In The Shock Doctrine: The Rise of Disaster Capitalism (2010), Naomi Klein found numerous examples of how the United States imposed a system of free trade, free markets and laissez faire capitalism on the rest of the world over the past forty years, through manufacturing crises to impose ‘shock treatments’ and structural adjustments on Asia, Africa, the Middle East, Latin America and Eastern Europe, or simply taking proper advantage of a crisis that was already underway. She calls the many “orchestrated raids on the public sphere in the wake of catastrophic events, combined with the treatment of disasters as exciting market opportunities, ‘disaster capitalism’” (Klein 6). Milton Friedman, the free market economist whose ideas most influenced Ronald Reagan and Margaret Thatcher, was also a leading proponent of the idea that a crisis was a terrible thing to waste. Even at the end of his life, when Hurricane Katrina struck New Orleans, he was advising the George W. Bush administration to use the catastrophe as a chance to privatize the city’s school system, abolish the teacher’s union and issue private-school vouchers to the students, which was done (Klein 5-6). For Friedman and his supporters, the key to advancing their free market agenda was “waiting for a major crisis, then selling off pieces of the state to private players while citizens were still feeling the shock” (Klein 7). This is the real basis for the success of the so-called ‘Washington Consensus’ of free trade and free market capitalism that has been imposed on virtually the entire world since the 1970s.
Sometimes the United States created the shock directly through organizing military coups and supporting dictatorships, as in Brazil in 1964, Chile in 1973 or the military intervention in Iraq in 2003. These same types of policies were also imposed on other Latin American countries during the economic crises of the 1970s and 1980s, in Russia and Eastern Europe after the fall of Communism in 1989-91, and in Asia after the meltdown of 1997-98. In Chile, Milton Friedman and the ‘Chicago School’ economists were actually the leading advisers to Gen. Augusto Pinochet after the U.S. put him in power, and he agreed to turn his country into a laboratory for free market capitalism and privatization. Indeed, in many such social and economic policies could only be passed under conditions of extreme oppression, as in China after the Tiananmen Square massacre in 1989 or in Iraq under military occupation. In the latter case, U.S. envoy L. Paul Bremer imposed massive privatization, starting with the oil industry, a 15% flat tax, complete free trade and vast reductions in government, which was the same type of shock treatment and structural adjustment that had been imposed on dozens of countries since the 1970s (Klein 9). With the U.S. in total control of the country, it was merely a much simpler matter to accelerate the entire program and impose it with no popular opposition permitted, but other dictatorships around the world had already been following the exact same prescription for decades. In almost every case the “radical free-market transformations were not imposed democratically” but in an atmosphere of fear and repression (Klein 12).
In earlier book No Logo, Klein was also highly critical of globalized capitalism and the consolidation of giant corporations and highly standardized brands and chain stores like Wal-Mart, the Gap and Starbucks. All of these companies are not attempting to become that “one overarching brand under which we consume, make art, [and] even build our homes” (No Logo 130). Even the retail outlets are completely uniform and clone-like, with one Kinko’s, Blockbuster or McDonald’s looking basically like any of the others. By 1998, Wal-Mart had become the biggest retailer in the world by following these policies, with over $137 billion in sales. It always builds stores two or three times larger than its competitors and they buys its products in bulk from low-wage countries like China, reselling at prices with rich smaller retailers cannot match. Suburban malls and discount centers have now drained “community life and small businesses out of the town centers”, and smaller retailers cannot even buy their products wholesale for the same price that Wal-Mart sells them retail (No Logo 134). No she has also examined how this domination of large corporations came about, and there is a great deal of evidence in the historical record to confirm her thesis that it has been imposed on most countries through extreme military and economic pressure.
