The Shock Doctrine: The Rise of Disaster Capitalism

by Naomi Klein

  Army Lieutenant General Peter W. Chiarelli, the top U.S. field commander in Iraq, explained that “we need to put the angry young men to work…. A relatively small decrease in unemployment would have a veryserious effect on the level of sectarian killing going on.” He couldn’t help adding, “I find it unbelievable after four years that we haven’t come to that realization…. To me, it’s huge. It’s as important as just about any other part of the campaign plan.”40

  Do these about-faces signal the death of disaster capitalism? Hardly. By the time U.S. officials came to the realization that they didn’t need to rebuild a shiny new country from scratch, that it was more important to provide Iraqis with jobs and for their industry to share in the billions raised for reconstruction, the money that would have financed such an undertaking had already been spent.

  Meanwhile, in the midst of the wave of neo-Keynesian epiphanies, Iraq was hit with the boldest attempt at crisis exploitation yet. In December 2006, the bipartisan Iraq Study Group fronted by James Baker issued its long-awaited report. It called for the U.S. to “assist Iraqi leaders to reorganize the national oil industry as a commercial enterprise” and to “encourage investment in Iraq’s oil sector by the international community and by international energy companies.”41

  Most of the Iraq Study Group’s recommendations were ignored by the White House, but not this one: the Bush administration immediately pushed ahead by helping to draft a radical new oil law for Iraq, which would allow companies like Shell and BP to sign thirty-year contracts in which they could keep a large share of Iraq’s oil profits, amounting to tens or even hundreds of billions of dollars—unheard of in countries with as much easily accessible oil as Iraq, and a sentence to perpetual poverty in a country where 95 percent of government revenues come from oil.42 This was a proposal so wildly unpopular that even Paul Bremer had not dared make it in the first year of occupation. Yet it was coming up now, thanks to deepening chaos. Explaining why it was justified for such a large percentage of the profits to leave Iraq, the oil companies cited the security risks. In other words, it was the disaster that made the radical proposed law possible.

  Washington’s timing was extremely revealing. At the point when the law was pushed forward, Iraq was facing its most profound crisis to date: the country was being torn apart by sectarian conflict with an average of one thousand Iraqis killed every week. Saddam Hussein had just been put to death in a depraved and provocative episode. Simultaneously, Bush was unleashing his “surge” of troops in Iraq, operating with “less restricted” rules of engagement. Iraq in this period was far too volatile for the oil giants to make major investments, so there was no pressing need for a new law—except to use the chaos to bypass a public debate on the most contentious issue facing the country. Many elected Iraqi legislators said they had no idea that a new law was even being drafted, and had certainly not been included in shaping its outcome. Greg Muttitt, a researcher with the oil-watch group Platform, reported. “I was recently at a meeting of Iraqi MPs and asked them how many of them had seen the law. Out of 20, only one MP had seen it.” According to Muttitt, if the law was passed, Iraqis “would lose out massively because they don’t have the capacity at the moment to strike a good deal.”43

  Iraq’s main labor unions declared that “the privatization of oil is a red line that may not be crossed” and, in a joint statement, condemned the law as an attempt to seize Iraq’s “energy resources at a time when the Iraqi people are seeking to determine their own future while still under conditions of occupation.”44 The law that was finally adopted by Iraq’s cabinet in February 2007 was even worse than anticipated: it placed no limits on the amount of profits that foreign companies can take from the country and made no specific requirements about how much or how little foreign investors would partner with Iraqi companies or hire Iraqis to work in the oil fields. Most brazenly, it excluded Iraq’s elected parliamentarians from having any say in the terms for future oil contracts. Instead, it created a new body, the Federal Oil and Gas Council, which, according to The New York Times, would be advised by “a panel of oil experts from inside and outside Iraq.” This unelected body, advised by unspecified foreigners, would have ultimate decision-making power on all oil matters, with the full authority to decide which contracts Iraq did and did not sign. In effect, the law called for Iraq’s publicly owned oil reserves, the country’s main source of revenues, to be exempted from democratic control and run instead by a powerful, wealthy oil dictatorship, which would exist alongside Iraq’s broken and ineffective government.45

  It’s hard to overstate the disgrace of this attempted resource grab. Iraq’s oil profits are the country’s only hope of financing its own reconstruction when some semblance of peace returns. To lay claim to that future wealth in a moment of national disintegration was disaster capitalism at its most shameless.

  There was another, little discussed, consequence of the chaos in Iraq: the longer it wore on, the more privatized the foreign presence became, ultimately forging a new paradigm for the way wars are fought and how human catastrophes are responded to.

  This is where the ideology of radical privatization at the heart of the anti–Marshall Plan paid off handsomely. The Bush administration’s steadfast refusal to staff the war in Iraq—whether with troops or with civilian administrators under its control—had some very clear benefits for its other war, the one to outsource the U.S. government. This crusade, while it ceased to be the subject of the administration’s public rhetoric, has remained a driving obsession behind the scenes, and it has been far more successful than all the administration’s more public battles combined.

