The Rise of Disaster Capitalism
by Naomi Klein
The Nation magazine, May 2, 2005
Last summer, in the lull of the August
media doze, the Bush Administration's doctrine of preventive war
took a major leap forward. On August 5, 2004, the White House
created the Office of the Coordinator for Reconstruction and Stabilization,
headed by former US Ambassador to Ukraine Carlos Pascual. Its
mandate is to draw up elaborate "post-conflict" plans
for up to twenty-five countries that are not, as of yet, in conflict.
According to Pascual, it will also be able to coordinate three
full-scale reconstruction operations in different countries "at
the same time," each lasting "five to seven years."
Fittingly, a government devoted to perpetual
pre-emptive deconstruction now has a standing office of perpetual
Gone are the days of waiting for wars
to break out and then drawing up ad hoc plans to pick up the pieces.
In close\ cooperation with the National Intelligence Council,
Pascual's office keeps "high risk" countries on a "watch
list" and assembles rapid-response teams ready to engage
in prewar planning and to "mobilize and deploy quickly"
after a conflict has gone down. The teams are made up of private
companies, nongovernmental organizations and members of think
tanks- some, Pascual told an audience at the Center for Strategic
and International Studies in October, will have "pre-completed"
contracts to rebuild countries that are not yet broken. Doing
this paperwork in advance could "cut off three to six months
in your response time."
The plans Pascual's teams have been drawing
up in his little-known office in the State Department are about
changing "the very social fabric of a nation," he told
CSIS. The office's mandate is not to rebuild any old states, you
see, but to create "democratic and market-oriented"
ones. So, for instance (and he was just pulling this example out
of his hat, no doubt), his fast-acting reconstructors might help
sell off "state-owned enterprises that created a nonviable
economy." Sometimes rebuilding, he explained, means "tearing
apart the old."
Few ideologues can resist the allure of
a blank slate-that was colonialism's seductive promise: "discovering"
wide-open new lands where utopia seemed possible. But colonialism
is dead, or so we are told; there are no new places to discover,
no terra nullius (there never was), no more blank pages on which,
as Mao once said, "the newest and most beautiful words can
be written." There is, however, plenty of destruction-countries
smashed to rubble, whether by so-called Acts of God or by Acts
of Bush (on orders from God). And where there is destruction there
is reconstruction, a chance to grab hold of "the terrible
barrenness," as a UN official recently described the devastation
in Aceh, and fill it with the most perfect, beautiful plans.
"We used to have vulgar colonialism,"
says Shalmali Guttal, a Bangalore-based researcher with Focus
on the Global South. "Now we have sophisticated colonialism,
and they call it 'reconstruction."
It certainly seems that ever-larger portions
of the globe are under active reconstruction: being rebuilt by
a parallel government made up of a familiar cast of for-profit
consulting firms, engineering companies, mega-NGOs, government
and UN aid agencies and international financial institutions.
And from the people living in these reconstruction sites-Iraq
to Aceh, Afghanistan to Haiti-a similar chorus of complaints can
be heard. The work is far too slow,
If it is happening at all. Foreign consultants
live high on cost-plus expense accounts and thousand-dollar-a-day
salaries, while locals are shut out of much-needed jobs, training
and decision-making. Expert "democracy builders" lecture
governments on the importance of transparency and "good governance,"
yet most contractors and NGOs refuse to open their books to those
same governments, let alone give them control over how their aid
money is spent.
Three months after the tsunami hit Aceh,
the New York Times ran a distressing story reporting that "almost
nothing seems to have been done to begin repairs and rebuilding."
The dispatch could easily have come from Iraq, where, as the Los
Angeles Times just reported, all of Bechtel's allegedly rebuilt
water plants have started to break down, one more in an endless
litany of reconstruction screw-ups. It could also have come from
Afghanistan, where President Hamid Karzai recently blasted "corrupt,
wasteful and unaccountable" foreign contractors for "squandering
the precious resources that Afghanistan received in aid."
Or from Sri Lanka, where 600,000 people who lost their homes in
the tsunami are still languishing in temporary camps. One hundred
days after the giant waves hit, Herman Kumara, head of the National
Fisheries Solidarity Movement in Negombo, Sri Lanka, sent out
a desperate e-mail to colleagues around the world. "The funds
received for the benefit of the victims are directed to the benefit
of the privileged few, not to the real victims," he wrote.
"Our voices are not heard and not allowed to be voiced."
