Racism, Obama and the Fall of the American Economy, The Law of the Jungle By FIDEL CASTRO

Trade, within a society and between countries, is the exchange of goods and services produced by human beings. The owners of the means of production appropriate the profits. As a class, they are the leaders of the capitalist state and they boast of fostering development and social wellbeing through market. This they worship as an infallible God.

In every country there is competition between the strongest and the weakest; the ones with more physical energy and better fed, those who learned how to read and write, who attended school and have more experience accumulated; the ones with more extensive social relations and more resources, and those within society who fail to have these advantages.

Now, as far as the countries is concerned, there are differences between those with a better climate and more arable land, more water and more natural resources in the area where they are located, when there are no more territories to conquer; the ones mastering technology, having greater development and handling unlimited media resources and those who, on the contrary, do not enjoy any of these prerogatives. These are the sometimes enormous differences between the rich and the poor nations.

It´s the law of the jungle.

There are no differences between ethnic groups, however, when it comes to the mental faculties of the human being. This has been thoroughly proven by science. The present society is not the natural way in which human life evolved, but rather a creation of the mentally developed man without which his life would be inconceivable. Therefore, what is at stake is whether the human being will be able to survive the privilege of having a creative mind.

The developed capitalist system, epitomized by the country with a privileged nature where the European white man brought his ideas, dreams and ambitions, is today in a crisis. But, it is not the usual crisis happening once in a number of years; not even the traumatic crisis of the 1930s but the worst of all crises since the world started to pursue this growth and development model.
The current crisis of the developed capitalist system is taking place when the empire is about to change leadership in the elections to be held in twenty-five days; it was all that was left to see.
The candidate of the two main parties that will say the last word in these elections are trying to persuade the bewildered voters --many of whom have never cared to cast a vote- that as candidates to the presidency they can secure the wellbeing and consumerism of what they describe as a people of middle class only, even though they are not planning to introduce any real changes to what they consider the most perfect economic system the world has ever known. The same world that, in their respective minds, is less important than the happiness of over three hundred million people who account for less than five percent of the world population. The fate of the remaining ninety-five percent of human beings, peace and war, the fit or unfit-for-breathing air, will highly depend on the decisions of the administrative leader of the empire, whether or not that constitutional position has any power at a time of nuclear weapons and space shields moved by computers in circumstances where every second counts and when ethical principles keep loosing their value. Still, the more or less nefarious role of the President of that country cannot be overlooked.

Racism is deeply-rooted in the United States where the mind of millions of people can hardly reconcile with the notion that a black man, with his wife and children could live in the White House, which is precisely called White.

It´s a miracle that the Democratic candidate has not met the same destiny as Martin Luther King, Malcolm X and others who only a few decades ago dreamed of justice and equality. He is in the habit of looking at his adversary with serenity and of smiling at the dialectic predicament of an opponent gazing into space.

The Republican candidate, on the other hand, who likes to enhance his reputation as a belligerent man, was one of the worst students in his class at West Point. He has confessed that he did not know any Mathematics; it can thus be assumed that he knew less of the complicated economic science.

The truth is his adversary surpasses him in cleverness and composure.
Something McCain has aplenty is age, and his health condition is not safe.

I am bringing up these data to indicate that eventually -if anything went wrong with the candidate´s health, in case he is elected- the lady of the riffle, the inexperienced former governor of Alaska could become President of the United States. It can be noticed that she does not know a thing.

Meditating on the current US public debt -$10,266 trillions- that President Bush is laying on the shoulders of the new generations in that country, I took to calculating how long it would take a man to count the debt that he has doubled in eight years.

A man working eight hours a day, without missing a second, and counting one hundred one-dollar bills per minute, during 300 days in the year, would need 710 billion years to count that amount of money.

I could not find a more graphic way to describe the volume of money that is practically mentioned every day now.

In order to avoid a general state of panic, the US administration has declared that it will secure deposits that do not exceed 250 thousand dollars. It will be managing banks and such funds as Lenin would never have thought of counting with an abacus.

