The Shock Doctrine: The Rise of Disaster Capitalism

by Naomi Klein

  Perhaps the greatest impact of the so-called antiglobalization movement was that it forced the Chicago School ideology into the dead center of the international debate. For a brief moment at the turn of the millennium, there was no pressing crisis to deflect attention—the debt shocks had faded, the “transitions” were complete, and a new global war had not yet arrived. What was left was the real world track record of the free-market crusade: the dismal reality of inequality, corruption and environmental degradation left behind when government after government embraced Friedman’s advice, given to Pinochet all those years ago, that it was a mistake to try “to do good with other people’s money.”

  In retrospect, it is striking that capitalism’s monopoly period, when it no longer had to deal with competing ideas or counterpowers, was extremely brief—only eight years, from the collapse of the Soviet Union in 1991 to the collapse of the WTO talks in 1999. But rising opposition would not slow the determination to advance this extraordinarily profitable agenda; its advocates would simply ride the waves of fear and disorientation created by bigger shocks than ever before.

  PART 5

  SHOCKING TIMES

  THE RISE OF THE DISASTER CAPITALISM COMPLEX

  Creative destruction is our middle name, both within our own society and abroad. We tear down the old order every day, from business to science, literature, art, architecture, and cinema to politics and the law…. They must attack us in order to survive, just as we must destroy them to advance our historic mission.

  —Michael Ledeen, The War against the Terror Masters, 2002

  George’s answer to any problem at the ranch is to cut it down with a chain saw—which I think is why he and Cheney and Rumsfeld get along so well.

  —Laura Bush, White House Correspondents’ Association Dinner, April 30, 2005

  CHAPTER 14

  SHOCK THERAPY IN THE U.S.A.

  THE HOMELAND SECURITY BUBBLE

  He’s a ruthless little bastard. You can be sure of that.

  —Richard Nixon, U.S. president, referring to Donald Rumsfeld, 19711

  Today I fear that we are in fact waking up to a surveillance society that is already all around us.

  —Richard Thomas, U.K. information commissioner, November 20062

  Homeland security may have just reached the stage that Internet investing hit in 1997. Back then, all you needed to do was put an “e” in front of your company name and your IPO would rocket. Now you can do the same with “fortress.”

  —Daniel Gross, Slate, June 20053

  It was a muggy Monday in Washington, and Donald Rumsfeld was about to do something he hated: talk to his staff. Since taking office as defense secretary, he had solidified his reputation among the Joint Chiefs of Staff as high-handed, secretive and—a word that kept coming up—arrogant. Their animosity was understandable. Since setting foot in the Pentagon, Rumsfeld had brushed aside the prescribed role of leader and motivator and acted instead like a bloodless hatchet man—a CEO secretary on a downsizing mission.

  When Rumsfeld accepted the post, many wondered why he would even want it. He was sixty-eight years old, had five grandchildren and a personal fortune estimated at as much as $250 million—and he had already held the same post in the Gerald Ford administration.4 Rumsfeld, however, had no desire to be a traditional defense secretary, defined by the wars waged on his watch; he had greater ambitions than that.

  The incoming defense secretary had spent the past twenty-odd years heading up multinational corporations and sitting on their boards, often leading companies through dramatic mergers and acquisitions, as well as painful restructurings. In the nineties, he had come to see himself as a man of the New Economy, directing a company specializing in digital TV, sitting on the board of another promising “e-business solutions,” and serving as board chairman of the very sci-fi biotech firm that held the exclusive patent on a treatment for avian flu as well as on several important AIDS medications.5 When Rumsfeld joined the cabinet of George W. Bush in 2001, it was with a personal mission to reinvent warfare for the twenty-first century—turning it into something more psychological than physical, more spectacle than struggle, and far more profitable than it had ever been before.

  Much has been written about Rumsfeld’s controversial “transformation” project, which prompted eight retired generals to call for his resignation and eventually forced him to step down after the 2006 midterm elections. When Bush announced the resignation he described the “sweeping transformation” project—and not the war in Iraq or the broader “War on Terror”—as Rumsfeld’s most profound contribution: “Don’s work in these areas did not often make the headlines. But the reforms that set in motion—that he has set in motion—are historic.”6 They are indeed, but it has not always been clear what those reforms consist of.

  Senior military officials derided “transformation” as “empty buzz words,” and Rumsfeld often seemed determined (almost comically) to prove the critics right: “The Army is going through what is a major modernization,” Rumsfeld said in April 2006. “It’s moving from a division-oriented force to a modular brigade combat team force…from service-centric war-fighting to deconfliction war-fighting to interoperability and now toward interdependence. That’s a hard thing to do.”7 But the project was never quite as complicated as Rumsfeld made it sound. Beneath the jargon, it was simply an attempt to bring the revolution in outsourcing and branding that he had been part of in the corporate world into the heart of the U.S. military.

  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. Some called the companies that underwent these radical restructurings “hollow corporations” because they were mostly form, with little tangible content left over.

