The Shock Doctrine

by Naomi Klein

Troy Shu
Troy Shu
Updated at: April 12, 2024
The Shock Doctrine
The Shock Doctrine

Explore the profound impact of the 'Shock Doctrine' - how crises are exploited to impose radical free-market reforms. Discover the human and democratic costs, and learn how communities are fighting back. Dive into this insightful book summary and apply its learnings.

What are the big ideas?

Exploitation of Crises

The book introduces the concept of the 'Shock Doctrine,' where crises are used strategically by profit-oriented groups and policymakers to implement free-market reforms that would be impossible under normal circumstances. This tactic, evident in multiple global scenarios, highlights how public distress can serve as a crucial window for radical sociopolitical changes without democratic consent.

Privatization after Hurricane Katrina, economic reforms in Iraq post-invasion.

Corporate-State Fusion

The analysis details how crises often lead to a 'corporatist state,' where corporate and state interests become deeply intertwined. This merger leads to policies primarily benefiting the corporate elite at the expense of wider societal needs, often accompanied by increased surveillance and reduced public sector influence.

Chile under Pinochet, Iraq's privatization post-2003 invasion.

Permanent Crisis Mode

The book presents the idea that certain economic ideologies thrive by maintaining a perpetual state of crisis, which helps bypass normal democratic processes. This mechanism allows for continuous implementation of neoliberal policies, reflecting a strategic use of 'crisis opportunism' by economic leaders and institutions.

IMF's structural adjustments during economic downturns.

Democracy at Risk

It argues compellingly that the implementation of radical free-market policies often comes at the expense of democratic principles, with economic shock therapies being imposed in ways that undermine public participation and consent. This results in a 'democracy-free zone' where decisions are made without genuine democratic engagement.

Yeltsin's economic reforms in Russia, Bolivia's 1985 economic crisis response.

Cultural and Human Costs

The narrative highlights the often overlooked social and cultural destruction brought by economic reforms pushed through during crises. These changes not only reshape economies but also cause deep, sometimes irreversible harm to cultural identities and community structures, exacerbating social divisions and hardships.

Destruction of Iraqi cultural sites, displacement of local communities in Sri Lanka post-tsunami.

Resistance and Recovery

Despite the prevalence of the shock doctrine, there's an emerging global resistance against these neoliberal tactics. The book explores how communities and nations are fighting back and fostering grassroots initiatives to reclaim control over their economies and democratically reshape their societies.

Latin America's shift towards more socialist policies, grassroots rebuilding efforts in New Orleans post-Katrina.

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Exploitation of Crises

The book reveals how powerful groups exploit crises to rapidly implement their ideological agenda. When societies are reeling from disasters, whether natural or man-made, these groups seize the opportunity to push through free-market reforms that would face strong public opposition in normal times.

This tactic, dubbed the 'Shock Doctrine,' has been deployed across the globe. After Hurricane Katrina devastated New Orleans, for example, profit-driven interests moved quickly to privatize public services and erase rooted communities, before residents could regroup. Similarly, in the chaos following the invasion of Iraq, the U.S. imposed sweeping economic liberalization measures, despite Iraqi opposition.

The common thread is that crises suspend normal democratic processes, allowing radical, market-driven changes to be imposed without public consent. Policymakers deliberately exploit the public's state of shock and disorientation to push through their agenda, before citizens can resist. This reveals how disasters, rather than being opportunities for repair and recovery, can become windows for corporate seizure of the public sphere.

Here are specific examples from the context that support the key insight about the exploitation of crises:

  • In Latin America and Africa in the 1980s, debt crises forced countries to accept "shock treatment" of privatization, deregulation, and cuts to social spending, despite being unpopular with citizens. This allowed free-market reforms to be imposed without democratic consent.

  • The 1997-98 Asian financial crisis "humbled the so-called Asian Tigers," cracking open their markets to a "world's biggest going-out-of-business sale" of radical free-market transformations, again without democratic processes.

  • In Iraq after the 2003 invasion, the U.S. chief envoy L. Paul Bremer imposed mass privatization, free trade, and a flat tax on the country "while it was still in flames," before Iraqis could regroup.

  • After Hurricane Katrina hit New Orleans, there were discussions of "clean sheets" and "exciting opportunities" to advance corporate goals by erasing public spaces and rooted communities.

  • The September 11, 2001 attacks provided a "green light" for the Bush administration to rapidly implement the free-market agenda of Friedman's "Chicago Boys" without seeking public consent.

The key concept illustrated is how crises, whether economic, political, or natural disasters, are strategically exploited by profit-oriented groups to push through radical free-market reforms that would be impossible under normal democratic conditions.

Corporate-State Fusion

The analysis reveals how crises are exploited to fuse corporate and state power. In this corporatist state, policies primarily benefit the corporate elite rather than the broader public. This merger erodes the distinction between public and private interests, as government officials conflate corporate profits with the national interest.

Crises, whether natural disasters or military conflicts, provide the pretext to rapidly implement radical free-market reforms that would otherwise face public opposition. The state becomes a venture capitalist, providing funding and becoming the largest customer for the new services of private contractors. This disaster capitalism complex expands into areas traditionally handled by the public sector, from security to disaster response.

The consequences are severe - increased surveillance, reduced public influence, and the prioritization of corporate profits over societal needs. Historical examples like Pinochet's Chile and post-2003 Iraq demonstrate how this corporate-state fusion undermines democracy and concentrates power in the hands of a privileged few. Understanding this dynamic is crucial to challenging the undemocratic consolidation of corporate power during times of crisis.

Here are specific examples from the context that support the key insight of corporate-state fusion:

  • In Argentina in the 1970s, the junta's "disappearance" of 30,000 leftist activists was "integral to the imposition of the country's Chicago School policies" - a merger of state repression and corporate-friendly economic reforms.

  • In China in 1989, the Tiananmen Square massacre and subsequent arrests "freed the hand of the Communist Party to convert much of the country into a sprawling export zone" - state violence enabling corporate interests.

  • In Russia in 1993, Boris Yeltsin's decision to send in tanks and imprison opposition leaders "cleared the way for the fire-sale privatization that created the country's notorious oligarchs" - state power used to advance corporate takeover.

  • The Falklands War in 1982 allowed Margaret Thatcher to "use tremendous force to crush the striking coal miners and to launch the first privatization frenzy in a Western democracy" - crisis exploited to consolidate corporate power.

  • The debt crises in Latin America and Africa in the 1980s "forced countries to be 'privatized or die'" as the IMF imposed corporate-friendly "shock treatment" policies in exchange for loans.

  • The Asian financial crisis of 1997-98 "cracked open their markets to what The New York Times described as 'the world's biggest going-out-of-business sale'" - crisis enabling corporate takeover.

  • In the War on Terror, the Bush administration "outsourced, with no public debate, many of the most sensitive and core functions of government" to private corporations, transforming the state into a "deep-pocketed venture capitalist" for the "disaster capitalism complex."

Permanent Crisis Mode

Certain economic ideologies thrive by maintaining a perpetual state of crisis. This allows them to bypass normal democratic processes and continuously implement their preferred neoliberal policies.

These ideologies strategically exploit moments of crisis, such as economic downturns or disasters, to push through radical free-market reforms. For example, the International Monetary Fund (IMF) has used structural adjustment programs to impose sweeping neoliberal policies on crisis-stricken countries, even overriding the expressed wishes of voters.

By creating an atmosphere of constant crisis, these economic leaders and institutions can act swiftly to impose their agenda before society has a chance to recover and resist. This reflects a calculated use of crisis opportunism - the deliberate exploitation of shocks and emergencies to advance an ideological agenda.

Here are specific examples from the context that support the key insight about how certain economic ideologies thrive by maintaining a perpetual state of crisis to bypass normal democratic processes:

  • The IMF's "structural adjustment" programs in the 1980s, where the IMF would respond to crisis-struck countries seeking debt relief by imposing "sweeping shock therapy programs" of radical free-market reforms, rather than stabilization policies. This allowed the IMF to "methodically leverage the international debt crisis to advance the Chicago School agenda."