We might be wondering about the contribution of Bush´s administration to Socialism. But, let´s not entertain any illusions. Once the banking operations go back to normal, the imperialists will return the banks to the private business as some other countries in this hemisphere have already done. The peoples always foot the bill.

Capitalism tends to reproduce itself under any social system because it is based on selfishness and on man´s instincts.

The only choice left to human society is to overcome this contradiction; otherwise it would not be able to survive.

At this time, the ocean of money being poured into the world finances by the central banks of the developed capitalist countries is dealing a hard blow to the Stock Exchanges of the countries which resort to these institutions in an effort to beat their economic underdevelopment. Cuba has no Stock Exchange. We shall certainly find more rational and more socialist ways of financing our development.

The current crisis and the brutal measures of the US administration to save itself will bring more inflation, more devaluation of the national currencies, more painful losses in the markets, lower prices for basic export commodities and more unequal exchange. But, they will also bring to the peoples a better understanding of the truth, a greater conscience, more rebelliousness and more revolutions.

We shall see how the crisis develops and what happens in the United States in twenty-five days.

October 13, 2008, CounterPunch

Now is the Time to Resist Wall Street's Shock Doctrine by Naomi Klein

I wrote The Shock Doctrine in the hopes that it would make us all better prepared for the next big shock. Well, that shock has certainly arrived, along with gloves-off attempts to use it to push through radical pro-corporate policies (which of course will further enrich the very players who created the market crisis in the first place...).

The best summary of how the right plans to use the economic crisis to push through their policy wish list comes from Former Republican House Speaker Newt Gingrich. On Sunday, Gingrich laid out 18 policy prescriptions for Congress to take in order to "return to a Reagan-Thatcher policy of economic growth through fundamental reforms." In the midst of this economic crisis, he is actually demanding the repeal of the Sarbanes-Oxley Act, which would lead to further deregulation of the financial industry. Gingrich is also calling for reforming the education system to allow "competition" (a.k.a. vouchers), strengthening border enforcement, cutting corporate taxes and his signature move: allowing offshore drilling.

It would be a grave mistake to underestimate the right's ability to use this crisis -- created by deregulation and privatization -- to demand more of the same. Don't forget that Newt Gingrich's 527 organization, American Solutions for Winning the Future, is still riding the wave of success from its offshore drilling campaign, "Drill Here, Drill Now!" Just four months ago, offshore drilling was not even on the political radar and now the U.S. House of Representatives has passed supportive legislation. Gingrich is holding an event this Saturday, September 27 that will be broadcast on satellite television to shore up public support for these controversial policies.
What Gingrich's wish list tells us is that the dumping of private debt into the public coffers is only stage one of the current shock. The second comes when the debt crisis currently being created by this bailout becomes the excuse to privatize social security, lower corporate taxes and cut spending on the poor. A President McCain would embrace these policies willingly. A President Obama would come under huge pressure from the think tanks and the corporate media to abandon his campaign promises and embrace austerity and "free-market stimulus."

We have seen this many times before, in this country and around the world. But here's the thing: these opportunistic tactics can only work if we let them. They work when we respond to crisis by regressing, wanting to believe in "strong leaders" - even if they are the same strong leaders who used the September 11 attacks to push through the Patriot Act and launch the illegal war in Iraq.
So let's be absolutely clear: there are no saviors who are going to look out for us in this crisis.

Certainly not Henry Paulson, former CEO of Goldman Sachs, one of the companies that will benefit most from his proposed bailout (which is actually a stick up). The only hope of preventing another dose of shock politics is loud, organized grassroots pressure on all political parties: they have to know right now that after seven years of Bush, Americans are becoming shock resistant.

http://www.naomiklein.org/

September 22, 2008 The Huffington Post

One Year After the Publication of The Shock Doctrine, A Response to the Attacks by Naomi Klein

Exactly one year ago, I set off on a book tour to promote The Shock Doctrine. The plan was for it to last three months, quite long by publishing standards. Twelve months later, it is still going. But this has been no ordinary book tour. Everywhere I have traveled- from Calgary, Alberta to Cochabamba, Bolivia - I have heard more stories about how shock strategies have been used to impose unwanted pro-corporate policies. I have also been part of stimulating debates and discussions about how the current round of crises - oil, food, financial markets, heavy weather -- can be transformed into opportunities for progressive change.

