The Shock Doctrine

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Tragic consequences

Michael Byers, Vancouver Sun, September 8, 2007

Right-wing politicians have a default option for balancing budgets without increasing taxes. From Margaret Thatcher to Gordon Campbell, the recipe for fiscal success is simple: sell off public assets while reducing and privatizing public services. Just don't ask how many of those politicians apply the same logic to their personal finances.

In the short term, the quickest way to pay off your debts is to sell the house and work longer hours. Yet the long-term consequences -- in terms of shelter, financial security and a legacy for your children -- can be severe. Wise individuals plan for the future, taking on debt to acquire and develop property, improving themselves through training and education and maintaining their health through exercise and vacations.

Left-wing politicians, unwilling to sell off public assets, have a more difficult time delivering on election promises. Yet policies of maintaining and strengthening public services also attract significant support. For this reason, Western democracies have experienced fairly regular oscillations between governments of the right and left. And both ends of the political spectrum have, for the most part, tempered their policies as they pursue electoral success.

This pattern lasted until Milton Friedman came along, as Naomi Klein explains in The Shock Doctrine, a riveting and rigorously researched book. Friedman, an economics professor at the University of Chicago, spent the latter half of the 20th century developing a strategy for overcoming public resistance to overt right-wing agendas. The strategy, which Klein calls "disaster capitalism," involves waiting for a currency meltdown, market crash or similar crisis. The upheaval throws citizens into a state of shock and fear, providing a window of opportunity for far-reaching privatizations, corporate tax cuts and the lifting of restrictions on foreign investment and trade.

Klein recounts how legions of Chicago-trained economists in the International Monetary Fund and the World Bank have travelled the world, offering assistance to temporarily overwhelmed governments in return for economic "reforms." Services built with public money, such as phone companies, airlines and health systems, have been sold off at fire-sale prices, along with resources previously held in trust for the citizenry, such as oil fields and copper mines and the patenting of traditional crops and medical knowledge. Central banks have been made independent, social spending pruned, labour laws gutted and investment and trade barriers removed.

At first, the focus was on economic emergencies. Later, Friedman and his disciples realized that similar opportunities arose as a consequence of wars, terrorist attacks and natural disasters. Klein chronicles these "shocks" and the subsequent capitalist predations. Included in her analysis are military coups in Chile and Argentina, the Tiananmen Square massacre in China and the terrorist attacks on the World Trade Center and the Pentagon in the United States.

She argues that a "corporatist" alliance between international financial institutions, multinational corporations and right-wing governments has moved on to its final frontiers: the closed oil economies of the Middle East and the defence and disaster-response departments of Western governments. The seeming incompetence of the Bush administration in Iraq and New Orleans has, Klein claims, been part of an effort to strip-mine states by destroying them.

In Iraq, U.S. envoy Paul Bremer fired 500,000 public employees, many of them soldiers who promptly joined the insurgency. He eliminated investment and trade barriers and handed U.S.-based corporations tens of billions of dollars for contracts that were seldom fulfilled. Today, the Pentagon is transferring $270 billion annually to companies such as Blackwater, CH2M Hill and Halliburton, most of it via untendered contracts. There are more than 50,000 mercenaries operating in Iraq, many employed by the above. With obscene profits being generated by the "war on terror," there is little incentive for this interest group and its political allies to bring the conflict to an end.

In New Orleans, the devastation caused by Hurricane Katrina created an opportunity to replace public schools with privately run, publicly funded "charter" schools, and public housing projects with upscale hotels and gated communities. Hundreds of thousands of poor, disproportionately black American citizens have been permanently displaced, while billions of dollars were doled out through untendered contracts to many of the same corporations that have been active in Iraq.

The Asian tsunami left more than two million people homeless in Sri Lanka, Thailand, Indonesia and the Maldives. Almost three years later, and despite an outpouring of charitable giving, many of these people remain homeless, often because their beachfront villages have been seized for hotel and resort developments. Overwhelmed national governments were, again, forced to make "appropriate" economic changes in return for assistance from the IMF, the World Bank and Western governments.

According to Klein, disaster capitalism succeeds only by deliberately excluding and impoverishing hundreds of millions of innocent people. Among the victims she counts the 72 million Russians cast into poverty by economic changes imposed after the collapse of the Soviet Union. Furthermore, the way many thousands of children were forced into prostitution after the 1997 Asian financial crisis was seized upon as yet another opportunity for an economic "shock treatment."

The most disturbing aspect of Klein's story concerns the role played by torture in the implementation of the shock doctrine and how the modern human rights movement -- led by Amnesty International -- developed a policy of strict impartiality to avoid having to address the economic aggression behind much of the physical and psychological abuse.

Torture rarely works as a method for extracting accurate information, but it can be an effective tool for terrorizing communities and thus controlling large groups of people. Torture is the shock doctrine applied to individual human beings. It's extreme disorientation combined with unbearable pain.

Its selective use can cause fear and distrust across entire societies. It almost always arises in deeply undemocratic circumstances, when such governments encounter resistance to political, religious or economic policies. Thus, one manifestation of disaster capitalism has been the resurgence of torture, including by countries such as the United States, which previously opposed it.

Klein, who is a dual Canadian-U.S. national, warns her fellow Canadians that we are not immune to the strategies of "shock and awe." In 1993, the Chrétien government's deep cuts to social programs were justified on the basis of a looming debt crisis, despite the fact that Canada had the highest international credit rating of any country. According to Klein, our business leaders wanted lower taxes, which required reduced social spending, which in turn meant that ordinary Canadians -- the principal beneficiaries of that spending -- had to be misled.

Similar strategies are in play today. The Stephen Harper government has overseen a dramatic increase in military spending, to the significant benefit of military-industrial multinationals, many based in the U.S. Untendered contracts, which invariably inflate prices, are often used. At the same time, the military itself is being partly privatized, with corporations taking over many of the functions of the Canadian Forces, from preparing food to managing ammunition supplies.

Most of these developments have been justified on the basis that success in Afghanistan would be difficult to achieve without them. The Afghan mission itself has been framed as essential to protecting Canadians from the terrorist threat. Left unmentioned is the fact that Afghan state is being radically transformed -- and, to a significant degree, privatized -- in accordance with the same corporatist agenda that Klein identifies elsewhere.

She is hardly an optimist, but she argues that the shock tactics of disaster capitalism are losing their potency. She points to the election of progressive politicians in Latin America and the failed attempt to entrench economic liberalization in a new European Constitution. She celebrates the prosecution of some practitioners of disaster capitalism, including Chile's Augusto Pinochet, Russia's Mikhail Khodorkovsky and America's own Ken Lay.

She concludes by drawing attention to the appearance of grassroots reconstruction efforts in some of the areas devastated by disaster capitalism -- for example, farm and factory co-ops in Latin America and displaced citizens reclaiming and rebuilding their villages and neighbourhoods in Thailand and New Orleans. These efforts may be few and far between, but for Klein they represent the first signs of ordinary people regaining their equilibrium and preparing themselves -- for the next shock.

So brace yourself. And while you do, read this book, which confirms Naomi Klein's status as one of the most important intellectuals of our times.

Michael Byers holds the Canada Research Chair in global politics and international law at the University of B.C. His latest book is Intent for a Nation (Douglas & McIntyre).
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