Sell the Lexus and Burn the
Globalization and Its Discontents
excerpted from the book
The Best Democracy Money
by Greg Palast
Plume Books, 2003, paper
The Price of Dissent: Venezuela, Exception to the New Globalization
Order, Taken Hostage
Sometimes a picture is worth a thousand
lies. Take the San Francisco Chronicle's front-page story of June
13, 2002. Not much of a story actually, just a big photo of angry
people and a caption under the headline "100,000 March Against
Venezuelan President." The caption said the angry people
wanted Hugo Chavez, president of Venezuela, kicked out. The demonstrators
say Chavez is a dictator. There was no story beyond the photo
and caption from Reuters, but they ran in almost every paper in
I'd just come back from Caracas-and I
have to report the photo is legit. In fact, I saw a good 200,000
march against President Hugo Chavez. But what the American papers
did not report was that nearly half a million Venezuelans marched
By the time the story reached the New
York Times, the anti-Chavez crowd had metastasized into 600,000,
a fantasy easy to print as the paper of record had no reporter
in Venezuela. Pro-Chavez demonstrations of up to a million citizens
had, appropriate to Latin America, "disappeared" from
American papers and broadcasts.
This Stalinesque cropping of the news
simply continued the yearlong disinformation campaign against
the populist South American president. It hit bottom when, on
April 12 and 13, 2002, every major paper in the USA-with no exception-
announced that Chavez had resigned his presidency. He was "unpopular,"
he was "dictatorial" and so, admitting to these truths,
he quit. Two things caught my eye about that story: First, every
one of these factoids was dead wrong. Second, almost all papers
used identical words, the ones quoted, plus "resigned"
. . . which I traced back to a U.S. State Department briefing.
In fact, President Chavez had been kidnapped
but had spoken to cabinet members via a cell phone handed him
by a sympathetic guard. Chavez had agreed to his "arrest"
by leaders of a coup d'etat who, had he resisted, would have slaughtered
everyone in Venezuela's White House, Miraflores. But, he told
his cabinet, "I am still president." Within twenty-four
hours, Chavez was back at his desk, "unresigned."
What was this all about-a president taken
hostage, the bent coverage, the smears? Why was the Bush administration's
maniacal hatred of Chavez fiercer, if less public, than its hatred
of Saddam Hussein? In Caracas, Chavez minister Miguel Bustamante
Madriz explained it to me. "America can't let us stay in
power. We are the exception to the new globalization order. If
we succeed, we are an example to all the Americas." Bustamante
Madriz, who had first tipped me off about the false "resignation"
reports, is a lucky man. He came close to a bullet in the head
from the coup leaders. But he didn't feel lucky. The Bush administration
still had his government in its crosshairs.
That Bush had played footsy with the coup
plotters is beyond question. Chavez has videotape of a U.S. military
attaché from our embassy entering the army base where Chavez
was held captive-something the State Department would not deny.
And there was no denying that Bush's ambassador had rushed down
from his hilltop compound to have his picture taken with the grinning
cutthroats who had overthrown a democratically elected president.
Bush's White House is quoted as saying that Chavez's election
by "a majority" of voters" did not confer "legitimacy"
on his government...
Chavez's crimes go beyond giving milk and housing to the poor.
His real sin was to pass two laws through Venezuela's national
assembly. First was the Ley de Terras, the new land law that promised
to give unused land to the landless-but only those properties
held out of production for more than two years by big plantation
But Chavez's tenure would not have been
threatened had he not also passed the petroleum law that doubled
the royalty taxes paid by ExxonMobil and other oil operators from
about 16 percent to roughly 30 percent on new finds. Chavez also
moved to take control of the state oil company PDVSA-nominally
owned by the government, but in fact in thrall to these foreign
This was no minor matter to the United
States. Few Americans realize that Venezuela has at times become
the USA's number-one supplier of foreign oil. It was the South
American nation that broke the back of the 1973 Arab oil embargo
by increasing output from its vast reserves way beyond its OPEC
quota. Chavez is not only president of Venezuela, but equally
importantly, president of the Organization of Petroleum Exporting
Countries (OPEC). Chavez had almost single-handedly rebuilt OPEC
by committing Venezuela to adhere to OPEC sales quotas, causing
world oil prices to double to over $20 per barrel. It was this
oil money that paid for the "bricks and milk" program
and put Chavez head to head against ExxonMobil, the number-one
extractor of Venezuelan oil.