And there have been other kinds of responses too. The Shock Doctrine is a direct attack on the intellectuals and institutions that have disseminated corporatist ideology around the world. When I wrote the book, I fully expected to get hit back. Yet for eight months following publication, there was an eerie silence from the "free-market" ideologues. Sure, a few dismissive reviews appeared in the business press. But not a word from the Washington think tanks that I name in the book. Nothing from the University of Chicago economics department. Even The Economist magazine, which used to attack me gleefully and with great regularity, never mentioned the book in print. An American television producer, who was trying to find an opponent to debate me on-air, confided that she had never been turned down so consistently. "They seem to think if they ignore you, you'll go away."

Well, the silence from the right has certainly been broken. In recent months, several articles and reports have come out claiming to debunk my thesis. The most prominent are a "background paper" published by The Cato Institute, extended into a full length book in Swedish (!), and a lengthy essay in The New Republic by senior editor Jonathan Chait.

Several readers have written to this site asking me to respond to these attacks, if only to help them defend the book more effectively. I resisted at first (clinging to my summer vacation...) but I appreciate the feedback and several points do need correcting. Since the reports by Cato and The New Republic - though purporting to come from radically different points on the political spectrum - share some marked similarities, I've decided to tackle them together. Here goes.
Sorry Boys, Milton Friedman Supported The War.

Both Jonathan Chait and The Cato Institute claim that the late economist Milton Friedman was a staunch opponent of the invasion of Iraq. The Cato paper states of me that, "She claims that Friedman was a ‘neoconservative' and thus in favor of an aggressive American foreign polic

y, and she argues that Iraq was invaded so that Chicago-style policies could be implemented there.... but nowhere does she mention Friedman's actual views about the war. Friedman himself said: ‘I was opposed to going into Iraq from the beginning. I think it was a mistake, for the simple reason that I do not believe the United States of America ought to be involved in aggression.' And this was not just one war that he happened to oppose. In 1995, he described his foreign policy position as ‘anti-interventionist.'"

Similarly, Chait accuses me of not knowing the difference between libertarians and neo-cons and chides me for never mentioning -- "not once, not anywhere" -- that Friedman "argued against the Iraq war from the beginning." Apparently Friedman's anti-war stance should be "morbidly embarrassing" to me.

I am not the one who should be embarrassed. Despite his later protestations, Milton Friedman openly supported the war when it was being waged. In April 2003, Friedman told the German magazine Focus that "President Bush only wanted war because anything else would have threatened the freedom and the prosperity of the USA." Asked about increased tensions between the U.S. and Europe, Friedman replied: "the end justifies the means. As soon as we're rid of Saddam, the political differences will also disappear." [Read the whole interview in German and our translation.] Clearly this was not the voice of anti-intervention. Even in July 2006, when Friedman claimed to have opposed the war from the beginning, he remained hawkish. Now that the U.S. was in Iraq, Friedman told The Wall Street Journal, "it seems to me very important that we make a success of it."

All of this has nothing to do with my book, however. In The Shock Doctrine, I describe the invasion and occupation of Iraq as the culmination of Friedman's ideological crusade because he was America's leading intellectual favoring the privatization of the state - not because he personally supported the war, which is irrelevant. For more than five years Iraq has been the vanguard of this radical privatization project. Private contractors now outnumber U.S. soldiers and corporations have taken on such core state functions as prisoner interrogation.

