Subprimelån - Vad är det?
Sedan  finanskrisens  början år 2007 har det talats en del om  subprimelån. Förenklat kan man säga at subprimelån är ett lån med dålig säkerhet och höga räntor. Problemet med subprimelån är att man bedömer bara värdet på de tillgångar ( exempelvis ett hus) som belånas och inte låntagarens kreditvärdighet. Det bankerna tänkt sig är att låntagarnas tillgång ska öka i värde med tiden så att de kan ta nya lån för att betala tillbaka de första lånen. (länk, länk2)

Problem när bubblan sprack
Det bankerna och ingen i hela världen väntade sig kom ändå tillslut, bubblan på bostadsmarknaden i USA sprack och priserna tillföljd av en liten efterfrågan störtdök.(se reflex sida 324-325). Samtidigt gick räntan i USA  upp i höjden vilket gjorde att många subprimelånare  hade svårt att betala tillbaka skulderna.  Kredinstituten fick ”konfiskera” massa bostäder vilka nu var mycket mindre värda en när lånen gjorts - bankerna förlorade enorma summor. 

Exempelvis fick New Century Financial, näst störst på subprimelån i USA, ansöka om konkursskydd våren 2007(länk). Banker i Sverige som Swedbank har samma problem idag. Dem har varit aggresiva i utlåningen till osäkra marknader som Baltikum, vilket dem nu sotar för då de baltiska länderna plötsligt befinner sig i recession(länk).

Det är inte många som haft höga tankar om bankväsendet sedan 2007, och det har märkts om man följer aktiemarknaden likt jag gör. Till exempel gick banken bear sterns ner 94% under en dag! Lehman Brothers gick i konkurs. Freddie Mac och Fannie Mae räddades av staten, ja, otaliga såna händelser har ägd rum på senaste tid på grund av dåliga givna krediter

Synden straffar sig själv
Som Justin Timberlake sjunger i sin sång sjunger jag liknande till bankväsendet:WHAT GOES AROUND COMES AROUND – Är man för girig  och lånar ut pengar till icke kreditvärdiga personer får man vänta sig en “fet smäll rätt på käften” när vinden vänder,  som precis slagit till på sista år, en rätt hård också.

Jag tycker det är tråkigt att finansvärdens största aktörer utnyttjar folkets dåliga vetskap om lånen bara för att tjäna pengar. Bankerna i USA har lyckats gömma dessa rent ut sagt “skitlånen” under ytan i goda tider för omvärlden. Enligt affärsvärlden hittar man inte en enda träff på affärsdatas arkiv om subprimelån innan 2006, under bara sista månaden hittar man flera hundra. Visdomsord från Herr Pawlak: 

Madoff genomförde en Ponzi-kupp under 20 års tid och de drabbade var allt från kändisar som Spielberg, till stora banker. Att han lurar Spielberg kan jag förstå, han är knappast någon expert, men att lura flera stora banker, hur kan det ha gått till?

Att lura en eller två banker under en kortare tid kan jag förstå men att under en lång tid lura många stora banker tror jag inte på. Det håller helt enkelt inte. Banker har noggranna interna kontroller för att undvika dylika situationer. Bankerna interna revisorer borde ha upptäckt det för länge sedan.

En annan konstig sak var att han erkände, varför? Så gott som alla lurendrejare vägrar erkänna, vanligen för att de inte ens anser sej ha gjort nåt fel, eftersom de ofta är psykopater i någon form. Det var hans söner, båda arbetar för samma fond som han, som angav honom efter att han tydligen berättat vad han gjort.

Trots att det är relativt lätt att lura allmänheten hävdar många finansexperter att det är omöjligt att lura banker. Deras kontroller är helt enkelt för omfattande för att det skall lyckas. Därför förefaller det mycket konstigt att Madoff lyckats med detta under så lång tid.

Frågan som kommer upp i denna situation är, vilken är den egentliga kuppen? Den han erkände eller följden av erkännandet? Då han erkände, behövs ingen undersökning om vad som verkligen skedde. Vi kommer aldrig att få veta sanningen. Den andra följden är att skattebetalarna i USA kommer att få betala notan. Lite förenklat kan man säga att alla utom skattebetalarna vinner och därför tiger också bankerna.

När Madoff erkände, höll fonden på att gå under p.g.a finanskrisen. Som följd av erkännandet kommer inga amerikanska investerare att förlora pengar, utan enbart de utländska, eftersom enligt amerikansk lag så ersätter staten pengarna ifall man blir lurad och det var ju ett lyckat sammanträffande! Fonden går under men alla amerikanska investerare får pengarna tillbaka då det var fråga om fusk.

Därtill var en del av pengarna försäkrade i Lloyds, vilket betyder att en del kommer att få mer pengar tillbaka än vad fonden i sej själv hade gett. Inte undra på att de inblandade, skyldiga som offer, tiger och tar pengarna, trots att bankerna får en hel del dålig reklam.

J.P Morgan startade ett illasinnat rykte att en stor bank kommer att gå under. Det fick investerare att hämta ut sina pengar från olika banker med påföljd att många fick likviditetsproblem och gick under. Ryktet var inte sant men krisen fick som följd att man skapade Federal Reserve. Detta var 1907 och 1913 fick Federal Reserv makten att skapa pengar åt USA och för det får de ränta.

Senare, närmare bestämt 1929, krävde Federal Reserv tillbaka de pengar de lånat ut till andra banker. Det fick många banker att gå under p.g.a likviditetsproblem, vilket igen gjorde investerare nervösa. När de sedan försökte rädda sina pengar, föll ännu flera banker och bollen kom i rullning.  Det blev den stora depressionen.

Den finanskris vi nu ser, är också skapad av banker men denna gång är det kanske inte lika avsiktligt som tidigare, utan denna gång kan orsaken vara inkompetens. Dock är det igen J.P Morgan som är vinnaren genom att kunna köpa upp konkursfärdiga storbanker för en bråkdel av deras egentliga värde. Det ger anledning till att misstänka att de igen ligger bakom detta men det är något som framtiden kanske kommer att visa.

Det sätt som bankerna spekulerar och manipulerar av eget intresse och girighet, är orsaken till att vårt nuvarande kapitalistiska system inte fungerar. Det finns de som hävdar att en fri marknad och globalisering är bästa sättet att garantera fred (bl.a Penn & Teller i sitt program Bullshit) men det är att förenkla problemen. Det är just kapitalismen som oftast ligger bakom olika krig. T.ex Irak, även om det också ligger en hel del politik bakom (Israels inverkan).

Visst, en del krig kan undvikas genom att ha finansiella förpliktelser kors och tvärs över klotet men det skapas ändå flera kriser än vad som undviks men skillnaden är var dessa kriser förekommer. De förekommer inte i den rika västvärlden, utan i de länder som väst vill råna på sina resurser. Exempel på detta är t.ex. Argentina. Dessa kriser kommer att flyttas runt i världen efter bankernas behov, för tro inget annat än att det är storbankerna som ligger bakom de flesta krig.

Vill vi ha fred i världen, låter kanske naivt men det är ingen omöjlighet, så måste vi bli av med makten bakom makten. Det är alltså inte alltid upp till politikerna att bestämma om det ska bli krig eller inte. Låter kanske absurt, men det är faktiskt inte politikerna som i slutändan bestämmer här i västvärlden, utan det är faktiskt de som sitter med makten att skapa pengar, alltså bankerna. Ok, det är inte den lokala banken som sitter med den makten men de stora internationella bankerna och centralbankerna.

Stora internationella banker styr vår politik mer än vad man kan tro. Även om de sällan direkt säger åt politikerna vad de ska gör, det händer dock ibland, så vet politikerna vad de måste göra för att bankerna inte ska straffa dem. Hur kan då bankerna straffa? Jo, t.ex. genom att höja räntorna, sänka kreditvärdigheten eller helt enkelt vägra ge lån. T.ex IMF dikterar stränga villkor som staten måste följa för att få lån och dessa villkor gynnar enbart USA och de som är rika. Villkoren är oftast sänkta skatter och privatiseringar, vilket resulterar i massarbetslöshet och höjda kostnader och det finns många exempel på detta. Speciellt i sydamerika som är mycket hårt drabbad av världsbankens och IMF:s inflytande och det är orsaken till att man vill skapa en egen gemensam valuta.

Vår ekonomi är uppbyggd på så lösa grunder att vi är helt beroende av bankerna eftersom staten inte längre skapar pengar, utan tar lån från dessa storbanker. Därför är vi känsliga för vad finanssektorn gör. Om vi, eller våra politiker, skulle få för oss att höja skatterna och satsa på sociala reformer, så skulle vi antagligen straffas med sämre kreditvärdighet, höjda räntor och I värsta fall vägras lån. Detta skulle göra att våra tidigare lån skulle bli så dyra att skattehöjningen skulle gå till att betala räntorna på lånen och reformen skulle inte kunna genomföras. Majoriteten av folket vill ha bättre service även om det skulle innebära höjda skatter men detta är orsaken till att politikerna inte lyssnar, de kan helt enkelt inte göra det för eliten tillåter det inte.

Därför sänker vi skatten och tar mer lån för att betala det. Vem vinner på det? Jo, bankerna och de som är rika. Som argument för skattesänkningen använder man att det behövs för att folk ska konsumera som tidigare och att vi därför drabbas mindre av finanskrisen. Det är dock strunt eftersom om folk får extra pengar så sparar de dem då det är kris. Det är ett erkänt psykologiskt fenomen och det vet politikerna men de tror att folk inte vet det. Så resultatet är att vi tar ett dyrt lån för att sänka skatterna, trots att folk inte vill det, utan vill ha bättre service, och det vinner enbart de som har pengar och inte behöver det. Vi kommer att betala ett mycket dyrt pris för dessa lån.

Det är ingen slump att det genomfördes stora privatiseringar efter den förra finanskrisen, det var ett krav för de lån som gavs men de genomfördes tack och lov ganska vettigt i jämförelse med hur det gott till i sydamerika. Får se vad denna kris för med sej. I Sverige diskuterar man ju IPRED, vilket är en nedmontering av svenskarnas rättssäkerhet. Det är finanssektorn som står bakom den lagen eftersom man behöver strängare lagar för att skydda övergången till elektroniska pengar. Samma sak fick man igenom i USA efter 9/11. Läs Naomi Kleins bok “Chock doktrinen” om du vill förstå mekanismen bakom den kuppen, för det var en kupp.

Finanssektorn har skött ärendet mycket skicklig, då man fått giriga artister, författare och skådespelare att sluta sej upp bakom lagförslaget, då de tror att de annars skulle förlora pengar. Det är dock osannolikt att de förlorar några pengar och ännu mer osannolikt att de kommer att få några pengar. Väldigt få kopierar böcker och de som gör det skulle ha gjort det ändå för det är få som vill läsa en bok från en dator. Filmer och musik kopieras ganska flitigt, men det beror mer på bolagens motvilja att forma sej efter konsumenternas vilja. Alltså att ge dem möjlighet att köpa sina filmer och musik via nätet och deras motsträvighet har orsakat att folk istället har piratkopierat. Orsaken till motstävigheten är det, att bolagen vet att deras tid är förbi och de försöker hålla sej kvar med all makt de har. De vill inte inse att deras tid är förbi och att de istället borde försöka rädda det som räddas kan.

Artisterna har i sin enfald blivit lurade att tro att lagen gäller dem och deras rättigheter, så är det dock inte. De håller på och säljer bort sin och andras rättssäkerhet i hoppet om att kunna tjäna lite mera pengar. De vill helt enkelt att det ska vara samma situation i Sverige som i USA där man stämmer gamla tanter som inte ens äger en dator, för fildelning. Det är helt förkastligt och jag är mycket besviken att annars relativt vettiga persom som t.ex. Jan Guillou går ut och pratar om moral. Det är inte frågan om moral, det är frågan om vår rättsäkerhet och det är något som artisterna och författarna helt har missat, förblindade av sin egen girighet.

Det kan hända att Jan Guillou förlorar pengar på fildelning, kanske t.o.m ganska mycket pengar, men han är en av de få som gör det och det spelar heller ingen roll. För honom gör det naturligtvis en skillnad men ska alla måsta ge upp sin rättsäkerhet för att Jan Guillou är drabbad av något som är moraliskt fel? De flesta artisterna är sådana som varken förlorar eller vinner något på lagen men de hoppas att de skulle kunna leva på sitt arbete, då verkligheten är sådan, att det kanske inte ens går att leva på det som de gör. Så har det varit förut också, men då fanns det inte något att skylla på då man inte var så populär att man kunde leva på sitt artisteri. Ska vi lösa en oförrätt, genom att skapa en ännu störra oförrätt? Därtill när den ursprungliga oförrätten är delvis skapad av branschen själv? Hade branschen lyssnat på konsumenten, hade artisterna inte varit i denna situation idag men bolagen hade antagligen haft det sämre och därav deras motvilja.

Sist och slutligen är det finanssektorn som vill ha friare makt att övervaka det system de vill få till stånd. De vill bli av med kontanter för då har de mera makt. Bankernas akilleshäl är idag just kontanter och därför vill bankerna bli av med dem. Därför vill man införa straffavgifter för dem som envisas med att använda dem och med nuvarande utveckling är det bara en tidsfråga innan de försvinner. Det bli allt svårarae att ta ut kontanter och det görs gradvis svårare, för att till sist bli omöjligt och då har vi uppnått bankernas nirvana. Ett kontantlöst samhälle där bankerna har all makt, eftersom de kontrollerar alla transaktioner, och kan följa allt det vi gör.

Bankerna blir samtidigt skyddade mot folkets oberäknerlighet genom att vi kan inte ta ut våra pengar, utan enbart flytta dem från ett konto till ett annat. Då har bankerna inte längre något problem med likviditeten eftersom vi inte kan ta ut pengarna våra. Det är just det som de vill, ha ryggen tryggad för att kunna utnyttja oss så mycket de vill. Bankerna är parasiter som lever på oss genom påtvingad ocker.

Hur hänger allt detta ihop, IPRED, IMF och världsfred? Krig och kriser behövs för att få bort uppmärksamheten från parasitsystemet och för att stävja stater till lydnad. De används också för att tvinga igenom beslut som är negativa för folket men som maktapparaten behöver, t.ex. IPRED som tvingas igenom genom att använda en snyfthistoria om alla dessa stackars artister som inte kan leva på sitt arbete p.g.a fildelning. I USA använde man terroristhotet som skäl och i Finland använde man massarbetslöshet (företagen hotade med att flytta om folket inte röstar för EU) som hot för att få folk att rösta för ett medlemskap i EU. Man hotar och skrämmer för att få igenom lagar och beslut som folk annars inte skulle godkänna.

Finanssektorn är också ofta ansvariga för konjunktursvängningar och depressioner. Finanskrisen på 30-talet var ett resultat av brist på pengar men vart tog dessa pengar vägen? Det var brist på pengar därför att bankerna vägrade låna ut dem och det fanns en liten grupp som tjänade på krisen. Återigen finns det de som tjänar på denna kris, som kanske inte är så avsiktligt skapad men är ändå orsakad av finanssektorn. En sektor som är så uppslukad av sin egen förträfflighet att den krävt absolut makt att få göra som den vill och kritiserat staten hårt för att den vill reglera den. Nu när misstagen kommit till dagen, ber man staten rädda dem. Vi betalar dyra pengar (räntan) för att bankerna skapar oss de pengar vi behöver och sedan när bankerna genom sin inkompetens slösar bort dessa, så är de vi igen som ska betala för att rädda dem som utnyttjar oss.

Vi måste komma ur bankernas grepp för att vi ska kunna leva. Vi har inte den frihet vi tror vi har, vi är alla (nästan) skuld- och löneslavar och det är så bankerna vill ha det. Även om vi inte har någon personlig skuld, är vi ändå skuldslavar eftersom staten lånar för oss. Det finns inget sådant behov men vi gav bankerna lillfingret (makten att skapa pengar) och nu håller de på och tar hela handen (helt elektroniska pengar). Om folk visste hur bankerna skapar pengar från intet och hur alla pengar är skapade från skuld, skulle de börja kräva upprättelse men bankerna är mästare på att skylla ifrån sej. Det är alltid så komplicerat (det är det egentligen inte) och det är alltid politikernas fel (det är det heller inte, om än det var fel att ge bankerna makten att skapa pengar).

Vi får inte ge ifrån oss vår rättssäkerhet, det lilla vi har, för rättsväsendet är under all kritik och vi måste ta tillbaka rätten att skapa pengar. Om staten skapar pengarna, behöver vi ingen statsskuld och då behöver vi inte betala skatt för att betala räntorna på skulden. Det betyder att vi kan sänka skatten avsevärt. Behöver vi mer pengar i systemet (samhället), kan staten skapa dem och satsa dem i att bygga nyttigheter såsom vägar, broar, skolor o.s.v. Vi får inte tillåta bankerna att ta bort kontanterna, det är vår sista livlina! Ger vi bort den, är det mycket svårt att få den tillbaka.

Finanskrisen har både negativa och positiva aspekter. De negativa är ju att företag avskedar och kanske går i konkurs. Positiva är att detta är en möjlighet till förändring, bankernas makt vacklar och nu har vi en möjlighet att få tillstånd en permanent förändring till det bättre. Bankernas sak är att låna och lagra pengar, inte skapa dem, det är statens sak att se till att det finns pengar att tillgå. Bankerna är privata, giriga institutioner som spekulerar och manipulerar för att tjäna pengar. Det har som konsekvens att konjunkturerna svänger, vi får sämre service för våra skattepengar eftersom mer går till att betala ränta på statsskulden, orsakar kriser och krig, lidande och svält, om än inte här hos oss. Klyftan mella rika och fattiga ökar.

