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