Furthermore, I never said Friedman was a "neo-conservative" and I discuss, at length, how difficult it is to find terms to describe the corporatist project that are acceptable to all readers. On page 17 (all page numbers refer to the Picador paperback) I write:

"In the attempt to relate the history of the ideological crusade that has culminated in the radical privatization of war and disaster, one problem recurs: the ideology is a shape-shifter, forever changing its name and switching identities. Friedman called himself a ‘liberal,' but his U.S. followers, who associated liberals with high taxes and hippies, tended to identify as ‘conservatives,' ‘classical economists,' ‘free marketers' and, later, as believers in ‘Reaganomics' or ‘laissez-faire.' In most of the world, their orthodoxy is known as ‘neo-liberalism,' but it is often called ‘free trade' or simply ‘globalization.' Only since the mid-nineties has the intellectual movement, led by the right-wing think tanks with which Friedman had long associations-Heritage Foundation, Cato Institute and the American Enterprise Institute-called itself ‘neo-conservative,' a world view that has harnessed the full force of the U.S. military machine in the service of a corporate agenda."

The significance of the "neo-con" label gaining currency in the mid-nineties is that it was then that the Republicans, under the leadership of Newt Gingrich and backed by the think tanks I mentioned, swept Congress promising a "Contract With America." At this point, the label "neo-conservatives" was not a reference primarily to hawkish foreign policy positions but to harsh economic ones. Back in the mid-nineties, many of the people most associated with the neo-con label today - David Frum and William Kristol and much of the Weekly Standard crowd - were squarely focused on demanding Friedmanite cut-backs and privatizations inside the United States. Frum, for example, first made his name in the U.S. with Dead Right, his 1994 book exhorting the conservative movement to return to its free market economic roots. After Bill Clinton embraced much of this economic agenda, several of the key neo-con warriors narrowed their focus to American dominance on the world stage, a fact that has allowed their keen interests in Friedmanite economic ideas to be largely overlooked.

Ignore the Reporting, Attack the Author

Both Chait's essay and the Cato paper are marked by a stubborn refusal to wrestle with the evidence quoted in my book. For instance, Chait dismisses out of hand my suggestion that there were economic interests behind the 1999 NATO intervention in Kosovo (though he grudingly admits I never claim that economics was the sole motivator). I do write that there were other factors motivating the war besides Slobodan Milosevic's egregious human rights violations. I base this claim on the post-war analysis provided by Strobe Talbott, Deputy Secretary of State under U.S. President Bill Clinton and the lead U.S. negotiator during the Kosovo war. In a 2005 essay (quoted on page 415), Talbott wrote:

"As nations throughout the region sought to reform their economies, mitigate ethnic tensions, and broaden civil society, Belgrade seemed to delight in continually moving in the opposite direction. It is small wonder NATO and Yugoslavia ended up on a collision course. It was Yugoslavia's resistance to the broader trends of political and economic reform-not the plight of the Kosovar Albanians-that best explains NATO's war."

Instead of explaining how the words of a top-level U.S. official could so clearly coincide with my argument, Chait chooses to completely ignore the Talbott quote. Again and again, readers of The New Republic are left with the distinct impression that The Shock Doctrine is a work of opinion journalism, rather than a thesis based on research and reporting.

When Chait and The Cato Institute do acknowledge my reliance on facts, they accuse me of manipulating them to fit my thesis. Interestingly, the first time Chait quotes my work, he does just that. To explain to his readers what kind of an extremist he is dealing with, he quotes my first book, No Logo. In it, I allegedly described the world as a "fascist state where we all salute the logo and have little opportunity for criticism because our newspapers, television stations, Internet servers, streets and retail spaces are all controlled by multinational corporate interests." If he had let the quote continue for one more sentence, his readers would have known that I went on to dismiss this worldview as overly caricatured. The next sentences read: "there is good reason for alarm. But a word of caution: we may be able to see a not-so-brave new world on the horizon, but that doesn't mean we are already living in Huxley's nightmare... Instead of an airtight formula, [corporate censorship] is a steady trend... but riddled with exceptions."