But if the reconstruction industry is
stunningly inept at rebuilding, that may be because rebuilding
is not its primary purpose. According to Guttal, "It's not
reconstruction at all-it's about reshaping everything." If
anything, the stories of corruption and incompetence serve to
mask this deeper scandal: the rise of a predatory form of disaster
capitalism that uses the desperation and fear created by catastrophe
to engage in radical social and economic engineering. And on this
front, the reconstruction industry works so quickly and efficiently
that the privatizations and land grabs are usually locked in before
the local population knows what hit them. Kumara, in another e-mail,
warns that Sri Lanka is now facing "a second tsunami of corporate
globalization and militarization," potentially even more
devastating than the first. "We see this as a plan of action
amidst the tsunami crisis to hand over the sea and the coast to
foreign corporations and tourism, with military assistance from
the US Marines."
As Deputy Defense Secretary, Paul Wolfowitz
designed and Reconstruction work has been revealed as a tremendously
lucrative industry, too important to be left to the do-gooders
at the UN. oversaw a strikingly similar project in Iraq: The fires
were still burning in Baghdad when US occupation officials rewrote
the investment laws and announced that the country's state-owned
companies would be privatized. Some have pointed to this track
record to argue that Wolfowitz is unfit to lead the World Bank;
in fact, nothing could have prepared him better for his new job.
In Iraq, Wolfowitz was just doing what the World Bank is already
doing in virtually every war-torn and disaster-struck country
in the world-albeit with fewer bureaucratic niceties and more
"Post-conflict" countries now
receive 20-25 percent of the World Bank's total lending, up from
16 percent in 1998-itself an 800 percent increase since 1980,
according to a Congressional Research Service study. Rapid response
to wars and natural disasters has traditionally been the domain
of United Nations agencies, which worked with NGOs to provide
emergency aid, build temporary housing and the like. But now reconstruction
work has been revealed as a tremendously lucrative industry, too
important to be left to the do-gooders at the UN. So today it
is the World Bank, already devoted to the principle of poverty-alleviation
through profit-making, that leads the charge.
And there is no doubt that there are profits
to be made in the reconstruction business. There are massive engineering
and supplies. contracts ($10 billion to Halliburton in Iraq and
Afghanistan alone); "democracy building" has exploded
into a $2 billion industry; and times have never been better for
public-sector consultants-the private firms that advise governments
on selling off their assets, often running government services
themselves as subcontractors. (Bearing 'Point, the favored of
these firms in the United States, reported that the revenues for
its "public services" division "had quadrupled
in just five years," and the profits are huge: $342 million
in 2002--a profit margin of 35 percent.)
But shattered countries are attractive
to the World Bank for another reason: They take orders well. After
a cataclysmic event, governments will usually do whatever it takes
to get aid dollars-even if it means racking up huge debts and
agreeing to sweeping policy reforms. And with the local population
struggling to find shelter and food, political organizing against
privatization can seem like an unimaginable luxury.
Even better from the bank's perspective,
many war-ravaged countries are in states of "limited sovereignty":
They are considered too unstable and unskilled to manage the aid
money pouring in, so it is often put in a trust fund managed by
the World Bank. This is the case in East Timor, where the bank
doles out money to the government as long as it shows it is spending
responsibly. Apparently, this means slashing public-sector jobs
(Timor's government is half the size it was under Indonesian occupation)
but lavishing aid money on foreign consultants the bank insists
the government hire (researcher Ben Moxham writes, "In one
government department, a single international consultant earns
in one month the same as his twenty Timorese colleagues earn together
in an entire year").
In Afghanistan, where the World Bank also
administers the country's aid through a trust fund, it has already
managed to privatize healthcare by refusing to give, funds to
the Ministry of Health to build hospitals. Instead it funnels
money directly to NGOs, which are running their own private health
clinics on three-year contracts. It has also mandated "an
increased role for the private sector" in the water system,
telecommunications, oil, gas and mining and directed the government
to "withdraw" from the electricity sector and leave
it to "foreign private investors." These profound transformations
of Afghan society were never debated or reported on, because few
outside the bank know they took place: The changes were buried
deep in a "technical annex" attached to a grant providing
"emergency" aid to Afghanistan's war-torn infrastructure-two
years before the country had an elected government.
It has been much the-same story in Haiti,
following the ouster of President Jean-Bertrand Aristide. In exchange
for a $61 million loan, the bank is requiring "public-private
partnership and governance in the education and health sectors,"
according to bank documents-i.e., private companies running schools
and hospitals. Roger Noriega, US Assistant Secretary of State
for Western Hemisphere Affairs, has made it clear that the Bush
Administration shares these goals. "We will also encourage
the government of Haiti to move forward, at the appropriate time,
with restructuring and privatization of some public sector enterprises,"
he told the American Enterprise Institute on April 14, 2004.