As OPEC's general secretary Ali Rodriguez
says: "The dependence of the U.S. on oil is increasing progressively.
Venezuela is one of the most important suppliers of the U.S.,
and the stability of Venezuela is very important for [them]."
While the immediate cause of America's
panicked need to move Chavez was a looming oil embargo, the heart
of the Bush administration's grievance goes much deeper, to Venezuela's
unique place as the "Anti' -Argentina"-to globalizers,
the economic equivalent of the Anti-Christ. Argentina accepted
the World Bank's four-step economic medicine with fatal glee:
free trade, "flexible" labor laws, privatization and
reduced government budgets and regulation. Chavez rejects it all
outright, beginning with the phony "free" trade agenda
under the terms of the WTO and NAFTA (which the United States
would expand to South America under the aegis of the Free Trade
Area of the Americas). Trade under these terms is anything but
free to the peoples of the Southern Hemisphere-the "Opium
Wars" coercive imbalance as identified by Joe Stiglitz. Instead,
Chavez calls for a change in the North-South terms of trade, increasing
the value of commodities exported to Europe and America. Chavez's
longer-term policies of rebuilding OPEC and higher tariffs on
oil must be seen in the context of smashing imbalanced trade relations
epitomized by the WTO.
We saw how the World Bank's secret June
2001 "Country Assistance Strategy" progress report ordered
Argentina to pull out of its economic depression by increasing
"labor force flexibility." This required cutting works
programs, smashing union rules and slicing real wages. Contrast
that with Chavez's first act after defeating the coup: announcing
a 20 percent increase in the minimum wage. Chavez's protection
of the economy by increasing the purchasing power of the lower-paid
workers, rather than cutting wages, is anathema to the globalizers.
Chavez moved to renationalize oil and
rejected the sale of Venezuela's water systems, while Argentina
sold off everything including the kitchen-sink tap. Economist
Mark Weisbrot of the Center for Economic Policy Research calculated
that the loss of income from state businesses accounts for 100
percent of Argentina's cavernous fiscal deficit. Argentina followed
World Bank and WTO directions and sold off the banks and water
companies owned by the state or Argentines to Citibank, Enron,
Bank Santander and Vivendi of the United States, Spain and France.
These swiftly vacuumed up Argentina's hard currency reserves,
setting the stage for the national bankruptcy at the first hint
of speculator-driven currency panics. Imagine if Argentina had
not sold off its oil companies on the cheap, or impoverished Ecuador
had not dropped out of OPEC-they would today be wealthy, not wanting.
Chavez took the path exactly opposite
to the guidance given, and ultimately imposed, on Argentina by
the World Bank and IMF. To pull out of the downturn threatened
by a corporate embargo of investment in his nation, Chavez taxed
the oil companies and spent the money-the "bricks and milk"
solution, old-style Keynesianism. This is none too revolutionary
despite his rhetoric. Chavez is no Fidel-in fact, he's not a socialist
of any sort. With Marx discredited as the philosophy of the "losers"
of the Cold War, "Chavismo" is as radical as it gets.
Chavez is an old-style social democratic reformer: increased investment
in housing and infrastructure, control over commodity export prices
and land to the landless-an attack on the "landlordism"
that Professor Stiglitz places at the heart of world poverty.