This is just the first of countless instances in which Chait twists my words to fit his thesis. When manipulation fails, he simply takes my points and passes them off as his own, without attribution. (I am well aware, for instance, that both Marxists and Keynesians have exploited crisis and disaster, which is why I explore left-wing disaster opportunism on pages 21-25, 65-70, 283, 316-317.)

Grasping at Straws

The Cato paper does, at times, acknowledge that there are facts in my book, but faults me for failing to provide sources for my statistics. This is a bold charge to make against a book with 74 pages of endnotes. The one example mentioned is the statistic "that between 25 and 60 percent of the population is discarded or becomes a permanent underclass in countries that liberalize their economies." I did not provide a source for this stat because it is an amalgamation of stats I had already cited and for which I had already provided multiple sources. This is standard practice: once a statistic has been sourced, it can repeated (for the sake of brevity) without repeating the source. So here are those stats on which the 25-60 per cent amalgamation is based, with their sources, straight out of The Shock Doctrine endnotes:

• Unemployment in Bolivia was between 25% and 30% in 1987 (page 186. Source: Mike Reid, "Sitting Out the Bolivian Miracle," Guardian (London), May 9, 1987.)

• 25% of Russians lived in desperate poverty in 1996 (page 300. Source: Russian Economic Trends 5, no. 1 (1996): 56-57 cited in Bertram Silverman and Murray Yanowitch, New Rich, New Poor, New Russia: Winners and Losers on the Russian Road to Capitalism (Armonk, NY: M.E. Sharpe, 2000), 47.)

• Unemployment for black South Africans more than doubled from 23% in 1991 to 48% in 2002 (page 272. Sources: "South Africa: The Statistics," Le Monde Diplomatique, September 2006; Michael Wines and Sharon LaFraniere, "Decade of Democracy Fills Gaps in South Africa," New York Times, April 26, 2004.)

• Unemployment in Poland was at 25% in some areas in 1993 (page 241. Source: Mark Kramer, "Polish Workers and the Post-Communist Transition, 1989-93," Europe-Asia Studies, June 1995)

• 40% of young workers were unemployed in Poland in 2006 (page 241. Source: Andrew Curry, "The Case Against Poland's New President," New Republic, November 17, 2005)

• 59% of Poles had fallen below the poverty line in 2003 (pages 241-242. Source: Przemyslaw Wielgosz, "25 Years of Solidarity," August 2005.)

Elsewhere, the Cato paper claims that, "Klein never provides the reader with any data [about Chile] over a longer period. She... never once admits that Chile is the social and economic success story of Latin America and has virtually abolished extreme poverty." In fact my economic analysis of Chile covers a 34-year span and I provide facts and data that directly challenge the claim that the country is a free market success story. Here is a relevant passage (pages 104-105):

"The only thing that protected Chile from complete economic collapse in the early eighties was that Pinochet had never privatized Codelco, the state copper mine company nationalized by Allende. That one company generated 85 percent of Chile's export revenues, which meant that when the financial bubble burst, the state still had a steady source of funds.... By 1988, when the economy had stabilized and was growing rapidly, 45 percent of the population had fallen below the poverty line. The richest 10 percent of Chileans, however, had seen their incomes increase by 83 percent. Even in 2007, Chile remained one of the most unequal societies in the world-out of 123 countries in which the United Nations tracks inequality, Chile ranked 116th, making it the eighth most unequal country on the list."

A Massacre of Straw Men

Most of the attacks on The Shock Doctrine involve manufacturing claims, falsely attributing them to me, then handily tearing them down. For example, Jonathan Chait telescopes my point about Donald Rumsfeld's holdings in the Disaster Capitalism Complex like this: "Donald Rumsfeld maintained his stock in Gilead Sciences, which holds the patent for Tamiflu, even while serving as defense secretary. Get it? Rumsfeld would stand to profit from a flu pandemic. But surely you don't have to be an admirer of Rumsfeld to doubt that he would engineer an outbreak of a deadly virus in order to fatten his stock portfolio."

