Movable Green Zone

excerpted from the book

The Shock Doctrine

The Rise of Disaster Capitalism

by Naomi Klein

Picador, 2007, paperback

Richard Cohen, a Washington Post columnist on his support for the invasion of Iraq

In a post-Sept. 11 world, I thought the prudent use of violence could be therapeutic.

Henry Kissinger to Argentina's military junta, 1976

If there are things that have to be done, you should do them quickly.

Washington's game plan for Iraq: shock and terrorize the entire- country, deliberately ruin its infrastructure, do nothing while its culture and history are ransacked, then make it all okay with an unlimited supply of cheap household appliances and imported junk food.

Condoleezza Rice, September 2002, on the need to invade Iraq

The world is a messy place, and someone has to clean it up.

Harry Belafonte, American musician and civil rights activist, September 2005

Katrina was not unforeseeable.. It was the result of a political structure that subcontracts its responsibility to private contractors and abdicates its responsibility altogether.

An economic indicator called "the guns-to-caviar index ... tracks the sales of fighter jets (guns) and executive jets (caviar). For seventeen years, it consistently found that when fighter jets were selling briskly, sales of luxury executive jets went down and vice versa: when executive jet sales were on the rise, fighter jet sales dipped. Of course, a handful of war profiteers always managed to get rich from selling guns, but they were economically insignificant. It was a truism of the contemporary market that you couldn't have booming economic growth in the midst of violence and instability.

But that truism is no longer true. Since 2003, the year of the Iraq invasion, the index found that spending has been going up on both fighter jets and executive jets rapidly and simultaneously, which means that the world is becoming less peaceful while accumulating significantly more profit. The galloping economic growth in China and India played a part in the increased demand for luxury items, but so did the expansion of the narrow military-industrial complex into the sprawling disaster capitalism complex. Today, global instability does not just benefit a small group of arms dealers; it generates huge profits for the high-tech security sector, for heavy construction, for private health care companies treating wounded soldiers, for the oil and gas sectors-and of course for defense contractors.

The scale of the revenues at stake is certainly enough to fuel an economic boom. Lockheed Martin, whose former vice president chaired the committee loudly agitating for war in Iraq, received $25 billion of U.S. taxpayer dollars in 2005 alone.

... Lockheed itself was an "emerging market." Companies like Lockheed (whose stock price tripled between 2000 and 2005) are a large part of the reason why the U.S. stock markets were saved from a prolonged crash following September 11. While conventional stock prices have underperformed, the Spade Defense Index, "a benchmark for defense, homeland security and aerospace stocks," went up every year from 2001 to 2006 by an average of 15 percent - seven and a half times the Standard & Poor's 500 average increase in that same period.

The only prospect that threatens the booming disaster economy on which so much wealth depends - from weapons to oil to engineering to surveillance to patented drugs - is the possibility of achieving some measure of climatic stability and geopolitical peace.

For much of the past decade, Israel has been experiencing its own miniaturized Davos Dilemma: wars and terrorist attacks have been increasing, but the Tel Aviv Stock Exchange has been rising to record levels right alongside this violence. As one stock analyst noted on Fox News after the July 7 London bombings, "In Israel they deal with the threat of terror daily, and that market is up for the year."° Like the global economy in general, Israel's political situation is, most agree, disastrous, but its economy has never been stronger, with 2007 growth rates rivaling those of China and India.

What makes Israel interesting as a guns-and-caviar model is not only that its economy is resilient in the face of major political shocks such as the 2006 war with Lebanon or Hamas's 2007 takeover of Gaza, but also that Israel has crafted an economy that expands markedly in direct response to escalating violence. The reasons for Israeli industry's comfort level with disaster are not mysterious. Years before U.S. and European companies grasped the potential of the global security boom, Israeli technology firms were busily pioneering the homeland security industry, and they continue to dominate the sector today. The Israeli Export Institute estimates that Israel has 350 corporations dedicated to selling homeland security products, and 30 new ones entered the market in 2007. From a corporate perspective, this development has made Israel a model to be emulated in the post-9/11 market.

Over the course of the 1990s, roughly 1 million Jews left the former Soviet Union and moved to Israel. Immigrants who came from the former Soviet Union in this period now make up more than 18 percent of Israel's total Jewish population.

Before the arrival of the Soviet refugees. Israel could not have severed itself for any length of time from the Palestinian populations in Gaza and the West Bank; its economy could no more survive without Palestinian labor than California could run without Mexicans. Roughly 150,000 Palestinians left their homes in Gaza and the West Bank every day and traveled to Israel to clean streets and build roads, while Palestinian farmers and tradespeople filled trucks with goods and sold them in Israel and in other parts of the territories. Each side depended on the other economically, and Israel took aggressive measures to prevent the Palestinian territories from developing autonomous trade relationships with Arab states.

