of Saddam, “that they could be easily marshaled from point A to point B.”4

The Marines were advised to select a group of Iraqis they thought were safe and have them pick a mayor. That was how the United States would control the process,” wrote Michael Gordon and General Bernard Trainor, the authors of Cobra II, regarded as the definitive military history of the invasion. In the end, the U.S. military appointed a Saddam-era army colonel as Najaf’s mayor, as they did in cities and towns across the country. bj7

Bremer insisted that there was “no blanket prohibition” against democracy. “I’m not opposed to it, but I want to do it a way that takes care of our concerns … . Elections that are held too early can be destructive. It’s got to be done very carefully.”8

Put simply, if Iraqis were allowed to freely elect the next government, and if that government had real power, Washington would have to give up on two of the war’s main goals: access to Iraq for U.S. military bases and full access to Iraq for U.S. multinationals.

Bremer’s canceling of national elections was a bitter betrayal for Iraq’s Shia. As the largest ethnic group, they were certain to dominate an elected government after decades of subjugation. At first, Shia resistance took the form of massive peaceful demonstrations: 100,000 protesters in Baghdad, 30,000 in Basra. Their unified chant was “Yes, yes, elections. No, no selections.” “Our main demand in this process is to establish all the constitutional institutions through elections and not appointments,” wrote Ali Abdel Hakim al-Safi, the second most senior Shia cleric in Iraq, in a letter to George Bush and Tony Blair. He declared Bremer’s new plan “nothing other than replacing one dictatorship with another” and warned that if they went ahead with it, they would find themselves fighting a losing battle.11 Bush and Blair were unmoved—they praised the demonstrations as evidence of freedom’s flowering but bulldozed ahead with the plan to appoint Iraq’s first post-Saddam government.

It was at this juncture that Moqtada al-Sadr became a political force to be reckoned with. When the other main Shia parties decided to participate in the appointed government and to abide by an interim constitution that was written inside the Green Zone, al-Sadr broke ranks, denouncing the process and the constitution as illegitimate and openly comparing

Bremer to Saddam ...