Actually, that is the plot of the movie V for Vendetta; it has absolutely nothing do with my book. What I do write about is how the Pentagon, under Rumsfeld's leadership, stockpiled Tamiflu and Rumsfeld stood to profit as the value of the stock increased by 807 per cent. On pages 394-395 I write:

"For the six years that he held office, Rumsfeld had to leave the room whenever talk turned to the possibility of avian flu treatment and the purchase of drugs for it. According to the letter outlining the arrangement that allowed him to hold on to his stocks, he had to stay out of decisions that ‘may directly and predictably affect Gilead.' His colleagues, however, took good care of his interests. In July 2005, the Pentagon purchased $58 million worth of Tamiflu, and the Department of Health and Human Services announced that it would order up to $1 billion worth of the drug a few months later."

There are many more straw men propped up in The Cato Institute paper. Most involve vastly inflating the role I attribute to Milton Friedman. And no little wonder. Other than the University of Chicago economics department, Cato is the institution most intimately aligned and associated with Milton Friedman's radical theories. Among other tributes, every two years, Cato hands out the Milton Friedman Prize for Advancing Liberty, worth half a million dollars. (This year it went to a 23-year-old Venezuelan student activist to further his opposition to the government of Hugo Chavez). Since Friedman continues to serve as Cato's patron saint, it has much to lose from a diminishing of Friedman's reputation, as well as a direct interest in exonerating him of all crimes, real or imagined.

Here are a few more examples. The Cato paper claims that I put the entire blame for Pinochet's economic policies on the shoulders of Milton Friedman - then "proves" that his direct involvement was minimal. Once again, I make no such claim. I do devote considerable space - roughly 60 pages -- to describing the impact of a U.S. State Department program that brought more than one hundred Chilean students to the University of Chicago as part of a deliberate effort to export free-market economic ideas to Chile. This is the program that gave birth to the infamous "Chicago Boys" of Chile, several of whom were actively involved in planning the Chilean dictatorship's economic program before the 1973 coup even took place. Amazingly, the Cato paper makes absolutely no mention of this academic program in its effort to exonerate Friedman personally. The writer either missed 60 pages of my book, or deliberately chose to ignore them.
The greatest challenge in responding to the Cato paper is the scope if its dishonesty. Consider this one passage:

"Klein also blames Friedman and Chicago economics for the actions of the International Monetary Fund during the Asian financial crisis and the Sri Lankan government's confiscation of the land of fishing families to build luxury hotels after the tsunami. Yet the fact is that Friedman thought that the IMF shouldn't be involved in Asia, and he held that governments should be forbidden from expropriating property to give it to private developers. Of course, Klein could argue that Friedman was in some sense a source of inspiration for those policies, even though he was opposed to them. But she doesn't do that. She pretends that he agreed with them, and that that is what he and other Chicago economists wanted all along."

Absolutely everything in this passage is wrong. I never say Friedman favored the IMF bailout in Asia, quite the opposite. On pages 335-336, I report that, "Milton Friedman himself, now in his mid-eighties, made a rare appearance on CNN to tell the news anchor Lou Dobbs that he opposed any kind of bailout and that the market should be left to correct itself." In what way could this constitute "pretending" that Friedman supported the bailout?

I also freely acknowledge the fact that Friedman opposed the IMF on principle. However, as with Pinochet's government in the seventies, I also document that the IMF, at the time of the bailout, was packed with ideological Chicago Boys - a very different point than claiming the IMF was taking orders from Friedman. On page 202, I directly address this apparent contradiction:
"Philosophically, Milton Friedman did not believe in the IMF or the World Bank: they were classic examples of big government interfering with the delicate signals of the free market. So it was ironic that there was a virtual conveyor belt delivering Chicago Boys to the two institutions' hulking headquarters on Nineteenth Street in Washington, D.C., where they took up many of the top positions."