  • In Argentina in the 1970s, the military junta's "disappearance" of 30,000 leftist activists was "integral to the imposition of the country's Chicago School policies", using terror to prepare the ground for radical free-market "reforms."

  • In China in 1989, the "shock of the Tiananmen Square massacre" allowed the Communist Party to "convert much of the country into a sprawling export zone, staffed with workers too terrified to demand their rights."

  • In Russia in 1993, Boris Yeltsin's decision to "send in tanks to set fire to the parliament building and lock up the opposition leaders" cleared the way for the "fire-sale privatization that created the country's notorious oligarchs."

  • The Falklands War in 1982 allowed Margaret Thatcher to "use tremendous force to crush the striking coal miners and to launch the first privatization frenzy in a Western democracy."

  • The 1997-98 Asian financial crisis was "almost as devastating as the Great Depression" and "humbled the so-called Asian Tigers, cracking open their markets to what The New York Times described as 'the world's biggest going-out-of-business sale.'"

The key concept illustrated here is "crisis opportunism" - the strategic exploitation of crises, whether economic, political, or military, to advance a radical free-market agenda that would otherwise face democratic resistance. This reflects a perpetual "shock doctrine" approach of maintaining a state of crisis to bypass normal democratic processes.

Democracy at Risk

Radical free-market policies pose a grave threat to democracy. These economic shock therapies are often imposed during times of crisis, exploiting public fear and disorientation to bypass democratic processes. This creates a democracy-free zone where decisions are made without genuine public participation or consent.

For example, in Russia, Boris Yeltsin used tanks to crush political opposition, clearing the way for rapid privatization and the rise of oligarchs. In Bolivia, the government responded to an economic crisis by abruptly implementing harsh free-market reforms, ignoring public demands. In both cases, democratic principles were sacrificed in the name of radical economic transformation.

This pattern repeats across the globe - from Latin America to Asia. Crises, whether natural disasters or political upheaval, are exploited to impose unpopular policies that concentrate wealth and power. The public's rightful role in shaping their economic future is usurped, leaving them disenfranchised in their own countries. Protecting democracy requires vigilance against these anti-democratic tactics, which seek to remake societies without the consent of the people.

Here are examples from the context that support the key insight that the implementation of radical free-market policies often comes at the expense of democratic principles:

  • In Latin America and Africa in the 1980s, debt crises forced countries to accept "shock treatment" economic reforms, overruling the "expressed wishes of voters" and handing control to "economic technocrats" instead of democratic processes.

  • In Asia, the 1997-98 financial crisis "cracked open their markets" to radical free-market transformations, even though these countries were democracies - the crisis provided the "pretext to overrule the expressed wishes of voters."

  • In Russia in the 1990s, Boris Yeltsin's decision to "send in tanks to set fire to the parliament building and lock up the opposition leaders" cleared the way for rapid privatization and the rise of oligarchs, bypassing democratic processes.

  • In China in 1989, the "shock of the Tiananmen Square massacre" freed the Communist Party to convert much of the country into an export zone, with workers "too terrified to demand their rights."

  • In Bolivia in 1985, the hyperinflation crisis created the "context for emergency measures" that allowed the imposition of shock therapy, despite Bolivia having a "strong, militant labor movement and a powerful left tradition."

The key concept illustrated is how large-scale crises and disasters are exploited to bypass democratic processes and impose radical free-market reforms, creating a "democracy-free zone" where economic decisions are made without genuine public consent.

Cultural and Human Costs

The narrative reveals the devastating cultural and human costs of the economic reforms pushed through during crises. These changes don't just reshape economies - they also cause deep, sometimes irreversible harm to cultural identities and community structures, exacerbating social divisions and hardships.

For example, the destruction of Iraqi cultural sites under military occupation erased the heritage and history of local communities. Similarly, the displacement of fishing communities in Sri Lanka after the tsunami disrupted their way of life and livelihoods, leaving them vulnerable.

These reforms are not just about numbers and policies - they have severe human consequences. They uproot people from their homes, dismantle their support systems, and undermine their very sense of identity and belonging. This social and cultural devastation is often overlooked, but it is a critical part of the story.

Here are specific examples from the context that support the key insight about the cultural and human costs of economic reforms during crises:

  • In South Korea, the unemployment rate nearly tripled from 1996 to 1999, causing the middle class to shrink from 63.7% to 38.4% of the population. This led to "wrenching sacrifice and degraded decisions" for many families.

  • In the Philippines and South Korea, many rural families were forced to sell their daughters into human trafficking and the sex trade in other countries due to the economic crisis.

  • In Thailand, public health officials reported a 20% increase in child prostitution in just one year after the IMF reforms, as families struggled to survive.

  • A community leader in northeast Thailand, Khun Bunjan, was forced to send her children to work as scavengers after her husband lost his factory job, saying "Even our limited access to schools and health [care] is now beginning to disappear."

  • In Sri Lanka after the tsunami, entire ways of life for coastal fishing communities were being "extinguished" as the government cleared them from the coasts to make way for hotel development, according to an ActionAid report.

  • The Maldives government used the tsunami as an opportunity to try to clear its citizens out of the majority of the country's livable islands, in order to lease them out for luxury resort development.

These examples illustrate how economic "reforms" and disaster capitalism can cause severe disruption to cultural identities, community structures, and access to basic services and opportunities, exacerbating human suffering.

Resistance and Recovery

The shock doctrine - the use of crisis to impose radical free-market policies - has faced growing resistance worldwide. Communities and nations are fighting back, rejecting the imposition of neoliberal "shock therapy" and instead reclaiming control over their economies and societies.

In Latin America, countries have shifted towards more socialist and democratic policies, rolling back the privatization and deregulation pushed by free-market ideologues. Grassroots efforts, like the rebuilding of New Orleans after Hurricane Katrina, demonstrate how people can collectively shape their own recovery, rather than allowing disaster capitalists to exploit crises for profit.

This resistance signals a rejection of the notion that crises must be met with extreme, undemocratic measures. Instead, there is a growing belief that communities should have the power to democratically determine their own economic and social futures, rather than having them dictated by outside forces. This shift represents an important challenge to the shock doctrine's hold over the global order.

Here are specific examples from the context that support the key insight about resistance and recovery against the shock doctrine:

  • Grassroots rebuilding efforts in New Orleans post-Katrina: After Hurricane Katrina, residents of New Orleans' Lower Ninth Ward began "reinvading" their old public housing projects that were slated for demolition. Volunteers helped clean out apartments and raised money to buy generators and solar panels, with one resident declaring "My home is my castle, and I'm taking it back." This represented a grassroots effort to reclaim their community in the face of disaster capitalism.

  • Latin America's shift towards more socialist policies: In the wake of the economic shocks and torture inflicted by the Chicago School policies in Chile, many in Latin America saw a direct connection between these neoliberal reforms and the repression used to maintain inequality. This led to a broader shift in Latin America towards more socialist, anti-neoliberal policies, exemplified by leaders like Evo Morales in Bolivia who saw their fight as a "continuity of the fight of our ancestors" against colonial oppression.

  • Residents of Caracas rebuilding their own barrios: As described, residents of the barrios (slums) of Caracas would "build the city twice" - working construction jobs for the wealthy during the day, then at night and on weekends, using "solidarity", they would build their own homes and communities. This represented a grassroots, community-driven effort to meet their own needs in the face of inequality and lack of government support.

  • Asian Disaster Preparedness Center's emphasis on local knowledge: The executive director of this organization emphasized that "People know best. They know every corner and every detail of their community best. They also know their weak points." This highlights the importance of empowering local communities, rather than relying on top-down, shock doctrine approaches, in disaster recovery and rebuilding efforts.

