The Shock Doctrine: The Rise of Disaster Capitalism

by Naomi Klein

  When the wealthy New Orleans neighborhood of Audubon Place decided it needed its own police force after Hurricane Katrina, it hired the Israel private security firm Instinctive Shooting International.35

  Agents with the Royal Canadian Mounted Police, Canada’s federal police agency, have received training from International Security Instructors, a Virginia-based company that specializes in training law enforcement and soldiers. Advertising its “hard won Israeli experience,” its instructors are “veterans of Israeli special task forces from…Israel Defense Force, Israel National Police Counter Terrorism units [and] General Security Services (GSS or ‘Shin Beit’).” The company’s elite list of clients includes the FBI, the U.S. Army, the U.S. Marine Corps, the U.S. Navy SEALs, and London’s Metropolitan Police Service.36

  In April 2007, special immigration agents with the U.S. Department of Homeland Security, working along the Mexican border, went through an intensive eight-day training course put on by the Golan Group. The Golan Group was founded by ex–Israeli Special Forces officers and boasts more than 3,500 employees in seven countries. “Essentially we put an Israeli security spin on our procedures,” Thomas Pearson, the company’s head of operations, explained of the training course, which covered everything from hand-to-hand combat to target practice to “getting really proactive with their SUV.” The Golan Group, now based in Florida but still marketing its Israeli advantage, also produces X-ray machines, metal detectors and rifles. In addition to many governments and celebrities, its clients include ExxonMobil, Shell, Texaco, Levi’s, Sony, Citigroup and Pizza Hut.37

  When Buckingham Palace needed a new security system, it selected a design by Magal, one of two Israeli companies that have been most involved in building the Israeli “security barrier.”38

  When Boeing begins building the planned $2.5 billion “virtual fences” on the U.S. borders with Mexico and Canada—complete with electronic sensors, unmanned aircraft, surveillance cameras and eighteen hundred towers—one of its main partners will be Elbit. Elbit is the other Israeli firm most involved in building Israel’s hugely controversial wall, which is “the largest construction project in Israel’s history” and has also cost $2.5 billion.39

  With more and more countries turning themselves into fortresses (walls and high-tech fences are going up on the border between India and Kashmir, Saudi Arabia and Iraq, Afghanistan and Pakistan), “security barriers” may prove to be the biggest disaster market of all. That’s why Elbit and Magal don’t mind the relentless negative publicity that Israel’s wall attracts around the world—in fact, they consider it free advertising. “People believe we are the only ones who have experience testing this equipment in real life,” explained Magal CEO Jacob Even-Ezra.40 Elbit and Magal have seen their stock prices more than double since September 11, a standard performance for Israeli homeland security stocks. Verint—dubbed “the granddaddy of the video surveillance space”—wasn’t profitable at all before September 11, but between 2002 and 2006 its stock price has more than tripled, thanks to the surveillance boom.41

  The extraordinary performance of Israel’s homeland security companies is well known to stock watchers, but it is rarely discussed as a factor in the politics of the region. It should be. It is not a coincidence that the Israeli state’s decision to put “counterterrorism” at the center of its export economy has coincided precisely with its abandonment of peace negotiations, as well as a clear strategy to reframe its conflict with the Palestinians not as a battle against a nationalist movement with specific goals for land and rights but rather as part of the global War on Terror—one against illogical, fanatical forces bent only on destruction.

  Economics is by no means the primary motivator for the escalation in the region since 2001. There is, of course, no shortage of fuel for violence on all sides. Yet within this context that is so weighted against peace, economics has, at certain points, been a countervailing force, pushing reluctant political leaders into negotiations, as was the case in the early nineties. What the homeland security boom has done is change the direction of that pressure, creating yet another powerful sector invested in continued violence.

  As has been the case on previous Chicago School frontiers, Israel’s post-9/11 growth spurt has been marked by the rapid stratification of society between rich and poor inside the state. The security buildup has been accompanied by a wave of privatizations and funding cuts to social programs that has virtually annihilated the economic legacy of Labor Zionism and created an epidemic of inequality the likes of which Israelis have never known. In 2007, 24.4 percent of Israelis were living below the poverty line, with 35.2 percent of all children in poverty—compared with 8 percent of children twenty years earlier.42 Yet even though the benefits of the boom have not been widely shared, they have been so lucrative for a small sector of Israelis, particularly the powerful segment that is seamlessly integrated into both the military and government (with all the familiar corporatist corruption scandals), that a crucial incentive for peace has been obliterated.