Eftersom bankerna enbart skapar pengar till skulden, inte till räntan, kommer det alltid att finnas en del som inte har pengar att betala sina skulder, eftersom det inte finns tillräckligt med pengar i systemet för både skulden och räntan. Det är inget problem sålänge det kommer till nya skulder men när folk slutar att ta nya skulder och däremot betalar bort sina nuvarande, så blir det problem och så fungerar det ju när det är kris. Vi måste komma bort från ett dylikt system eftersom det har ju nu blivit bevisat att det inte fungerar. Hyllade ekonomer såsom Milton Friedman har bevisats ha fel. Marknaden är inte självreglerande, det är en naiv idé som inte har fungerat och inte kommer att fungera. Man behöver inte vara ekonom för att förstå det, det räcker med lite bondförnuft. 

Enligt Dagens Nyheter har många bankchefer väldigt höga pensioner. Jag anser att hundratals miljoner kronor per person, som detta handlar om, är galet mycket. En DN-skribent verkar hålla med. Tänk om de pengarna istället gick till andra anställda på banken, som får en mycket mindre lön. Eller om de gick till någon ideell förening såsom Röda korset (banken som gav lyxpensionspengar till Röda korset skulle verkligen få god uppmärksamhet, goodwill och många nya kunder, det är jag säker på). Jag kan inte särskilt mycket alls om bankväsendet eller ekonomi, men jag vågar gissa på att det arbete dessa chefer gjort inte är värt så mycket pengar, i alla fall om man jämför med andra yrken. Det är nog minst lika jobbigt, svårt, viktigt och arbetsamt att vara exempelvis lärare, och vilken lärare har någonsin fått så här bra lön?

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Reviewing Naomi Klein’s “The Shock Doctrine”

by Stephen Lendman

Naomi Klein is an award-winning Canadian journalist, author, documentary filmmaker and activist. She writes a regular column for The Nation magazine and London Guardian that’s syndicated internationally by the New York Times Syndicate that gives people worldwide access to her work but not its own readers at home.

In 2004, she and her husband and co-producer Avi Lewis released their first feature documentary – “The Take.” It covered the explosion of activism in the wake of Argentina’s 2001 economic crisis. People responded with neighborhood assemblies, barter clubs, mass movements of the unemployed and workers taking over bankrupt companies and reopening them under their own management.

Klein is also the author of three books. Her first was “No Logo – Taking Aim at the Brand Bullies” (2000) that analyzes the destructive forces of globalization. Next came “Fences and Windows – Dispatches from the Front Lines of the Globalization Debate” (2002) covering the global revolt against corporate power.

Her newest book just out is “The Shock Doctrine: The Rise of Disaster Capitalism” that explodes the myth of “free market” democracy. It shows how neoliberal Washington Consensus fundamentalism dominates the world with America its lead exponent exploiting security threats, terror attacks, economic meltdowns, competing ideologies, tectonic political or economic shifts, and natural disasters to impose its will everywhere. Wars are waged, social services cut, and freedom sacrificed when people are too distracted, cowed or bludgeoned to object. Klein describes a worldwide process of social and economic engineering she calls “disaster capitalism” with torture along for the ride to reinforce the message – no “New World Order” alternatives are tolerated.

“Free market” triumphalism is everywhere – from Canada to Brazil, China to Bulgaria, Russia to South Africa, Vietnam to Iraq. In all cases, the results are the same. People are sacrificed for profits and Margaret Thatcher’s dictum applies – “there is no alternative.”

“The Shock Doctrine” is a powerful tour de force, four years of on-the-ground research in the making and well worth the wait. In an age of corporatism partnered with corrupted political elites, it’s must reading by an author now firmly established as a major intellectual figure on the left and champion of social justice. Naomi Klein is all that and more. Even for those familiar with her topics, the book is stunning, revealing, unforgetable and essential to know. This review will cover a healthy sample of what’s in store for readers in the full equisitely written text. It’s in seven parts with a concluding section. Each will be discussed below starting with a brief introduction.

Introduction – Blank Is Beautiful: Three Decades of Erasing and Remaking the World (into Hell)

New Orleans, post-Katrina, is a metaphor for an American-style “New World Order” with unfettered capitalism unleashed in its most savage form. Klein quotes Republican congressman Richard Baker telling lobbyists: “We finally cleaned up public housing in New Orleans. We couldn’t do it but God did.” And New Orleans developer Joseph Canizaro added: “I think we have a clean sheet to start again (and take advantage of) big opportunities.” Their scheme is erasing communities and replacing them with upscale condos and other high-profit projects on choice city real estate at the expense of the poor mother nature forced out and government won’t allow back.

Enter the “grand guru” of free-wheeling capitalism, then age 93 and in failing health. This was conservative/libertarian economist Milton Friedman’s moment that he first articulated in his 1962 book “Capitalism and Freedom.” His thesis: “only a crisis – actual or perceived – produces real change. When a crisis occurs, the actions that are taken depend on the ideas that are lying around….our basic function (is) to develop alternatives to existing policies (ones Friedman rejects, and have them ready to roll out when the) the impossible becomes politically inevitable.” Klein calls crises “democracy-free zones,” and Friedman’s thesis “the shock doctrine.” For New Orleans it means “permanent reforms” like destroying public housing and issuing vouchers for privatized schools in lieu of rebuilding public ones with government reconstruction funds.

For Friedman, government’s sole function is “to protect our freedom both from (outside) enemies….and from our fellow-citizens.” It’s to “preserve law and order (as well as) enforce private contracts, (and) foster competitive markets.” In his view, anything else in public hands is socialism that for “free market” fundamentalists like Friedman is blasphemy.

Until 1973, Friedman’s radical doctrine stayed in his classroom, but all that changed on an earlier September 11. Following General Augusto Pinochet’s bloody ascent to power, he had a real life laboratory as advisor to the new Chilean dictator. His prescription came to be known as the “Chicago School” revolution of rapid-fire economic transformation he called “shock treatment,” now known as “shock therapy.” It’s an economic version of “destroy(ing) the village (and country) to save it” from the Vietnam era and nearly as harsh.

Millions know its lessons, but Friedman’s not their hero. It’s central tenets are structurally adjusted mass-privatizations, government deregulation, unrestricted free market access for foreign corporations, and deep cuts in social spending with repressive laws, harsh crackdowns and torture along for the ride to reinforce the core tenet Reaganites call “trickle down” and Brits call “Thatcherism.”

Its recipients call it hell, and Klein explains why – in Chile, Argentina, Uruguay, Bolivia, Brazil, China, Russia, the Falklands, Poland, South Africa, Sri Lanka, New Orleans, Israel, and coming to a neocon-occupied homeland neighborhood near you. It’s “disaster capitalism” unleashed, and business is booming. Klein cites insiders saying opportunities are on a par with a thriving “emerging market….”the deals are even better than the dot-com days, and the ‘the security bubble’ picked up the slack when those earlier bubbles popped.”

Reaganomics adherents are today’s neoconservatives with the “full force of the US military machine (serving their unfettered) corporate agenda” of greed writ large. Its holy policy trinity is: “elimination of the public sphere, total liberation for corporations and skeletal social spending (if any at all).” But instead of lifting all boats as promised, it’s mirror opposite. It creates a powerful ruling corporatist class partnered with corrupted political elites – “with hazy and ever-shifting lines between the two groups.” Russia got billionaire “oligarchs,” China “the princelings,” Chile “the piranhas,” and America the Bush-Cheney “Pioneers.”

Everywhere, the scheme is the same: huge public wealth transfers to private hands, exploding public debt most often, “an ever-widening chasm between the dazzling rich and disposable poor, and an aggressive nationalism (like George Bush’s permanent “war on terrorism” and the world) that justifies bottomless spending on security.” “Inside the bubble” is paradise. Outside, however, is hell with “aggressive surveillance, mass incarceration, shrinking civil liberties,” a declining standard of living, and repression and torture reinforcing the message to non-believers.

Klein calls the harshness “a metaphor of the shock doctrine’s underlying logic.” When applied, it induces a state of “deep disorientation,” and shock to force targets “to make concessions against their will.” The “shock doctrine” works the same way on a mass scale, and the 9/11 experience proved it. It exploded the “familiar world” and created a period of disorientation and regression the Bush administration jumped on abroad and at home. As Klein put it: “Suddenly we found ourselves living in a kind of Year Zero (with) everything we knew of the world before (now) dismissed as ‘pre-9/11′ thinking.” We became a “blank slate, a clean sheet of paper,” and the administration did what was impossible before. It’s how the “shock doctrine” works: “the original disaster (terror attack, war, hurricane, market meltdown) puts the entire population into a state of collective shock” enabling policy manipulators to move in for the kill to remake the world in their image and get it done before the shock wears off.

Part 1 – Two Doctor Shocks – Torture and Chicago School Fundamentalism

Following a crisis shock, another quickly follows. The corporate piranhas exploit disorientation with economic “shock therapy” along with “police, soldiers and prison interrogators” with torture their method of choice “to build a model country (by) erasing people and then trying to remake them from scratch.”

Klein reviews the history of CIA’s interest in torture as a way to control the human mind. It began with the Montreal doctor they funded to perform “bizarre experiments on his psychiatric patients (by) keeping them asleep and in isolation for weeks, then administering huge doses of electroshock (plus) experimental (psychedelic LSD and hallucinogen PCP angel dust) drug cocktails.”

The experiments were performed at McGill University’s Allan Memorial Institute by Dr. Ewen Cameron even though they clearly violated all standards of medical ethics using human guinea pigs without their permission with permanent damage their reward. Cameron believed by blasting the human brain with an array of shocks, he could “unmake and erase faulty minds, then rebuild (on a blank slate) new personalities” cleansed of their previous nature. It was voodoo science, and it failed. His patients were his victims, but CIA gained a wealth of knowledge it now employs with no pangs of conscience or regard for ethics.

Klein traces CIA’s interest in mind manipulation to a 1951 trinational meeting of intelligence agencies and academics in Montreal when concern was that Communists could brainwash POWs to control them. That was when the spy agency engaged Canadian researchers to learn how, and one of them was Dr. Donald Hebb, director of psychology at McGill, who was working on the problem. Intelligence agencies were impressed enough with his work to fund classified sensory-deprivation experiments on volunteer McGill students.

They proved intensive isolation interferes with clear thinking enough to make people more receptive to suggestion. They were also “formidable interrogation techniques” amounting to torture that Hebb knew violated medical ethics. He later characterized Cameron’s work as “criminally stupid,” but CIA got what it wanted – a way to interrogate “resistant sources” in a “new age of precise, refined torture, not the gory, inexact” kind from the Spanish Inquisition or what Nazis and other tyrants often practiced. Cameron’s experiments with human guinea pigs built on Hebb’s earlier work laying the foundation for CIA’s “two-stage psychological torture method” of sensory deprivation followed by sensory overload. University of Wisconsin historian Alfred McCoy in his book, “A Question of Torture” on CIA interrogation, called it “the first real revolution in the cruel science of pain in more than three centuries.”

Pre-9/11, these techniques were freely used covertly as any form of abuse or torture violates the Geneva, UN and other statutes prohibiting these practices as well as the US Army’s own Uniform Code of Military Justice barring “cruelty” and “oppression” of prisoners. No longer, as “On September 11, 2001, that longtime insistence on plausible deniability went out the window” as well as any claim this nation respects the law and rights of free people everywhere. What once was done sub rosa or by proxy is now condoned and authorized at the highest levels of government on the fraudulent claim of national security to hide the real aim of social control.

Klein notes torture is still technically banned in the US, but only when pain is the “equivalent in intensity to (what accompanies) serious physical injury, such as organ failure.” Simply put, anything goes, but it’s not put that way. In Iraq, it was thought “shock and awe” would be so stunning, Iraqis “would go into a kind of suspended animation.” A second makeover Chicago School fundamentalism shock could then be imposed on a blank post-invasion slate, and bingo, mission accomplished. Klein notes “there was no blank slate, only rubble and shattered, angry people” who were blasted with more shocks when they resisted. Like Cameron and his experiments, “Iraq’s shock doctors can destroy, but they can’t seem to rebuild,” and the same is true wherever these shock doctors show up.

Milton Friedman and the Search for a Laissez-Faire Factory

The epicenter of shock ideology is the University of Chicago Economics Department. It came out of the 1950s “in the thrall” (of a) man on a mission to fundamentally revolutionize his profession,” and on that score Milton Friedman succeeded mightily. Friedman, now gone, believed, markets work efficiently and best unfettered of rules, regulations, onerous taxes, trade barriers, entrenched interests, and human interference. Whereas Cameron believed electroshocks could restore natural health, Friedman favored economic shock as extreme and destructive to nations as Cameron and CIA’s methods are to human minds.

Friedman taught this voodoo science and believed to the end, all contrary evidence aside, it was perfect and worked. Chicago School fundamentalism developed at a post-war time in the 1950s when leftist ideas supporting worker rights were gaining ground. Where they “promised (workers) freedom from bosses, citizens from dictatorship (and) countries from colonialism,” Friedman promised “individual freedom” to choose that appealed to owners of capital who embraced him and his thinking.

It stood in stark contrast to what became known as “developmentalism” or “Third World nationalism” in the post-war developing world. Economists in it favored an “inward-oriented industrialization” strategy to break the cycle of poverty and grow. Like Keynesians and social democrats, they showed it worked in Latin America’s Southern Cone with leaders like Juan Peron “put(ting) their ideas into practice with a vengeance (by) pouring public money into infrastructure projects, (providing) local businesses generous subsidies, and keeping out foreign imports with….high tariffs.” It brought prosperity to the South and “dark days” for Friedman, his acolytes, and free-wheeling capitalists losing out to social progress.

It sprung corporate America to action by funding a legion of think tank and Chicago School foot soldiers to change the message and fortunes of their businesses. Friedman was their ideological leader preaching public wealth should be in private hands, rules and regulations out the window, accumulation of profits unrestrained, and social welfare programs curtailed or abolished. In short – deregulate, privatize and get government out of the business of everything besides providing security and enforcing contracts. He also believed taxes were onerous and once said he was “in favor of cutting (them) under any circumstances and for any excuse, for any reason, whenever it’s possible….”

He also said corporations should be exempt from federal taxes claiming what they pay ends up in consumer prices that, in fact, is pure nonsense as every marketing MBA (like this writer) learns straightaway. The fundamental law of pricing is to charge what the market will bear, no more or less. In other words, get all you can but no more than buyers will pay. Soon enough they’d pay plenty in the developing world.

In 1953, the US declared war against “developmentalism” with CIA’s first ever coup against Mohammed Mossadegh in Iran. Another followed the next year in Guatemala, and in both instances democratically elected leaders were ousted because corporate interests opposed them. It was only the beginning, and Friedman and his “Chicago Boys” soon had a real time laboratory to prove their “capitalist utopia” worked.

Salvador Allende’s Popular Unity government electoral victory in 1970 was the opportunity. Three years later he was out giving Friedman the chance he wanted. Klein related the results in what she called “the first Chicago School state” with others to follow. They’re all the same with “an unstoppable hurricane of mutually reinforcing destruction and reconstruction, erasure and creation” following the crisis. Next is unfettered economic shock therapy with torture and disappearances awaiting resisters and anyone guilty of bad thinking. Friedman’s brave new world was beginning to roll. It’s devastation is everywhere including at home.

Part 2 – The First Test – The Bloody Birth of the Counterrevolution

Counterrevolution began 34 years ago in Chile on another September 11 that should have been unimaginable and had to seem surreal. There were tanks in the streets and fighter jets attacking government buildings in a scene all too real and deadly. It played out in Santiago and around Chile and was just the beginning of a long nightmare. It brought General Augusto Pinochet to power (with plenty of CIA help) who called his action “a war,” not a coup, and to reinforce his message he made it seem like one. Blood in the streets, the presidential palace in flames, and President Salvador Allende dead ended the most vibrant democracy in the Americas. It was a cakewalk with “the junta’s grand battle over by mid-afternoon.”

A state of siege was imposed followed by mass arrests, killings and torture in a climate of fear that enveloped the country. Allende supporters were targeted in Chile’s “Caravan of Death.” Chileans paid dearly, but the Chicago Boys had their moment of triumph, and they were ready. Rolling off the press was their detailed economic manual for the new government called “The Brick.” It was a 500 page Chicago School shock therapy wish list. It was “the first Chicago School state,” its first “global counterrevolution” victory, and “a genesis of terror” in a brave new world for Chileans.

The economic playbook was right from Milton Friedman’s “Capitalism and Freedom” that’s long on free market triumphalism and void on its effects on real people. It was pure Friedman featuring mass privatizations, deregulation and deep social spending cuts flavored generously with corporate-friendly tax cuts, trade unionist crackdowns, savage repression for non-believers, and an end to Chile’s social democratic state Friedman condemned.