The key point is that in the face of the shock doctrine's attempts to exploit crises for neoliberal reforms, there are growing grassroots movements and community-driven initiatives that are resisting these tactics and taking control of their own recovery and development in a more democratic, equitable way.


Let's take a look at some key quotes from "The Shock Doctrine" that resonated with readers.

Extreme violence has a way of preventing us from seeing the interests it serves.

When extreme violence occurs, it often distracts us from understanding the true intentions it serves. It can create chaos and fear, making it difficult for people to focus on the underlying motives or interests that may be driving such violence. This quote encourages us to look beyond the immediate act of violence and consider the possible benefits or advantages that certain groups might gain from these destructive actions.

The parties with the most gain never show up on the battlefield.

This quote means that those who reap the greatest benefits from a situation do not involve themselves in the struggles or challenges faced during that situation. They do not participate in the fight, yet they still gain the most from its outcome.

The widespread abuse of prisoners is a virtually foolproof indication that politicians are trying to impose a system--whether political, religious or economic--that is rejected by large numbers of the people they are ruling. Just as ecologists define ecosystems by the presence of certain "indicator species" of plants and birds, torture is an indicator species of a regime that is engaged in a deeply anti-democratic project, even if that regime happens to have come to power through elections.

The quote highlights that the mistreatment of prisoners is a strong sign of a government trying to implement an unpopular political, religious, or economic system. It suggests that when such abuses occur in a regime that has been elected, it indicates an undemocratic agenda. In simpler terms, the quote implies that torture serves as a warning signal for oppressive governance, even if disguised as democratic.

Comprehension Questions

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How well do you understand the key insights in "The Shock Doctrine"? Find out by answering the questions below. Try to answer the question yourself before revealing the answer! Mark the questions as done once you've answered them.

1. What term describes the tactic of using crises to implement ideological agendas rapidly?
2. How do crises affect the democratic process when radical reforms are introduced?
3. What are some typical reforms pushed through during crises under the Shock Doctrine?
4. What is the common consequences of exploiting crises for implementing ideological agendas?
5. What does the term 'corporate-state fusion' refer to in the context of political and economic crises?
6. How do crises typically influence the relationship between corporations and the state?
7. What are the typical consequences of a corporatist state where corporate-state fusion has occurred?
8. What role does the state often play in facilitating the expansion of corporate interests during crises?
9. What strategy do some economic ideologies employ to implement their policies without strong democratic resistance?
10. How do crises facilitate the advancement of radical free-market reforms?
11. What is the rationale behind the use of crisis opportunism by certain economic ideologies?
12. What is the impact of a crisis on democratic processes according to the described economic strategy?
13. What is the primary danger of implementing radical free-market policies during crises?
14. How do economic shock therapies exploit crises to impact democracy?
15. What is meant by a 'democracy-free zone' in the context of economic reforms?
16. Why is it crucial to remain vigilant against anti-democratic tactics during economic crises?
17. How can large-scale crises lead to the loss of public democratic rights?
18. What are the broader impacts of economic reforms during crises beyond financial changes?
19. How can rapid economic reforms affect social structures within a community?
20. Why is it essential to consider the non-economic effects of economic reforms?
21. What is the term used for the use of crises to implement radical free-market policies?
22. How have communities worldwide reacted to the implementation of neoliberal policies during crises?
23. What growing trend is seen among communities in response to crisis exploitation by market forces?

Action Questions

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"Knowledge without application is useless," Bruce Lee said. Answer the questions below to practice applying the key insights from "The Shock Doctrine". Mark the questions as done once you've answered them.

1. How can individuals and communities better prepare to protect and assert their democratic rights in the face of potential crisis-driven policy changes?
2. What steps can you take to increase public participation in policy-making processes that may be influenced by corporate interests during crises?
3. What steps can you take to increase public participation in policy-making processes that may be influenced by corporate interests during crises?
4. What steps can you take to increase public participation in policy-making processes that may be influenced by corporate interests during crises?
5. What steps can you take to increase public participation in policy-making processes that may be influenced by corporate interests during crises?
6. How can you stay informed and resist external influences during times of crisis?
7. How can you educate yourself and others about the impact of emergency economic measures on democratic processes in your community?
8. What steps can you take to ensure public participation in economic decision-making processes during crises?
9. What steps can you take in your community to raise awareness about the human consequences of economic changes?
10. How can you engage in or support community-driven initiatives in your local area that foster collective control over economic and social decisions?
11. What steps can you take to promote democratic decision-making and resist external control during crises in your community?

Chapter Notes

INTRODUCTION Blank Is Beautiful: Three Decades of Erasing and Remaking the World

Here are the key takeaways from the chapter:

  • The Shock Doctrine: The idea that crises, whether natural disasters or man-made, are exploited by free-market ideologues to impose radical, pro-corporate policies without public consent. This has been the modus operandi of Milton Friedman's movement for the past three decades.

  • Disaster Capitalism: The process of using large-scale crises to advance radical free-market policies, often under the guise of "reconstruction" or "reform." Examples include the privatization of New Orleans' public school system after Hurricane Katrina and the imposition of shock therapy in post-invasion Iraq.

  • Friedman's Strategic Approach: Friedman believed that "only a crisis—actual or perceived—produces real change" and that it was crucial to act swiftly to impose radical free-market reforms before the crisis-racked society could "slip back into the 'tyranny of the status quo.'"

  • Torture as a Metaphor: The techniques of torture, designed to disorient and shock prisoners into compliance, are used as a metaphor for the shock doctrine's underlying logic of using collective trauma to push through unpopular policies.

  • The Corporatist State: Rather than freeing the market from the state, the shock doctrine has resulted in a merging of corporate and political power, creating a "corporatist" system characterized by massive wealth transfers to private hands, growing inequality, and the aggressive use of surveillance and incarceration.

  • The Dangerous Ideology: The shock doctrine represents a fundamentalist, authoritarian strain of capitalism that is intolerant of pluralism and demands the complete erasure of existing social and economic structures to make way for its purist vision. This makes it a dangerous ideology akin to other closed, apocalyptic belief systems.

1.   The Torture Lab: Ewen Cameron, the CIA and the Maniacal Quest to Erase and Remake the Human Mind

Here are the key takeaways from the chapter:

  • Ewen Cameron's Experiments: Ewen Cameron, a psychiatrist at the Allan Memorial Institute in Montreal, conducted experiments in the 1950s funded by the CIA to erase and remake the human mind. He used techniques like massive doses of electroshock, sensory deprivation, and drug-induced comas to try to regress patients to a "blank slate" state.

  • Connections to Torture Techniques: Cameron's methods, as well as the sensory deprivation experiments of Donald Hebb at McGill University, formed the scientific basis for the CIA's "Kubark" manual on interrogation techniques, which were later used in torture practices in Latin America and the War on Terror.

  • Destruction vs. Reconstruction: While Cameron was able to effectively destroy his patients' personalities and memories, he was unable to successfully "rebuild" them as he had intended. Similarly, the architects of the Iraq War believed that destroying the existing system would create a blank slate for rebuilding, but they were unable to effectively reconstruct a new model country.

  • Lasting Trauma: Gail Kastner, one of Cameron's former patients, suffered lifelong physical and psychological damage from the experiments, including memory loss, regression, and PTSD-like symptoms. Her experience represents the lasting trauma inflicted on the victims of these mind control programs.

  • Covert Operations and Plausible Deniability: The CIA's funding and involvement in these mind control experiments was kept secret for decades, allowing the agency to maintain plausible deniability about its role in developing torture techniques used by proxy forces and later adopted more openly after 9/11.

  • Shock as a Political Tool: The chapter explores how "shock" - whether from disasters, wars, or coercive interrogation techniques - can be exploited by governments and corporations to push through radical economic and political changes, a phenomenon the author calls "disaster capitalism."