Had Chavez won office in the time of Jack Kennedy, he would have
fit in nicely with the old "Alliance for Progress" development
model, JFK's kinder, gentler answer to Communism. Today, Chavez's
redistributionist reformism offers an operating, credible alternative
to the IMF's corporate-friendly free market nostrums.
Unfortunately for Chavez, his economic
plan was working. Despite the European and American media's hoo-ha
over how Chavez has "ruined" Venezuela's economy, its
gross domestic product grew by 2.5 percent in 2001. And it wasn't
all due to improvements in oil prices; excluding crude oil, economic
activity jumped by about 4 percent. Compare the "ruined"
Venezuelan economy to Argentina, which the World Bank displayed
as the pet student of market theory, now a financial delinquent.
The Keystone Kops-style plot against Chavez
by Venezuela's military-industrial complex served Big Oil's interests.
But that's an old-style shoot-'em-up coup, likely to fail. The
coup d'etats of the twenty-first century will follow the Argentine
model, in which the international banks seize the financial lifeblood
of a nation, making the official presidential titleholder merely
inconsequential except as a factotum of the corporate agenda.
This is what Chavez's minister meant when
he said Venezuela represented a threatening example that could
not be allowed to succeed. Dissent from the new globalization
order will be punished. Already, the plan I saw put in place in
Chile against Allende (President Richard Nixon's order to his
CIA chief to "make their economy scream") is in the
offing for Venezuela: capital boycotts, sabotage, disinformation
intended to cause panics and financial runs. And lastly, there
is the all-important propaganda war aimed at U.S. citizens to
ensure that Americans remain ignorant and quiescent when a democratically
elected president is assassinated, overthrown or hounded from
Two Friedmans, One Pinochet and the Fairy-Tale Miracle of Chile:
Questioning Globalization's Genesis Myth
I have an advantage over globalization
fetishists like Thomas Friedman, Mr. Lexus-and-Olive-Tree. I was
there at the beginning, at the moment of globalization's conception
when the sperm of Milton Friedman's oddball economic theories
entered the ovum of the fertilized mind of Ronald Reagan, who
was then governor of California. I witnessed the birth of Thatcherism
before Thatcher-there, at the University of Chicago, in the early
1970s, as the only American member of an elite group later known
as the "Chicago Boys." Professor Friedman (no relation
to Thomas) was the economic god who walked among us, soon to win
the Nobel Prize for his extremist laissez-faire theories. Other
academics found Friedman intriguing, but considered his free market
fanaticism off the kooky edge. But the Chicago Boys believed;
and, quite different from other students, were handed an entire
nation to experiment on, courtesy of a coup d'etat by a general
in Chile. Most of the "Boys" were Latin Americans, a
strange collection in white turtleneck sweaters and dark shades,
right out of the movie Missing, who would return to Chile and
make it into a Friedmanite laboratory. ( . . . With a twist. Contrary
to typical academic exercise, those who asked questions "disappeared.")
Like Tinkerbell and Cinderella's fairy
godmother, General Augusto Pinochet is reported to have performed
magical good deeds. In the case of Pinochet, he is universally
credited with the Miracle of Chile, the wildly successful experiment
in free markets, free trade, privatization, deregulation and union-free
economic expansion designed by the Chicago Boys, whose laissez-faire
seeds have spread from Santiago to Surrey, from Valparaiso to
Some may be a bit squeamish about the
blood on his chariot, but all conservative "reformers"
must agree, globalization's free market revolution was born from
the barrel of Pinochet's guns. Whatever the general's shortcomings,
they tell us, he was Chile's economic savior and lit the world's
future economic path.
Within the faith of the Reaganauts and
Thatcherites, Pinochet's Chile serves a quasi-religious function.
It provides the necessary genesis fable, the ersatz Eden from
which the laissez-faire dogma sprang successful and shining. But
what if Cinderella's pumpkin did not really turn into a coach?
What if the Miracle of Chile, too, is just another fairy tale?