Unknown to almost everyone in the United States, the military coup in Brazil in 1964 provided one of the very first free market laboratories in the world, and laid the groundwork for the so-called ‘economic miracle’ that occurred there in the ensuring decades. In fact, Brazil was the original model for Latin America and the other BRICs (Brazil-Russia-China-India), even before the U.S.-organized coup in Chile in 1974. For years, Washington had been dissatisfied with the leftist, nationalist and neutralist policies of Brazil’s civilian leaders for at least ten years before it organized the military coup against President Joao Goulart in April 1964. From Washington’s viewpoint, this problem grew especially acute after the Cuban Revolution in 1959 and the refusal of the Brazilian government to join enthusiastically in the covert and overt campaigns to remove Fidel Castro from power. There was precedent for the military and Central Intelligence Agency (CIA) actions against President Goulart, including the removal of President Jacobo Arbenz of Guatemala in Operation Success in 1954. Certainly the U.S. had a long history of supporting ‘friendly dictators’ of the right-wing variety in Latin America, such as the notorious Somoza families. After the coup in Brazil, it would also conduct a similar operation against President Salvador Allende of Chile in 197, and support the other military police states in Argentina, Uruguay and Paraguay with military aid and training for their police and intelligence services. All of this occurred in Brazil after the 1964 coup as well, along with a shift in economic policies that was much friendlier to foreign investment and the free market/monetarist ideology of the Wall Street banks and the International Monetary Fund (IMF). Brazil did experience rapid economic growth for a time under military rule, at least before it stalled out during the 1970s oil shocks, but it was badly distributed by region and social class, and government policy neglected education, land reform, literacy, poverty reduction and other programs that would have aided the country’s impoverished majority. In short, the U.S. government obtained the exact type of domestic and foreign policies it desired in Brazil in 1964-85, and even considered it a ‘model’ for the rest of South America, but at a very high cost to the majority of the country’s people.
Like Gen. Pinochet in Chile in 1973-89. Gen. Castello Branco and his successors in Brazil followed free market and monetarist economic policies that reduced government spending, opened the country to foreign investment, cut back on domestic subsidies and credit, banned strikes and labor unions, and eliminated taxes on foreign profits. They created private investment banks, jailed, tortured and executed student and labor leaders, and eliminated elections at all levels, state local and federal (Henry 134). Congress was suspended as were the state legislatures and city councils, and no elections were held again until 1982. As in other countries, the CIA established the SNI, which had 50,000 employees and served as the secret police and surveillance arm of the military regime, tasked with repression of dissent at home and abroad (Henry 125). Only two sham political parties were allowed to exist, the ARENA and the ‘official’ opposition PCB, both controlled by the military and SNI and known to Brazilians as the ‘yes’ and ‘yes sir’ parties (Henry 136). As in other right-wing dictatorships in Latin America, the press was censored, habeas corpus suspended permanently, and mass arrests and detentions without charges were commonplace. In return, Brazil received over $2 billion in direct U.S. aid during the first six years of the military regime, as well as a loan of $214 million from the IMF, which had loaned Brazil nothing at all in 1959-64. Literacy programs were eliminated, the minimum wage fell by 25% and malnutrition and infant mortality increased dramatically (Henry 135). Although there was economic growth and an increase in exports under the early years of military rule, wealth and incomes were very unequally distributed by region and social class, which even many military and intelligence officers realized (Skidmore 90). This was an economic program designed to benefit U.S. and other foreign investors rather than the country and its people as a whole.
All of this should sound very familiar to students of international relations and economic policies, and it proves Klein’s point about how shocks can be created or manipulated to create the basis for imposing free market capitalism on unwilling ‘partners’. It just so happens that Latin America was the first such laboratory because it was closest to the U.S. and highly accessible to the military and economic ‘experts’ who were ordered to impose certain types of free market military regimes there, and there was already a long-established history and pattern of U.S. interventionism there even before the Cold War. It is not the type of story that will ever be found in the mainstream media and academia in the U.S., although none of the information is really secret and the general details were well known at the time. It is simply that this subject is not widely publicized and most of the public has never been aware of it, but the fact remains that the U.S. overthrew the democratically-elected government of Brazil in 1964 and replaced it with a right-wing military dictatorship that remained in power for over twenty years. It supported this dictatorship with massive economic and military aid and also trained its police and intelligence services in the methods of repression. This policy was hardly atypical or unusual at the time but was in fact the norm, and was put into practice in many countries in Asia, Africa, Latin America and the Middle East. It was done in Iran after the CIA coup there in 1953 (Operation Ajax), in Guatemala after the 1954 coup and in Chile after the overthrow of Allende in 1973. It would have been done in Cuba in the 1960s had U.S. covert operations against Castro been successful, and more recently in Venezuela against Hugo Chavez. Once the researcher becomes aware of the basic pattern in these coups and the policies that are put in place in their aftermath, the guiding hand behind them is not at all difficult to detect. In this case, the majority of the people of Brazil suffered twenty years of political repression and economic inequality on a massive scale, but that was by no means unusual after any of these coups either.