2.   The Other Doctor Shock: Milton Friedman and the Search for a Laissez-Faire Laboratory

Here are the key takeaways from the chapter:

  • The Chicago School of Economics and its Radical Free-Market Ideology: The University of Chicago Economics Department in the 1950s was home to a group of conservative academics, led by Milton Friedman, who were on a mission to fundamentally revolutionize the economics profession. They believed in an idealized vision of a pure, self-regulating capitalist system, and saw any government intervention in the economy as a distortion that needed to be eliminated.

  • The Chicago School's Search for a "Laissez-Faire Laboratory": Unable to test their theories in the real world, the Chicago School economists sought to create a "laboratory" where they could implement their radical free-market policies. They found this opportunity in Chile, where they trained a generation of Chilean economists, known as the "Chicago Boys," to become the intellectual leaders of the country.

  • The U.S. Government's War against Developmentalism: The U.S. government, under pressure from corporate interests, saw the rise of developmentalist economic policies in Latin America as a threat and sought to undermine them. This led to the CIA-backed coups in Iran and Guatemala, as well as the U.S. government's efforts to fund the Chicago School's influence in Chile.

  • The Coup in Chile and the Chicago Boys' Economic "Shock Treatment": When the military coup against Salvador Allende's government in Chile succeeded in 1973, the Chicago Boys were ready with a detailed economic program to radically transform the country along neoliberal lines. This "shock treatment" approach, combined with the shock of the coup itself and the use of torture, allowed the Chicago School to implement its vision in Chile.

  • The Broader Implications: Shock Doctrine and the Global Counterrevolution: The convergence of the shock of the coup, the economic "shock treatment," and the use of torture techniques in Chile represented a broader pattern that would be replicated in other countries, creating what the author calls a "live laboratory" for the Chicago School's global counterrevolution against developmentalism and the welfare state.

3.   States of Shock: The Bloody Birth of the Counterrevolution

Here are the key takeaways from the chapter:

  • The Violent Seizure of Power: On September 11, 1973, General Augusto Pinochet and the Chilean military staged a violent coup d'état against the democratically elected government of Salvador Allende. This was not a "war" as Pinochet claimed, but a one-sided attack where the military had complete control and Allende's supporters had no armed defense. The coup was designed to be as dramatic and traumatic as possible, with the presidential palace in flames, Allende's body being carried out, and his colleagues lying facedown in the street.

  • The Chicago Boys and the Counterrevolution: The coup paved the way for the Chicago School economists, known as the "Chicago Boys," to implement their radical free-market policies in Chile. They had previously tried to introduce these ideas peacefully but were overwhelmingly rejected. Now, with the military in control, no one besides a handful of men in uniform needed to agree with them. The coup was the beginning of a "counterrevolution" - the first concrete victory in the Chicago School's campaign to seize back the gains that had been won under developmentalism and Keynesianism.

  • Shock Therapy and Economic Disaster: The Chicago Boys convinced Pinochet to implement "shock therapy" - a rapid and severe program of privatization, deregulation, and cuts to social spending. This caused an economic disaster, with inflation reaching 375% in 1974 and unemployment skyrocketing. The Chicago Boys argued the problem was not with their theory, but that it was not being applied with sufficient strictness, leading to even more extreme measures.

  • The Myth of the "Chilean Miracle": The period of steady growth in Chile that is often held up as proof of the "Chilean miracle" did not begin until the mid-1980s, a full decade after the Chicago Boys' policies were implemented. The earlier period was marked by economic collapse, with the debt exploding and unemployment reaching 30%. Chile under Pinochet and the Chicago Boys was not a capitalist state with a liberated market, but a corporatist state where a small elite became super-rich through debt and public subsidies.

  • Disappearances and State Terror: To enforce their economic policies, the military juntas in Chile, Argentina, and Uruguay used widespread disappearances, torture, and extrajudicial killings. Victims were often taken from their homes or workplaces in broad daylight, with neighbors forced to witness the spectacle of terror. The juntas justified these tactics as a "war on terror" against Marxist guerrillas, even though the actual threat was greatly exaggerated or manufactured.

  • The Spread of the Counterrevolution: The Chicago School counterrevolution quickly spread to other countries in Latin America's Southern Cone, including Brazil, Uruguay, and Argentina, where military juntas implemented similar free-market policies backed by state terror. These regimes collaborated through Operation Condor, sharing information and techniques for repression.

4.   Cleaning the Slate: Terror Does Its Work

Here are the key takeaways from the chapter:

  • Genocide vs. "Dirty War": The chapter argues that the killings and disappearances in Argentina during the military dictatorship were not just a "dirty war" between two sides, but a deliberate attempt to destroy a "substantial part" of Argentine society - a genocide targeting leftists, unionists, intellectuals, and others who represented an alternative vision to the junta's free-market agenda.

  • Terror as a Tool of Economic Transformation: The chapter contends that the terror and human rights abuses perpetrated by the military juntas were not separate from, but integral to, the implementation of free-market policies. The juntas used systematic violence to uproot and erase the left-wing movements and culture that opposed laissez-faire capitalism.

  • Coordinated Regional Repression: The chapter describes how the military dictatorships in the Southern Cone countries coordinated their efforts to eliminate leftist opposition through Operation Condor, a cross-border campaign of kidnapping, torture, and assassination.

  • Corporate Complicity: The chapter provides evidence that multinational corporations like Ford and Mercedes-Benz actively collaborated with the military regimes, providing names of union leaders to be "disappeared" and even hosting detention and torture facilities on factory grounds.

  • Torture as "Curing": The chapter explains how the military torturers saw their brutal methods as a kind of "therapeutic" treatment to "cure" prisoners of their leftist beliefs and commitment to solidarity, replacing it with individualism and shame.

  • Erasing Culture and Identity: The juntas launched systematic campaigns to destroy left-wing culture, banning books, music, and theater, and even stealing the children of disappeared activists to be raised by "normal" families aligned with the regime's values.

  • Neoliberalism Imposed by Force: The chapter argues that the free-market transformation imposed by the Chicago Boys in the Southern Cone could not have been achieved without the violent repression carried out by the military dictatorships, demonstrating the inherent tension between neoliberalism and democracy.

5.   “Entirely Unrelated”: How an Ideology Was Cleansed of Its Crimes

Here are the key takeaways from the chapter:

  • The Intellectual Firewall: After the crimes of the Southern Cone dictatorships were exposed, the Chicago School economists and the human rights movement created an "intellectual firewall" that prevented any meaningful connection between the economic ideology and the violent political repression used to implement it. Friedman and other economists refused to acknowledge the link between their policies and the use of terror, while the human rights movement focused narrowly on documenting abuses without examining their political and economic roots.

  • The Limitations of the Human Rights Framing: The human rights movement's focus on "universal human rights" violations, rather than the specific political and economic goals behind the repression, helped the Chicago School ideology escape its first bloody laboratory largely unscathed. By framing the abuses as isolated "human rights violations" rather than as tools to serve clear political and economic ends, the human rights movement inadvertently reinforced the notion that the economics and the violence were "entirely unrelated."

  • The Role of the Ford Foundation: The Ford Foundation, a major funder of human rights work in the Southern Cone, had previously been a key supporter of the training of the "Chicago Boys" who implemented the neoliberal economic model in Chile and other countries. When the Chicago Boys' policies were enforced through brutal repression, the Ford Foundation shifted to funding human rights groups, but insisted on a narrow, apolitical framing of their work to avoid implicating the foundation's own role in the region.

  • Torture as an Indicator of Anti-Democratic Projects: The widespread use of torture by the Southern Cone dictatorships was not an "excess" or "abuse," but a necessary tool for imposing an economic model rejected by the population. Torture is a reliable indicator that a regime is engaged in an anti-democratic project, whether political, religious or economic, and cannot rule with the consent of the people.

  • The Continuity of Violent Dispossession: The repression and violence used to implement the neoliberal model in the Southern Cone was part of a long history of violent dispossession of the poor and marginalized, as exemplified by the testimony of Sergio Tomasella, a peasant activist who linked his torture to the interests of foreign corporations and the landed oligarchy.

