Sell the Lexus and Burn the Olive Tree:
Globalization and Its Discontents

excerpted from the book

The Best Democracy Money Can Buy

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 the USA.

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 for Chavez.

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 owners.

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 operators.

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]."

The Anti-Argentina

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 office.

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 Virginia.

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 laboratory floor.

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....

"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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