Pinochet bought it along with a team of Chicago School alumni called “technos.” They embarked on a free market binge with disastrous results. In the first year, inflation hit 375%, thousands of Chileans lost jobs, the country was flooded with cheap imports, local businesses closed and hunger grew along with public and small business discontent in this free market “paradise.” In desperation, “it was time to call in the big guns” with Milton Friedman coming to Santiago to reinforce his message that for things to improve they first had to get worse. It was classic shock treatment and Chicago School baloney with Friedman preaching patience and promising an “economic miracle” if his prescription was followed.

Pinochet agreed, and slash and burn followed with visions of paradise at the end of the rainbow. It was pure untested fantasy, and the results showed it. After one year of hardened shock therapy, Chile’s economy contracted 15%, unemployment rocketed to 20%, and contrary to Friedman’s rosy scenario it lasted for years with no social safety net help for desperate Chileans.

Klein notes Chile today is still cited as a model that free market “Friedmanism” works in spite of the clear evidence it doesn’t. Growth did resume a decade later, but only after conditions worsened. It forced Pinochet to reinstate Allende policies like renationalizing privatized companies but not his social democratic agenda. Chileans were left with the shambles. When the economy stabilized and rapid growth resumed in the late 80s, poverty was 45%, but the richest 10% saw their incomes rise by 83%. Even today, Klein notes, Chile remains one of the most unequal societies in the world. It’s shock therapy miracle shifted “wealth to the top and shock(ed) much of the middle class out of existence.”

It’s the way it works everywhere and a glimpse of the future: “an urban bubble of frenetic speculation and dubious accounting fueling superprofits and frantic consumerism, ringed by ghostly factories and rotting infrastructure of a development past; roughly half the population (excluded); out-of-control corruption and cronyism; (decimated) nationally owned small and medium-sized businesses; (mass) transfer of (public) wealth (and resources) to private hands (accompanied by) a huge (shift) of private debts into public hands.” Inside the Chilean bubble was paradise. Outside was “The Great Depression.” Bubble-benefitters reacted with “junkie logic: Where is the next fix?”

It was first across the border in other Latin American Southern Cone countries where the “counterrevolution spread (and) people vanish(ed).” Argentina, Brazil and Uruguay were targeted with similar results as in Chile under juntas replacing democrats. Chicago School fundamentalism was on a roll, and woe to the non-believers. Nations that were developmentalism models became wastelands with decades of worker gains lost almost overnight. Factories closed, wages fell, unemployment soared, poverty grew severe, dissenters disappeared, and ordinary people suffered to prove what pin-stripped academics knew after Chile went sour. Instead, it was on to the next target.

In them all, the slate was cleansed and terror unleashed, unrestrained by national borders. Former Allende economist and diplomat turned activist Marcos Orlando Letelier became a victim in September, 1976. While living in Washington, he condemned Chile’s “economic freedom” for the privileged and paid with his life. Pinochet’s DINA secret police killed him and his American colleague, Ronni Moffit, by remote-detonating a bomb planted under his driver’s seat. An FBI investigation learned the assassins entered the country under false passports with full CIA knowledge and complicity.

The purging included cleansing wrong ideas and thinkers like legendary left wing Chilean folk singer, Victor Jara. He was seized and taken to Chile’s notorious National (killing and torture) Stadium to be reeducated. Soldiers broke his hands so he couldn’t play the guitar. Then they shot him 44 times “to make sure he couldn’t inspire from….the grave.” One culture was being erased and replaced by another. As in Nazi Germany, books were burned, newspapers and magazines shuttered, universities occupied and strikes and political meetings banned. Trade unionists were specially targeted as threats to the new economic order. It’s leaders were rounded up, movement members viciously attacked, and “battalions” targeted workers in factories. They were arrested, imprisoned, tortured, and disappeared in a sweeping reign of terror designed to crush opposition and wrong-thinking.

In Argentina, Ford Motor Company’s local subsidiary was complicit. It helped soldiers and secret police rid unionists from its factories and supplied vehicles as well. Green Ford Falcon sedans became the feared symbol of terror an Argentine playwright called “death-mobiles.” Many thousands kidnapped and disappeared rode off in these cars, never to return.

Farmers involved in land reform struggles also were targeted along with anyone with “a vision of society built on values other than pure profit.” It affected community worker activists, many church-connected, who wanted social services like health care, public housing and education the state was erasing through shock therapy and mass repression. Klein noted while “policies attempted to excise collectivism from the culture, inside….prisons (the practice was to) excise it from the mind and spirit.” The sickness was democratic socialism, the cure pain and suffering. Wrong-thinkers were taught the hard way, and many paid with their lives. Chicago School fundamentalism is harsh medicine. Its grand guru, Milton Friedman, was unrepentant. He called it “freedom” and took his mathematical model miracle to the grave amidst a hail of undeserved eulogies.

In his memoirs before he died, his “blatant revisionism” on Chile was shameful and disturbing. He falsely claimed Pinochet only asked for help in 1975 when, in fact, the Chicago Boys worked with the military before the 1973 coup, and their policies were implemented on Pinochet’s first day in power. Friedman also claimed the junta’s repressive years didn’t undo Chilean democracy. In his view, it opened up “more room for individual initiative and for a private sphere of life (offering a greater) chance of a return to a democratic society.” It was classic convoluted Chicago School thinking. It made him famous courtesy of corporate triumphalism, generous funding and an utter disdain for human rights and dignity.

Friedman also used his 1976 Nobel lecture to argue economics was as scientifically accurate and objective as other sciences. He failed to mention its dark side – devastating poverty, unemployment, shuttered factories and mass human misery and deaths in the first nation adopting his ideology on its victimized people. Now it’s everywhere and savagely enforced in an age of corporate dominance, wars for profit and neglect of human needs to fund them. That’s Friedman’s real legacy from the barrel of a gun and called “freedom.”

Part 3 – Surviving Democracy

Chicago School dogma became known as Thatcherism in Britain, but its prime minister wasn’t an early adherent. Margaret Thatcher thought Chilean shock therapy wasn’t possible in a democracy like the UK because voters wouldn’t buy it. Three years into her first term, her approval rating was lower than George Bush’s. She was in danger of not being reelected and didn’t dare risk imposing bitter economic medicine that would sink her chances. That is, until destiny intervened on April 2, 1982 when Argentina invaded the British-held Falkland Islands off its coast that was unimportant to either country except for the political hay to gain from war.

Thatcher jumped at the chance to regain her footing and “went into Churchillian battle mode,” even though Argentina’s president, General Leopoldo Galtieri, wasn’t Adolph Hitler. But defending the British empire was almost as good, and it paid off. Thatcher’s political future was at stake. She revived it, more than doubled her approval rating and henceforth was known as the “Iron Lady” that for her was high praise, and she made the most of it.

She launched a “corporatist revolution” based on Chicago School economics she thought impossible earlier. She parlayed her new popularity to a victory against striking coal miners in 1984 with tactics like unleashing 8000 “truncheon-wielding” riot police in a single confrontation. Before the strike ended, thousands of workers were injured, but Thatcher stood firm with a clear message to other unionists. Take what you’re offered or get the same medicine.

She didn’t stop there, and what followed was a radical economic agenda in a wave of state enterprise privatizations including British Telecom, British Gas, British Airways, British Steel and others in what Klein called “the first mass privatization auction in a Western democracy.” It proved Chicago School fundamentalism didn’t need repressive dictatorships to advance as long as “Iron Ladies” like Thatcher were around to match the best of them, short of all out tanks in the streets shock therapy, that is. Her eleven and a half years in power proved it, and Britain hasn’t been the same since with Labor as committed now as the Tories.

Bolivia was soon targeted as well, but in 1985 was part a democratic wave sweeping the world. It was an election year with two familiar figures facing off for the presidency – former dictator Hugo Banzar and former elected president, Victor Paz Estenssoro. It was close and Banzar thought he won so before final returns were in he named 30 year old Harvard economist Jeffrey Sachs to help develop an anti-inflation economic plan for the country.

Sachs was part Keynsian but larger part Chicago School adherent that made for a bad combination. He bought its orthodoxy in softer form by supporting debt relief and generous aid along with the shock therapy he advised Banzar to adopt as the only solution to hyperinflation.

As it turned out, Banzar lost and Paz won, and while no socialist, he was no Chicago School adherent either, or so voters thought. Four days into his term, he charged his emergency economic team to radically restructure the economy using shock therapy with a twist. It was much harsher than Sachs proposed with the entire state-centered structure Paz erected decades earlier dismantled in the first 100 days before the public could react. In its place, food subsidies were ended, price controls lifted, wages frozen, oil prices hiked 300%, deep government spending cuts imposed, unrestricted imports allowed, and state-owned companies downsized as a first step to privatizing them. It cost hundreds of thousands of full-time jobs, pensions and safety net protections. Friedman continued to roll.

The results were predictable. The minimum wage never regained its value, and two years later real wages were down 40% and average per capita income dropped from $845 in 1985 to $789 in 1987. As in other shock therapy countries, a small elite got richer while the great majority of Bolivians lost out with campesinos faring worst. In 1987, they earned on average $140 a year, or less than one-fifth the nation’s declining average income.

Bolivian misery gave Sachs star status for the country’s “Miracle.” It launched his new career and brought him to Argentina, Peru, Brazil, Ecuador, Venezuela and Russia later on plus a best-selling book and three-part PBS “success story” series. The only problem was it wasn’t true. President Paz had no mandate for shock therapy, and many workers were predictably furious at his betrayal. They went on strike and Paz’s response made Margaret Thatcher’s earlier action against striking coal miners seem tame by comparison. Tanks rolled in the streets, and riot police raided union halls, a university and factories. Hundreds of arrests followed, including the top 200 union leaders, and oppositional politics was banned. The siege lasted three months during the decisive shock therapy period with more repression and Chicago School medicine later.

It showed shock therapy needs harsh authoritarian rule backing with Bolivia’s pin-stripped politicians, economists and bureaucrats administering it, not uniformed soldiers as in Chile. Paz’s democratic victory was illusory like others when leaders renege on promises and sacrifice them on the alter of Chicago School orthodoxy.

Argentina was another “textbook case.” In the post-Falklands War period, it was burdened with billions in odious debt Washington insisted be serviced and paid. It was far more onerous after the (Paul) “Volker Shock” when the US Federal Reserve Chairman hiked interest rates up to 21% in the early-mid 1980s to fight inflation, so he said. It was painful in the US and disastrous for developing countries turning their debt burdens into crises. New loans were needed to pay off old ones, and the debt spiral was born afflicting nations then and still today. That was the whole idea, or at least one of them.

Argentina, Brazil and other countries had another option they didn’t take – defaulting on debt so great it was unrepayable. As Klein put it: “Understandably (new democracies were) unwilling to go to war with Washington (and the international lending agencies it controls so they) had little choice but to play by Washington’s rules (and) in the early eighties (they) got a great deal stricter….It was the dawn of the era of ’structural adjustment’ – otherwise known as the dictatorship of debt.”

In the 1980s, Chicago School economists colonized the IMF and World Bank to advance their corporatist crusade. Economist John Williamson named it “the Washington Consensus” that stuck ever since. It consisted of core economic policies both institutions consider essential for economic health according to their orthodoxy. We know them well: all “state enterprises ….privatized (and) barriers impeding entry of foreign firms….abolished.” There was more that together was classic Friedman dogma: privatization, deregulation, unrestricted free trade (never called fair), and deep cuts in government spending except for security.

Indebted developing countries learned shock doctrine 101 the hard way. Getting aid meant accepting Washington Consensus rules – the whole package. So to save their countries, they had to “sell (them) off.” Klein calls Argentina the “model student” in the 1990s under leaders like Carlos Menem. Appointing Domingo Cavallo economy minister signaled he bought the corporatist package. But as Klein points out: “Argentina was not unique (and by 1999) Chicago School alumni included more than twenty-five government ministers and more than a dozen central bank presidents from Israel to Costa Rica.”

Shock therapy was on a role that in Argentina turned into a textbook case of therapeutically induced disaster. What Time magazine in 1992 called “Menem’s Miracle” became Menem’s Mirage when the economy collapsed in 2001, and Argentina did the unthinkable with Menem gone and a new president in power. It defaulted on an $805 million debt to the World Bank. It should have ended the neoliberal experiment, but instead it spread. Economic crises fueled it, and when old ones ebbed “even more cataclysmic ones appear(ed): tsunamis, hurricanes, wars and terrorist attacks. Disaster capitalism was taking shape” with shock therapy its tool of choice.

Part 4 – Lost in Transition: Slamming the Door on History

Before the Berlin Wall fell, Lech Walesa became a labor hero in Poland and the West by defying the Moscow-controlled government and getting away with it. Solidarnosc (Solidarity) spread from its Gdansk roots to the country’s mines, shipyards and factories and within a year had 10 million members. They won the right to bargain but wanted more. They aspired to take over the state and institute their own alternative economic and political program. It’s radical centerpiece was to transform huge state-run companies into worker-run cooperatives so Solidarity members could be empowered in their own “socialized enterprise.”

Walesa objected, lost the debate, and he feared what then happened. The Jaruzelski government declared martial law, sent tanks to the streets and rounded up thousands of Solidarity members. By the late 80s, the crackdown subsided, the economy was in free fall, workers again struck and Mikhail Gorbachev’s reformist government was in power in Moscow. Solidarity was legalized, a Citizens’ Committee Solidarity wing was formed, its members stood in snap elections and won effective control of the government capturing 260 parliamentary seats.

It should have been the best of times, but with the economy in trouble, Poland needed aid including debt relief. With Chicago School alumni running IMF, none was offered except under Washington Consensus rules, take it or leave it. Enter Jeffrey Sach, the shock doc, with an even harsher plan than imposed on Bolivia. It included an immediate end to price controls, slashing subsidies, and privatizing mines, shipyards and factories. It short, it ran directly counter to Solidarity’s aim for worker-run industry.

Sachs promised Solidarity Poland could become like France or Germany under his plan. By swallowing shock therapy medicine first, taking the pain, the patient would end up cured and healthy – if he was right. After debate, the verdict was in and the treatment bought with predictable results. Sachs promised “momentary dislocations” but delivered a full-blown depression. Industrial production plummeted 30% after two years of “reforms.” Unemployment skyrocketed, and in 1993 hit 25% in some areas. It’s still chronic today with recent World Bank figures pegging it at around 20%, the highest in the European Union. For young people, it’s even worse with 40% of workers under 24 unemployed.

Most alarming is the number of people in poverty. From a 15% level in 1989, it rose to a startling 59% in 2003. Incredibly, the country, like Chile, is still cited as a free market reform model. It’s pure myth, angry Poles know it, but reports in the West ignore them as they do shocked victims everywhere.

They didn’t ignore “the shock of Tiananmen Square,” but didn’t report it accurately either. In the early 1980s, Deng Xiaoping was transforming his country economically while keeping rigid political control including iron-fisted repression when needed. Democracy was nowhere in sight nor is it now. While many of Deng’s reforms were successful and popular, others in the late 80s weren’t, and it provoked deep anger in the cities by people most affected. Price controls were lifted, corruption and nepotism was rampant, freedom minimal, job security eliminated, unemployment soared, and deep inequalities grew between “winners and losers in the new China.”

It came to a head with mass protests in 1989 in Tiananmen Square that Western reports characterized as a clash between old-guard Communist authoritarians and idealistic students wanting western-style democracy. It was pure propaganda. The protests were massive and threatened the government, but democracy wasn’t the issue. It was popular discontent from wrenching economic change raising prices, lowering wages, and causing “a crisis of layoffs and unemployment.” Protesters weren’t against economic reform. They were against the Chicago School version of it, but their efforts were costly.

Deng declared martial law May 20, tanks rolled in the square, indiscriminate shooting took place, and when it ended thousands were dead, many more thousands injured, and still more thousands hunted down, arrested, jailed, some tortured, and hundreds likely executed. Shock therapy rolled in China as in Chile – through the barrel of a gun and raw state terror. Following the crackdown, China opened to foreign investment, joined the WTO, and turned the country into the world’s largest low wage sweatshop for Wal-Mart’s “Always Low Prices.”

For foreign investors and party apparatchiks, it was a win-win arrangement with Klein citing a 2006 study showing 90% of China’s billionaires to be Communist Party officials. About 2900 “party scions” (called “the princelings”) control $260 billion, and Klein notes the “stark similarity between (China’s authoritarian rule) and Chicago School capitalism – a shared willingness to disappear opponents, blank the slate of all resistance and begin anew” using shock and fear to transform countries into free market paradises for the privileged.

The Tragedy of South Africa’s “Democracy Born in Chains”

Klein quotes Nelson Mandela in January, 1990 (two weeks before he was freed) in a note to his supporters from prison saying: “The nationalisation of the mines, banks and monopoly industries is the policy of the ANC (and changing) our views….is inconceivable. Black economic empowerment is a goal we fully support and encourage, but in our situation state control of certain sectors of the economy is unavoidable.” That belief became ANC policy in 1955 in its Freedom Charter. The liberation struggle wasn’t just about a political system but an economic one as well. White workers in mines earned 10 times more than blacks, and large industrialists worked with the military to enforce order and disappear dissenters.

Once apartheid ended, a new way was possible, and Mandela seemed poised to lead it. The ANC had “a unique opportunity to reject the free market orthodoxy of the day” and choose a “third path between Communism and capitalism.” ANC candidates swept the 1994 elections and Mandela became president at a time South Africa surpassed Brazil as the most unequal society in the world. Negotiations were held with the ruling National Party, and a peaceful handover was achieved but not without “prevent(ing) South Africa’s apartheid-era rulers from wreaking havoc on their way out the door.”