These are extraordinarily controversial
plans in a country with a powerful socialist base, and the bank
admits that this is precisely why it is pushing them now, with
Haiti under what approaches military rule. "The Transitional
Government provide[s] a window of opportunity for implementing
economic governance reforms... that may be hard for a future government
to undo," the bank notes in its Economic Governance Reform
Operation Project agreement. For Haitians, this is a particularly
bitter irony: Many blame multilateral institutions, including
the World Bank, for deepening the political crisis that led to
Aristide's ouster by withholding hundreds of millions in promised
loans. At the time, the Inter-American Development Bank, under
pressure from the State Department, claimed Haiti was insufficiently
democratic to receive the money, pointing to minor irregularities
in a legislative election. But now that Aristide is out, the World
Bank is openly celebrating the perks of operating in a democracy-free
The World Bank and the International Monetary
Fund have been imposing shock therapy on countries in various
states of shock for at least three decades, most notably after
Latin America's military coups and the collapse of the Soviet
Union. Yet many observers say that today's disaster capitalism
really hit its stride with Hurricane Mitch. For a week in October
1998, Mitch parked itself over Central America, swallowing villages
whole and killing more than 9,000. Already impoverished countries
were desperate for reconstruction aid and it came, but with strings
attached. In the two months after Mitch struck, with the country
still knee-deep in rubble, corpses and mud, the Honduran congress
initiated what the Financial Times called "speed sell-offs
after the storm." It passed laws allowing the privatization
of airports, seaports and highways and fast-tracked plans to privatize
the state telephone company, the national electric company and
parts of the water sector. It overturned land-reform laws and
made it easier for foreigners to buy and sell property. It was
much the same in neighboring countries: In the same two months,
Guatemala announced plans to sell off its phone system, and Nicaragua
did likewise, along with its electric company and its petroleum
All of the privatization plans were pushed
aggressively by the usual suspects. According to the Wall Street
Journal, "the World Bank and International Monetary Fund
had thrown their weight behind the [telecom] sale, making it a
condition for release of roughly $47 million in aid annually over
three years and linking it to about $4.4 billion in foreign-debt
relief for Nicaragua."
Now the bank is using the December 26
tsunami to push through its cookie-cutter policies. The most devastated
countries have seen almost no debt relief, and most of the World
Bank's emergency aid has come in the form of loans, not grants.
Rather than emphasizing the need to help the small fishing communities-more
than 80 percent of the wave's victims-the bank is pushing for
expansion of the tourism sector and industrial fish farms. As
for the damaged public infrastructure, like roads and schools,
bank documents recognize that rebuilding them "may strain
public finances" and suggest that governments consider privatization
(yes, they have only one idea). "For certain investments,"
notes the bank's tsunami-response plan, "it may be appropriate
to utilize private financing."
As in other reconstruction sites, from
Haiti to Iraq, tsunami relief has little to do with recovering
what was lost. Although hotels and industry have already started
reconstructing on the coast, in Sri Lanka, Thailand, Indonesia
and India, governments have passed laws preventing families from
rebuilding their oceanfront homes. Hundreds of thousands of people
are being forcibly relocated inland, to military style barracks
in Aceh and prefab concrete boxes in Thailand. The coast is not
being rebuilt as it was-dotted with fishing villages and beaches
strewn with handmade nets. Instead, governments, corporations
and foreign donors are teaming up to rebuild it as they would
like it to be: the beaches as playgrounds for tourists, the oceans
as watery mines for corporate fishing fleets, both serviced by
privatized airports and highways built on borrowed money.
In January Condoleezza Rice sparked a
small controversy by describing the tsunami as "a wonderful
opportunity" that "has paid great dividends for us."
Many were horrified at the idea of treating a massive human tragedy
as a chance to seek advantage. But, if anything, Rice was understating
the case. A group calling itself Thailand Tsunami Survivors and
Supporters says that for "businessmen-politicians, the tsunami
was the answer to their prayers, since it literally wiped these
coastal areas clean of the communities which had previously stood
in the way of their plans for resorts, hotels, casinos and shrimp
farms. To them, all these coastal areas are now open land!"
Disaster, it seems, is the new terra nullius.
Additional research was provided by Aaron
Maté and Debra Levy.
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