Supposedly, economic development stimulates democratization over time and democratic countries also experience higher levels of economic growth and prosperity. In reality, the record shows that the imposition of these policies often runs directly counter to the democratic desires of the people, and that Western governments, corporations and military and intelligence organizations have given them no choice in the matter. One commonly-held view is that China’s rapid economic growth over the past three decades is bound to lead to greater democratization over time, while India’s democracy will ensure that it will develop into an economic superpower eventually. Even so, all the BRIC countries have high levels of social and economic inequality and this has been increasing under globalization, although democracy is supposed to lead to improved social safety nets and a more egalitarian distribution of wealth. This does not seem to be occurring under the present version of global capitalism, however (World Bank 2011). In theory at least, global capitalism will become more liberal or democratic in the long run because dictatorships cannot offer rule of law and security for contacts and property rights, while democracies are more stable and guarantee a wider distribution of wealth for the lower classes (Olson 574). China’s leaders have no intention in moving in this direction, though, but rather to create an authoritarian state combined with a capitalist economy (Dickson 245). This is also the Russian model under the dictatorship of Vladimir Putin, and it may well influence many other developing nations in the decades ahead.
Among the BRIC countries, only India has a well-established electoral democracy, even though it also has authoritarian tendencies, severe ethnic and religious conflicts and a huge mass of impoverished people who are not exactly being well-served by the global capitalist system. It has a strong civil society, free media and independent judiciary, and even though its problems of poverty, illiteracy and poor education and health care have improved since 1947, it still has a long way to go before becoming an economic superpower (Ganguly and Pordesi 11). Over the last thirty years, then, global capitalism has radically altered the patterns of trade, communication and manufacturing in many ways, and by no means only in the BRIC countries it suffers from a severe democracy deficit in both authoritarian capitalist states like Russia and China and also on the international level, since global institutions like the IMF and WTO are highly undemocratic and that the entire system favors large corporate interests at the expense of the common people and the ability of national governments to control their own social and economic policies has affected globalization in the BRIC states through economic development.
In Egypt, the World Bank Social Fund and the NGOs associated with it began a program to organize youth micro-industries in the 1990s as part of the Structural Adjustment Program (SAP) to move the economy away from socialism, but most of these failed rather quickly. Small enterprises and artisans represent over 90% of the economy in cities like Cairo, but they are not necessarily the type of modern, capitalist enterprises that the World Bank, the IMF and the NGOs were attempting to create. In theory, these new businesses were to be “established with loans from development agencies to reduce unemployment, empower the poor, and support the free market”, but this is not how the plan worked out in practice (Elyachar 3). They were not like the traditional workshops in Cairo, with craftsmen (and they were almost all men) passing down their knowledge from father to son, one generation after the other, which had been part of Egyptian culture for centuries. Indeed, in the 19th Century they were even thought of as a symbol of resistance to British colonialism and the attempts of its officials to impose their own versions of free trade and free market policies from 1882 to the early-1950s. At that time, the young officers led a military coup against the British-caked King Farouk, and under the leadership of Gamal Nasser proclaimed that the economy would now follow an Arab socialist model of development, which remained in place until the IMF and World Bank ‘reforms’ of the 1990s.
Under this new policy of financing ‘modern’ types of small capitalists, the general assumption was that the more tradition type of small merchant and artisan would gradually become extinct, at least if they were unable to keep up with the times. Yet these traditions still remained quite vital in Egypt where they still represented important values which placed great importance on “the creation, reproduction, and extension of relationships in communities of Cairo” (Elyachar 7). From time immemorial, the custom in this society has been to give the ‘evil eye’ to capitalists and “selfish pursuers of short-term gain” at the expense of the community, and this continues down to the present (Elyachar 10). Even the NGOs that were supposed to lead the way into the neoliberal era turned out to be not so independent of the state and traditional system, and in fact all began seeking ‘rents’ of their own from the national and international organizations, while many of the young entrepreneurs trained to use the latest computer software and advanced marketing and administrative tools ended up failing. Far from being a free market success story, this particular initiative left the World Bank planners denouncing the flaws and corruption of Egypt rather than their own flawed ideology (Elyachar 11).