Negotiations took place on two parallel tracks – political and economic. Mandela and his chief negotiator, Cyril Ramaphosa, “won on almost every count” politically. But along side it, economic negotiations were held with the country’s current president, Thabo Mbeki, in charge with the outcome in the end far different. With ANC leaders preoccupied with controlling Parliament, the former white supremacist government and industrialists were determined to safeguard their wealth, and they succeeded by assuring Washington Consensus policies would be instituted when political power changed hands.

ANC economists and lawyers were outfoxed or outgunned by the opposition, IMF, World Bank, GATT and power of big capital against inexperienced politicians and technocrats who ended up losers. Black officials controlled the government, but discovered the real power was elsewhere. As Klein put it: “The bottom line was that South Africa was free but simultaneously captured.” The leadership mistakenly thought once firmly in power they could undo earlier made transition compromises.

They couldn’t or didn’t for the same reasons other developing countries accept free market rules. Adopt them or be punished by the market as Mandela learned when he was freed. The South African stock market collapsed in panic, and the country’s currency (the rand) dropped by 10%. He acknowledged the problem later on saying it’s “impossible for countries….to decide economic policy without regard to the likely response of these markets.” It’s too bad he didn’t know how Hugo Chavez managed after 1999 (oil aside). He achieved what Mandela reneged on, and Venezuela’s economy is booming. Had he and ANC officials stood their ground early on, South Africa (with its mineral riches) might have done the same thing – had a growth economy in a socially democratic state and a model for its neighbors.

They didn’t, black South Africans lost out, Mandela’s legacy is tainted, and a key factor was current president Thabo Mbeki. He spent spent years studying in exile in England during the apartheid years during which time “he was breathing in the fumes of Thatcherism.” He became the ANC’s free market tutor, believed in market fundamentalism, and its prescription was “growth and more growth.” It meant neoliberal shock therapy with the full Friedman package Mbeki supported. He later professed: “Just call me a Thatcherite,” and Mandela told journalist John Pilger the same thing in retirement saying: “….you can call it Thatcherite but, for this country, privatization is the fundamental policy.”

After over a decade of that agenda (1994 – 06), Klein highlighted the toll showing conditions today much worse than under apartheid, and ANC’s leadership responsible:

– the number of people living on less than $1 a day doubled from two to four million;

– the unemployment rate more than doubled to 48% from 1991 – 2002;

– only 5000 of 35 million black South Africans earn over $60,000 a year;

– the ANC government build 1.8 million homes while two million South Africans lost theirs;

– nearly one million South Africans were evicted from farms in the first decade of democracy; as a result, the shack dweller population grew by 50%, and in 2006, 25% of South Africans lived in them with no running water or electricity. And there’s more:

– the HIV/AIDS infection rate is about 20%, and the Mbeki government shamefully denied the severity of the crisis and did little to alleviate it; it’s been a major reason why average life expectancy in the country declined by 13 years since 1990;

– 40% of schools have no electricity;

– 25% of people have no access to clean water and most who do can’t afford the cost; and

– 60% of people have inadequate sanitation, and 40% no telephones.

“Freedom” for these people and all black South Africans came at a high price, and no efforts are being made to ameliorate it. Political empowerment was traded for economic apartheid under Chicago School fundamentalist rules. Klein observed: “Never before had a government-in-waiting been so seduced by the international community.” If China, Vietnam and even Russia saw “the neoliberal light,” Mandela was told, how could South Africa resist it. The ANC leadership might have (and Mandela had the credentials to lead them) had they examined the wreckage around the world in Friedman-seduced countries. Instead, they took the easy way out and surrendered.

Russia Chooses “the Pinochet Option”

The man who ignited political and social change in Russia wasn’t around long enough to lead it. Mikhail Gorbachev became head of the Soviet Union’s Communist Party in March, 1985, believing the economy stalled and needed change. His solution became glasnost (liberalizing opening up) and perestroika (reconstruction), and Soviet Russia would never be the same again. By the early 1990s the press was freed, the constitutional court was independent, and elections were held for Russia’s parliament, local councils, president and vice-president. In addition, Gorbachev favored a Scandinavian-style social democracy combining free market capitalism with strong social safety net protections. He hoped to build “a socialist beacon for all mankind.” He never got the chance.

While still in office at the 1991 G7 meeting in London, his fellow heads of state delivered a free market message Chicago School-style. Later, the IMF, World Bank and other international lending agencies reinforced it – Soviet-era debts must be honored and aid depended on adopting strict shock therapy rules. The Soviet Union soon dissolved, Gorbachev was out, Boris Yeltsin became Russia’s president, and Chicago School fundamentalism was adopted as needed “reform.” Klein calls what happened next “one of the greatest crimes committed against a democracy (in peacetime) in modern history.”

Yeltsin assembled a team of Chicago School ideologues to remake the economy. Jeffrey Sachs showed up, too, with other US-funded transition experts to help write privatization decrees, launch a New York-style stock exchange, and craft a total radical economic makeover for a country long used to central planning. Only one thing stood in the way – democracy, and a parliament able to vote down what Yeltsin’s team designed. A clash of wills drew closer in the spring of 1993 when parliament’s budget diverged from IMF demands for strict austerity. Yeltsin reacted with the “Pinochet option.” He issued decree 1400 dissolving parliament and abolishing the constitution. Two days later, parliament voted 636 – 2 to impeach him, and battle lines were drawn.

Yeltsin sent troops to surround parliament and cut off power, heat and phone lines. The army backed him and he pressed on. He then proceeded to dissolve all city and regional councils in the country. Then, on October 4, 1993, he ordered the army to storm the parliament, set it ablaze and “defend Russia’s new capitalist economy from the grave threat of democracy.” The assault took about 500 lives, wounded nearly 1000 others with the enthusiastic support from the West in headlines like the Washington Post proclaiming “Victory Seen for Democracy” in Russia. Some democracy.

Yeltsin now had unchecked dictatorial power, the West had its man in Moscow, and shock therapy had an open field to inflict wreckage on Russia’s people who didn’t know what him them as it unfolded. A corporatist state replaced a communist one, and its apparatchiks were winners along with a handful of western mutual fund managers who made “dizzying returns investing in newly privatized Russian companies.” In addition, “a clique of nouveaux billionaires” (17 in all called “the oligarchs”) were empowered to strip mine the country of its wealth and ship profits offshore at the rate of $2 billion a month.

As a result, Yeltsin’s popularity plunged so he did what all desperate leaders do to hold power with the next election to worry about. He began a war in 1994 in the breakaway Chechen republic killing 100,000 civilians by the late 90s. Elections were held in 1996, and Yeltsin won by overcoming his low approval ratings with huge oligarch-funding and near-total control of television coverage. He then quietly handed power to Vladimir Putin on December 31, 1999 without an election but with the stipulation he was exempt from criminal prosecution. His legacy was devastating with Klein noting “never have so many lost so much in so short a time.” When Russia’s 1998 financial crisis hit:

– 80% of Russia’s farmers were bankrupt;

– around 70,000 states factories had closed;

– an “epidemic” of unemployment raged;

– before shock therapy in 1989, two million Russians lived in poverty on less than $4 a day; by the mid-90s, the World Bank estimated 74 million were impoverished and by 1996 conditions for 25% (almost 37 million) Russians were “desperate” and the country’s underclass remained permanent;

– Russians drink twice as much now as before; painkilling and hard drug use increased 900%, and HIV/AIDS threatens to become epidemic with a 20-fold jump in infections since 1995; suicides are also rising, and violent crime increased more than fourfold; and

– Russia’s population is declining by 700,000 a year with capitalism having already having killed off 10% of it as one more example of free market-inflicted disaster. That’s the brave new world disease spreading everywhere with another scorched-earth stop below. Friedman called it “freedom.”

The Looting of Asia

In the summer of 1997, economic crisis hit Asia from no apparent cause beyond rumors the Thai bhat was in trouble, and Thailand didn’t have enough dollars to back it. Hot money in became an electronic stampede out with “Asian Contagion” unleashed and heading for Indonesia, South Korea and other so-called Asian Tiger countries that were fast-growth miracles until they crashed together with the plight of one affecting the others. It then got worse and spread to Latin America and Russia with US markets also affected briefly in 1997 and then again with a severe jolt in the summer of 1998.

The 1997 Asian panic was crippling with $600 billion in stock market wealth taking decades to build wiped out in a year. Klein notes “a classic fear cycle” ignited the crisis that might have been contained by the same type “quick, decisive loan” rescue package offered Mexico in 1994 in their so-called Tequila Crisis. It would have been a strong signal to markets the US Treasury and international lending agencies wouldn’t let the Asian Tigers fail. No help came, and the message instead was: “Don’t help Asia.” Why? Because “Asia’s catastrophe was an opportunity (for predatory western corporations and vulture investors) in disguise.”

Asian Tigers grew by protecting their markets and barring foreign companies from ownership of land or national firms. They also restricted imports from the West and Japan and instead built up their own domestic markets. Western predators wanted unfettered entry to the region with the right to scoop up the best Asian companies but needed a way to do it. Now they had it from an event Klein calls “the fall of a second Berlin Wall,” as important to western capital as the first one.

Enter the IMF with crisis-struck Asian countries too sick to resist it. They needed help, and the lending agency had plenty to offer on similar terms as to previous crisis recipients. With economies in trouble and empty treasuries, the Tigers got no choice. First, they had to remove all “trade and investment protectionism and activist state intervention that were the key ingredients of the Asian miracle.” IMF also demanded big spending cuts, “flexible” workforces (meaning mass layoffs and constrained wages and benefits), privatized basic services, and the rest of the package they demand for loans.

The regional toll was devastating with the International Labor Organization estimating 24 million lost jobs along with “what was so remarkable about the region’s ‘miracle’ in the first place: its large and growing middle class.” In addition, 20 million people fell into the “planned misery” of poverty, reversing an earlier trend reducing it. Women and children suffered most with families selling daughters to human sex traffickers to survive as child prostitution had a new growth market.

So did Wall Street as IMF structural adjustments put “pretty much everything in Asia….up for sale” in the affected countries. The more markets panicked, the lower asking prices became, and the more pressured hurting companies were to sell out for what they could get or face bankruptcy. It was a bonanza for buyers, and major deals went through in a great fire sale at bargain prices. Asia became hugely transformed with hundreds of local brands replaced by western transnational ones. The New York Times called it “the world’s biggest going-out-of-business sale.” It also became an early glimpse of post-9/11 disaster capitalism – a way for corporate predators to exploit crises in what’s become common practice in the age of “terror” creating opportunities galore and big profits for well-connected firms.

Klein notes the Asian crisis never ended as desparation took root after 24 million people lost jobs in two years. No nation handles that, and the fallout can be unpredictable. It led to a rise in religious extremism in Indonesia and Thailand and “the explosive growth in the child sex trade.” Unemployment is still high and layoffs continue with new foreign owners demanding higher profits with jobs disappearing to provide them.

Eventually things settle down but never to where they once were. Throwing people overboard, displacing small farmers and business owners and crushing unions means those affected stay that way. “They end up in slums, now home to one billion people (and rising); they end up in brothels or in cargo ship containers. They are the disinherited (or what) German poet Rainer Maria Rilke (called) ‘ones to whom neither the past nor the future belongs.’ ” They’re the human wreckage left behind by countries swallowing Chicago School economic medicine. Its promised miracle is people-poison but not for vulture investors thriving on it. Disaster capitalism is on a roll, and its growth market potential is unlimited and guaranteed to continue unless mass public outrage stops it as one day it will.

Part 5 – The Rise of the Disaster Capitalism Complex -

Shock Therapy in the USA

Richard Nixon knew before the rest of us that Donald Rumsfeld is “a ruthless little bastard.” He also has a knack for making enemies even inside the Pentagon he ran as Defense Secretary. He planned to “reinvent warfare for the twenty-first century (making it) more psychological than physical, more spectacle than struggle, and far more profitable” than ever before. Talk aside, he wanted to revolutionize the military by running it like the corporate world, and that meant using methods like outsourcing and branding. His idea was for fewer full-time troops, more as-needed ones from the Reserves and National Guard, and a lot of backup help from private contractors like Blackwater USA for security and Halliburton for a range of functions unrelated to soldiering. He wanted less staff and more tax dollars diverted to private companies. The Pentagon brass wasn’t pleased, but Rumsfeld was boss and Dick Cheney backed him.

Klein calls them both “proto-disaster capitalists” who practice “the central tenet of the Bush regime (that) the job of government is not to govern but to subcontract.” The privatization mania was kick-started in the Reagan era, but Bill Clinton bought it as well. Now the feeling is anything government can do, private business can do better so let them. That means fire departments, prisons, public schools, public health, data management, border control and even parts of the military. As Klein explained: “crisis-exploiting methods….honed over the previous three decades would be used to (privatize) the infrastructure of disaster creation and….response. Friedman’s crisis theory was going postmodern (to create a) privatized police state” by auctioning it off.

“Then came 9/11, and the idea of hollowing out government seemed opposite of what a frightened public wanted – a strong central government to protect them. Bush promised it in speeches, but “his inner circle had no intention of converting to Keynesianism.” September 11 security failures only reinforced their belief that private firms could handle the challenge better than government, and that meant transferring hundreds of billions of public dollars to corporate pockets. The Bush administration exploited shock and fear “to push through its radical vision of a hollow government in which everything from war fighting to disaster response was a for-profit venture.”

Mass disorientation post-9/11 provided the opportunity, and the “war on terror” became a “bold evolution of shock therapy….built to be private from the start” to capitalize on it. It came in two stages. First, policing, surveillance, detention and war-making powers of the executive were dramatically increased though nothing in the Constitution permits it. Then, the whole package, including occupation and “reconstruction,” was outsourced to well-connected private firms that responded with generous campaign funds to keep the mutually reinforcing daisy chain humming. Using the ploy of fighting “terrorism,” the homeland disaster capitalism complex emerged as a full-blown new economy and what Klein calls “a virtual fourth branch of government.”

The Bush administration’s idea of government, with security as one function, wasn’t to provide it but to buy it at cost-plus market prices with lots of latitude for the plus. Just as the internet launched the dot-com bubble, from 9/11 emerged the disaster capitalism one, and it was off to the races “in an ad hoc….chaotic fashion.”

Fighting “terrorism” is big business, and one of the first opportunities was the market for surveillance cameras with 30 million of them installed in the US, billions of hours of footage, analytic software to scan it, digital image enhancement to help it, and information management and data mining technology to handle all data government collects on everyone and everything. September 11 unlocked the potential, a huge new growth market was created, and protection from terror became more important than big brother watching. In six short years, an industry that barely existed is now much larger than Hollywood or the music business, and its potential looks limitless.

Klein calls it “an unprecedented convergence of unchecked police powers and unchecked capitalism, a merger of the shopping mall and the secret prison” in a frightening brave new world most people barely understand or know exists. It generates enormous wealth that creates a powerful incentive for its winners to sell fear for more of it and partnering with government makes it easy, especially the kind in power now.

Capitalism Becomes Corporatism in a Corporatist State

Proto-disaster capitalism defines the Bush administration as crises, wars and other disasters “conflate with what’s good for Lockheed, Halliburton, Carlyle and (Rumsfeld’s old company) Gilead” Sciences. Cataclysm is a growth business that in the current climate involved “some of the seediest and most blatant corruption scandals in recent history,” war-profiteering in the hundreds of billions, and a “whirling revolving door between government and business” taken to a new level. The limitless homeland security and war-profiteering markets are so alluring, hundreds of administration officials can’t wait to cash in like earlier ones did. Klein names some noted ones like Richard Pearle, James Baker, Henry Kissinger, Paul Bremer, George Shultz, John Ashcroft, Tom Ridge, Rudi Giuliani, Richard Clarke, James Woolsey, Joe Allbaugh, and Michael Brown who wrote an infamous memo to a fellow FEMA staffer asking: “Can I quit now?”

That’s the whole idea in a get rich quick environment – get an impressive government title, stay in office long enough in a department handing out big contracts, collect insider information with market value, then quit and cash in. Klein calls public service now “little more than a reconnaissance mission for future work in the disaster capitalism complex.” She also quotes Danielle Brian, executive director of the Project on Government Oversight (a nonprofit watchdog group) saying: “It’s impossible to tell where the government ends and Lockeed begins.” She also believes that corporatist economic goals and right to limitless profit seeking lie at the heart of the most committed neocons who talk a good game but value great wealth their top priority. They partnered permanent war and homeland security with the disaster capitalism complex to get it, and it’s hard indeed telling where one ends and the other begins. But it’s centerpiece project is Iraq, and its headquarters is in Baghdad’s heavily fortified Green Zone.

Part 6 – Iraq, Full Circle – Overshock – Erasing A Country

Perhaps no country provides a greater untapped opportunity for unfettered capitalism than Iraq. It represents the planet’s last remaining low-hanging oil resources fruit with potentially more of it than Saudi Arabia according to some oil analysts. It’s also strategically located in the heart of the oil-rich Middle East (with two-thirds of proved reserves) Klein calls the “crusade’s….final frontier.” Iraq’s potential alone is so enormous it made war the way to crack open its market potential because peaceful methods hadn’t worked. Its conquest would then serve as “a different model in the heart of the Arab-Muslim world” that could become a catalyst to opening the whole region.