  Rumsfeld was convinced that the U.S. Department of Defense needed an equivalent makeover; as Fortune said when he arrived at the Pentagon, “Mr. CEO” was “about to oversee the same sort of restructuring that he orchestrated so well in the corporate world.”8 There were, of course, some necessary differences. Where corporations unburdened themselves of geography-bound factories and full-time workers, Rumsfeld saw the army shedding large numbers of full-time troops in favor of a small core of staffers propped up by cheaper temporary soldiers from the Reserve and National Guard. Meanwhile, contractors from companies such as Blackwater and Halliburton would perform duties ranging from high-risk chauffeuring to prisoner interrogation to catering to health care. And where corporations poured their savings on labor into design and marketing, Rumsfeld would spend his savings from fewer troops and tanks on the latest satellite and nano-technology from the private sector. “In the twenty-first century,” Rumsfeld said of the modern military, “we’re going to have to stop thinking about things, numbers of things, and mass, and think also and maybe even first about speed and agility and precision.” He sounded very much like the hyperactive management consultant Tom Peters, who declared in the late nineties that companies had to decide if they were “pure ‘players’ in brain-ware” or “lumpy-object purveyors.”9

  Not surprisingly, the generals who were used to holding sway in the Pentagon were pretty sure that “things” and “mass” still mattered when it came to fighting wars. They soon became deeply hostile to Rumsfeld’s vision of a hollow military. After a little more than seven months in office, the secretary had already stepped on so many powerful toes that it was rumored his days were numbered.

  It was at this moment that Rumsfeld called a rare “town hall meeting” for Pentagon staff. The speculation began immediately: Was he going to announce his
resignation? Was he going to try his hand at a pep talk? Was he belatedly trying to sell the old guard on transformation? As hundreds of Pentagon senior staff filed into the auditorium that Monday morning, “the mood was definitely one of curiosity,” one staffer told me. “The feeling was, How are you going to convince us? Because there was already a huge amount of animosity toward him.”

  When Rumsfeld made his entrance, “we politely stood up and sat down.” It rapidly became clear that this was not a resignation, and it most certainly was not a pep talk. It may have been the most extraordinary speech ever given by a U.S. secretary of defense. It began like this:

  The topic today is an adversary that poses a threat, a serious threat, to the security of the United States of America. This adversary is one of the world’s last bastions of central planning. It governs by dictating five-year plans. From a single capital, it attempts to impose its demands across time zones, continents, oceans and beyond. With brutal consistency, it stifles free thought and crushes new ideas. It disrupts the defense of the United States and places the lives of men and women in uniform at risk.

  Perhaps this adversary sounds like the former Soviet Union, but that enemy is gone: our foes are more subtle and implacable today…. The adversary’s closer to home. It’s the Pentagon bureaucracy.10

  As Rumsfeld’s rhetorical gimmick revealed itself, the faces in the audience went stony. Most of the people listening had devoted their careers to fighting the Soviet Union and didn’t appreciate being compared to Commies at this stage in the game. Rumsfeld wasn’t finished. “We know the adversary. We know the threat. And with the same firmness of purpose that any effort against a determined adversary demands, we must get at it and stay at it…today we declare war on bureaucracy.”

  He’d done it: the defense secretary had not only described the Pentagon as a grave threat to America but declared war against the institution where he worked. The audience was stunned. “He was saying we were the enemy, that the enemy was us. And here we were thinking we were doing the nation’s business,” the staffer told me.

  It wasn’t that Rumsfeld wanted to save taxpayer dollars—he had just asked Congress for an 11 percent budget increase. But following the corporatist principles of the counterrevolution, in which Big Government joins forces with Big Business to redistribute funds upward, he wanted less spent on staff and far more public money transferred directly into the coffers of private companies. And with that, Rumsfeld launched his “war.” Every department needed to slash its staff by 15 percent, including “every base headquarters building in the world. It’s not just the law, it’s a good idea, and we’re going to get it done.”11

  He had already directed his senior staff to “scour the Department [of Defense] for functions that could be performed better and more cheaply through commercial outsourcing.” He wanted to know, “Why is DoD one of the last organizations around that still cuts its own checks? When an entire industry exists to run warehouses efficiently, why do we own and operate so many of our own? At bases around the world, why do we pick up our own garbage and mop our own floors, rather than contracting services out, as many businesses do? And surely we can outsource more computer systems support.”

  He even went after the sacred cow of the military establishment: health care for soldiers. Why were there so many doctors? Rumsfeld wanted to know. “Some of those needs, especially where they may involve general practice or specialties unrelated to combat, might be more efficiently delivered by the private sector.” And how about the houses for soldiers and their families—surely these could be done through “public-private partnerships.”

  The Defense Department should focus on its core competency: “warfighting…But in all other cases, we should seek suppliers who can provide these non-core activities efficiently and effectively.”

  After the speech, plenty of Pentagon staffers griped that the only thing standing in the way of Rumsfeld’s bold vision of outsourcing the army was the small matter of the U.S. Constitution, which clearly defined national security as the duty of government, not private companies. “I thought the speech was going to cost Rumsfeld his job,” my source told me.