Then, just as Oslo came into effect, that deeply interdependent relationship was abruptly severed. Unlike Palestinian workers, whose presence in Israel challenged the Zionist project by making demands on the Israeli state for restitution of stolen land and for equal citizenship rights, the hundreds of thousands of Russians who came to Israel at this juncture had the opposite effect. They bolstered Zionist goals by markedly increasing the ratio of Jews to Arabs, while simultaneously providing a new pool of cheap labor. Suddenly, Tel Aviv had the power to launch a new era in Palestinian relations. On March 30, 1993, Israel began its policy of "closure," sealing off the border between Israel and the occupied territories, often for days or weeks at a time, preventing Palestinians from getting to their jobs and selling their goods. Closure began as a temporary measure, ostensibly as an emergency response to the threat of terrorism. It quickly became the new status quo, with territories sealed off not just from Israel but from each other, policed through an ever more elaborate and demeaning system of checkpoints.


... Many residents of the former Soviet Union who arrived in Israel penniless after seeing their life savings disappear in the shock therapy devaluations were easily lured into the occupied territories, where houses and apartments were far cheaper, and special loans and bonuses were on offer. Some of the most ambitious settlements - such as Arid in the West Bank, which boasts a university, a hotel and a Texas mini golf course-aggressively recruited in the former Soviet Union, sending scouts and launching Russian-language Web sites. Arid managed to double its population thanks to this approach, and today it stands as a kind of mini-Moscow, with store signs advertising in both Hebrew and Russian.

In the mid- and late nineties, Israeli companies took the global economy by storm, particularly high-tech firms specializing in telecommunications and Web technology, with Tel Aviv and Haifa becoming Middle Eastern outposts of Silicon Valley. At the peak of the dot-com bubble, 15 percent of Israel's gross domestic product came from high tech and about half its exports.

Among the hundreds of thousands of Soviets who came to Israel in the nineties were more highly trained scientists than Israel's top tech institute had graduated in the eighty years of its existence. These were many of the scientists who had kept up the Soviet side of the Cold War-and as one Israeli economist put it, they became "the rocket fuel for [Israel's] tech industry."

The biggest obstacle was [border] closure, a policy that was never once lifted in the fourteen years since it was first imposed in 1993. According to the Harvard Middle East specialist Sara Roy, when the borders were abruptly sealed in 1993, the effects on Palestinian economic life were catastrophic.

... Workers couldn't work, traders couldn't sell their goods, farmers couldn't reach their fields. In 1993 per capita GNP in the occupied territories plummeted close to 30 percent; by the following year, poverty among Palestinians was up 33 percent. By 1996, says Roy, who has extensively documented the economic impact of closure, "66 per cent of the Palestinian labor force was either unemployed or severely under-employed." Far from a "peace of markets," what Oslo meant for Palestinians was disappearing markets, less work, less freedom-and crucially, as the settlements expanded, less land.

Shlomo Ben-Ami, 2006, a lead negotiator for the Israeli government at both Camp David and Taba

Camp David was not the missed opportunity for the Palestinians, and if! were Palestinian I would have rejected Camp David, as well.

When Israel's niche in the global economy turned out to be information technologies, it meant that the key to growth was sending software and computer chips to Los Angeles and London, not shipping heavy cargo to Beirut and Damascus. Success in the tech sector did not require Israel to have friendly relationships with its Arab neighbors or to end its occupation of the territories. The rise of the tech economy was only the first phase of Israel's fateful economic transformation, however. The second came after the dot-corn economy crashed in 2000, and Israel's leading companies needed to find a new niche in the global market.

With the most tech-dependent economy in the world, Israel was hit harder by the dot-corn crash than anywhere else. The country went into immediate free fall, and by June 2001, analysts were predicting that roughly three hundred high-tech Israeli firms would go bankrupt with tens of thousands of layoffs.

... The government also encouraged the tech industry to branch out from information and communication technologies and into security and surveillance. In this period, the Israeli Defence Forces played a role similar to a business incubator. Young Israeli soldiers experimented with network systems and surveillance devices while they fulfilled their mandatory military service, then turned their findings into business plans when they returned to civilian life. A slew of new start-ups were launched, specializing in everything from "search and nail" data mining, to surveillance cameras, to terrorist profiling. 25 When the market for these services and devices exploded in the years after September 11, the Israeli state openly embraced a new national economic vision: the growth provided by the dot-com bubble would be replaced with a homeland security boom. It was the perfect marriage of the Likud Party's hawkishness and its radical embrace of Chicago School economics, as embodied by Sharon's finance minister, Benjamin Netanyahu, and Israel's new central bank chief, Stanley Fischer, chief architect of the IMF's shock therapy adventures in Russia and Asia.