The potential is a giant free-trade zone, the illusion of newly created democracies, and the freedom for unfettered capitalism “to feed off freshly privatized states.” Klein explained this as “the model theory,” Iraq as the model, with the idea not being nation-building but nation-creating. But what of the nation already there that’s known as the “cradle of civilization.” It would have to be erased, and Chicago School fundamentalism would create a new one in its place in its own image with a blank slate to work from.

Bush administration war planners considered the full array of possible shocks and went with them all – blitzkrieg “shock and awe,” elaborate PsyOps, use of fear as a weapon, repressive occupation, mass detention and torture, and “the fastest and most sweeping political and economic shock therapy program attempted anywhere….From the start, the invasion was (Washington’s message) to the world….in the language of fireballs, deafening explosions and city-shattering quakes.” It said dare challenge US authority, and you’re next. Shock and awe planners designed its strategy to deter “the public will of the adversary to resist (to render) the adversary completely impotent” from the effects of sensory deprivation and overload inducing disorientation and regression.

In March, 2003, Baghdad got it on a massive scale. The ministry of communication and four telephone exchanges was blitzed and set ablaze cutting off millions of phones and preventing people from learning if their family and friends were alive. Television and radio transmitters were also destroyed along with the electrical grid plunging the city into “an awful, endless night.” Residents were trapped in their homes unable to speak or hear each other or see outside at night. “LIke a prisoner destined for a CIA black site, the entire city was shackled and hooded. Next it was stripped.”

Unchecked looting did the most to erase the “country that was….Gone are 80% of the museum’s 170,000 priceless objects….the national library is a blackened ruin….the Ministry of Religious Affairs….was left a burned-out shell (and the) national heritage was lost.” Paul Bremer’s senior economic advisor, Peter McPherson, wasn’t bothered. It made his job of radically downsizing the state and selling it off easier. Cleaning the slate and erasing the nation was proceeding fast. It “all unfolded in a matter of weeks.” Baghdad was “open for business,” and the fire sale for its assets began with US firms having first dibs on everything, except oil, and that would come later as it has now but is stalled.

While he was there, Paul Bremer was Washington’s man in Baghdad charged with readying the launch of Iraq, Inc. He saw to it laws were passed smoothing the way for Chicago School shock therapy. Two hundred firms were to be privatized immediately to get “inefficient state enterprises into private (predatory) hands….” New economic laws followed that comprised a “wish list….foreign investors and donor agencies dream of,” according to The Economist. The corporate tax was cut from 45% to a flat 15%; another allowed foreign companies to own 100% of Iraqi assets and take all profits out of the country; all restrictions on imports were removed; and investors could sign deals and leases lasting 40 years so no future government could change them.

Iraq became a bold new experiment with invasion, occupation and reconstruction transforming the country into a fully privatized new market “with a huge pot of public money” doing it. Klein called the adventure an “anti-Marshall plan,” mirror opposite the post-WW II plan, and guaranteed “to further undermine Iraq’s badly weakened industrial sector and send Iraqi unemployment soaring.” No funds went to Iraqis or their industries nor was anything done to build a sustainable economy, or rebuild local infrastructure like electrical grids, schools, and hospitals. Iraqis played no role in planning, local firms weren’t even given “subsubsubcontracts,” jobs were destroyed not created while thousands of serf-type foreign workers were brought in and abused, and critically needed social services were ignored.

Another goal was for a fully outsourced, hollow government with no function so “core” a contractor couldn’t handle it for profit. It was pure pillage, but nothing went as planned. “Each miscalculation provoked escalating levels of resistance” with occupying forces responding with counterrepression “sending the country into an inferno of (unending) violence.” Everything “tearing Iraq apart today – rampant corruption (and unfettered plundering), ferocious sectarianism, the surge in religious fundamentalism and the tyranny of death squads (including US ‘Salvador option’ ones) – escalated in lockstep with….Bush’s anti-Marshall Plan.” In that environment, the country became “a cutthroat capitalist laboratory” for shameless pillage. Iraq today is a model, a metaphor for everything wrong with Chicago School dogma showing it to be savage, ruthless, heartless and bankrupt.

Its implementation is the core reason for resistance that continues and grows, but it caught war planners off guard when it began. They thought the shock and awe of attack, invasion, occupation and rapid transformation on the ground would be disorienting. Instead, Iraqis demanded a say from the start in how their country would be rebuilt and transformed. “And it was the Bush administration’s response to this unexpected turn of events that generated the most blowback of all” that became even worse by crushing democracy and effectively installing a puppet government in the fortified Green Zone masquerading as a real one.

The result was predictable and so was the harsh response – mass detentions, aggressive interrogations, administration-sanctioned gloves off torture, and US unleashed “Salvador option” death squads making it hard to know who’s doing the killing and blasting away at selected targets. What is clear are the consequences – “millions of psychologically and physically (traumatized, angry and) shattered people, first by Saddam, (then) by war, (then) by one another (and the occupation). Bush’s in-house disaster capitalists didn’t wipe Iraq clean, they just stirred it up….Countries, like people, don’t reboot to zero with a good shock; they just break and keep breaking….Which….requires more blasting – upping the dosage….”

Slowly, it’s disappearing, disintegrating, erasing an entire country – women behind veils and doors, children from schools, four million displaced, Iraqi industry collapsed, a new growth industry in kidnapping for ransom, a country so unstable investment is high-risk, and even the heavily fortified Green Zone is too unsafe for George Bush to visit on one of his “surprise trips” to the country. Bremer’s charge was to build a “corporate utopia” but instead unleashed a “ghoulish dystopia,” and, on an April, 2004 visit to the country, Klein thought she was witnessing a mass contractor exodus with 1500 of them leaving in one week.

Now she’s not sure. Big investors like Wal-Mart, HSBC and Procter and Gamble never showed up, and in December, 2006, the Pentagon announced a new project to get state-owned factories operating with plans to buy cement and machinery from them instead of the usual corporate suppliers. Does it signal a change of disaster capitalism tactics? Not at all, and it’s likely this amounts to no more than tinkering and tokenism that in the end will do little for the local economy and even less to reduce hardened anger.

The Big Oil drafted Hydrocarbon Law is still a work in progress but already inflamed things further, and well it should. It’s an anti-Marshall Plan project at its worst, and in whatever final form is a shameless act of theft on the grandest scale. It’s a privatization blueprint for plunder giving Big Oil a bonanza and Iraqis a mere sliver of their own resources. In one draft, Iraq’s National Oil Company got exclusive control of just 17 of the country’s 80 known oil fields with all yet-to-be-discovered deposits set aside for foreign investors. Even worse, Big Oil is free to expropriate all earnings with no obligation to invest anything in Iraq’s economy, partner with Iraqi companies, hire local workers, respect union rights, or share new technologies. In addition, foreign investors are guaranteed long-term contracts up to 30 or more years, dispossessing Iraq and its people of their own resources in a naked scheme to steal them and deny them the one source of revenue able to rebuild their shattered country and lives.

The battle for Iraq continues that involves clinging to if not winning the hearts and minds on the home front as well. The country is a wasteland, the nation creation project bankrupt, and the prospect for success bad and worsening. Iraq has been a graveyard for past imperial powers, and it may just be a matter of time until history again repeats. The Brits in the South know it, and after four and a half futile years are tiptoeing out to the dismay of their “coalition” partners. One day, Washington may join them, and for shocked Iraqis it can’t come too soon. For now, though, the shock continues, and Iraq more closely resembles hell than “the cradle of civilization.”

Part 7 – The Movable Green Zone: Blanking the Beach – “The Second Tsunami”

For coastal Sri Lankans, like those in Arugam Bay, December 26, 2004 felt more like 1945 Hiroshima than life before that fateful day changing everything for them. A devastating tsunami took 250,000 lives and left 2.5 million homeless throughout the region. It affected Arugam Bay, “a fishing and faded resort village” on the island’s east coast that government was showcasing in its plans to “build back better.” Indeed, but not for the villagers hoteliers, developers and the government wanted removed but weren’t sure how until nature did what they couldn’t. Everything was gone, and a blank slate remained for what the tourist industry long wanted – “a pristine beach (in a prime area), scrubbed clean of all the messy signs of people working, a vacation Eden. It was the same up and down the coast once rubble was cleared….paradise.”

“New rules” forbade homes on the beach and a “buffer zone” imposed insured it. Beaches were off-limits, displaced Sri Lankans were shoved into temporary grim barracks camps inland, and “menacing, machine-gun-wielding soldiers” patrolled to keep them there.

Tourist operators were treated differently. They were encouraged to build and expand on prime vacated oceanfront land. It was all in a document called the “Arugam Bay Resource Development Plan” to transform the former fishing village into a “high-end ’boutique tourism destination’ (with) five-star resorts, luxury….chalets, (and even a) floatplane pier and helipad.” Arugam Bay was to be a model for transforming up to 30 similar “tourism zones” into a “South Asian Riviera.” When the plan leaked out, people in Arugam Bay and around the country were outraged.

The grand scheme to remake Sri Lanka was around two years earlier and began when the civil war ended. It was to be the country’s reentry into the world economy as one of the last remaining uncolonized places globalization hadn’t touched, and a high-end tourism project was seen as the right option. It would be a luxury destination for the “plutonomy set,” once a few changes were made. Government’s 80% land ownership had to be opened to private buyers, more “flexible” labor laws were needed, and modernized infrastructure had to be developed with World Bank and IMF providing funds on their usual shock therapy terms discussed above. With mass public opposition to the ideas, it wouldn’t be easy, and before the tsunami hit, militant strikes and street protests held it back.

Sri Lanka’s president, Chandrika Kumaratunga, was elected on an “overtly antiprivatization platform,” but the tsunami changed everything and helped her see “the free market light.” Four days after the disaster, her government passed a bill “pav(ing) the way for water privatization.” It also raised gasoline prices and began crafting legislation to privatize the electricity company in pieces. It was like a second tsunami, and the same scheme followed hurricane Mitch in October, 1998 with Hondurus, Guatemala and Nicaragua hardest hit like New Orleans discussed below.

Klein explained when the tsunami struck in 2004, “Washington was ready to take the Mitch model (now familiar) to the next level – aiming not just at individuals laws but at direct corporate control over the construction.” Sri Lanka’s president complied and created a new body called the Task Force to Rebuild the Nation fully empowered to proceed. On it were the most powerful business leaders from banking and industry including key players from the beach tourism sector. Absent were villagers, farmers, environmentalists or even a “disaster-reconstruction specialist.” Klein called the task force a new type corporate coup d’etat mother nature made possible.

In ten days, then had a complete reconstruction blueprint from “housing to highways” with aid money directed to corporate development and nothing for disaster victims. They were destined to become permanent shantytown dwellers similar to the kinds ringing most Global South cities and populating Global North inner ones. Similar stories of law changes and land grabs came out of other affected Southeast Asian countries like Indonesia, Thailand, the Maldives and India where around 150 Tamil Nadu displaced women had to sell their kidneys for food.

A year after the tsunami, NGO ActionAid surveyed the aftermath in five Asian countries and found the same pattern everywhere – residents barred from rebuilding, living in militarized temporary camps, hotels “showered with incentives,” no restoration of homes lost, and “entire ways of life” destroyed. In July, 2006 in Sri Lanka, the Tamil Tigers ended their cease-fire and war resumed. It’s hard knowing if disaster capitalism had a role because peace was always precarious, the government offered little, and continued violence at least promised a chance for something better before and more than ever now given the choice between disaster capitalism and hope.

Disaster Apartheid – A World of Green and Red Zones

On August 29, 2005, Hurricane Katrina hit the Gulf Coast and flooded New Orleans. The well-off left town, “checked into hotels, and called their insurance companies.” For 120,000 others without cars or means of transportation, it was another story. They depended on the state, waited for help and got none. FEMA is supposed to provide it, too, but it was one of the many government functions Bush gutted advancing savage capitalism at the expense of public service.

Katrina was disastrous for those affected, but Milton Friedman saw “an opportunity” in a Wall Street Journal op-ed. It was easy for him to say from his luxury San Francisco digs as well as his like-minded ideologues who met 14 days later to plan how to pounce on the tragedy for profit. They produced 32 Chicago School-type schemes packaged as “hurricane relief” that was a wish list for developers and hell for the displaced. They ranged from suspending Davis-Bacon prevailing wage laws in disaster areas and making the whole area a flat tax free enterprise zone to erasing public schools by giving parents vouchers for privately-run charter ones. They also wanted environmental regulations suspended on the Gulf Coast and permission to drill in the Arctic National Wildlife Refuge that showed how far afield they’d go to capitalize on the shock of a local tragedy.

Things moved fast, and within weeks “the Gulf Coast became a domestic laboratory for the same kind of (outsourcing schemes) pioneered in Iraq.” The names were familiar with Halliburton first in line along with Bechtel, Blackwater USA and a host of others homing in for the kill. Billions were at stake, and no open bidding was required, just good connections. As Klein put it: “within days of the storm it was as if Baghdad’s Green Zone….lifted from….the Tigris and landed on the bayou….As in Iraq, government once again played the role of a cash machine equipped for both withdrawals and deposits.” Corporations took one and repaid with the other in sizable campaign contributions in a pattern now familiar.

They also ignored unemployed locals and relied instead on cheap imported undocumented labor easily exploited. The Bush administration showed its type compassion, too, with $40 billion in budget cuts for essentials like Medicaid, food stamps, student loans and more so funds could go to contractors and the wars in Iraq and Afghanistan. Again, a familiar pattern.

In visiting Iraq, Klein first thought the “Green Zone phenomenon was unique to the war in Iraq.” She then discovered it emerges wherever disaster capitalism lands with the same stark divisions between the included and excluded. It was evident in New Orleans with “gated green zones and raging red” ones – not from flood damage but from predatory free market solutions only for the privileged.

The Bush administration refused emergency funds for public sector salaries so 3000 city workers were fired. Charity Hospital closed and still isn’t open. Public transit was gutted losing half its workers, and most public housing is still boarded up and empty by design. Some sits on prime land close to the French Quarter, developers want it for luxury properties, and New Orleans is being erased for profit just like Iraq. It was all planned with the storm the excuse to do it.

Earlier “creative destruction” opportunities generated “rust belts,” neglected neighborhoods, and underfunded inner city public schools. Creative neglect is at work as well as the American Society of Civil Engineers in 2007 said it will cost $1.5 trillion over five years to bring essential public infrastructure back to standard. Instead it continues to deteriorate while the well-off withdraw into gated communities and luxury condos with all their needs met by private providers. Klein calls this trend a “state-within-a-state that is muscular” and as able as the public one is frail. It no longer can function without help from contractors as government is hollowed so business can prosper.

New Orleans is a window on the future in which survival depends on the ability to pay, and those who can’t are discarded like trash. It promises a world of protected Green Zones with those outside it neglected, abandoned, ignored and forgotten.

Losing the Peace Incentive – Israel As Warning

Conventional wisdom once thought economic growth and prosperity required peace and stability. No longer. Post-9/11, the terror scare was ignited, wars rage in Iraq and Afghanistan, more war is threatened on Iran, oil prices touched $80 a barrel, the WTO Doha Round trade talks collapsed, and “a golden period of broadly shared growth” prevails (at least until the recent credit crunch). How come?

Conflict and global instability don’t just benefit arms related industries. They help the high-tech security sector, heavy construction, private health care companies treating soldiers and oil and gas. The business bonanza in Iraq alone is hugely profitable with all sorts of companies cashing in. The same goes for New Orleans and Gulf Coast overall. Terrorist attacks are good for business. The more destruction, the more to rebuild – a great market for disaster capitalism it pounces on with every incentive to assure the trend continues unchallenged, and why not when government throws public tax dollars at it.

Today, “instability is the new stability,” and Israel is its “Exhibit A.” In the post-1993 Oslo years, the Jewish state designed its economy to expand in response to escalating violence at home at first and now everywhere. The nation’s technology firms pioneered the homeland security industry, and they still dominate it. In addition, its economy overall is the most “tech-dependent in the world,” according to Business Week magazine, twice as dependent as the US representing half its exports.

Following the 2000 dot-com crash, Israel’s leading tech companies needed a new global niche, and the government encouraged expansion beyond information and communications technologies into security and surveillance. It launched a slew of start-ups “specializing in everything from ’search and nail,’ data mining, surveillance cameras, to terrorist profiling.” It was perfect timing for a market that exploded post-9/11, and Israel’s economy is thriving with one of the fastest growth rates in the world. Klein calls the country “a kind of shopping mall for homeland security technologies,” and Forbes magazine says it’s “the go-to country for antiterrorism technologies.” Today, the country’s counterterrorism industry is booming, and its defense-related exports make it the fourth largest arms dealer in the world, larger than the UK.

Klein notes: “With more and more countries turning themselves into fortresses (with walls and high-tech fences part of it), ’security barriers’ may prove to be the biggest disaster market of all.” In the case of Israel, it’s also another “Chicago School frontier marked by rapid stratification of society between rich and poor inside the state.” The security boom fueled a wave of privatizations accompanied by social program cuts, “an epidemic of inequality,” and the virtual end of Labor Zionism. Klein notes 24.4% of Israelis live in poverty, including 35.2% of children, compared to 8% twenty years earlier (but she doesn’t say if these figures include Arab Israeli citizens comprising 20% of the population). She concludes Israeli industry no longer fears war as it thrives on it.