  • The Lasting Impact of the Chicago School Ideology: By failing to hold the Chicago School ideology accountable for the crimes committed in its first laboratory, the subculture of unrepentant ideologues was given immunity to spread their dangerous ideas around the world, leading to further instances of corporatist massacres and brutal attempts to remake societies along "free market" lines.

6.  Saved by a War: Thatcherism and Its Useful Enemies

Here are the key takeaways from the chapter:

  • Thatcher's Reluctance to Implement Shock Therapy: Despite Hayek's urging, Thatcher was initially hesitant to implement the radical free-market policies championed by the Chicago School in the UK, citing the need for a "high degree of consent" and alignment with British "traditions and Constitution." She recognized that such policies were "quite unacceptable" in a democracy like the UK.

  • Failure of Chicago School Policies in Democracies: The chapter highlights how the Chicago School's free-market policies had been successfully implemented in authoritarian regimes like Chile, but struggled to gain traction in democratic countries. Leaders like Nixon and Thatcher were reluctant to impose such unpopular measures for fear of losing elections.

  • Friedman's "Crisis Hypothesis": Friedman theorized that economic crises could create windows of opportunity for implementing radical free-market reforms, as the normal political constraints would be suspended in the face of a perceived emergency. He aimed to have his ideas "ready" to be implemented when such crises occurred.

  • The Falklands War as a Political Opportunity: The Falklands War provided Thatcher with the political cover she needed to launch her radical economic agenda. The patriotic fervor and "Falklands spirit" allowed her to break the power of the coal miners' union and embark on a sweeping privatization program, overcoming previous democratic constraints.

  • Crises as "Democracy-Free Zones": The chapter suggests that economic crises can create "democracy-free zones" where the normal need for consent and consensus is suspended, allowing leaders to implement unpopular policies in the name of emergency response.

  • The Corporatist Agenda Behind the Falklands War: The chapter argues that the Falklands War, despite its military insignificance, had a profound impact on the advancement of the free-market, corporatist agenda championed by the Chicago School. Thatcher's victory in the war enabled her to push through radical economic reforms.

7.   The New Doctor Shock: Economic Warfare Replaces Dictatorship

Here are the key takeaways from the chapter:

  • Hyperinflation and Economic Crisis in Bolivia: In 1985, Bolivia was facing a severe economic crisis, with hyperinflation reaching 14,000% and the country's debt exceeding its entire national budget. This crisis was exacerbated by a U.S.-funded crackdown on Bolivia's coca farmers, which cut off a major source of export revenue.

  • Jeffrey Sachs and Shock Therapy: Sachs, a young Harvard economist, was brought in by the former dictator Hugo Banzer's party to develop an anti-inflation economic plan. Sachs advocated for a "shock therapy" approach, drawing on Keynes's warnings about the dangers of hyperinflation and the rise of fascism in Weimar Germany.

  • Backroom Deals and Betrayal of Voters: Despite running on a nationalist platform, the newly elected president, Víctor Paz Estenssoro, secretly collaborated with Sachs and Banzer's party to implement a radical neoliberal restructuring of the Bolivian economy, without the knowledge or consent of his own cabinet or the Bolivian electorate.

  • Repression and Authoritarian Measures: To implement the shock therapy program, the Paz government declared a "state of siege," cracking down on protests and labor unions. Hundreds of union leaders were arrested and flown to remote Amazon camps, effectively suspending civil liberties and democratic rights during the critical implementation period.

  • Devastating Social Impacts: The shock therapy measures led to a sharp increase in unemployment, a 40% drop in real wages, and the elimination of hundreds of thousands of full-time jobs with benefits. This resulted in widespread poverty, malnutrition, and the growth of the informal and illegal economies, including the coca and cocaine trade.

  • Rebranding Shock Therapy as "Democratic": Despite the authoritarian measures used to implement it, the Bolivian shock therapy experiment was hailed as a triumph of "democratic capitalism," allowing Sachs and others to present it as a model for how neoliberal reforms could be achieved within a democratic framework, in contrast with the Pinochet dictatorship in Chile.

8.   Crisis Works: The Packaging of Shock Therapy

Here are the key takeaways from the chapter:

  • Hyperinflation as an Opportunity for Shock Therapy: The chapter argues that for hard-core Chicago School ideologues, hyperinflation was not a problem to be solved, but a "golden opportunity to be seized." Hyperinflation created a "state of exception" that allowed for the suspension of democratic rules and the imposition of radical free-market reforms.

  • Passing on Odious Debts: The chapter explains how newly democratic governments in Latin America were forced to take on debts accumulated by the previous military dictatorships, even though these debts were considered "odious" and illegitimate. This created a major burden for the new democracies.

  • The Volcker Shock and the Debt Crisis: The dramatic increase in interest rates by the U.S. Federal Reserve under Paul Volcker, known as the "Volcker Shock," led to a massive debt crisis in the developing world, as interest payments on foreign debts skyrocketed. This compounded the economic challenges faced by new democracies.

  • Crisis Opportunism at the IMF and World Bank: The chapter argues that the IMF and World Bank, dominated by Chicago School economists, deliberately leveraged economic crises to advance a radical free-market agenda through "structural adjustment" programs, even though these policies had little to do with stabilizing economies.

  • The Packaging of Shock Therapy: The chapter examines how governments like Argentina's used the cover of hyperinflation crises to implement sweeping privatization and deregulation programs, often without public consent. This "packaging" of shock therapy with stabilization measures was a key tactic.

  • The Role of Chicago Boys: The chapter highlights the extensive influence of economists trained at the University of Chicago, known as "Chicago Boys," who occupied key positions at the IMF, World Bank, and in the governments of countries undergoing economic crises. This allowed them to shape policy in line with the Chicago School agenda.

  • Crisis as a Self-Reinforcing Cycle: The chapter suggests that the Chicago School model, with its emphasis on deregulation and export-oriented economies, created a crisis-prone global economy. This in turn generated more opportunities for the imposition of shock therapy policies, leading to a self-reinforcing cycle.

9.   Slamming the Door on History: A Crisis in Poland, a Massacre in China

  • Solidarity Movement in Poland: The Solidarity movement in Poland was a grassroots pro-democracy and workers' rights movement that challenged the Communist Party's authoritarian rule. It grew rapidly, gaining 10 million members within a year, and sought to transform the state-run economy into a system of democratic workers' cooperatives.

  • Imposition of Shock Therapy: When Solidarity came to power in 1989, they were faced with a severe economic crisis. Under pressure from the IMF and the U.S. government, Solidarity's leaders abandoned their vision for a democratic, worker-controlled economy and instead implemented a radical "shock therapy" program of rapid privatization and free-market reforms.

  • Exploitation of "Extraordinary Politics": The Polish finance minister, Leszek Balcerowicz, deliberately exploited the state of "extraordinary politics" during the transition to push through shock therapy policies that were deeply unpopular and antithetical to Solidarity's original goals, arguing that normal democratic processes did not apply in this crisis situation.

  • Tiananmen Square Massacre: In China, the government's response to pro-democracy protests in Tiananmen Square in 1989 was a violent crackdown, with the military killing hundreds or even thousands of protesters. This allowed the Chinese government to then accelerate its own free-market reforms, which had previously faced popular resistance, by eliminating organized opposition through terror.

  • Friedman's Influence: Economist Milton Friedman played a key advisory role in both Poland and China, encouraging the governments to rapidly implement free-market policies despite popular opposition. He saw no connection between the violence required to enforce these policies and the economic advice he provided.

  • Betrayal of Workers: In both Poland and China, the imposition of shock therapy policies led to severe economic dislocation, unemployment, and a decline in living standards for workers, betraying the original goals of the pro-democracy movements. This bred deep cynicism and anger among the working class.

  • Myth of Peaceful Transition: Despite the unrest, strikes, and electoral backlash against shock therapy in Poland, the country was often held up as a model of a peaceful, democratic transition to a free-market economy. The reality was much more complex, with democracy being used to resist the imposition of radical capitalism.