By 2003, Israel was already making a stunning recovery, and by 2004 the country had seemed to pull off a miracle: after its calamitous crash, it was performing better than almost any Western economy. Much of this growth was due to Israel's savvy positioning of itself as a kind of shopping mall for homeland security technologies. The timing was perfect. Governments around the world were suddenly desperate for terrorist hunting tools, as well as for human intelligence know-how in the Arab world. Under the leadership of the Likud Party, the Israeli state billed itself as a showroom for the cutting-edge homeland security state, drawing on its decades of experience and expertise fighting Arab and Muslim threats. Israel's pitch to North America and Europe was straightforward: the War on Terror you are just embarking on is one we have been fighting since our birth. Let our high-tech firms and privatized spy companies show you how it's done.

Overnight, Israel became, in the words of Forbes magazine, "the go-to country for antiterrorism technologies.

Israel's exports in counterterrorism-related products and services increased by 15 percent in 2006 and were projected to grow by 20 percent in 2007, totalling $1.2 billion annually. The country's defense exports in 2006 reached a record $3.4 billion (compared to $1.6 billion in 1992), making Israel the fourth largest arms dealer in the world, larger than the U.K. Israel has more technology stocks listed on the Nasdaq exchange-many of them security related-than any other foreign country, and it has more tech patents registered in the U.S. than China and India combined. Its technology sector, much of it linked to security, now makes up 60 percent of all exports .

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

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

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

The Israeli business sector's shift in political direction has been dramatic. The vision that captivates the Tel Aviv Stock Exchange today is no longer that of Israel as a regional trade hub but rather as a futuristic fortress, able to survive even in a sea of determined enemies.

This recipe for endless worldwide war is the same one that the Bush administration offered as a business prospectus to the nascent disaster capitalism complex after September 11. It is not a war that can be won by any country, but winning is not the point. The point is to create "security" inside fortress states bolstered by endless low-level conflict outside their walls.

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

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

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

Democratic Senatorial candidate Jim Webb, 2006

[America has drifted] toward a class-based system, the likes of which we have not seen since the 19th century.

United Nations study, 2006

The richest 2 percent of adults in the world own more than 50% of global household wealth.

Democratic socialism, meaning not only socialist parties brought to power through elections but also democratically run workplaces and land holdings, has worked in many regions, from Scandinavia to the thriving and historic cooperative economy in Italy's Emilia-Romagna region. It was a version of this combination of democracy and socialism that Allende was attempting to bring to Chile between 1970 and 1973. Gorbachev had a similar, though less radical, vision to turn the Soviet Union into a "socialist beacon" on the Scandinavian model. South Africa's Freedom Charter, the dream that animated the long liberation struggle, was a version of this same third way: not state communism, but markets existing alongside the nationalization of the banks and mines, with the income used to build comfortable neighborhoods and decent schools-economic as well as political democracy. The workers who founded Solidarity in 1980 pledged to struggle not against socialism but for it, with workers eventually winning the power to run their workplaces and country democratically.

Washington has always regarded democratic socialism as a greater threat than totalitarian Communism, which was easy to vilify and made for a handy enemy. In the sixties and seventies, the favored tactic for dealing with the inconvenient popularity of developmentalism and democratic socialism was to try to equate them with Stalinism, deliberately blurring the clear differences between the woridviews. (Conflating all opposition with terrorism plays a similar role today.) A stark example of this strategy comes from the early days of the Chicago crusade, deep inside the declassified Chile documents. Despite the CIA-funded propaganda campaign painting Allende as a Soviet-style dictator, Washington's real concerns about the Allende election victory were relayed by Henry Kissinger in a 1970 memo to Nixon: "The example of a successful elected Marxist government in Chile would surely have an impact on - and even precedent value for - other parts of the world, especially in Italy; the imitative spread of similar phenomena elsewhere would in turn significantly affect the world balance and our own position in it."

Latin America's new leaders are also taking bold measures to block any future U.S.-backed coups that could attempt to undermine their democratic victories. The governments of Venezuela, Costa Rica, Argentina and Uruguay have all announced that they will no longer send students to the School of the Americas (now called the Western Hemisphere Institute for Security Cooperation) -the infamous police and military training center in Fort Benning, Georgia, where so many of the continent's notorious killers learned the latest in "counterterrorism" techniques, then promptly directed them against farmers in El Salvador and auto workers in Argentina. Bolivia looks set to cut its ties with the school, as does Ecuador. Chavez has let it be known that if an extremist right-wing element in Bolivia's Santa Cruz province makes good on its threats against the government of Evo Morales, Venezuelan troops will help defend Bolivia's democracy. Rafael Correa is set to take the most radical step of all. The Ecuadorean port city of Manta currently hosts the largest U.S. military base in South America, which serves as a staging area for the "war on drugs," largely fought in Colombia. Correa's government has announced that when the agreement for the base expires in 2009, it will not be renewed. "Ecuador is a sovereign nation," said the minister of foreign relations, Maria Fernanda Espinosa. "We do not need any foreign troops in our country.