The Shock Doctrine has room for this kind of complexity because it is not - despite what Cato claims - a book about the actions of one man. It is about a multifaceted ideological trend that has successfully served the most powerful corporate interests in society for half a century.
Furthermore, I never wrote, as Cato claims in that same passage, that Friedman had anything to do with "the Sri Lankan government's confiscation of the land of fishing families to build luxury hotels after the tsunami." His name does not appear once in my 25-page chapter on the tsunami. Once again, to write that I "pretend" that Friedman is advocating these policies is pure fabrication. Furthermore, all of these inventions and misrepresentations appear in a single paragraph. The Cato background paper is 20 pages long and is comprised of dozens and dozens of equally dishonest paragraphs. Subjecting them all to this kind of rebuttal is simply too time consuming; my full rebuttal is the book itself.

Go to the Source

Thanks to a fantastic team of researchers, especially my incredible research assistant Debra Levy, The Shock Doctrine has withstood a year's worth of intense media scrutiny in dozens of countries. It is not unscathed, but it has emerged in better shape than I dared hope. When errors are discovered, we immediately correct them in future editions and post a correction and an explanation on the book's website. So far there has been only one significant error discovered, related to the profits earned from Dick Cheney's Halliburton stocks. It was immediately corrected. Readers of The Shock Doctrine know that this is but one of many examples that make the same point about conflicts of interest in the Bush Administration; indeed I devote an entire chapter to the topic. And this is the benefit of a methodology that is grounded not in anecdotes but in thousands of sourced facts and figures: the thesis does not rise or fall on any single example.

As to my critics' charge that I am selective in my use of quotations, that's a danger for any writer. It is also why Debra and I launched the "resources" section of the book's website. On this page, readers can access dozens of original reports, letters and studies that make up some of the key source material for the book. If you are concerned that I am exaggerating Friedman's support for the brutal regime of Augusto Pinochet, read a letter Friedman wrote to Pinochet. If you are suspicious that I am making disaster capitalism seem more conspiratorial than it is, read the minutes from a meeting that took place at the Heritage Foundation just two weeks after the levees broke in New Orleans. It lays out 32 "free market solutions" for Hurricane Katrina and high gas prices, many of which have been championed by the Bush Administration.

The thesis of The Shock Doctrine was not born of whimsy but of four years of research. Debra and I put these documents online because we want educators, students and general readers to move beyond an admittedly subjective version of history - as all histories are -- and go straight to the source. We invite you to explore these documents, send us ones we missed, and come to your own conclusions.

Published on Tuesday, September 2, 2008 by CommonDreams.org

Naomi Kline's Shock Doctrine Website

The Olympics: Unveiling Police State 2.0 By Naomi Klein

Naomi Klein

So far, the Olympics have been an open invitation to China-bash, a bottomless excuse for Western journalists to go after the Commies on everything from internet censorship to Darfur. Through all the nasty news stories, however, the Chinese government has seemed amazingly unperturbed. That's because it is betting on this: when the opening ceremonies begin friday, you will instantly forget all that unpleasantness as your brain is zapped by the cultural/athletic/political extravaganza that is the Beijing Olympics.

Like it or not, you are about to be awed by China's sheer awesomeness.The games have been billed as China's "coming out party" to the world. They are far more significant than that. These Olympics are the coming out party for a disturbingly efficient way of organizing society, one that China has perfected over the past three decades, and is finally ready to show off. It is a potent hybrid of the most powerful political tools of authoritarianism communism -- central planning, merciless repression, constant surveillance -- harnessed to advance the goals of global capitalism. Some call it "authoritarian capitalism," others "market Stalinism," personally I prefer "McCommunism.

"The Beijing Olympics are themselves the perfect expression of this hybrid system. Through extraordinary feats of authoritarian governing, the Chinese state has built stunning new stadiums, highways and railways -- all in record time. It has razed whole neighborhoods, lined the streets with trees and flowers and, thanks to an "anti-spitting" campaign, cleaned the sidewalks of saliva. The Communist Party of China even tried to turn the muddy skies blue by ordering heavy industry to cease production for a month -- a sort of government-mandated general strike.