Today, Baghdad, New Orleans and suburban Atlanta Sandy Springs are glimpses of a gated community future run by the disaster capitalism complex. But it’s in its most advanced state in Israel – “an entire country (turned into) a fortified gated community, surrounded by locked-out people living in (the) permanently excluded red zones” of Gaza and the West Bank that aren’t just left out but are encroached on and under attack. Disaster capitalism thrives in this environment so it yearns to bring it to a neighborhood near you, and that’s a prospect to fear.

Hopeful Signs – Shock Wears Off

Klein quotes Canada’s National Post editor, Terence Corcoran, wondering if the Chicago School movement Milton Friedman launched could continue as before after his November, 2006 death. The movement’s pinnacle was capturing the Congress in 1994 that it lost in 2006 for three reasons – public disenchantment with the Iraq war, political corruption, and a growing class divide unseen since the Gilded Age of the “robber barons” or roaring 20s. Each factor related to core Chicago School economics – privatization, deregulation and cutting government services. In the US, it created a wealth disparity economist Paul Krugman calls unprecedented while poverty is growing and the middle class dying in the richest country in the world that’s also the least caring one.

Everywhere Chicago School fundamentalism shows up, the results are the same. A small elite gains hugely while most others don’t. But cracks in the ideology are visible as many of its front line adherents got caught up “in an astonishing array of scandals and criminal proceedings (from the) earliest laboratories in Latin America to the most recent one in Iraq.”

Before he died, Pinochet was under house arrest. In Argentina, courts stripped former junta leaders of immunity. Bolivia’s de Lozada got chased from the country and is now a wanted man. In Russia, many of the oligarch fraudsters were either in exile or jail. In Canada, newspaper magnate Conrad Black was convicted of fraud. In the US, a rogue’s gallery of CEOs were charged and convicted as well, and other high level types were caught up in scandals like lobbyist Jack Abramoff’s influence-peddling one.

Klein notes another hopeful sign as well – shock effects were beginning to wear off, and in Argentina’s 2001 economic crisis forced out five presidents in three weeks. It was spreading and most apparent in Latin America where it began with opponents of Chicago School doctrine winning elections like Hugo Chavez in Venezuela, but he wasn’t alone. It showed a renewed faith in democracy and condemnation of Washington Consensus dogma when people made a choice at the polls in free and open elections. Today’s movements aren’t replicas of the past, and one of the differences “is an acute awareness of the need for protection from shocks of the past” – coups, foreign shock therapists, torturers, debt and currency shocks.

They’ve learned from the past and are building “shock absorbers into their organizing models.” It’s in movements less centralized, Venezuela’s grassroots community councils, Brazil’s Landless Peoples Movement, and the streets of Oaxaca, Mexico where thousands battled police since a year ago May and still won’t quit. In addition, governments are rejecting old trade models and adopting new ones like Venezuela’s ALBA bartering system making it less vulnerable to turbulent markets.

They’re also rejecting World Bank and IMF debt slavery, and the change is dramatic. In 2005, 80% of IMF’s lending portfolio was to Latin America. It dropped to 1% in 2007. And IMF’s 2005 $81 billion dollar portfolio shrank to $11.8 billion in three years with nearly all of it in Turkey. The World Bank is also being rejected. Venezuela severed its relationship, and Ecuador’s Raphael Correa suspended bank loans and declared its country representative persona non grata in an extraordinary move the equivalent of a well-deserved slap in the face. In addition, the Doha Round trade talks collapsed, and some observers thought it signaled “globalization is dead,” or if not, it’s at least breathing hard.

Resistance is showing up in Europe, too, with voters in France and the Netherlands rejecting the European Constitution the French call “savage capitalism” and a codification of the corporatist order they reject. The Putin era in Russia is also seen as a backlash against the shock therapy of the 90s that impoverished millions of its people still left out and many desperate. The same is true in South Africa where people in slums abandoned the ANC to protest against their broken Freedom Charter promises. It even surfaced in China where, according to official government sources, 87,000 large protests were held involving over four million workers and peasants. They won major victories for new rural area spending, better health care, and pledges to eliminate education fees.

Millions of Lebanese were in the streets as well that wasn’t a show of strength by Hezbollah as the major media characterized it. It was a rejection of the Siniora government’s willingness to accept Chicago School reforms in exchange for billions of needed reconstruction loans to recover from Israel’s summer, 2006 blitzkrieg attack. Klein called their actions “a poor and working-class people’s revolt.”

Examples are everywhere but so far just ripples in a pond needing greater numbers for real change. They were in tsunami-struck Thailand where, unlike in Sri Lanka, many settlements were successfully rebuilt in months but not by the government offering no aid. So hundreds of villagers “engaged in what they called land ‘reinvasions,’ ” defied their government with direct-action, and rebuilt their communities making them better than before the destruction.

The same thing happened in New Orleans. In February, 2007, housing project residents “reinvaded” their old homes and reclaimed them in another example of “people rebuilding for themselves” and bypassing government indifferent to their needs and rights. Klein calls this phenomenon “the antithesis of the disaster capitalism complex’s ethos.” The actions are communal with people helping each other, rebuilding rubble, and aiming to end the erasure “of history, of culture, of memory.”

It’s a message of collective shock resistance replacing shock, but it’s too early to declare victory. The signs are encouraging, and with enough of them who knows what’s possible. Hopefully a better world replacing the bankrupt notion that markets work best and government is the problem. That’s an idea for the trash bin of history where it belongs and where it one day will be.

Stephen Lendman lives in Chicago

Finanskris, kreditkris, dollarraset, olja, oljekrig, oilwars, USA, FED, nyliberalism, nyliberal, neoliberal, skojare, liberaler, kollapsen av nyliberalismen, militär keynesianism, Bush, Clinton, McCain, Förenta Staterna, George W Bush, liberal kris, den osynliga handen, konsument krediter, skuld, nationell skuld, räntenivå, recession, konjunktur,strukturell kris, national debt,handelsbalans utlandsskuld, nykeynesianism; internationell ekonomi, ekonomiskt läge, globalisering, internationella förhållande, amerikansk ekonomi, bankväsendet, finansmarknad, avreglering, pension, globala rånet, nyliberal skojeriet, neoliberalism, neocons, financial crisis, bank crisis, recesion, depresion, economics, voodoo economics, freakonomics, Federal reserve, neokeynesianism,interest rate, obligations, CDOs, state obligations, economic colapse, the dolar empire, monetary policy, national debt, state debt, credit crisis, credit card, mortgages structured investment vehicles , financial asset , credit crunch, Bank of England , financial panic , Individual Voluntary Agreement , toxic packages , sub-prime mortgages ,privatization, deregulation, foreign debt, dolar asssets, dollar collaps, the invisible hand, neocons, debt,mortage loans, mortage debt, consumer debt, bonds, trasure bonds,inflation, consument price index, producent price index, energy price, oil price, bonds price, stocks, stock, Wall Street, financial markets, militar speditures, structural crisis,trade balance, Globalisation, Globalization, globalism, Globalisering,  IMF, world bank, corporate bond equities markets, disarray; the banking system, collapsing, consumer spending, tax revenues, national debt black holes

Leftists used to think that at least as a general axiom, if not by a precise deadline, capitalism was doomed. When I first arrived in the United States in the early 1970s, there was enough exuberance in the air even for mild-mannered reformers to be pushing plans for the abolition of the Federal Reserve, World Bank and kindred institutions.

But today most of these same leftists deem capitalism invincible and fearfully lob copious documentation at each other detailing the efficient devilry of the executives of the system. The internet serves to amplify this pervasive funk into a catastrophist mindset. It imbues most of the English-speaking left west of the Atlantic after seven years of Bush and Cheney, and frames Naomi Klein’s “The Shock Doctrine, The Rise of Disaster Capitalism.”

At the outset Klein permits herself a robust trumpet blast as intrepid pioneer:

“This book is a challenge to the central and most cherished claim in the official story — that the triumph of deregulated capitalism has been born of freedom, that unfettered free markets go hand in hand with democracy. Instead, I will show that this fundamentalist form of capitalism has consistently been midwifed by the most brutal forms of coercion, inflicted on the collective body politic as well as on countless individual bodies.”

The arc of triumph she is alluding to spans the half century from the Eisenhower administration’s onslaughts on political and economic nationalism in Iran and Guatemala in the early 1950s, to the US attack on Iraq in 2003 and its subsequent occupation. These are not decades where official apologetics have been entirely without challenge until Ms. Klein embarked on her researches. There are shelves worth of books on the ghastly consequences of the covert interventions and massacres organized or connived at by the United States in the name of freedom and the capitalist way. Klein’s own bibliography attests that there has plenty of detailed work on the neoliberal onslaught that gathered strength from the mid-70s on, marching under the intellectual colors of one of her arch villains, the late Milton Friedman, the Chicago School economist.

Where Klein would presumably claim originality is in identifying the taxonomy of this “shock doctrine”, the latest in capitalism’s phases of “creative destruction”, as Schumpeter described the soul of the system. So she describes the shock of a sudden attack, whether the overthrow of Salvador Allende in Chile in 1973 or the bombing of Baghdad in 2003; the shock of torturers using sensory deprivation techniques and crude electrodes to instill fear and acquiescence; Friedman’s economic “shock treatment.” Methodically combined and elaborated, these onslaughts now amount, on Klein’s account, to a new and frightful chapter in the history of capitalist predation.

Klein begins with a chapter on the CIA-sponsored psychic “de-patterning” experiments of that monster, Dr Ewen Cameron of McGill University’s Allan Memorial Institute, and states explicitly that torture, aside from being a tool, is “a metaphor of the shock doctrine’s underlying logic”. To use shock literary tactics to focus attention on the deliberate and sadistic engineering of collective social trauma is certainly no crime. But, as often happens after a shock, one eventually retrieves a sense of proportion, one that is not entirely flattering to the larger pretensions.

Capitalism, after all, as always been a shock doctrine of selfish predation, as one can discover from Hobbes and Locke, Marx and Weber, none of them saluted by Klein. Read the vivid accounts of the Hammonds about the English enclosures of the eighteenth century, when villagers would find nailed to the door of the parish church an announcement their common lands had been privatized. Protesters may not have “depatterned”, but were briskly hanged or relocated to Botany Bay. Klein could have used Karl Polanyi to better effect than as an epigraph. The wrenching conversion of peasant societies to cash economics, private property, the job regime, has always been brutal.

The Chicago Boys laid waste the southern cone of Latin America in the name of unfettered private enterprise, but 125 years earlier a million Irish peasants starved to death while Irish grain was exported onto ships flying the flag of economic liberalism. Klein writes about “the bloody birth of counter-revolution” in the 1960s and 1970s, but any page from the histories of Presidents Jackson, Polk or Roosevelt discloses a bleak and blood-stained continuity with the past. Depatterning? Indian children were taken from their families and punished for every word spoken in their own language, even as African slaves were given Christian names and forbidden to use their own, or to drum. Amid the shock of the Civil War the Republicans deferred by several years the freeing of slaves, while hastening to use crisis to arrange a banking and monetary system to their liking.

Just as there is continuity in capitalist predation, there is continuity in resistance. Here’s where Klein’s catastrophism distorts the picture. Her controlling metaphor for the attack on Iraq is the initial “shock and awe” bombardment, designed to numb Saddam’s forces and the overall civilian population into instant surrender and long-term submission. But “shock and awe” was a bust. It didn’t work. Its value even as a metaphor is useless, except as illustration of what parlor wargamers in Washington DC can hype. Having sensibly decided not to fight or die on an American timetable, many of Iraq’s soldiers regrouped to commence an effective resistance. Iraqi civilians struggle along as best they can under awful conditions and, un-numbed, tell pollsters that they wish the Americans would leave at once.

“Shock therapy” neoliberalism really isn’t most closely associated with Milton Friedman, but rather with Jeffrey Sachs, to whom Klein does certainly give many useful pages, even though Friedman remains the dark star of her story. Sachs first introduced shock therapy in Bolivia in the early 1990s. Then he went into Poland, Russia, etc, with the same shock therapy model. Sachs’ catchy phrase then was that “you can’t leap over an abyss step-by-step,” or words to that effect. This is really where contemporary neoliberalism took shape. And, it wasn’t just Sachs.

It was also other slightly left of center mainstream economists, most notably Summers and Paul Krugman as well. To his credit, Krugman has now recanted; Sachs also, but only partially. It’s true that you can make a case that this all goes back to Friedman. David Harvey’s book, A History of Neoliberalism, actually traces the origins of neoliberalism to Friedman in Chile. It’s an interesting perspective. But, as the left economist Robert Pollin remarks, to blame Friedman for the whole thing, and not how the entire economics mainstream went along–including the “liberals” like Sachs, Krugman, and Summers–is to let these people off the hook and to misrepresent history.

As Pollin, a brilliant and creative economist who spends much of his time advancing progressive counter-models–both for African nations and for advanced capitalist countries–emphasizes, “it’s important to pummel the Sachs’s of the world on this point, because they are changing, slowly. To get the world to change, their 1980s-1990s views need to be totally discredited. It’s not enough to just say Milton Friedman was an ultra right winger and leave it at that.”

There are huge third world economies that have been ravaged by neoliberalism that haven’t endured “the shock doctrine”, in the torments that phrase, as defined by Klein. India in the early Nineties was not on the receiving end of physical ’shock and awe’ bombardment. Tortures were not inflicted by electric shock devices or techniques of sensory deprivation. Death squads have not rampaged through the countryside. If Friedman counseled the Congress Party or the BJP this is not recorded by Klein, who only gives India one brief mention. Yet the neoliberal policies advanced by the World Bank and other multilateral agencies and also enthusiastically seized upon by home grown politicians and government officials–many springing from a Keynesian (or further left) tradition–have certainly been sweeping and savage in consequence. Month after month on our CounterPunch site P. Sainath has described the immiseration of half a billion peasants from circumstances that were bad in the first place, along with the suicides of ruined farmers–a total now running well above 100,000. India has no place in Naomi Klein’s model of the “shock doctrine” and “the rise of disaster capitalism”, which suggests that model’s limitations.

Capitalists try to use social and economic dislocation or natural disaster–New Orleans is only the latest instance – to advantage, but so do those they oppress. War has been the mother of many a positive social revolution, as have natural disasters. The incompetence of the Mexican police and emergency forces after the huge earthquake of 1985 prompted a huge popular upheaval. In Latin America there has been shock attacks and shock doctrines for 500 years. Right now, in Latin America, the pendulum is swinging away from the years of darkness, of the death squad and Friedman’s doctrines. Klein’s outrage is admirable. Her specific exposes across six decades of infamy are often excellent, but in her larger ambitions her metaphors betray her. From the anti-capitalist point of view she’s too gloomy by half. A capitalism that thrives best on the abnormal, on disasters, is by definition in decline. As Cassius put it, “The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings”.

Finanskris, kreditkris, dollarraset, olja, oljekrig, oilwars, USA, FED, nyliberalism, nyliberal, neoliberal, skojare, liberaler, kollapsen av nyliberalismen, militär keynesianism, Bush, Clinton, McCain, Förenta Staterna, George W Bush, liberal kris, den osynliga handen, konsument krediter, skuld, nationell skuld, räntenivå, recession, konjunktur,strukturell kris, national debt,handelsbalans utlandsskuld, nykeynesianism; internationell ekonomi, ekonomiskt läge, globalisering, internationella förhållande, amerikansk ekonomi, bankväsendet, finansmarknad, avreglering, pension, globala rånet, nyliberal skojeriet, neoliberalism, neocons, financial crisis, bank crisis, recesion, depresion, economics, voodoo economics, freakonomics, Federal reserve, neokeynesianism,interest rate, obligations, CDOs, state obligations, economic colapse, the dolar empire, monetary policy, national debt, state debt, credit crisis, credit card, mortgages structured investment vehicles , financial asset , credit crunch, Bank of England , financial panic , Individual Voluntary Agreement , toxic packages , sub-prime mortgages ,privatization, deregulation, foreign debt, dolar asssets, dollar collaps, the invisible hand, neocons, debt,mortage loans, mortage debt, consumer debt, bonds, trasure bonds,inflation, consument price index, producent price index, energy price, oil price, bonds price, stocks, stock, Wall Street, financial markets, militar speditures, structural crisis,trade balance, Globalisation, Globalization, globalism, Globalisering,  IMF, world bank, corporate bond equities markets, disarray; the banking system, collapsing, consumer spending, tax revenues, national debt black holes

 WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke and the Bush administration on Thursday defended the decision to rescue Bear Stearns amid questions by lawmakers about why the government was helping Wall Street investment houses but not people on Main Street.

Bernanke and Treasury Department Undersecretary Robert Steel said that the consequences to the U.S. economy and financial system would have been far more serious had the government allowed the nation’s fifth largest investment house to go bankrupt. “Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain,” Bernanke told the Senate Banking Committee.

The panel conducted a five-hour hearing as lawmakers sought to understand the decisions made during the hectic weekend of March 14-15 after Bear Stearns informed the Fed that it was on the verge of having to file for bankruptcy protection because nervous creditors were demanding to be repaid. The investment house was purchased by JP Morgan Chase & Co. with assistance from the Fed in the form of a loan backed by $30 billion of Bear Stearns assets.

