Part II: 1971-1975

Part III: 1975-1981

excerpted from the book

Confession of an Economic Hit Man

by John Perkins

Berrett-Koehler Publishers, SF, 2004, hardcover

Part II: 1973-1975

p45
"Vietnam is just a holding action," one of the men interjected, "like Holland was for the Nazis. A stepping-stone."

"The real target," the woman continued, "is the Muslim world?'

I could not let this go unanswered. "Surely," I protested, "you can't believe that the United States is anti-Islamic."

"Oh no?" she asked. "Since when? You need to read one of your own historians - a Brit named Toynbee. Back in the fifties he predicted that the real war in the next century would not be between Communists and capitalists, but between Christians and Muslims."

'Arnold Toynbee said that?" I was stunned.

"Yes. Read Civilization on Trial and The World and the West."

"But why should there be such animosity between Muslims and Christians?" I asked.

Looks were exchanged around the table. They appeared to find it hard to believe that I could ask such a foolish question.

"Because," she said slowly, as though addressing someone slowwitted or hard of hearing, "the West - especially its leader, the U.S. - is determined to take control of all the world, to become the greatest empire in history. It has already gotten very close to succeeding. The Soviet Union currently stands in its way, but the Soviets will not endure. Toynbee could see that. They have no religion, no faith, no substance behind their ideology. History demonstrates that faith - soul, a belief in higher powers - is essential. We Muslims have it. We have it more than anyone else in the world, even more than the Christians. So we wait. We grow strong."

"We will take our time," one of the men chimed in, "and then like a snake we will strike."

"What a horrible thought!" I could barely contain myself. "What can we do to change this?"

The English major looked me directly in the eyes. "Stop being so greedy," she said, "and so selfish. Realize that there is more to the world than your big houses and fancy stores. People are starving and you worry about oil for your cars. Babies are dying of thirst and you search the fashion magazines for the latest styles. Nations like ours are drowning in poverty, but your people don't even hear our cries for help. You shut your ears to the voices of those who try to tell you these things. You label them radicals or Communists. You must open your hearts to the poor and downtrodden, instead of driving them L further into poverty and servitude. There's not much time left. If you don't change, you're doomed."

p48
I wrote in my journal:

Is anyone in the U.S. innocent? Although those at the very pinnacle of the economic pyramid gain the most, millions of us depend - either directly or indirectly - on the exploitation of the LDCs for our livelihoods. The resources and cheap labor that feed nearly all our businesses come from places like Indonesia, and very little ever makes its way back. The loans of foreign aid ensure that today's children and their grandchildren will be held hostage. They will have to allow our corporations to ravage their natural resources and will have to forego education, health, and other social services merely to pay us back. The fact that our own companies already received most this money to build the power plants, airports, and industrial parks does not factor into this formula. Does the excuse that most Americans are unaware of this constitute innocence? Uninformed and intentionally misinformed, yes - but innocent?

Of course, I had to face the fact that I was now numbered among those who actively misinform.

The concept of a worldwide holy war was a disturbing one, but the longer I contemplated it, the more convinced I became of its possibility. It seemed to me, however, that if this jihad were to occur it would be less about Muslims versus Christians than it would be about LDCs versus DCs, perhaps with Muslims at the forefront. We in the DCs were the users of resources; those in the LDCs were the suppliers. It was the colonial mercantile system all over again, set up to make it easy for those with power and limited natural resources to exploit those with resources but no power.

p49
I wondered what sort of a world we might have if the United\ States and its allies diverted all the monies expended in colonial wars - like the one in Vietnam - to eradicating world hunger or to making education and basic health care available to all people, including our own. I wondered how future generations would be affected if we committed to alleviating the sources of misery and to protecting watersheds, forests, and other natural areas that ensure clean water, air, and the things that feed our spirits as well as our bodies.

p55
I came to understand that most of those men believed they were doing the right thing. Like Charlie, they were convinced that communism and terrorism were evil forces - rather than the predictable reactions to decisions they and their predecessors had made - and that they had a duty to their country, to their offspring, and to God to convert the world to capitalism. They also clung to the principle of survival of the fittest; if they happened to enjoy the good fortune to have been born into a privileged class instead of inside a cardboard shack, then they saw it as an obligation to pass this heritage on to their progeny.