  It didn’t, and the coverage of his declaration of war on the Pentagon was sparse. That’s because the date of his contentious address was September 10, 2001.

  It is a strange historical footnote that CNN Evening News on September 10 carried a short story under the headline “Defense Secretary Declares War on the Pentagon’s Bureaucracy” and that, the next morning, the network would report on an attack on that institution of a distinctly less metaphorical kind, one that killed 125 Pentagon employees and seriously wounded another 110 of the people whom Rumsfeld had portrayed as enemies of the state less than twenty-four hours earlier.12

  Cheney and Rumsfeld: Proto-Disaster Capitalists

  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. As Rumsfeld made clear, this task was about nothing as prosaic as trimming the budget, but was, for its advocates, a world-changing crusade on a par with defeating Communism.

  By the time the Bush team took office, the privatization mania of the eighties and nineties (fully embraced by the Clinton administration, as well as state and local governments) had successfully sold off or outsourced the large, publicly owned companies in several sectors, from water and electricity to highway management and garbage collection. After these limbs of the state had been lopped off, what was left was “the core”—those functions so intrinsic to the concept of governing that the idea of handing them to private corporations challenged what it meant to be a nation-state: the military, police, fire departments, prisons, border control, covert intelligence, disease control, the public school system and the administering of government bureaucracies. The earlier stages of the privatization wave had been so profitable, however, that many of the companies that had devoured the appendages of the state were greedily eyeing these essential functions as the next source of instant riches.

  By the late nineties, a powerful move was afoot to break the taboos protecting “the core” from privatization. It was, in many ways, merely a logical extension of the status quo. Just as Russia’s oil fields, Latin America’s telecoms, and Asia’s industry had supplied the stock market with superprofits in the nineties, now it would be the U.S. government itself that would play that central economic role—all the more crucial because the backlash against privatization and free trade was spreading rapidly through the developing world, closing off other avenues for growth.

  It was a move that brought the shock doctrine to a new, self-referential phase: until that point, disasters and crises had been harnessed to push through radical privatization plans after the fact, but the institutions that had the power both to create and respond to cataclysmic events—the military, the CIA, the Red Cross, the UN, emergency “first responders”—had been some of the last bastions of public control. Now, with the core set to be devoured, the crisis-exploiting methods that had been honed over the previous three decades would be used to leverage the privatization of the infrastructure of disaster creation and disaster response. Friedman’s crisis theory was going postmodern.

  At the vanguard of the push to create what can only be described as a privatized police state were the most powerful figures in the future Bush administration: Dick Cheney, Donald Rumsfeld and George W. Bush himself.

  For Rumsfeld, the idea of applying “market logic” to the U.S. military was a project that dated back four decades. It began in the early sixties, when he used to attend seminars at the University of Chicago’s Economics Department. He had developed a particularly close connection with Milton Friedman, who, after Rumsfeld was elected to Congress at the age of thirty, took the precocious Republican under his wing, helping him to develop a bold free-market policy platform and tutoring him in economic theory. The two men
remained close over the years, with Rumsfeld attending an annual birthday celebration for Friedman, organized every year by the Heritage Foundation’s president, Ed Feulner. “There is something about Milton that when I am around him, and talking to him, I feel smarter,” Rumsfeld said of his mentor when Friedman turned ninety.13

  The admiration was mutual. Friedman was so impressed with Rumsfeld’s commitment to deregulated markets that he aggressively lobbied Reagan to name Rumsfeld as his running mate in the 1980 election instead of GeorgeH. W. Bush—and he never did quite forgive Reagan for disregarding his advice. “I believe that Reagan made a mistake when he chose Bush as his vice-presidential candidate,” Friedman wrote in his memoirs; “indeed, I regard it as the worst decision not only of his campaign but of his presidency. My favorite candidate was Donald Rumsfeld. Had he been chosen, I believe he would have succeeded Reagan as president, and the sorry Bush-Clinton period would never have occurred.”14

  Rumsfeld survived being passed over as Reagan’s running mate by throwing himself into his burgeoning business career. As CEO of the international drug and chemical company Searle Pharmaceuticals, he used his political connections to secure the controversial and extraordinarily lucrative Food and Drug Administration (FDA) approval for aspartame (marketed as NutraSweet); and when Rumsfeld brokered the deal to sell Searle to Monsanto, he personally earned an estimated $12 million.15

  The high-stakes sale established Rumsfeld as a corporate power player, landing him seats on the boards of such blue-chip firms as Sears and Kellogg’s. His status as a former defense secretary, meanwhile, made him a score for any company that was part of what Eisenhower had called the “military-industrial complex.” Rumsfeld sat on the board of the aircraft manufacturer Gulfstream and was also paid $190,000 a year as a board member of ASEA Brown Boveri (ABB), the Swiss engineering giant that gained unwanted attention when it was revealed to have sold nuclear technology to North Korea, including the capacity to produce plutonium. The nuclear reactor sale went through in 2000, and at the time Rumsfeld was the only North American on the ABB board. He claims to have no memory of the reactor sale coming before the board, though the company insists that “board members were informed about the project.”16