Globalization is too mild and neutral a term to describe what has really been happening over the past forty years, as Klein and many others have pointed out. This global capitalist system has never developed ‘naturally’ but was always deliberately imposed on the rest of the world by Western economic and military elites, either through manufacturing crises or ruthlessly manipulating and exploiting them. Global capitalism is not a new system, and the free trade/free market, neoliberal ideology of Milton Friedman was already a cliché in the 19th Century. What Klein calls ‘disaster capitalism’ was known even then to serve the interests of the ruling elites and the large capitalist interests in the Western, imperialist countries, and so it does today. Its use of various types of ‘shock therapies’ on weaker nations is hardly new either, and these types of interventions were even more blatant and frequent in back in the era of direct colonial rule before World War II. In the past, it was often imposed by direct colonial rule, military intervention and Gunboat Diplomacy, and that has continued up to the present in countries like Iraq, but more typically the system uses more indirect and subtle economic pressures or ‘international’ institutions like the IMF, World Bank and WTO, which are of course dominated by the U.S. and the other Western powers. Many people in the developing world, from Egypt to Latin America to Southeast Asia and India have already had considerable experience with it dating back to the 19th Century, since they were subjects of the various European empires. They also have considerable experience in resisting it in the name of nationalism, socialism or preserving traditional culture, and this tradition continues in the present.
Neoliberalism, ‘disaster capitalism’ and the free market ‘shock treatment’ policies serve the interests of the U.S. and the institutions it controls such as the IMF, World Bank and the numerous NGOs funded by them. On the other hand, all plans and policies these organizations have imposed on the poorer countries do not really meet the needs of the local small producers they are attempting to incorporate into the system. This was also the case during the era of old-fashioned colonialism before the Second World War, and the successors of that system today seem equally unfamiliar with the actual customs, traditions and life circumstances of those they are trying to ‘help’. At its worst, the new system of undermining the authority of the state and replacing it with private organizations and NGOs simply seems like a cover designed to serve the interests of global corporations. As a system, international capitalism is rapidly eliminating geographical and political boundaries, as Marx predicted in the 19th Century. In the global, postmodern economy, branding also involves relentless synergy and tie-ins between various diverse lines of products. Films and cartoons market their images to toy companies, fast-food restaurants and cereal manufacturers, generating billions of dollars of revenue annually, as does the commerce in seeds, genetic materials and even human body parts. Western science and technology have been synonymous with modernization and development in India and other Asian nations, even though this paradigm ignores the historical and cultural that has existed in many civilizations over the centuries.
WORKS CITED
Blum, William. Killing Hope: U.S. Military and CIA Interventions since World War II. London: Zed Books, 2004.
Dickson, Bruce J. “The Party is far from Over”. Current History, September 2007: 243-45.
Elyachar, Julia. Markets of Dispossession: NGOs, Economic Development and the State in Cairo. Duke University, 2005.
Ganguly, Sumet and Manjeet S. Pordesi. “India Rising: What is New Dehli to Do? World Policy Journal, Spring 2007: 9-18.
Henry, James. The Blood Bankers: Tales from the Global Underground Economy. NY: Four Walls Eight Windows, 2003.
Klein, Naomi. No Logo. Vintage Canada, 2009.
Klein, Naomi. The Shock Doctrine: The Rise of Disaster Capitalism. Picador, 2010.
Olson, Mansur. “Dictatorship, Democracy and Development”. The American Political Science Review, Vol. 87, No. 3 (September 1993): 567-76.
Skidmore, Thomas. The Politics of Military Rule in Brazil, 1964-1985. Oxford University Press, 1988.
World Bank. Inequality in Focus: An Overview of Global Income Inequality, 2011.