The current measurable failure of the economics of free markets,
starvation from Quito to Kyrgyzstan, is dismissed as the pain
of "transition" to market economies. But unblinking
study discloses that the original claim to "success"-that
General Pinochet begot an economic powerhouse-is one of those
utterances, like "we are winning the war on terror,"
whose truth rests entirely on its repetition.
Chile can claim some economic success.
But that is the work of President Salvador Allende, who saved
his nation, miraculously, a decade after Pinochet had him murdered.
These are the facts. In 1973, the year
the general seized the government, Chile's unemployment rate was
4.3 percent. In 1983, after ten years of free market modernization,
unemployment reached 22 percent. Real wages declined by 40 percent
under military rule. In 1970, before Pinochet seized power, 20
percent of Chile's population lived in poverty. By the year "President"
Pinochet left office, the number of destitute had doubled to 40
percent. Quite a miracle.
Pinochet did not destroy Chile's economy
all alone. It took nine years of hard work by the most brilliant
minds in world academia, that gaggle of Milton Friedman's trainees,
the Chicago Boys. Under the spell of their theories, the general
abolished the minimum wage, outlawed trade union bargaining rights,
privatized the pension system, abolished all taxes on wealth and
on business profits, slashed public employment, privatized 212
state industries and sixty-six banks and ran a fiscal surplus.
The general goose-stepped his nation down the "neoliberal"
(free market) path, and soon Thatcher, Reagan, Bush, Clinton,
the IMF and the planet would follow.
But what actually happened in Chile? Freed
from the dead hand of bureaucracy, taxes and union rules, the
country took a giant leap forward . . . into bankruptcy. After
nine years of economics Chicago-style, Chile's industry keeled
over and died. In 1982 and 1983, gross domestic output dropped
19 percent. That's a depression. The free market experiment was
kaput, the test tubes shattered. Blood and glass littered the
Yet, with remarkable chutzpa, the mad
scientists of Chicago declared success.
In the United States, President Ronald
Reagan's State Department issued a report concluding: "Chile
is a casebook study in sound economic management." Milton
Friedman himself coined the phrase "the Miracle of Chile."
Friedman's sidekick, economist Art Laffer, preened that Pinochet's
Chile was "a showcase of what supply-side economics can do."
It certainly was. More exactly, Chile
was a showcase of deregulation gone berserk. The Chicago Boys
persuaded the junta that removing restrictions on the nation's
banks would free them to attract foreign capital to fund industrial
expansion. (A decade later, such capital market liberalization
would become the sine qua non of globalization.) On this advice,
Pinochet sold off the state banks-at a 40 percent discount from
book value-and they quickly fell into the hands of two conglomerate
empires controlled by speculators Javier Vial and Manuel Cruzat.
From their captive banks, Vial and Cruzat siphoned cash to buy
up manufacturers- then leveraged these assets with loans from
foreign investors panting to get their piece of the state giveaways.
The banks' reserves filled with hollow
securities from affiliated enterprises.
Pinochet let the good times roll for the
speculators. He was persuaded that governments should not hinder
the "logic" of the market. By 1982, the Chilean pyramid
finance game was up. The Vial and Cruzat groups defaulted. Industry
shut down, private pensions were worthless, the currency swooned.
Riots and strikes by a population too hungry and desperate to
fear bullets forced Pinochet to l reverse course. He booted his
beloved Chicago experimentalists.
"It is the firm and continuing policy
that Allende be overthrown by a coup . . . please review all your
present and possibly new activities to include propaganda, black
operations, surfacing of intelligence or disinformation, personal
contacts, or anything else your imagination can conjure....
EYES ONLY" "RESTRICTED HANDLING"
"SECRET" message from CIA headquarters to U.S. station
chief in Santiago, October 16, 1970
"Sub-machine guns and ammo being sent by courier leaving
Washington 0700 hours 19 October due arrive Santiago.
Message from CIA, October 18, 1970
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