  Because Rumsfeld designed the war as a just-in-time invasion, with soldiers there to provide only core combat functions, and because he eliminated fifty-five thousand jobs in the Department of Defense and the Department of Veterans Affairs in the first year of the Iraq deployment, the private sector was left to fill in the gaps at every level.46 In practice, what this configuration meant was that, as Iraq spiraled into turmoil, an ever more elaborate privatized war industry took shape to prop up the bare-bones army—whether on the ground in Iraq or back home treating soldiers at the Walter Reed Medical Center.

  Since Rumsfeld steadfastly rejected all solutions that required increasing the size of the army, the military had to find ways to get more soldiers into combat roles. Private security companies flooded into Iraq to perform functions that had previously been done by soldiers—providing security for top officials, guarding bases, escorting other contractors. Once they were there, their roles expanded further in response to the chaos. Blackwater’s original contract in Iraq was to provide private security for Bremer, but a year into the occupation, it was engaging in all-out street combat. During the April 2004 uprising of Moqtada al-Sadr’s movement in Najaf, Blackwater actually assumed command over active-duty U.S. marines in a daylong battle with the Mahdi Army, during which dozens of Iraqis were killed.47

  At the start of the occupation, there were an estimated ten thousand private soldiers in Iraq, already far more than during the first Gulf War. Three years later, a report by the U.S. Government Accountability Office found that there were forty-eight thousand private soldiers, from around the world, deployed in Iraq. Mercenaries represented the largest contingent of soldiers after the U.S. military—more than all the other members of the “Coalition of the Willing” combined. The “Baghdad boom,” as it was called in the financial press, took what was a frowned-upon, shadowy sector and fully incorporated it into the U.S. and U.K. war-fighting machines. Blackwater hired aggressive Washington lobbyists to erase the word “mercenary” from the public vocabulary and turn its company into an all-American brand. According to its CEO, Erik Prince, “This goes back to our corporate mantra: We’re trying to do for the national security apparatus what FedEx did for the postal service.”48

  When the war moved inside the jails, the military was so short on trained interrogators and Arabic translators that it couldn’t get informatio
n out of its new prisoners. Desperate for more interrogators and translators, it turned to the defense contractor CACI International Inc. In its original contract, CACI’s role in Iraq was to provide information technology services to the military, but the wording of the work order was vague enough that “information technology” could be stretched to mean interrogation.49 The flexibility was intentional: CACI is part of a new breed of contractor that acts as a temp agency for the federal government—it has ongoing, loosely worded contracts and keeps large numbers of potential workers on call, ready to fill whatever positions come up. Calling CACI, whose workers did not need to meet the rigorous training and security clearances required of government employees, was as easy as ordering new office supplies; dozens of new interrogators arrived in a flash.*

  The corporation that gained most from the chaos was Halliburton. Before the invasion, it had been awarded a contract to put out oil fires set by Saddam’s retreating armies. When those fires did not materialize, Halliburton’s contract was stretched to include a new function: providing fuel for the entire nation, a job so big that “it bought up every available tanker truck in Kuwait, and imported hundreds more.”50 In the name of freeing up soldiers for the battlefield, Halliburton took on dozens more of the army’s traditional functions, including maintaining army vehicles and radios.

  Even recruiting, long since seen as the job of soldiers, rapidly became a for-profit business as the war wore on. By 2006, new soldiers were being recruited by private head-hunting firms such as Serco or a division of the weapons giant L-3 Communications. The private recruiters, many of whom had never served in the military, were paid bonuses every time they signed up a soldier, so, one company spokesperson bragged, “If you want to eat steak, you have to put people in the army.”51 Rumsfeld’s reign also fueled a boom in outsourced training: companies such as Cubic Defense Applications and Blackwater ran soldiers through live combat training and war games, bringing them to privately owned training facilities, where they practiced house-to-house combat in simulated villages.

  And thanks to Rumsfeld’s privatization obsession, as he first suggested in his speech on September 10, 2001, when soldiers came home sick or suffering from posttraumatic stress, they were treated by private health care companies for whom the trauma-heavy war in Iraq generated windfall profits. One of these companies, Health Net, became the seventh-strongest performer in the Fortune 500 in 2005, owing largely to the number of traumatized soldiers returning from Iraq. Another was IAP Worldwide Services Inc., which won the contract to take over many of the services at the military hospital Walter Reed. The move to privatize the running of the medical center allegedly contributed to a shocking deterioration in maintenance and care, as more than a hundred skilled federal employees left the facility.52

  The greatly expanded role of private companies was never openly debated as a question of policy (much in the way Iraq’s proposed oil law suddenly materialized). Rumsfeld did not have to engage in pitched battles with federal employees’ unions or high-ranking generals. Instead, it all just happened on the fly in the field, in what the military describes as mission creep. The longer the war wore on, the more it became a privatized war, and soon enough, this was simply the new way of war. Crisis was the enabler of the boom, just as it had been for so many before.