10.   Democracy Born in Chains: South Africa’s Constricted Freedom

Here are the key takeaways from the chapter:

  • The Freedom Charter and the ANC's Economic Vision: The Freedom Charter, drafted in 1955, enshrined the ANC's vision for economic transformation in a post-apartheid South Africa. It called for the nationalization of key industries and the redistribution of wealth and resources to the people. This vision of economic justice was a core part of the ANC's liberation struggle.

  • Negotiating the Transition: During the negotiations to end apartheid in the early 1990s, the ANC leadership was outmaneuvered by the National Party in the economic negotiations. The National Party was able to insert various constraints and safeguards into the new constitution and economic policies that effectively prevented the ANC from implementing the economic vision of the Freedom Charter.

  • The Influence of Global Economic Orthodoxy: The ANC leadership was heavily influenced by the prevailing global economic orthodoxy of the time, which emphasized free markets, privatization, and fiscal austerity. Fearing backlash from financial markets and international institutions like the IMF, the ANC abandoned its more radical economic agenda and instead embraced neoliberal policies.

  • The Consequences of Compromise: The ANC's compromises during the transition period resulted in a post-apartheid South Africa that maintained the fundamental economic inequalities of the apartheid era. Wealth and land remained concentrated in the hands of the white minority, while the majority black population continued to face high levels of poverty, unemployment, and lack of access to basic services.

  • The Betrayal of the Freedom Charter: The ANC's failure to implement the economic vision of the Freedom Charter was seen by many as a betrayal of the promises of the liberation struggle. This has led to disillusionment and anger among the ANC's base, who feel that the benefits of political freedom have not translated into meaningful economic transformation.

  • The Constraints of "Transitional" Democracy: The chapter highlights how the ANC government's power was constrained by various "technical" and "administrative" mechanisms put in place during the transition, such as central bank independence, trade agreements, and debt servicing. These constraints effectively limited the new government's ability to enact the kind of economic policies promised in the Freedom Charter.

11.  Bonfire of a Young Democracy: Russia Chooses “The Pinochet Option”

Here are the key takeaways from the chapter:

  • Gorbachev's Reforms and the West's Demands: Mikhail Gorbachev's policies of glasnost (openness) and perestroika (restructuring) had led to a remarkable process of democratization in the Soviet Union. However, at the 1991 G7 Summit, the West pressured Gorbachev to embrace radical economic "shock therapy" reforms immediately, threatening to abandon support for the transition if he did not comply.

  • Yeltsin's Rise and the Assault on Democracy: Boris Yeltsin emerged as a defender of democracy during the 1991 coup attempt against Gorbachev. Yeltsin then used this newfound power to dissolve the Soviet Union and gain control, inviting Western "Chicago School" economists to implement shock therapy reforms in Russia. This led to the violent suppression of the elected parliament in 1993, as Yeltsin sought to impose the economic program by force.

  • Rapid Privatization and the Rise of the Oligarchs: Yeltsin's "Chicago Boys" team implemented a rapid privatization program, selling off state assets at fire-sale prices. This led to the rise of a class of powerful oligarchs who amassed immense wealth, often through corrupt and opaque deals, while the majority of Russians fell into poverty.

  • Corruption and Cronyism: The privatization process was rife with corruption, as Yeltsin's team and the new oligarchs enriched themselves at the expense of the public. Western advisers like Jeffrey Sachs were complicit in this, and even Harvard academics were found to have profited personally from the reforms they were overseeing.

  • Devastating Social Impacts: The shock therapy reforms led to a dramatic decline in living standards for most Russians, with poverty, homelessness, alcoholism, drug addiction, and suicide rates all skyrocketing. Russia's population also declined significantly during this period.

  • Parallels to Iraq: The chapter draws parallels between the West's approach to economic "reform" in Russia and its later efforts in Iraq, noting the shared goals of erasing existing institutions to create a blank slate for capitalist transformation, as well as the tendency to blame "corruption" and cultural factors when the reforms fail to deliver the promised benefits.

  • Frontier Capitalism and the Cycle of Crises: The chapter argues that the pattern of crisis-driven privatization and deregulation, followed by corruption and cronyism, is a recurring feature of "frontier capitalism" as it expands into new domains. This cycle of crises and pillage has been repeated in various countries, with the West often supporting authoritarian measures to defend the economic reforms.

12.  The Capitalist Id: Russia and the New Era of the Boor Market

Here are the key takeaways from the chapter:

  • Sachs' Failed Attempt to Secure Aid for Russia: Jeffrey Sachs, a prominent economist, had proposed a $30 billion aid package for Russia to help with its transition to a market economy after the collapse of the Soviet Union. However, Sachs was unable to secure this aid from the U.S. Treasury and the IMF, despite his reputation and previous success in securing aid for other countries. This failure was a turning point for Sachs, as he began to criticize the lack of serious effort and debate from policymakers in Washington.

  • The Changing Dynamics of Capitalism and the End of the Cold War: The collapse of the Soviet Union marked the end of the Cold War and the need for capitalism to compete with an alternative economic model. This led to the abandonment of the Keynesian policies and social welfare programs that had been implemented to make capitalism more appealing during the Cold War era. With the removal of this competitive pressure, capitalism was able to revert to its more savage, unregulated form.

  • The "Crisis Hypothesis" and the Deliberate Creation of Crises: Economists like John Williamson and Michael Bruno at the World Bank advocated the idea of deliberately creating or exacerbating economic crises in order to push through unpopular, market-oriented reforms. This "crisis hypothesis" was seen as a way to overcome political resistance to shock therapy policies.

  • The IMF's Use of "Statistical Malpractice": The case of Davison Budhoo, a former IMF employee, highlighted allegations that the IMF had deliberately manipulated economic data and statistics to exaggerate the economic problems of countries like Trinidad and Tobago, in order to force them to accept IMF-mandated structural adjustment policies.

  • The Absence of Mass Movements in Sachs' Perspective: The chapter notes that Sachs' approach to economic reform is focused on elite policymakers and technocrats, without considering the role of mass popular movements in pressuring governments to adopt more progressive economic policies, as was the case with the New Deal in the United States.

13.   Let It Burn: The Looting of Asia and “The Fall of a Second Berlin Wall”

Here are the key takeaways from the chapter:

  • The Asian Economic Crisis of 1997-1998: The crisis was caused by a classic fear cycle, where a rumor about Thailand's inability to back its currency triggered a stampede by investors, leading to a massive outflow of capital from the region. This exposed the vulnerabilities of the "Asian Tiger" economies, which had been touted as paragons of economic success.

  • The IMF's Response and Agenda: Rather than providing emergency stabilization loans, the IMF used the crisis as leverage to impose a sweeping set of "reforms" on the affected countries, stripping them of trade protections, state intervention, and other policies that had underpinned their rapid growth. This was driven by the Chicago School ideology of free-market fundamentalism.

  • Destruction of the Asian Middle Class: The IMF's policies led to massive job losses, business closures, and a dramatic decline in living standards, wiping out much of the emerging middle class that had been the hallmark of the "Asian Miracle." This resulted in a rise in poverty, child labor, and human trafficking.

  • Opportunism of Western Firms: The crisis created a "fire sale" of Asian assets, allowing Western multinational firms to acquire local companies and public services at bargain prices, often dismantling them to eliminate competition. This was facilitated by the IMF's demands for privatization and deregulation.

  • Backlash and Resistance: The human costs of the IMF's policies sparked public outrage and a growing anti-globalization movement, which began to challenge the dominance of Chicago School ideology and the institutions like the IMF that were advancing it. This set the stage for a broader confrontation over the direction of the global economy.

  • Lasting Damage: The crisis had long-term negative impacts on the affected countries, including persistently high unemployment, rising suicide rates, and the erosion of the middle class. The IMF's actions were criticized even by its own internal evaluation as being "ill-advised" and going beyond what was necessary to resolve the crisis.