In Venezuela, Chavez has made the co-ops a top political priority, giving them first refusal on government contracts and offering them economic incentives to trade with one another. By 2006, there were roughly 100,000 cooperatives in the country, employing more than 700,000 workers. 28 Many are pieces of state infrastructure-toll booths, highway maintenance, health clinics-handed over to the communities to run. It's a reverse of the logic of government outsourcing-rather than auctioning off pieces of the state to large corporations and losing democratic control, the people who use the resources are given the power to manage them, creating, at least in theory, both jobs and more responsive public services. Chavez's many critics have derided these initiatives as handouts and unfair subsidies, of course. Yet in an era when Halliburton treats the U.S. government as its personal ATM for six years, withdraws upward of $20 billion in Iraq contracts alone, refuses to hire local workers either on the Gulf Coast or in Iraq, then expresses its gratitude to U.S. taxpayers by moving its corporate headquarters to Dubai (with all the attendant tax and legal benefits), Chavez's direct subsidies to regular people look significantly less radical.

Latin America's most significant protection from future shocks (and therefore from the shock doctrine) flows from the continent's emerging independence from Washington's financial institutions, the result of greater integration among regional governments. The Bolivarian Alternative for the Americas (ALBA) is the continent's retort to the Free Trade Area of the Americas, the now buried corporatist dream of a free-trade zone stretching from Alaska to Tierra del Fuego. Though ALBA is still in its early stages, Emir Sader, the Brazil-based sociologist, describes its promise as "a perfect example of genuinely fair trade: each country provides what it is best placed to produce, in return for what it most needs, independent of global market prices .1129 So Bolivia provides gas at stable discounted prices; Venezuela offers heavily subsidized oil to poorer countries and shares expertise in developing reserves; and Cuba sends thousands of doctors to deliver free health care all over the continent, while training students from other countries at its medical schools. This is a very different model from the kind of academic exchange that began at the University of Chicago in the mid-fifties, when Latin American students learned a single rigid ideology and were sent home to impose it with uniformity across the continent.

When one country does face a financial shortfall, this increase integration means that it does not need to turn to the IMF or the U.S. Treasury for a bailout.

Thanks to high oil prices, Venezuela has emerged as a major lender to other developing countries, allowing them to do an end run around Washington.

... The results have been dramatic. Brazil, so long shackled to Washington by its enormous debt, is refusing to enter into a new agreement with the IMF. Nicaragua is negotiating to quit the fund, Venezuela has withdrawn from both the IMF and the World Bank, and even Argentina, Washington's former "model pupil," has been part of the trend. In his 2007 State of the Union address, President Néstor Kirchner said that the country's foreign creditors had told him, "You must have an agreement with the International Fund to be able to pay the debt.' We say to them, 'Sirs, we are sovereign. We want to pay the debt, but no way in hell are we going to make an agreement again with the IMF.'" As a result, the IMF, supremely powerful in the eighties and nineties, is no longer a force on the continent. In 2005, Latin America made up 80 percent of the IMF's total lending portfolio; in 2007, the continent represented just 1 percent-a sea change in only two years. "There is life after the IMF," Kirchner declared, "and it's a good life."

The transformation reaches beyond Latin America. In just three years, the IMF's worldwide lending portfolio had shrunk from $81 billion to $11.8 billion, with almost all of that going to Turkey. The IMF, a pariah in so many countries where it has treated crises as profit-making opportunities, is starting to wither away. The World Bank faces an equally grim future. In April 2007, Ecuador's president, Rafael Correa, revealed that he had suspended all loans from the bank and declared the institution's representative in Ecuador persona non grata - an extraordinary step. Two years earlier, Correa explained, the World Bank had used a $100-million loan to defeat economic legislation that would have redistributed oil revenues to the country's poor. "Ecuador is a sovereign country, and we will not stand for extortion from this international bureaucracy," he said. At the same time, Evo Morales announced that Bolivia would quit the World Bank's arbitration court, the body that allows multinational corporations to sue national governments for measures that cost them profits. "The governments of Latin America, and I think the world, win the cases. The multinationals always win," Morales said.

Without a story, we are, as many of us were after September 11, intensely vulnerable to those people who are ready to take advantage of the chaos for their own ends. As soon as we have a new narrative that offers a perspective on the shocking events, we become reoriented and the world begins to make sense once again.

The Shock Doctrine

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