I vacillated between viewing such people as an actual conspiracy and simply seeing them as a tight-knit fraternity bent on dominating the world. Nonetheless, over time I began to liken them to the plantation owners of the pre-Civil War South. They were men drawn together in a loose association by common beliefs and shared self-interest, rather than an exclusive group meeting in clandestine hideaways with focused and sinister intent. The plantation autocrats had grown up with servants and slaves, had been educated to believe that it was their right and even their duty to take care of the "heathens" and to convert them to the owners' religion and way of life. Even if slavery repulsed them philosophically, they could, like Thomas Jefferson, justify it as a necessity, the collapse of which would result in social and economic chaos. The leaders of the modern oligarchies, what I now thought of as the corporatocracy, seemed to [fit the same mold.

p57
I recalled an economics professor from my business school days, a ma from northern India, who lectured about limited resources, about man's need to grow continually, and about the principle of slave labor. According to this professor, all successful capitalist systems involve hierarchies with rigid chains of command, including a handful at the very top who control descending orders of subordinates, and a massive army of workers at the bottom, who in relative economic terms truly can be classified as slaves. Ultimately, then, I became convinced that we encourage this system because the corporatocracy has convinced us that God has given us the right to place a few of our people at the very top of this capitalist pyramid and to export our system to the entire world.

p72
I had researched Guatemala and I understood [Omar] Torrjos's [President of Panama] meaning. United Fruit Company had been that country's political equivalent of Panama's canal. Founded in the late 1800s, United Fruit soon grew into one of the most powerful forces in Central America. During the early 1950s, reform candidate Jacobo Arbenz was elected president of Guatemala in an election hailed all over the hemisphere as a model of the democratic process. At the time, less than 3 percent of Guatemalans owned 70 percent of the land. Arbenz promised to help the poor dig their way out of starvation, and after his election he implemented a comprehensive land reform program.

"The poor and middle classes throughout Latin America applauded Arbenz," Torrijos said. "Personally, he was one of my heroes. But we also held our breath. We knew that United Fruit opposed these measures, since they were one of the largest and most oppressive landholders in Guatemala. They also owned big plantations in Colombia, Costa Rica, Cuba, Jamaica, Nicaragua, Santo Domingo, and here in Panama. They couldn't afford to let Arbenz give the rest of us ideas:'

I knew the rest: United Fruit had launched a major public relations campaign in the United States, aimed at convincing the American public and congress that Arbenz was part of a Russian plot and that Guatemala was a Soviet satellite. In 1954, the CIA orchestrated a coup. American pilots bombed Guatemala City and the democratically elected Arbenz was overthrown, replaced by Colonel Carlos Castillo Armas, a ruthless right-wing dictator.

The new government owed everything to United Fruit. By way of thanks, the government reversed the land reform process, abolished taxes on the interest and dividends paid to foreign investors, eliminated the secret ballot, and jailed thousands of its critics. Anyone who dared to speak out against Castillo was persecuted. Historians trace the violence and terrorism that plagued Guatemala for most of the rest of the century to the not-so-secret alliance between United Fruit, the CIA, and the Guatemalan army under its colonel dictator.

"Arbenz was assassinated' Torrijos continued. "Political and character assassination." He paused and frowned. "How could your people swallow that CIA rubbish? I won't go so easily. The military here are my people. Political assassination won't do." He smiled.

"The CIA itself will have to kill me!"

We sat in silence for a few moments, each lost in his own thoughts. Torrijos was the first to speak.

"Do you know who owns United Fruit?" he asked.

"Zapata Oil, George Bush's company - our UN ambassador."

"A man with ambitions:' He leaned forward and lowered his voice. 'And now I'm up against his cronies at Bechtel."

This startled me. Bechtel was the world's most powerful engineering firm and a frequent collaborator on projects with MAIN. In the case of Panama's master plan, I had assumed that they were one of our major competitors.

"What do you mean?"