14.   Shock Therapy in the U.S.A.: The Homeland Security Bubble

Here are the key takeaways from the chapter:

  • Rumsfeld's "Transformation" Project: Rumsfeld aimed to bring the revolution in outsourcing and branding from the corporate world into the U.S. military, shedding full-time troops in favor of a small core of staffers propped up by cheaper temporary soldiers and contractors.

  • Cheney and Rumsfeld as "Proto-Disaster Capitalists": Cheney and Rumsfeld had long histories of pushing for the privatization of government functions, from Cheney's work at Halliburton to Rumsfeld's patenting of drugs that could profit from pandemics.

  • 9/11 and the "Disaster Capitalism Bubble": The Bush administration exploited the post-9/11 climate of fear to dramatically increase the policing, surveillance, detention, and war-waging powers of the executive branch, then immediately outsourced these functions to private companies.

  • The Department of Homeland Security as a "Hollow Shell": The Department of Homeland Security was built from the ground up as an outsourced model of government, with the private sector providing the majority of its capabilities and services.

  • The Disaster Industry as a "Booming Economy": The War on Terror has created a massive new market for homeland security and private military contractors, with the government acting as the venture capitalist fueling this growth.

  • Privatized Surveillance and Detention: Private companies have taken over key functions of the security state, from operating surveillance systems to running prisons and conducting interrogations, often with perverse financial incentives.

  • The Incentive to Perpetuate Fear and Conflict: The disaster industry has a vested interest in maintaining a climate of fear and the perception of an ongoing threat, as this ensures the continuation of lucrative government contracts.

  • Lack of Public Debate and Oversight: The transformation of core government functions into a profit-driven private industry has occurred with little public debate or scrutiny over the implications for civil liberties and democratic accountability.

15.   A Corporatist State: Removing the Revolving Door, Putting in an Archway

Here are the key takeaways from the chapter:

  • Conflation of Corporate and National Interests: The chapter discusses how politicians, especially those with corporate backgrounds, often conflate the interests of multinational corporations with the national interest of the United States. This leads to a situation where policies and military interventions are driven by a desire to protect corporate profits rather than genuine national security concerns.

  • Revolving Door between Government and Industry: The chapter highlights the "revolving door" phenomenon, where government officials leave their posts to take lucrative jobs in the private sector, often with companies that benefited from their policies while in office. This allows the disaster capitalism complex to maintain a strong influence within the government.

  • Conflict of Interest and Refusal to Divest: The chapter examines the cases of Donald Rumsfeld and Dick Cheney, who refused to fully divest from their corporate holdings even after taking on high-level government positions. This allowed them to continue profiting from the very disasters and wars they were responsible for shaping.

  • The Power of "Formers": The chapter discusses how the Bush administration relied heavily on "former" government officials, such as James Baker, George Shultz, and Henry Kissinger, to serve as advisers and envoys. These individuals were able to wield significant influence while maintaining their lucrative private-sector interests, creating a blurred line between public service and private profit.

  • Corporatist State: The chapter argues that the Bush administration's actions represent the emergence of a "corporatist state," where the interests of a small corporate elite are closely aligned with and embedded within the right-wing government, leading to a merger of political and corporate power.

  • Disaster Capitalism Complex: The chapter introduces the concept of the "disaster capitalism complex," which refers to the network of companies and individuals who profit from wars, epidemics, natural disasters, and other crises. This complex has become deeply entrenched within the government, shaping policies and decisions to its own advantage.

16.   Erasing Iraq: In Search of a “Model” for the Middle East

Here are the key takeaways from the chapter:

  • The "Shock and Awe" Military Doctrine: This doctrine was designed to overwhelm the enemy through a massive display of military force, including the use of precision-guided weapons and psychological operations. The goal was to induce fear and disorientation in the Iraqi population, rendering them "completely impotent" to resist the invasion.

  • Erasing Iraq's History and Culture: The widespread looting and destruction of Iraq's cultural heritage, including the National Museum, national library, and other important institutions, was seen by some as an intentional effort to erase Iraq's history and identity, clearing the way for the imposition of a new "model" state.

  • The "Model" Theory for the Middle East: The invasion of Iraq was driven by the idea that it could be transformed into a model of free-market democracy that would then spread throughout the region, addressing the perceived "deficit in free-market democracy" that was seen as the root cause of terrorism.

  • Shock Therapy and Privatization: The rapid and sweeping economic reforms imposed on Iraq, including the privatization of state assets, were part of a broader strategy of "shock therapy" designed to quickly and forcefully remake the Iraqi economy along neoliberal lines, regardless of the wishes or needs of the Iraqi people.

  • Dehumanization and Sensory Deprivation: The invasion and occupation of Iraq employed tactics of dehumanization and sensory deprivation, similar to those used in interrogation and torture, to break the will of the Iraqi population and clear the way for the imposition of the new "model" state.

  • Continuity with Past US Interventions: The strategies used in the invasion and occupation of Iraq, including the use of overwhelming force, the destruction of cultural heritage, and the imposition of radical free-market reforms, had precedents in past US interventions, such as the support for military dictatorships in Latin America during the Cold War.

17.   Ideological Blowback: A Very Capitalist Disaster

Here are the key takeaways from the chapter:

  • Bremer's Economic Reforms: Bremer implemented a series of radical free-market reforms in Iraq, including privatizing state-owned enterprises, lowering corporate tax rates, and allowing 100% foreign ownership of Iraqi assets. These reforms were modeled on the "shock therapy" programs implemented in Russia and other former Soviet states.

  • Exclusion of Iraqis from Reconstruction: The reconstruction of Iraq was largely outsourced to U.S. and other foreign corporations, with minimal involvement of Iraqi firms and workers. This was seen by many Iraqis as a form of economic occupation and exploitation.

  • Ideological Blowback: The implementation of free-market reforms and the exclusion of Iraqis from the reconstruction process fueled resentment and resistance, contributing to the rise of sectarian violence, religious extremism, and the insurgency against the U.S. occupation.

  • Hollowing Out of the State: The occupation authority (CPA) was severely understaffed and outsourced most government functions to private contractors, creating a "hollow state" with little oversight or accountability.

  • Contractor Fraud and Mismanagement: Many of the U.S. contractors involved in the reconstruction were accused of fraud, waste, and mismanagement, with little completed work to show for the billions of dollars spent.

  • Failure to Rebuild Public Sector: The ideological aversion to the public sector led to the neglect of Iraq's state-owned enterprises and public infrastructure, further undermining the country's economic and social stability.

  • Rise of Religious and Sectarian Movements: In the absence of effective public services and reconstruction, religious and sectarian movements, such as Moqtada al-Sadr's Mahdi Army, were able to fill the vacuum and gain popular support.

18.   Full Circle: From Blank Slate to Scorched Earth

Here are the key takeaways from the chapter:

  • Bremer's Dismantling of Democracy in Iraq: Paul Bremer, the U.S. administrator in Iraq, systematically dismantled democracy in Iraq by cancelling local elections, handpicking the Iraqi Governing Council, and abandoning plans for national elections. This was done to preserve the economic agenda of the war, which would have been threatened by a democratically elected Iraqi government.

  • Shift to Shock Tactics and Torture: As resistance to the occupation grew, the U.S. shifted to increasingly brutal "shock tactics", including nighttime raids, sensory deprivation, and torture in secret prisons. This mirrored the tactics used in the "Dirty Wars" of Latin America, where economic shock therapy was enforced through repression.

  • Privatization of the Iraq War: The Iraq war saw an unprecedented level of privatization, with private security firms, interrogators, and even recruiters taking on roles traditionally performed by the military. This "privatized warfare" model became a new economic frontier, with crises enabling the expansion of private contractors.

  • Failure of Reconstruction and Shift to Oil Law: The reconstruction efforts in Iraq were a failure, with many private contractors pulling out due to the violence. However, the chaos enabled the Bush administration to push through a radical new oil law that would allow foreign oil companies to keep a large share of Iraq's oil profits.