  The Israeli business sector’s shift in political direction has been dramatic. The vision that captivates the Tel Aviv Stock Exchange today is no longer that of Israel as a regional trade hub but rather as a futuristic fortress, able to survive even in a sea of determined enemies. The revised attitude was most pronounced in the summer of 2006, when the Israeli government turned what should have been a prisoner exchange negotiation with Hezbollah into a full-scale war. Israel’s largest corporations didn’t just support the war, they sponsored it. Bank Leumi, Israel’s newly privatized megabank, distributed bumper stickers with the slogans “We Will Be Victorious” and “We Are Strong,” while, as the Israeli journalist and novelist Yitzhak Laor wrote at the time, “the current war is the first to become a branding opportunity for one of our largest mobile phone companies, which is using it to run a huge promotional campaign.”43

  Clearly, Israeli industry no longer has reason to fear war. In contrast to 1993, when conflict was seen as a barrier to growth, the Tel Aviv Stock Exchange went up in August 2006, the month of the devastating war with Lebanon. In the final quarter of the year, which had also included the bloody escalation in the West Bank and Gaza following the election of Hamas, Israel’s overall economy grew by a staggering 8 percent—more than triple the growth rate of the U.S. economy in the same period. The Palestinian economy, meanwhile, contracted by between 10 and 15 percent in 2006, with poverty rates reaching close to 70 percent.44

  One month after the UN declared a cease-fire between Israel and Hezbollah, the New York Stock Exchange hosted a special conference on investing in Israel. More than two hundred Israeli firms attended, many of them in the homeland security sector. At that moment in Lebanon, economic activity was at a virtual standstill and roughly 140 factories—manufacturers of everything from prefab homes to medical products to milk—were clearing away the rubble after being hit by Israeli bombs and missiles. Impervious to the impact of the war, the message of the New York gatherings was upbeat: “Israel is open for business—has always been open for business,” announced Israel’s ambassador to the United Nations, Dan Gillerman, welcoming delegates to the event.45

  Only a decade earlier, this kind of wartime exuberance would have been unimaginable. It was Gillerman who, as head of the Israeli Federation of Chambers of Commerce, had called for Israel to seize the historic opportunity and become “a Middle Eastern Singapore.” Now he was one of the most inflammatory of Israel’s pro-war hawks, pushing for an even wider escalation. On CNN, Gillerman said that “while it may be politically incorrect and maybe even untrue to say that all Muslims are terrorists, it happens to be very true that nearly all terrorists are Muslim. So this is not just Israel’s war. This is the world’s war.”46

  This recipe for endless worldwide war is the same one that the Bush administration offered as a business prospectus to the nascent disaster capitalism complex after September 11. It is not a war that can be won by any country, but winning is not the point. The poin
t is to create “security” inside fortress states bolstered by endless low-level conflict outside their walls. In a way, it is the same goal that the private security companies have in Iraq: secure the perimeter, protect the principal. Baghdad, New Orleans and Sandy Springs provide glimpses of a kind of gated future built and run by the disaster capitalism complex. It is in Israel, however, that this process is most advanced: an entire country has turned itself into a fortified gated community, surrounded by locked-out people living in permanently excluded red zones. This is what a society looks like when it has lost its economic incentive for peace and is heavily invested in fighting and profiting from an endless and unwinnable War on Terror. One part looks like Israel; the other part looks like Gaza.

  Israel’s case is extreme, but the kind of society it is creating may not be unique. The disaster capitalism complex thrives in conditions of low-intensity grinding conflict. That seems to be the end point in all the disaster zones, from New Orleans to Iraq. In April 2007, U.S. soldiers began implementing a plan to turn several volatile Baghdad neighborhoods into “gated communities,” surrounded by checkpoints and concrete walls, where residents would be tracked using biometric technology. “We’ll be like the Palestinians,” predicted one resident of Adhamiya, watching his neighborhood being sealed in by the barrier.47 After it becomes clear that Baghdad is never going to be Dubai, and New Orleans won’t be Disneyland, Plan B is to settle into another Colombia or Nigeria—never-ending war, fought in large measure by private soldiers and paramilitaries, damped down just enough to get the natural resources out of the ground, helped along by mercenaries guarding the pipelines, platforms and water reserves.

  It has become commonplace to compare the militarized ghettos of Gaza and the West Bank, with their concrete walls, electrified fences and checkpoints, to the Bantustan system in South Africa, which kept blacks in ghettos and demanded passes when they left. “Israel’s laws and practices in the OPT [occupied Palestinian territories] certainly resemble aspects of apartheid,” said John Dugard, the South African lawyer who is the UN’s special rapporteur on human rights in the Palestinian territories, in February 2007.48 The similarities are stark, but there are differences too. South Africa’s Bantustans were essentially work camps, a way to keep African laborers under tight surveillance and control so they would work cheaply in the mines. What Israel has constructed is a system designed to do the opposite: to keep workers from working, a network of open holding pens for millions of people who have been categorized as surplus humanity.

  Palestinians are not the only people in the world who have been so categorized: millions of Russians also became surplus in their own country, which is why so many fled their homes in the hope of finding a job and a decent life in Israel. Although the original Bantustans have been dismantled in South Africa, the one in four people who live in shacks in fast-expanding slums are also surplus in the new, neoliberal South Africa.49 This discarding of 25 to 60 percent of the population has been the hallmark of the Chicago School crusade since the “misery villages” began mushrooming throughout the Southern Cone in the seventies. In South Africa, Russia and New Orleans the rich build walls around themselves. Israel has taken this disposal process a step further: it has built walls around the dangerous poor.