"We've been considering building a new canal, a sea-level one, without locks. It can handle bigger ships. The Japanese may be interested in financing it."

"They're the Canal's biggest clients:'

"Exactly. Of course, if they provide the money, they will do the construction."

It struck me. "Bechtel will be out in the cold:'

"The biggest construction job in recent history." He paused. "Bechtel's president is George Shultz, Nixon's secretary of the treasury. You can imagine the clout he's got - and a notorious temper. Bechtel's loaded with Nixon, Ford, and Bush cronies. I've been told that the Bechtel family pulls the strings of the Republican Party."

p78
... both the 4 Depression and World War 11 led to the creation of organizations like the World Bank, the IMF, and the General Agreement on Tariffs and Trade (GATT). The 1960s was a pivotal decade in this period and in the shift from neoclassic to Keynesian economics. It happened under the Kennedy and Johnson administrations, and perhaps the most important single influence was one man, Robert McNamara. McNamara was a frequent visitor to our discussion groups - in absentia, of course. We all knew about his meteoric rise to fame, from manager of planning and financial analysis at Ford Motor Company in 1949 to Ford's president in 1960, the first company head selected from outside the Ford family. Shortly after that, Kennedy appointed him secretary of defense.

McNamara became a strong advocate of a Keynesian approach to government, using mathematical models and statistical approaches to determine troop levels, allocation of funds, and other strategies in Vietnam. His advocacy of "aggressive leadership" became a hallmark not only of government managers but also of corporate executives. It formed the basis of a new philosophical approach to teaching management at the nation's top business schools, and it ultimately led to a new breed of CEOs who would spearhead the rush to global empire.'

As we sat around the table discussing world events, we were especially fascinated by McNamara's role as president of the World Bank, a job he accepted soon after leaving his post as secretary of defense. Most of my friends focused on the fact that he symbolized what was popularly known as the military-industrial complex. He had held the top position in a major corporation, in a government cabinet, and now at the most powerful bank in the world. Such an apparent breach in the separation of powers horrified many of them; I may have been the only one among us who was not in the least surprised.

I see now that Robert McNamara's greatest and most sinister contribution to history was to jockey the World Bank into becoming an agent of global empire on a scale never before witnessed. He also set a precedent. His ability to bridge the gaps between the primary components of the corporatocracy would be fine-tuned by his successors. For instance, George Shultz was secretary of the treasury and chairman of the Council on Economic Policy under Nixon, served as Bechtel president, and then became secretary of state under Reagan. Caspar Weinberger was a Bechtel vice president and general council, and later the secretary of defense under Reagan. Richard Helms was Johnson's CIA director and then became ambassador to Iran under Nixon. Richard Cheney served as secretary of defense under George H. W. Bush, as Halliburton president, and as U.S. vice president to George W. Bush. Even a president of the United States, George H. W. Bush, began as founder of Zapata Petroleum Corp, served as U.S. ambassador to the U.N. under presidents Nixon and Ford, and was Ford's CIA director.

***

Saudi Arabia

p82
On October 6,1973 (Yom Kippur, the holiest of Jewish holidays), Egypt and Syria launched simultaneous attacks on Israel. It was the beginning of the October War - the fourth and most destructive of the Arab-Israeli wars, and the one that would have the greatest impact on the world. Egypt's President Sadat pressured Saudi Arabia's King Faisal to retaliate against the United States' complicity with Israel by employing what Sadat referred to as "the oil weapon." On October 16, Iran and the five Arab Gulf states, including Saudi Arabia, announced a 70 percent increase in the posted price of oil.

Meeting in Kuwait City, Arab oil ministers pondered further options. The Iraqi representative was vehemently in favor of targeting the United States. He called on the other delegates to nationalize American businesses in the Arab world, to impose a total oil embargo on the United States and on all other nations friendly to Israel, and to withdraw Arab funds from every American bank. He pointed out that Arab bank accounts were substantial and that this action could result in a panic not unlike that of 1929.

Other Arab ministers were reluctant to agree to such a radical plan, but on October 17 they did decide to move forward with a more limited embargo, which would begin with a 5 percent cut in production and then impose an additional 5 percent reduction every month until their political objectives were met. They agreed that the United States should be punished for its pro-Israeli stance and should therefore have the most severe embargo levied against it.