  The numbers tell the dramatic story of corporate mission creep. During the first Gulf War in 1991, there was one contractor for every hundred soldiers. At the start of the 2003 Iraq invasion, the ratio had jumped to one contractor for every ten soldiers. Three years into the U.S. occupation, the ratio had reached one to three. Less than a year later, with the occupation approaching its fourth year, there was one contractor for every 1.4 U.S. soldiers. But that figure includes only contractors working directly for the U.S. government, not for other coalition partners or the Iraqi government, and it doesn’t account for the contractors based in Kuwait and Jordan who had farmed out their jobs to subcontractors.53

  British soldiers in Iraq are already far outnumbered by their countrymen working for private security firms at a ratio of three to one. When Tony Blair announced in February 2007 that he was pulling sixteen hundred soldiers out of Iraq, the press reported instantly that “civil servants hope ‘mercenaries’ can help fill the gap left behind,” with the companies paid directly by the British government. At the same time, the Associated Press put the number of contractors in Iraq at 120,000, almost equivalent to the number of U.S. troops.54 In scale, this kind of privatized warfare has already overshadowed the United Nations. The UN’s budget for peacekeeping in 2006–2007 was $5.25 billion—that’s less than a quarter of the $20 billion Halliburton got in Iraq contracts, and the latest estimates are that the mercenary industry alone is worth $4 billion.55

  So while the reconstruction of Iraq was certainly a failure for Iraqis and for U.S. taxpayers, it has been anything but for the disaster capitalism complex. Made possible by the September 11 attacks, the war in Iraq represented nothing less than the violent birth of a new economy. This was the genius of Rumsfeld’s “transformation” plan: since every possible aspect of both destruction and reconstruction has been outsourced and privatized, there’s an economic boom when the bombs start falling, when they stop and when they start up again—a closed profit-loop of destruction and reconstruction, of tearing down and building up. For companies that are clever and farsighted, like Halliburton and the Carlyle Group, the destroyers and rebuilders are different divisions of the same corporations.*56

  The Bush administration has taken several important and little-examined measures to institutionalize the privatized warfare model forged in Iraq, making it a permanent fixture of foreign policy. In July 2006, Bowen, the inspector general for Iraq reconstruction, issued a report on “lessons learned” from the various contractor debacles. It concluded that the problems stemmed from insufficient planning and called for the creation of “a deployable reserve corps of contracting personnel who are trained to execute rapid relief and reconstruction contracting during contingency operations” and to “pre-qualify a diverse pool of contractors with expertise in specialized reconstruction areas”—in other words, a standing contractor army. In his 2007 State of the Union address, Bush championed the idea, announcing the creation of a brand-new civilian reserve corps. “Such a corps would function much like our military reserve. It would ease the burden on the Armed Forces by allowing us to hire civilians with critical skills to serve on missions abroad when America needs them,” he said. “It would give people across America who do not wear the uniform a chance to serve in the defining struggle of our time.”57

  A year and half into the Iraq occupation, the U.S. State Department launched a new branch: the Office of Reconstruction and Stabilization. On any given day, it is paying private contractors to draw up detailed plans to reconstruct twenty-five different countries that may, for one reason or another, find themselves the target of U.S.-sponsored destruction, from Venezuela to Iran. Corporations and consultants are lined up on “presigned contracts” so that they are ready to leap into action as soon as disaster strikes.58 For the Bush administration, it was a natural evolution: after claiming it had a right to cause unlimited preemptive destruction, it then pioneered preemptive reconstruction—rebuilding places that have not yet been destroyed.

  So in the end, the war in Iraq did create a model economy—it was just not the Tiger on the Tigris that the neocons had advertised. Instead, it was a model for privatized war and reconstruction—a model that quickly became export-ready. Until Iraq, the frontiers of the Chicago crusade had been bound by geography: Russia, Argentina, South Korea. Now a new frontier can open up wherever the next disaster strikes.

  PART 7

  THE MOVABLE GREEN ZONE

  BUFFER ZONES AND BLAST WALLS

  Because you are able to start new, you can start fundamentally at the leading edge, which is a very good thing. It is a privilege for you to have that opportunity, because there are other places that haven’t had such systems
or are burdened with systems that are a hundred or two hundred years old. In a way, this is an advantage for Afghanistan to start anew with the best ideas and the best technical knowledge.

  —Paul O’Neill, U.S. Treasury secretary, November 2002, in postinvasion Kabul

  CHAPTER 19

  BLANKING THE BEACH

  “THE SECOND TSUNAMI”

  The tsunami that cleared the shoreline like a giant bulldozer has presented developers with an undreamed-of opportunity, and they have moved quickly to seize it.

  —Seth Mydans, International Herald Tribune, March 10, 20051

  I went to the beach at sunrise, hoping to meet some fishing people before they went out on the turquoise waters for the day. It was July 2005 and the beach was almost deserted, but there was a small cluster of hand-painted wooden catamarans, and beside one of them a small family was getting ready to go to sea. Roger, forty years old and sitting shirtless in his sarong on the sand, was repairing a tangled red net with his twenty-year-old son, Ivan. Jenita, Roger’s wife, was circling the boat, waving a small tin of smoldering incense. “Asking for luck,” she explained of the ritual, “and safety.”