  CONCLUSION

  SHOCK WEARS OFF

  THE RISE OF PEOPLE’S RECONSTRUCTION

  I want to say to you, my Indian brothers concentrated here in Bolivia, that the five-hundred-year campaign of resistance has not been in vain. This democratic, cultural fight is part of the fight of our ancestors, it is the continuity of the fight of [the indigenous anticolonial leader] Tupac Katari, it is a continuity of the fight of Che Guevara.

  —Evo Morales, after being sworn in as president of Bolivia, January 22, 20061

  People know best. They know every corner and every detail of their community best. They also know their weak points.

  —Pichit Ratakul, executive director of the Asian Disaster Preparedness Center, October 30, 20062

  The people from the barrio built the city twice: during the day we built the houses of the well-off. At night and at weekends, with solidarity, we built our own homes, our barrio.

  —Andrés Antillano, resident of Caracas, April 15, 20043

  When Milton Friedman died in November 2006, many of the obituaries were imbued with a sense of fear that his death marked the end of an era. In Canada’s National Post, Terence Corcoran, one of Friedman’s most devoted disciples, wondered whether the global movement the economist had launched could carry on. “As the last great lion of free market economics, Friedman leaves a void…. There is no one alive today of equal stature. Will the principles Friedman fought for and articulated survive over the long term without a new generation of solid, charismatic and able intellectual leadership? Hard to say.”4

  Corcoran’s grim assessment did not begin to encompass the state of disarray in which the quest for unfettered capitalism found itself that November. Friedman’s intellectual heirs in the United States, the neocons who launched the disaster capitalism complex, were at the lowest point in their history. The movement’s pinnacle had been the winning of the U.S. Congress by the Republicans in 1994; just nine days before Friedman’s death, they lost it again to a Democratic majority. The three key issues that contributed to the Republican defeat in the 2006 midterm elections were political corruption, the mismanagement of the Iraq war and the perception, best articulated by a winning Democratic candidate for the U.S. Senate, Jim Webb, that the country had drifted “toward a class-based system, the likes of which we have not seen since the 19th century.”5 In each case, the core tenets of Chicago School economics—privatization, deregulation and cuts to government services—had laid the foundation for the breakdowns.

  In 1976, Orlando Letelier, one of the counterrevolution’s first victims, had insisted that the massive wealth inequalities that the Chicago Boys opened up in Chile were “not an economic liability but a temporary political success.” For Letelier, it was obvious that the dictatorship’s “free market” rules were doing exactly what they were designed to do: they were not creating a perfectly harmonious economy but turning the already wealthy into the superrich and the organized working class into the disposable poor. These patterns of stratification have been repeated everywhere that the Chicago School ideology has triumphed. In China, despite its stunning economic growth, the gap between the incomes of city dwellers and the 800 million rural poor has doubled over the past twenty years. In Argentina, where in 1970 the richest 10 percent of the population earned 12 times as much as the poorest, the rich were by 2002 earning 43 times as much. Chile’s “political success” has truly been globalized. In December 2006, a month after Friedman died, a UN study found that “the richest 2 per cent of adults in the world own more than half of global household wealth.” The shift has been starkest in the U.S., where CEOs made 43 times what the average worker earned in 1980, when Reagan kicked off the Friedmanite crusade. By 2005, CEOs earned 411 times as much. For those executives, the counterrevolution that began in the basement of the Social Sciences building in the 1950s has indeed been a success, but the cost of that victory has been the widespread loss of faith in the core free-market promise—that increased wealth will be shared. As Webb said during the midterm campaign, “Trickle-down economics didn’t happen.”6

  The hoarding of so much wealth by a tiny minority of the world’s population was not a peaceful process, as we have seen, nor, often, was it a legal one. Corcoran was right to question the caliber of the movement’s leadership, but the problem was not simply that there were no figureheads of Friedman’s stature. It was that many of the men who had been on the front lines of the international drive to liberate the markets from all restrictions were at that moment caught up in an astonishing array of scandals and criminal proceedings, dating from the earliest laboratories in Latin America to the most recent one in Iraq. Throughout its thirty-five-year history, the Chicago School agenda has advanced through the
intimate cooperation of powerful business figures, crusading ideologues and strong-arm political leaders. By 2006, key players from each camp were either in jail or up on charges.

  Augusto Pinochet, the first leader to put Friedman’s shock treatment into effect, was under house arrest (though he died before trials could go ahead on either the corruption or murder charges). The day after Friedman died, Uruguayan police came to arrest to Juan María Bordaberry on charges related to the killing of four prominent leftists in 1976. Bordaberry had led Uruguay during its brutal embrace of Chicago School economics, with Friedman’s colleagues and students serving as prominent advisers. In Argentina, the courts have stripped the country’s former junta leaders of immunity, sending ex-president Jorge Videla and Admiral Emilio Massera to jail for life. Domingo Cavallo, who had headed the central bank during the dictatorship and had gone on to impose the sweeping shock therapy program under democracy, was also indicted on charges of “fraud in public administration.” A debt deal that Cavallo engineered with foreign banks in 2001 cost the country tens of billions of dollars, and the judge, who froze $10 million of Cavallo’s personal assets, asserted that the administration had acted with “absolute consciousness” of the detrimental outcome.7