Several of the countries attending the meeting announced that they would implement cutbacks of 10 percent, rather than 5 percent.

On October 19, President Nixon asked Congress for $2.2 billion in aid to Israel. The next day, Saudi Arabia and other Arab producers imposed a total embargo on oil shipments to the United States.'

The oil embargo ended on March 18, 1974. Its duration was short, its impact immense. The selling price of Saudi oil leaped from $1.39 a barrel on January 1, 1970, to $8.32 on January 1, 1974.2 Politicians and future administrations would never forget the lessons learned during the early- to mid-1970s. In the long run, the trauma of those few months served to strengthen the corporatocracy; its three pillars -big corporations, international banks, and government - bonded as never before. That bond would endure.

The embargo also resulted in significant attitude and policy changes. It convinced Wall Street and Washington that such an embargo could never again be tolerated. Protecting our oil supplies had always been a priority; after 1973, it became an obsession.

p83
Almost immediately after the embargo ended, Washington began negotiating with the Saudis, offering them technical support, military hardware and training, and an opportunity to bring their nation into the twentieth century, in exchange for petrodollars and, most importantly, assurances that there would never again be another oil embargo. The negotiations resulted in the creation of a most extraordinary organization, the United States-Saudi Arabian Joint Economic Commission. Known as JECOR, it embodied an innovative concept that was the opposite of traditional foreign aid programs: it relied on Saudi money to hire American firms to build up Saudi Arabia.

Although overall management and fiscal responsibility were delegated to the U.S. Department of the Treasury, this commission was independent to the extreme. Ultimately, it would spend billions of dollars over a period of more than twenty-five years, with virtually no congressional oversight. Because no U.S. funding was involved, Congress had no authority in the matter, despite Treasury's role. After studying JECOR extensively, David Hoilden and Richard Johns conclude, "It was the most far-reaching agreement of its kind ever concluded by the U.S. with a developing country. It had the potential to entrench the U.S. deeply in the Kingdom, fortifying the concept of interdependence.

p85
I understood, of course, that the primary objective here was not the usual - to burden this country with debts it could never repay but rather to find ways that would assure that a large portion of petrodollars found their way back to the United States. In the process, Saudi Arabia would be drawn in, its economy would become increasingly intertwined with and dependent upon ours, and presumably it would grow more Westernized and therefore more sympathetic with and integrated into our system.

p86
Saudi Arabia was a planner's dream come true, and also a fantasy realized for anyone associated with the engineering and construction business. It presented an economic opportunity unrivaled by any other in history: an underdeveloped country with virtually unlimited financial resources and a desire to enter the modern age in a big way, very quickly.

p87
I always kept in mind the true objectives: maximizing payouts t1 U.S. firms and making Saudi Arabia increasingly dependent on the United States. It did not take long to realize how closely the two went together; almost all the newly developed projects would require continual upgrading and servicing, and they were so highly technical as to assure that the companies that originally developed them would have to maintain and modernize them. In fact, as I moved forward with my work, I began to assemble two lists for each of the projects I envisioned: one for the types of design-and-construction contracts we could expect, and another for long-term service and management agreements. MAIN, Bechtel, Brown & Root, Halliburton, Stone & Webster, and many other U.S. engineers and contractors would profit handsomely for decades to come.

Beyond the purely economic, there was another twist that would render Saudi Arabia dependent on us, though in a very different way. The modernization of this oil-rich kingdom would trigger adverse reactions. For instance, conservative Muslims would be furious; Israel and other neighboring countries would feel threatened. The economic development of this nation was likely to spawn the growth of another industry: protecting the Arabian Peninsula. Private companies specializing in such activities, as well as the U.S. military and defense industry, could expect generous contracts - and, once again, long-term service and management agreements. Their presence would require another phase of engineering and construction projects, including airports, missile sites, personnel bases, and all of the infrastructure associated with such facilities.

p89
Under this evolving plan, Washington wanted the Saudis guarantee to maintain oil supplies and prices at levels that could fluctuate but that would always remain acceptable to the United States and our allies. If other countries such as Iran, Iraq, Indonesia, or Venezuela threatened embargoes, Saudi Arabia, with its vast petroleum supplies, would step in to fill the gap; simply the knowledge that they might do so would, in the long run, discourage other countries from even considering an embargo. In exchange for this guarantee, Washington would offer the House of Saud an amazingly attractive deal: a commitment to provide total and unequivocal U.S. political and - if necessary - military support, thereby ensuring their continued existence as the rulers of their country.