JP Morgan has agreed to absorb the first $1 billion of losses if the value of the assets declines, but taxpayers are at risk for the remaining $29 billion. Bear Stearns, with a stock price around $150 per share a year ago, was sold for $10 a share, becoming the biggest victim of a severe credit crisis that hit financial markets in August. That crisis, which was triggered by a prolonged housing slump and cascading mortgage defaults, has made it harder for consumers and businesses to get loans and helped to push the country to the brink of a recession. Democrats on the Senate Banking Committee questioned why the Fed was willing to put such a large amount of money at risk to protect Wall Street while as many as 3 million homeowners are facing the risk of defaulting on their mortgages with the administration balking at greater efforts to help them.

 “Was this a justified rescue to prevent a systemic collapse of financial markets or a $30 billion taxpayer bailout for a Wall Street firm while people on Main Street struggle to pay their mortgages?” Senate Banking Committee Chairman Christopher Dodd asked Bernanke and the other witnesses. Bernanke said that government’s effort was not a bailout for Bear Stearns shareholders, who will suffer big losses, but an effort to protect the financial system and ultimately the entire economy, which could have faced severe consequences from a Bear Stearns bankruptcy. “The adverse impact of a default would not have been confined to the financial system but would have been felt broadly in the real economy through its effect on asset values and credit availability,” said Bernanke. On Wednesday, Bernanke had for the first time raised the possibility that the current economic troubles could push the country into a recession.

Steel said that Treasury Secretary Henry Paulson was actively monitoring four days of marathon negotiations that began after Bear Stearns notified the Fed on March 13 that it was one day away from having to file for bankruptcy protection. Steel said the administration supported the Fed’s decisions. Most of the questions on the deal centered on the value of the assets the Fed is now holding as collateral for the loan. Bernanke and Timothy Geithner, president of the Fed’s New York regional bank, said they believed $30 billion was a valid price for those assets and Bernanke said the central bank could end up making money on the deal as the assets are sold along with interest on the loan.

But some lawmakers questioned whether the Fed had done enough to properly value the Bear Stearns assets and wondered whether the entire episode had set a dangerous precedent for future risky behavior by other investment houses. “How big do you have to be to be too big to fail?” asked Sen. Jim Bunning, R-Ky. “Who let our entire financial system become so fragile that one failure jeopardizes the health of the entire system?” Also appearing before the committee were Alan Schwartz, the head of Bear Stearns, and Jamie Dimon, the head of JP Morgan, who described grueling marathon sessions over the weekend as executives searched for the best way out of the crisis.

Schwartz told the panel that Bear Stearns was brought down by “unfounded” market rumors that led to what was essentially a “run on the bank” as Bear Stearns creditors began demanding payment out of fears the company was about to collapse. “Facing the dire choice of bankruptcy or a forced sale under exigent circumstances, we salvaged what we could to avoid wiping out our shareholders, bondholders and 14,000 employees,” Schwartz told the panel. Dimon took issue with reports that the Fed had taken Bear Stearns’ riskiest securities as collateral for the $30 billion loan the central bank made to facilitate the sale, saying that JP Morgan did not “cherry pick” the assets it would keep on its books and that it was critical that the sale be arranged. “A Bear Stearns bankruptcy could well have touched off a chain reaction at other major financial institutions that would have shaken confidence in credit markets that already have been battered,” Dimon told the committee. Sen. Charles Schumer, D-N.Y., said entire episode pointed out the need to overhaul the government’s regulatory system.

On Monday, Treasury Secretary Henry Paulson put forward a plan that would scrap the current system of overlapping agencies for three super regulators, giving the Fed greater powers to monitor the safety of the entire financial system. Dodd said his panel would examine the need for an overhaul of financial regulations but that this exercise, because of its complexity, would have to wait until next year when a new administration is in place. 

Finanskris, kreditkris, dollarraset, olja, oljekrig, oilwars, USA, FED, nyliberalism, Liberalism, liberal, Dick Erixon, Johan Norberg, skojare, nyliberal, neoliberal, skojare, liberaler, kollapsen av nyliberalismen, militär keynesianism, Bush, Clinton, McCain, Förenta Staterna, George W Bush, liberal kris, den osynliga handen, institutionalismen , nykeynesianism; internationell ekonomi, ekonomiskt läge, globalisering, internationella förhållande, amerikansk ekonomi, bankväsendet, finansmarknad, avreglering, pension, globala rånet, nyliberal skojeriet; financial crisis, the end of the dollar, dollar collapse, colapso del dolar, EEUU, neoliberales, ladrones, la mano invisible, imperio del dolar, the american crisis, la crisis americana, the termino del neoliberalismo, invisble hand, osynliga handen, hustlers, el termino de los rateros neoliberales, mercado financiero, prestamos, vivienda, obligationes, bonds, ränta, interest, intereses, the empire.

Part I

 F. William Engdahl is a leading researcher, economist and analyst of the New World Order who’s written on issues of energy, politics and economics for over 30 years. He contributes regularly to publications like Japan’s Nihon Keizai Shimbun, Foresight magazine, Grant’s Investor.com, European Banker and Business Banker International. He’s also a frequent speaker at geopolitical, economic and energy related international conferences and is a distinguished Research Associate of the Centre for Research on Globalization where he’s a regular contributor.Engdahl wrote two important books.

This writer reviewed his latest one in three parts called “Seeds of Destruction: The Hidden Agenda of Genetic Manipulation.” It’s the diabolical story of how Washington and four Anglo-American agribusiness giants plan world domination by patenting animal and vegetable life forms. They aim to control food worldwide, make it all genetically engineered, and use it as a weapon to reward friends and punish enemies.  The book is a sequel to Engdahl’s first one and subject of this review – “A Century of War: Anglo-American Oil Politics and the New World Order.” It’s breathtaking in scope and content, and a shocking and essential history of geopolitics and strategic importance of oil. The book is reviewed in-depth so readers will know the type future Henry Kissinger had in mind in 1970 when he said: “Control oil and you control nations; control food and you control people.” Engdahl recounts the story in his two masterful books, both critically essential reading.  

The story line in his first one began late in the 19th century when oil’s advantage was first realized, and First Lord of the Admiralty Winston Churchill told Parliament in 1919: ”We must become the owners, or at any rate the controllers at the source, of at least a proportion of the supply (of oil) which we require….and obtain our oil supply, so far as possible, from sources under British control, or British influence.”After defeating Napoleon in 1815, Britain was supreme until America emerged predominant during WW II. Engdahl explains how: through two pillars and one commodity – unchallengeable military power and the dollar as the world’s reserve currency combined with the quest to control global oil and other energy resources.Engdahl calls his book “no ordinary history of oil” because what he recounts is suppressed in the mainstream and what passes for education in America. It settles for mediocrity, ignorance, and a barely literate public by design. As a result, people don’t know that US manipulators arranged “the greatest confidence game the world had ever seen” – a “special hegemony” to: — print limitless dollar paper certificates to buy every imaginable product;– accumulate endless trade deficits;– “inflate (the) currency beyond imagination;” — have the government pay interest on its own money; and — create an unprecedented public and private debt to enrich an elite few at the expense of the greater good. So far it’s worked because people haven’t caught on, other nations need our markets, fear our might, and countries like China, Japan and petrodollar recyclers remain lenders of last resort. Combined, it let America rule the world, control its energy, and crush all upstart competition. Washington had a good role model, and that’s where the story begins. 

The Three Pillars of the British EmpireGeopolitical history for the last 100 years was shaped around the quest for what Big Oil acolyte Daniel Yergin called “The Prize: The Epic Quest for Oil, Money and Power” with two countries at its epicenter – first Britain and now America with its UK junior partner that built its rule on three essential pillars:– controlling the seas and setting the terms of trade; — dominating world banking and manipulating the world’s largest gold supply; and– controlling world raw materials with oil the key one at the turn of the century; with these working, it devised an “informal empire” to loot world wealth and maintain a balance of power on the continent. Britain’s “genius” was being able to shift alliances without letting sentiment interfere with its interests. Post-Waterloo, it operated “on an extremely sophisticated marriage between top (London) bankers and financiers, government cabinet ministers,” key industrialists and espionage chiefs.

By keeping everything secret, it “wielded immense power over credulous and unsuspecting foreign economies.” By the late 19th century, however, things began to change, and a new strategy was needed. Key to it was oil geopolitics as a vital naval supremacy ingredient.The Lines are Drawn: Germany and the Geopolitics of the Great War The importance of oil and emergence of continental economies (especially in Germany) provided the backdrop to WW I. By the late 19th century, British bankers and political elites were alarmed that German industrial and technological development began surpassing its own that was in decline. Included was a modern German merchant and naval fleet and an ambitious railway project linking Berlin with Baghdad, then part of the Ottoman empire. At stake was British hegemony, and preserving it led to war. Prior to its outbreak, coal was king,

German output was impressive and so was its growth:– its steel production increased 1000% in 20 years, leaving Britain far behind by 1900;– its state-backed rail infrastructure doubled in track kilometers from 1870 to 1913;– with the advent of centralized electric power generation and long-distance transmission, its electrical industry exploded to dominate half the world’s trade by 1913;– impressive research built the country’s chemical industry and made Germany the world leader in analine dye production, pharmaceuticals and chemical fertilizers; — German agriculture thrived; it made “astonishing” gains from the introduction of “scientific agriculture chemistry” and produced an 80% grain harvest increase from 1887 to 1914; — population growth was dramatic – 75% to 67 million between 1870 and 1914; — Germany’s merchant fleet rocketed to second place in the world behind Britain and at a pace to overtake it;– steel and engineering advances were achieved; and consider another British concern: — early in the century, British Dreadnought battleship leadership was surpassed; Germany’s super model was superior and that spelled trouble for UK sea power supremacy; by 1910, “dramatic remedies” were needed; Germany’s economic emergence had to be confronted, its growing naval strength as well, and for the first time oil was a factor. A Global Fight for Control of Petroleum BeginsBy 1882, British Admiral Lord Fisher saw oil’s potential as qualitatively superior to coal. It required one-quarter the tonnage, one-third the engine weight, and expanded a fleet’s “radius of action” fourfold. It was first used in 1885 after Gottlieb Daimler developed the internal combustion engine. Another 20 years passed, however, before its importance was realized, and that created a problem. Britain had no oil and needed a supply. Up to then, its Middle East presence was limited, but that changed after oil was discovered in Masjed Soleiman, Persia (now Iran) in 1908. It secured Britain an “extraordinarily significant exclusive right (to potential) vast untapped petroleum deposits” for the country’s newly formed Anglo-Persian Oil Company (APOC).Earlier in 1899, German industrialists and bankers got Ottoman approval for a Berlin-Baghdad railway. The aim – to establish strong economic ties to Turkey and develop new markets in the East. Once extended to Kuwait, it would be the fastest, cheapest rail link to the Indian subcontinent, and that spelled trouble for Britain. It would challenge UK supremacy and had to be confronted. 

The project was costly and needed help to complete, so Germany turned to Britain. London, for its part however, used “every device known to delay and obstruct progress. The game lasted” until war began in 1914 and after Britain secured an exclusive oil development “lease in perpetuity” in what today is Iraq and Kuwait. Yet competition remained because Germany got the Ottoman emperor to grant its Baghdad Railway Company full rights to all oil and minerals on a parallel 20 kilometers of land on either side of the rail line. By 1912, oil’s importance was apparent, and geologists discovered it between Mosul and Baghdad.WW I stalled efforts for a German-owned oil company, independent of Rockefeller interests. At a time, the US produced over 63% of world supply, Russia’s Baku 19% and Mexico 5%. Britain’s new APOC was barely a player when First Lord of the Admiralty Winston Churchill convinced the government to buy a majority interest in what today is British Petroleum (BP). “From that point, oil was at the core of British strategic interests,” and the game was this – secure its own supplies, deny them to key rivals like Germany, and do it if necessary by war. That became London’s scheme early in the century when Britain, France and Russia allied in a Triple Entente against Germany and the Austro-Hungarian powers. By 1907, it was solidified, effectively encircled Germany, and it laid the foundation for the coming showdown with Kaiser Wilhelm II. From then until 1914, preparations were made for the “final elimination of the German threat.” Included was a “series of continuous crises and regional (Balkans) wars (in) the ’soft underbelly’ of Central Europe.” Three months after the alliance, Austria’s heir to the throne was assassinated in Sarajavo, and it “detonated the Great War.” Oil Becomes the Weapon, the Near East the BattlegroundWW I was no different from other wars.

Imperial, territorial and economic rivalries were at its root. It lasted from July 28, 1914 to November 11, 1918 and at a time Britain was effectively bankrupt, had big plans along with other combatants, plus a “secret weapon” that later emerged: the special relationship of “His Majesty’s Treasury” with The House of Morgan.  The conflict matched the Allied powers of Britain, France, Russia, Belgium, Serbia, Greece, Romania, Montenegro, Italy, Portugal, Japan and for its last seven months the US against the Central Powers of Germany, Austria-Hungary, Bulgaria and Ottoman Turkey. The timeline was as follows: — on June 28, Archduke Ferdinand and his wife were assassinated;– on July 28, Austria declared war on Serbia;– on August 1, Germany declared war on Russia;– on August 3, Germany declared war on France and invaded Belgium on August 4; and– on August 4, Britain declared war on Germany, and the world was at war. Four years later, its toll was horrific, and four empires were destroyed – Ottoman Turkey, Austria-Hungary, Germany and Russia. Later on, so would Britain’s, but in 1914 schemes and intrigue drove the winners to reallocate the spoils, especially where it was thought large oil deposits lay.Well before 1914, Britain’s geostrategy was threefold: — create and preserve an unchallengeable global empire; — defeat its main rival Germany; and — secure and control the most strategically important resource – oil that was crucial to winning the war. At its end, Britain’s Foreign Secretary Lord Curzon commented: “The Allies were carried to victory on a flood of oil.” Germany ran short and lost because it couldn’t mount a decisive offensive in 1918. In 1915, however, Britain gambled and lost. It failed to defeat Turkey in the Battle of Gallipoli, and the stakes involved were high – to secure Russia’s rich Baku oil fields at a time they supplied almost a fifth of world production. It was early in the war, Britain ultimately prevailed, and in no small measure by preemptively occupying Baku in August, 1918 to deny Germany its vital resources. 

Throughout the war, oil’s importance was key and the reason for the Allies’ secret 1916 Sykes-Picot agreement. It spelled “betrayal and Britain’s intent to….control….the undeveloped petroleum reserves of the Arabian Gulf after the war.” Britain was devious. While France and Germany clashed along the Western Front, London moved 1.4 million troops to the Gulf and eastern Mediterranean on the pretext of bolstering Russia. After 1918, a million forces remained on what became a “British Lake” by 1919 with access to the region’s oil. Its potential was later learned, France was cheated out of its share, Saudi Arabia’s value was unknown, and turned out to be a major British blunder that didn’t elude America in the 1930s. Partitioning the Ottoman Empire proceeded post-war and included an “extraordinary new element.” Now known as the Balfour Declaration, it was a classified British policy statement supporting a Jewish homeland in Palestine at a time Jews comprised 1% of the population.

It came on November 2, 1917, a year of conflict remained, and it was the basis for the post-1919 British mandate over Palestine that gave London “strategic possibilities of enormous importance.” British elites and its principal think tank (the Royal Institute for International Affairs or Chatham House) supported a “Jewish-dominated Palestine, beholden to England for its survival (and) surrounded by a balkanized group of squabbling Arab states.”  The scheme was to link England’s colonial possessions from South Africa’s gold and diamond mines, north to Egypt and the Suez canal, through Mesopotamia (Iraq and Kuwait), Persia (Iran) and East into India and what today is Pakistan and Bangladesh. Controlling this territory became crucial. It meant dominating the world’s most strategically valuable resources before their vast potential was realized. Combined and Conflicting Goals: The United States Rivals BritainBritain was the world’s major post-WW I power, its territorial winner, and borrowed Wall Street money secured the victory, but with a problem. The country was deeply in debt, mired in depression, and the US now loomed as the world’s economic power. In the 1920s, a rivalry ensued pitting America against Britain’s three imperial pillars: control of world sea lanes, its banking and finance, and its strategic raw materials. At stake was whether London or Washington would be the world’s new capital, with no assured winner at the time. Later, it was very clear that WW II’s seeds were planted in a place called Versailles and a 1919 treaty in its name.Its terms were outrageous and onerous. They made unimaginable demands, and therein lay the problem.

In May 1921, Germany got an ultimatum with six days to accept or the industrial Ruhr Valley would be militarily occupied. Even worse, the country lost its colonial possessions and all their raw material resources. In the end, all combatants were losers. Their combined debt overwhelmed world finance and monetary policy from 1919 to the 1929 Wall Street crash. The entire pyramid was built on punitive war debts with Morgan and other major New York banks uncompromising on the terms. They was so burdensome that yearly payments exceeded America’s annual 1920s foreign trade. In addition, paying it took precedence over rebuilding and modernizing war-torn European economies. At the same time, oil’s importance grew as Britain exploited the spoils at France and America’s expense. In March 1921, Winston Churchill was UK secretary of state for colonial affairs, the British Colonial Office Middle East Department was established, and Mesopotamia was renamed Iraq and became a British colony. Anglo-Persian Oil officials got administrative control, American companies gained no British Middle East concessions, and a fierce battle raged over the region’s oil throughout the 1920s.