  • Disaster Capitalism in Iraq: The Iraq war exemplified the "disaster capitalism" model, where crises and chaos are exploited to push through radical free market policies that would otherwise be rejected. The destruction and reconstruction of Iraq became a closed profit loop for certain corporations.

  • Institutionalization of Privatized Warfare: The Bush administration took steps to institutionalize the privatized warfare model developed in Iraq, including creating a "civilian reserve corps" and the Office of Reconstruction and Stabilization, which pre-plans reconstruction efforts for countries that may face future crises.

19.   Blanking the Beach: “The Second Tsunami”

Here are the key takeaways from the chapter:

  • Disaster Capitalism in Sri Lanka: The tsunami disaster in Sri Lanka was exploited by the government and foreign corporations to push through unpopular free-market policies and development plans that had previously been rejected by the public. This included plans to privatize public services, clear coastal areas of fishing communities, and develop high-end tourism resorts.

  • Displacement of Fishing Communities: The government used the tsunami as a pretext to forcibly relocate fishing communities from the coast, clearing the way for tourism development. This was done through the imposition of "buffer zones" that prohibited rebuilding in coastal areas, despite these areas not being the hardest hit.

  • Corporate Takeover of Reconstruction: The government created an unelected "Task Force to Rebuild the Nation" dominated by business executives with ties to the tourism industry. This task force developed reconstruction plans that prioritized the interests of corporations over the needs of tsunami victims.

  • Exploitation of Disaster for Profit: Foreign aid and reconstruction contracts were channeled towards projects that benefited corporations, such as the construction of deep-water fishing ports and luxury resorts, rather than meeting the immediate needs of displaced tsunami survivors.

  • Precedent from Hurricane Mitch: The exploitation of the tsunami disaster in Sri Lanka followed a similar pattern to the exploitation of Hurricane Mitch in Central America in the late 1990s, where disaster was used as a pretext to push through unpopular free-market reforms.

  • Militarized Gentrification: The displacement of coastal communities was enforced through the use of police and private security forces, resulting in a "militarized gentrification" of the coastline to make way for high-end tourism development.

  • Undermining of Democracy: The government's disaster response undermined democratic processes, with elected officials sidelined in favor of an unelected business-led task force. This allowed the imposition of unpopular policies that had previously been rejected by voters.

  • Exacerbation of Ethnic Tensions: The unequal distribution of reconstruction aid and the targeting of certain communities for displacement fueled resentment and contributed to the resumption of the country's civil war.

20.   Disaster Apartheid: A World of Green Zones and Red Zones

Here are the key takeaways from the chapter:

  • Disasters Discriminate: Disasters do not affect everyone equally - they disproportionately impact the dispossessed and marginalized. The chapter argues that disasters are not "great equalizers" but rather expose and exacerbate existing inequalities.

  • Privatization of Disaster Response: In the aftermath of disasters like Hurricane Katrina, the disaster response and recovery efforts were heavily privatized, with lucrative government contracts going to familiar private contractors like Halliburton, Blackwater, and Bechtel. This led to inefficient, wasteful, and unaccountable spending.

  • Green Zones and Red Zones: Disasters create stark divides between the protected "green zones" of the wealthy and privileged, and the neglected "red zones" of the poor and marginalized. This "disaster apartheid" mirrors the segregation seen in places like Iraq's Green Zone.

  • Erosion of the Public Sphere: In the aftermath of Katrina, the public infrastructure and services of New Orleans were not rebuilt, but rather systematically dismantled and privatized, with public schools, housing, healthcare, and transit gutted or handed over to private entities.

  • Disaster Capitalism Complex: A parallel, privatized disaster response industry has emerged, with companies like Blackwater, Fluor, and Bechtel building up their own disaster response capabilities, infrastructure, and workforce. This industry sees disasters as business opportunities and seeks to limit the role of the public sector.

  • Disaster Apartheid Future: The chapter warns of a future in which survival during disasters is determined by wealth, with the wealthy able to buy their way into protected "green zones" while the poor are left to fend for themselves in the "red zones" of neglect and abandonment.

21.   Losing the Peace Incentive: Israel as Warning

Here are the key takeaways from the chapter:

  • The Davos Dilemma: The global economy has continued to thrive despite political instability, wars, and disasters, challenging the conventional wisdom that economic growth requires relative peace and stability. This has been dubbed the "Davos Dilemma".

  • The Rise of the Disaster Capitalism Complex: Certain industries, such as defense, homeland security, heavy construction, and oil and gas, have profited immensely from global instability and disasters, creating a "disaster capitalism complex" that has a vested interest in the continuation of crises and conflicts.

  • Israel as a Model for the Disaster Capitalism Complex: Israel's economy has thrived despite ongoing conflict, with its homeland security and defense industries becoming a major driver of economic growth, leading to a shift away from the pursuit of peace.

  • The Impact of Soviet Jewish Immigration on the Israeli Economy and the Peace Process: The influx of over 1 million Soviet Jewish immigrants in the 1990s reduced Israel's reliance on Palestinian labor, allowing it to seal off the occupied territories and abandon the peace process.

  • The Shift from a "Peace of Markets" to a "Peace of Flags": During the Oslo Accords, the Israeli business community had hoped for a "peace of markets" that would integrate Israel into the global economy, but this was replaced by a focus on the homeland security industry and a retreat from serious peace negotiations.

  • The Transformation of the Israeli Economy: Israel's economy shifted from being dependent on high-tech exports to being heavily reliant on the homeland security and defense industries, creating a powerful incentive for the continuation of conflict.

  • The Creation of a Fortified, Gated Community: Israel has transformed itself into a "fortified gated community," surrounded by a network of walls, checkpoints, and surveillance systems, while the occupied territories have become permanent "red zones" of exclusion and control.

  • The Broader Implications: The model of the "disaster capitalism complex" and the creation of fortified, gated communities may not be unique to Israel, but could become a template for how societies respond to global instability and the categorization of certain populations as "surplus humanity".

CONCLUSION Shock Wears Off: The Rise of People’s Reconstruction

  • Shock Resistance and Collective Memory: The chapter emphasizes the importance of collective memory in building shock resistance. When people have experienced past shocks and crises, they become less vulnerable to being caught off-guard by new shocks, as they have a shared understanding of the mechanics of the "shock doctrine." This allows them to organize more effectively in response to attempts to exploit new crises.

  • Latin America's Resistance to Neoliberalism: The chapter highlights the wave of resistance to neoliberal policies in Latin America, with the election of left-wing leaders who are rolling back the Chicago School agenda and pursuing more democratic and socialist economic models. This includes initiatives like the Bolivarian Alternative for the Americas (ALBA), which aims to create a regional economic integration based on fair trade and mutual aid, rather than free market orthodoxy.

  • People's Reconstruction Efforts: The chapter provides examples of grassroots, community-led reconstruction efforts in the aftermath of disasters, such as the "land reinvasions" by Thai fishing communities after the 2004 tsunami, and the direct action taken by New Orleans residents to rebuild their neighborhoods after Hurricane Katrina. These efforts prioritize local control, self-organization, and the use of existing resources, in contrast to the top-down, corporate-led reconstruction models promoted by the "disaster capitalism complex."

  • Decline of the IMF and World Bank: The chapter notes the declining influence of the International Monetary Fund (IMF) and World Bank, as countries in Latin America and elsewhere have refused to submit to the austerity measures and privatization demands typically attached to loans from these institutions. This represents a significant blow to the global reach of neoliberal economic policies.

  • Backlash Against Neoliberalism and the Rise of Nationalism: The chapter acknowledges that the backlash against neoliberal policies has sometimes taken the form of reactionary nationalism and scapegoating of vulnerable groups, as seen in the rise of far-right movements in Eastern Europe and Russia. However, it argues that the most promising resistance is coming from grassroots, democratic socialist movements that are challenging the core tenets of free market fundamentalism.


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