It was a deal the House of Saud could hardly refuse, given its geographic location, lack of military might, and general vulnerability to neighbors like Iran, Syria, Iraq, and Israel. Naturally, therefore, Washington used its advantage to impose one other critical condition, a condition that redefined the role of EHMs in the world and served as a model we would later attempt to apply in other countries, most notably in Iraq. In retrospect, I sometimes find it difficult to understand how Saudi Arabia could have accepted this condition. Certainly, most of the rest of the Arab world, OPEC, and other Islamic countries were appalled when they discovered the terms of the deal and the manner in which the royal house capitulated to Washington's demands.

The condition was that Saudi Arabia would use its petrodollars to purchase U.S. government securities; in turn, the interest earned by these securities would be spent by the U.S. Department of the Treasury in ways that enabled Saudi Arabia to emerge from a medieval society into the modern, industrialized world. In other words, the interest compounding on billions of dollars of the kingdom's oil income would be used to pay U.S. companies to fulfill the vision I (and presumably some of my competitors) had come up with, to convert Saudi Arabia into a modern industrial power. Our own U.S. Department of the Treasury would hire us, at Saudi expense, to build infrastructure projects and even entire cities throughout the Arabian Peninsula.

Although the Saudis reserved the right to provide input regarding the general nature of these projects, the reality was that an elite corps of foreigners (mostly infidels, in the eyes of Muslims) would determine the future appearance and economic makeup of the Arabian Peninsula.

***

Osama Bin Laden

p96
The United States made no secret of its desire to have the House of Saud bankroll Osama bin Laden's Afghan war against the Soviet Union during the 1980s, and Riyadh and Washington together contributed an estimated $3.5 billion to the mujahideen. However, U.S. and Saudi participation went far beyond this.

In late 2003, U.S. News & World Report conducted an exhaustive study titled, "The Saudi Connection". The magazine reviewed thousands of pages of court records, U.S. and foreign intelligence reports, and other documents, and interviewed dozens of government officials and experts on terrorism and the Middle East. Its findings include the following:

The evidence was indisputable: Saudi Arabia, America's longtime ally and the world's largest oil producer, had somehow become, as a senior Treasury Department official put it, "the epicenter" of terrorist financing...

Starting in the late 1980s - after the dual shocks of the Iranian revolution and the Soviet war in Afghanistan - Saudi Arabia's quasi-official charities became the primary source of funds for the fast-growing jihad movement. In some 20 countries the money was used to run paramilitary training camps, purchase weapons, and recruit new members...

Saudi largess encouraged U.S. officials to look the other way, some veteran intelligence officers say. Billions of dollars in contracts, grants, and salaries have gone to a broad range of former U.S. officials who had dealt with the Saudis: ambassadors, CIA station chiefs, even cabinet secretaries...

Electronic intercepts of conversations implicated members of the royal family in backing not only Al Qaeda but also other terrorist groups.

After the 2001 attacks on the World Trade Center and the Pentagon, more evidence emerged about the covert relationships between Washington and Riyadh. In October 2003, Vanity Fair magazine disclosed information that had not previously been made public, in an in-depth report titled, "Saving the Saudis." The story that emerged about the relationship between the Bush family, the House of Saud, and the bin Laden family did not surprise me. I knew that those relationships went back at least to the time of the Saudi Arabian Money-laundering Affair, which began in 1974, and to George H. W. Bush's terms as U.S. Ambassador to the United Nations (from 1971 to 1973) and then as head of the CIA (from 1976 to 1977). What surprised me was the fact that the truth had finally made the press. Vanity Fair concluded:

The Bush family and the House of Saud, the two most powerful dynasties in the world, have had close personal, business, and political ties for more than 20 years...