Then it moved to Latin America. In the 19th century, US Senator Henry Cabot Lodge stated “commerce follows the flag” and by it meant economic progress requires expansion. In 1912, it got Mexico targeted after oil was discovered in Tampico in 1910. Woodrow Wilson sent in troops to seize control from Britain and the UK-connected Mexican Eagle Oil Company that had concessions for half the country’s oil at the time. As war in Europe loomed, Britain backed off, and America secured Tampico’s enormous potential.Britain, nonetheless, pressed on, and by the early 1920s controlled “a formidable arsenal of apparently private companies” that, in fact, let His Majesty’s government “dominate and ultimately control all” major world oil-containing regions. Four companies were empowered that were also an “integral part of British secret intelligence activities:” – Royal Dutch Shell that rivaled Rockefeller’s Standard Oil, even in America through California Oil Fields and Oklahoma-based Roxana Petroleum;– the Anglo-Persian Oil Company that became the Anglo-Iranian Oil Company and is now British Petroleum;– the little-known d’Arcy Exploitation Company; it was tied to the Foreign Office and British intelligence, and its agents showed up wherever there was oil development potential; and– the nominally Canadian company called British Controlled Oilfields (BCO); it was secretly government- owned as were Shell and the others.In 1912, British companies controlled about 12% of world oil production. By 1925, it was most of it, America noticed, but in 1922, London and Washington united against a common threat and called a truce to their post-Versailles conflict. 

The Anglo-Americans Close RanksIn April 1922, Germany and Russia stunned the West by their bilateral Rapello Treaty. Under it, Russia waived its war reparations claims in return for Germany’s industrial technology. The news shocked the continent, especially as it emerged from a British-organized Genoa meeting with other strategic aims in mind.While secretly financing an anti-Soviet counterrevolution, London approached Russia regarding Baku’s oil fields, hoping to arrange lucrative deals for Royal Dutch Shell and other UK oil companies. Rockefeller’s Standard Oil also eyed them, but was disadvantaged by Britain’s favored position and its own unsavory reputation. Yet it proceeded through Harry Sinclair of Sinclair Petroleum as a perceived independent middleman with no Rockefeller taint. Moscow was interested because Sinclair had ties to President Harding, and a deal meant US diplomatic recognition and an end to Russia’s international isolation post-1917. Sinclair agreed, Harding approved, but events then intervened.It was scandal in Wyoming in a place called Teapot Dome. It involved political influence and the awarding of no-bid oil leases to Sinclair Oil (then called Mammoth Oil) and a whole lot more with illegal payoffs and no-interest loans as part of the deal. Harding, though not directly involved, was implicated, a year later he was dead (“under strange circumstances”), Coolidge became President, dropped the Baku project, and ended plans to recognize Russia. At the time, it was thought British intelligence was involved, blocked the bid to give UK oil companies an edge, but Germany’s deal with Russia intervened. It was Germany’s second option at a time its onerous debt made dealing with Britain preferable. Efforts failed because London was hard-line, stuck to its punitive repayment process, and imposed stiff tariffs to make things worse with Germany already on its knees. The looting ruined the country’s economy and forced the Reichsbank to print enormous amounts of money to survive. Inevitable inflation followed and by 1923 was catastrophic. In January, the mark dropped to 18,000 to the dollar. By July, it was at 353,000, by August 4,620,000, and by November an astonishing 4,200,000,000,000.

It was effectively worthless in the greatest ever (before or since) inflation that destroyed the country’s savings and made further calamitous events inevitable. The misery was compounded when Germany lost its assets. Britain took its colonies, and also seized was Alsace-Lorraine and Silesia with its rich mineral and agricultural resources. Gone was 75% of the country’s iron ore, 68% of zinc ore, 26% of coal as well as Alsatian textile industries and potash mines. In addition, Germany’s entire merchant fleet was taken, a portion of its transport and fishing fleet plus locomotives, railroad cars and trucks – all justified as war debts that were fixed at an impossible to pay 132 billion gold marks at 6% annual interest, and with it an ultimatum. Agree in six days or Allied troops would occupy the Ruhr. Unsurprisingly, the Reichstag approved. It made dealing with Russia essential as Germany sought practical ways to survive. It proved impossible, France objected to a minor treaty obligation and occupied the Ruhr anyway. In the meantime, inflation soared, German industrial activity was erased, Reichsbank and other German bank assets were seized, and the currency became worthless. In 1923, a so-called Dawes Plan (named for US banker Charles Dawes) was adopted. It was the Anglo-American banking community’s way to reassert fiscal control over Germany, assure reparations were paid, and continue the state-sponsored looting. It continued until 1929 when the debt pyramid collapsed, an ensuing banking crisis followed, capital flowed out of the country, its economy crashed, the world headed into depression, and radical political elements gained prominence. Reichbank president, Hjalmar Schacht, was a key figure. He resigned his post to organize financial support for the man he and Bank of England governor Montagu Norman wanted as chancellor. From 1926, Schacht secretly backed the radical National Socialist German workers party, the NSDAP Nazis.

Britain also favored the “Hitler Project,” support for it went right to the top and included figures like Prime Minister Chamberlain and the Prince of Wales (later King Edward VIII in 1936 until he abdication later in the year). Throughout the period, Wall Street and Washington were comfortable with the Nazis, and a key government official met Hitler in 1922. He came away saying he “was deeply impressed by his personality and thought it likely he would play an important part in German politics.” By this time, the Anglo-American power struggle was resolved. So, too, the oil wars with the creation of an “enormously powerful Anglo-American oil cartel,” later called the “Seven Sisters.” British and American companies struck a deal. They ended competition, kept existing market shares, and secretly set prices with governments of both countries arranging a Red Line agreement. From then to now, Big Oil ruled the energy world and devised how to deal with “outsiders.” Later, the consequences from Baron Kurt von Schroeder’s January 4, 1932 meeting would have to be faced after he, Heinrich von Papen and Hitler secretly arranged a Nazi takeover. A year later, another meeting followed preparatory to acting. The Weimar government was weak, the scheme was to topple it, and it made Hitler Reichschancellor on January 30, 1933. On August 2, 1934 he seized absolute power as Fuhrer. British interests backed him, Royal Dutch Shell financed him, and the Bank of England “moved with indecent haste to reward” him with a vital line of credit. The rest, as they say, is history, and from it would emerge a new world order. Oil and the New World Order of Bretton WoodsIn 1945, the world had changed. Post-WW I, Britain was preeminent with an empire spanning one-fourth the globe. Thirty years later, it was disintegrating and “in the throes of the largest upheaval of perhaps any empire in history” (although it happened most prominently to Rome, but it took longer). It wasn’t from “beneficence” or a matter of principle.

It was unavoidable because the war took its toll. It shattered Britain’s financial power, its industry was decaying, its housing stock was dilapidated, and its people exhausted. Britain was “utterly dependent on America,” so the baton passed to the only major power left standing in a ravaged post-war world. A “special relationship” between them emerged post-Versailles. Britain led it then, it hoped post-1945 to continue indirectly, and a new element was added – the post-war CIA that worked with Britain in the war as the OSS (Office of Strategic Services). The relationship continued as the two countries have mutual interests and jointly share intelligence, except that Britain now is junior in a US-dominated world.Post-war, Anglo-American oil interests had enormous power. It was assured by the 1944 Bretton Woods system that was built around three dominant pillars – the IMF, World Bank and managed “free trade” from GATT. Clauses were built into each to ensure Anglo and especially American dominance over monetary and trade issues. Both countries have voting control, and the arrangement created a “gold exchange system.” Under it, each member country’s currency was pegged to the dollar that, in turn, was set at a fixed $35 an ounce gold price. It suited Big Oil fine as America by then had the bulk of world gold reserves. They also benefitted from the Marshall Plan as more than 10% of it went for American oil, and five US companies supplied over half of western Europe’s supply at a dear price (that was pennies on the dollar compared to today). They profited enormously, nonetheless, as oil became the key commodity fueling world growth that without which would halt. Partnered with Big Oil and its trade were Wall Street and New York international banks. They profited hugely from its capital inflows, and it ensured their advantage that was built into the Bretton Woods system. They also had cartel power by having consolidated to hold disproportionate control over world finance. 

Britain, as well, had its post-war priorities in the wake of its lost empire. Its leadership regrouped around the power and profits of oil and other strategic raw materials with US help. It made Iran a target, Britain humiliated its nationalist elements, occupied the country, and demanded concessions for its government-linked Royal Dutch Shell. Finally in December, 1944, nationalist leader Mohammed Mossadegh introduced a bill to bar foreign country oil negotiations. A bitter fight ensued, by 1948 foreign troops were withdrawn, but the country remained under UK control through its Anglo-Iranian Oil Company at a time Iran’s southern region had the world’s richest known reserves. In late 1947, the Iranian government demanded an increase in its oil revenue share (meager at the time) and cited Venezuela where Standard Oil had a 50 – 50 arrangement. London wasn’t pleased, talks dragged on, and the strategy was to stall and delay. In late 1949, Mossadegh headed a parliamentary commission, a 50 – 50 split was demanded, Britain refused, and by 1951 Mossadegh was Prime Minister.

Around the same time, Iran’s parliament nationalized the Anglo-Iranian Oil Company and paid fair compensation for it. Britain, nonetheless, was outraged and reacted.Full economic sanctions and an oil embargo followed. In addition, Iranian assets in British banks were frozen, and major Anglo-American oil companies supported London. Iran’s economy was devastated. Its oil revenues plummeted from $400 million in 1950 to less than $2 million from July 1951 to August 1953 when Mossadegh was ousted by a CIA-British SIS coup. Shah Reza Pahlevi returned to power, sanctions were lifted, and America and Britain regained their client state until 1979 when the same Anglo-American interests turned on the Shah and deposed him. More on that below. An Italian company defied the sanctions at the time – Azienda Generale Italiana Petroli (AGIP). Its founder and head was Enrico Mattei, a man to be reckoned with. He sought indigenous energy resources for Italy that Anglo-American oil interests wouldn’t co-opt. It was no simple task, yet he got a new law passed that established a central semi-autonomous state energy company called Ente Nazionale Idrocarburi (ENI). AGIP became a subsidiary. As its leader in 1957, he negotiated an unprecedented deal with Iran – 75% of profits to the National Iranian Oil Company and 25% to ENI.

Washington, London and Big Oil weren’t pleased. If unchecked, this type arrangement would upset their entire world oil order benefitting them at the expense of host countries. Mattei had to be stopped, and the US and Britain pressured the Shah to opt out – to no avail.Mattei became a major irritant. He challenged Big Oil with low gasoline prices. He also offered deals with former colonies on more favorable terms than the majors, including the prospect of local refineries so supplier countries could be more than just raw material sources. Finally, in October 1960 he went too far and enraged Washington and London. He negotiated a deal with Moscow they opposed. In 1958, he contracted to buy one million annual tons of Soviet crude. He then signed an exchange agreement for 2.4 million tons for five years but not to be paid in cash. Instead it would be in large-diameter oil pipe that Russia badly needed to construct a huge pipeline network bringing Volga-Urals oil to Czechoslovakia, Poland and Hungary – 15 million tons annually when completed. The deal helped both sides with Mattei getting Russian oil at below market price and the Soviets getting a pipe works plant completed for them in September, 1962.  A month later, Mattei was dead. His private plane crashed on takeoff killing him and two others on board. To this day, deliberate sabotage was suspected, and why not. Mattei was at the peak of his powers, he’d already signed deals with Iran, Russia, Morocco, Sudan, Tanzania, Ghana, India and Argentina and upset the established order. He also planned to meet President Kennedy who, at the time, was pressing Big Oil to reach accommodation with him.

A year later, Kennedy was also dead, and the finger pointed to “US intelligence, through a complex web of organized crime cutouts.” A Sterling Crisis and the Adenauer-De Gaulle ThreatIn 1957, western European countries headed by France, West Germany and Italy signed the Treaty of Rome. It established the European Economic Community (EEC) that came into force on January 1, 1959. Germany was recovering from the war, and Charles De Gaulle regained power in France with vigorous restructuring plans – to rebuild the country’s infrastructure, expand its devastated industrial and agricultural economy, and restore fiscal stability. It was already under way in continental Europe, the result of unprecedented EEC trade-driven growth. De Gaulle and Germany’s Konrad Adenauer led the effort with the French President exerting a strong independent voice. The two leaders bonded, and the Treaty Between and French Republic and Federal Republic of Germany was concluded on January 22, 1963. It assured close cooperation and coordination of economic and industrial policy. Washington and London were alarmed at the prospect of an independent alliance that included Italy under Aldo Moro. An Anglo-American alliance was hatched to counter it. It targeted Europe and took the form of pushing the EEC to open to US imports and be firmly part of a Washington-London-dominated NATO. Britain also demanded inclusion in the six nation Common Market. De Gaulle strongly opposed it, but was denied when Atlanticist Ludwig Erhard became Germany’s Chancellor in April 1963. He favored admitting Britain and agreed to support London’s 19th century “balance of power” strategy against continental Europe. Though formally ratified, the Franco-German accord was lifeless, and the culmination of Adenauer’s work was lost – stolen by the America and Britain at the last moment. Washington supported the EEC but not as an independent alliance. It might have become that in 1957 at a time recession hit America and lasted into the 1960s. It led to debate in the US with the New York Council of Foreign Relations and Rockefeller Brothers Fund drafting options at a time Henry Kissinger emerged. It was also when Big Oil and New York banks (the East Coast establishment) were dominant and viewed the world as their market. They also controlled the media and used it to promote their interests over what was best for the nation and greater good. Rebuilding US infrastructure, investing in modern factories, improving the national economy and developing a skilled labor force were ignored. Instead, investment flowed abroad for greater returns.  

Cheating on quality also became fashionable, and productive pride lost out to bottom line priorities to please Wall Street.It came with a cost, however, and part of it was the state’s financial health. As dollars flowed abroad, US gold reserves plunged enough to threaten the Bretton Woods system. The problem was a “fatal flaw” in its design. Its rules established a “gold exchange standard” requiring IMF countries to fix the value of their currencies to the US dollar and indirectly to gold at $35 an ounce. By the 1960s, European growth outpaced the US, and domestic investment sought to take advantage of double the returns it could get domestically. It was the beginning of the Eurodollar market, and the start of a decade of “ever worsening international monetary crises.” By the late 1970s, it became a cancer that “threatened to destroy its entire host – the world monetary system.” It also influenced the Johnson administration to believe that a full-scale southeast Asian conflict could stimulate a stagnant economy and show the world who was still boss.In the 1960s, New York bankers, Big Oil and the defense establishment advocated war and a homeland garrison state to boost profits, but consider the strategy. DOD Secretary Robert McNamara and Pentagon planners obliged. They designed a protracted “no-win war from the outset” to rev up spending and secure the defense component of the economy. Deficits resulted, the dollar inflated, and Washington forced its trading partners to accept war costs in the form of cheapened greenbacks. It led to European central banks accumulating large Eurodollars reserves they then earned interest on from US treasuries.

The net effect was continental bankers funded US deficits the way they do now, along with China and Japan. Engdahl quoted futurist Herman Kahn saying: “We’ve pulled off the biggest ripoff in history (running) rings around the British empire.” Nonetheless, London planned a comeback with “expatriate American dollars.” More on that below. Lyndon Johnson waged war on two fronts, and failed at both. Vietnam cost him his presidency while his War on Poverty and Great Society barely made a difference but amassed huge European-financed deficits. At the same time, industrial and scientific investment declined, financial speculation grew, a service-oriented economy was favored, and America headed down the same “road to ruin” Britain followed earlier. Few understood that Johnson’s domestic policy had little to do with alleviating poverty. It was a corporate scheme to exploit economic decay, curb wage growth and back a 19th century colonial-style looting. Inciting “race war” was part of the plan. Engdahl described it as a domestic Vietnam pitting blacks against whites, unemployed against employed, and high wage earners against lower paid ones in a “new Great Society, while Wall Street bankers benefited from slashed union wages and cuts in infrastructure investment.” They, in turn, recycled their profits into cheap Asian and South American labor markets for still greater profits. It’s the same scheme writ large today. By 1967, trouble was evident.

The Bretton Woods system was threatened as US external debt soared and the nation’s gold reserves plummeted to one-third their liability. At the same time, Britain’s economy was “a rotting mess and getting worse.” Faith in the pound sterling was eroding because the UK, like America, neglected its industrial base, amassed large trade deficits, and was a net currency exporter. Something had to give, and it was the pound. At this time, De Gaulle withdrew from the gold pool, and “the entire Bretton Woods edifice (shook) at its weakest link, the pound sterling.” The crisis highlighted the core vulnerability of the international monetary system, the US dollar. Things came to a head on November 18, 1967. Britain devalued the pound by 14% for the first time since 1949. It abated the sterling crisis, but the dollar one was just beginning as international holders of the currency demanded gold in exchange. Crisis built in 1968, and Business Week magazine devoted an astonishing nine articles and feature editorial to it in its March 23 issue headlined “Gold crisis jolts the West” on its front cover. A publisher’s memo also addressed it and quoted Virgil’s Aeneid, Book III: “Oh cursed lust for gold, to what dost thou not drive the hearts of men!” It affected Charles De Gaulle as well. His independence made him a target for removal that succeeded. It got him voted out of office a year later. For Washington and London, however, it was a Pyrrhic victory. 

 “A Century of War” will continue in Part II of this review to complete the story to the present era under George Bush. F. William Engdahl is the author of A Century of War: Anglo-American Oil Politics and the New World Order (Pluto Press) and Seeds of Destruction: The Hidden Agenda of Genetic Manipulation 

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