In the private sector, the Saudis supported Harken Energy, a struggling oil company in which George W. Bush was an investor. Most recently, former president George H. NV. Bush and his longtime ally, former Secretary of State James A. Baker III, have appeared before Saudis at fundraisers for the Carlyle Group, arguably the biggest private equity firm in the world. Today, former president Bush continues to serve as a senior adviser to the firm, whose investors allegedly include a Saudi accused of ties to terrorist support groups...

Just days after 9/11, wealthy Saudi Arabians, including members of the bin Laden family, were whisked out of the U.S. on private jets. No one will admit to clearing the flights, and the passengers weren't questioned. Did the Bush family's long relationship with the Saudis help make it happen?

***

Part III: 1975-1981

p127
... my times in Colombia also helped me comprehend the distinction between the old American republic and the new global empire. The republic offered hope to the world. Its foundation was moral and philosophical rather than materialistic. It was based on concepts of equality and justice for all. But it also could be pragmatic, not merely a utopian dream but also a living, breathing, magnanimous entity. It could open its arms to shelter the downtrodden. It was an inspiration and at the same time a force to reckon with; if needed, it could swing into action, as it had during World War II, to defend the principles for which it stood. The very institutions - the big corporations, banks, and government bureaucracies - that threaten the republic could be used instead to institute fundamental changes in the world. Such institutions possess the communications networks and transportation systems necessary to end disease, starvation, and even wars - if only they could be convinced to take that course.

The global empire ... is the republic's nemesis. It is self-centered, self-serving, greedy, and materialistic, a system based on mercantilism. Like empires before, its arms open only to accumulate resources, to grab everything in sight and stuff its insatiable maw. It will use whatever means it deems necessary to help its rulers gain more power and riches.

... I was loyal to the American republic, but what we were perpetrating through this new, highly subtle form of imperialism was the financial equivalent of what we had attempted to accomplish militarily in Vietnam. If Southeast Asia had taught us that armies have limitations, the economists had responded by devising a better plan, and the foreign aid agencies and the private contractors who served them (or, more appropriately, were served by them) had become proficient at executing that plan.

In countries on every continent, I saw how men and women working for U.S. corporations -though not officially part of the EHM network - participated in something far more pernicious than anything envisioned in conspiracy theories. Like many of MAIN's engineers, these workers were blind to the consequences of their actions, convinced that the sweatshops and factories that made shoes and automotive parts for their companies were helping the poor climb out of poverty, instead of simply burying them deeper in a type

of slavery reminiscent of medieval manors and southern plantations. Like those earlier manifestations of exploitation, modern serfs or slaves were socialized into believing they were better off than the unfortunate souls who lived on the margins, in the dark hollows of Europe, in the jungles of Africa, or in the wilds of the American frontier.

p139
Mafia bosses often start out as street thugs. But over time, the ones who make it to the top transform their appearance. They take to wearing impeccably tailored suits, owning legitimate businesses, and wrapping themselves in the cloak of upstanding society. They support local charities and are respected by their communities. They are quick to lend money to those in desperate straits. Like the John Perkins in the MAIN résumé, these men appear to be model citizens. However, beneath this patina is a trail of blood. When the debtors cannot pay, hit men move in to demand their pound of flesh. If this is not granted, the jackals close in with baseball bats. Finally, as a last resort, out come the guns.

***

Ecuador

p141
Ecuador had suffered under a long line of dictators and , right-wing oligarchies manipulated by U.S. political and commercial interests. In a way, the country was the quintessential banana republic, and the corporatocracy had made major inroads there.

The serious exploitation of oil in the Ecuadorian Amazon basin began in the late 1960s, and it resulted in a buying spree in which the small club of families who ran Ecuador played into the hands of the international banks. They saddled their country with huge amounts of debt, backed by the promise of oil revenues. Roads and industrial parks, hydroelectric dams, transmission and distribution systems, and other power projects sprang up all over the country. International engineering and construction companies struck it rich - once again.

Confession of an Economic Hit Man

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