As for those Chinese citizens who might go off-message during the games -- Tibetan activists, human right campaigners, malcontent bloggers -- hundreds have been thrown in jail in recent months. Anyone still harboring protest plans will no doubt be caught on one of Beijing's 300,000 surveillance cameras and promptly nabbed by a security officer; there are reportedly 100,000 of them on Olympics duty.The goal of all this central planning and spying is not to celebrate the glories of Communism, regardless of what China's governing party calls itself. It is to create the ultimate consumer cocoon for Visa cards, Adidas sneakers, China Mobile cell phones, McDonald's happy meals, Tsingtao beer, and UPS delivery -- to name just a few of the official Olympic sponsors. But the hottest new market of all is the surveillance itself. Unlike the police states of Eastern Europe and the Soviet Union, China has built a Police State 2.0, an entirely for-profit affair that is the latest frontier for the global Disaster Capitalism Complex.

Chinese corporations financed by U.S. hedge funds, as well as some of American's most powerful corporations -- Cisco, General Electric, Honeywell, Google -- have been working hand in glove with the Chinese government to make this moment possible: networking the closed circuit cameras that peer from every other lamp pole, building the "Great Firewall" that allows for remote internet monitoring, and designing those self-censoring search engines.

By next year, the Chinese internal security market is set to be worth $33-billion. Several of the larger Chinese players in the field have recently taken their stocks public on U.S. exchanges, hoping to cash in the fact that, in volatile times, security and defense stocks are seen as the safe bets. China Information Security Technology, for instance, is now listed on the NASDAQ and China Security and Surveillance is on the NYSE. A small clique of U.S. hedge funds has been floating these ventures, investing more than $150-million in the past two years. The returns have been striking. Between October 2006 and October 2007, China Security and Surveillance's stock went up 306 percent.

Much of the Chinese government's lavish spending on cameras and other surveillance gear has taken place under the banner of "Olympic Security." But how much is really needed to secure a sporting event? The price tag has been put at a staggering $12-billion -- to put that in perspective, Salt Lake City, which hosted the Winter Olympics just five months after September 11, spent $315 million to secure the games. Athens spent around $1.5-billion in 2004. Many human rights groups have pointed out that China's security upgrade is reaching far beyond Beijing: there are now 660 designated "safe cities" across the country, municipalities that have been singled out to receive new surveillance cameras and other spy gear. And of course all the equipment purchased in the name of Olympics safety -- iris scanners, "anti-riot robots" and facial recognition software -- will stay in China after the games are long gone, free to be directed at striking workers and rural protestors.

What the Olympics have provided for Western firms is a palatable cover story for this chilling venture. Ever since the 1989 Tiananmen Square Massacre, U.S. companies have been barred from selling police equipment and technology to China, since lawmakers feared it would be directed, once again, at peaceful demonstrators. That law has been completely disregarded in the lead up to the Olympics, when, in the name of safety for athletes and VIPs (including George W. Bush), no new toy has been denied the Chinese state.

There is a bitter irony here. When Beijing was awarded the games seven years ago, the theory was that international scrutiny would force China's government to grant more rights and freedom to its people. Instead, the Olympics have opened up a backdoor for the regime to massively upgrade its systems of population control and repression. And remember when Western companies used to claim that by doing business in China, they were actually spreading freedom and democracy? We are now seeing the reverse: investment in surveillance and censorship gear is helping Beijing to actively repress a new generation of activists before it has the chance to network into a mass movement.

The numbers on this trend are frightening. In April 2007, officials from 13 provinces held a meeting to report back on how their new security measures were performing. In the province of Jiangsu, which, according to the South China Morning Post, was using "artificial intelligence to extend and improve the existing monitoring system" the number of protests and riots "dropped by 44 per cent last year." In the province of Zhejiang, where new electronic surveillance systems had been installed, they were down 30 per cent. In Shaanxi, "mass incidents" -- code for protests -- were down by 27 per cent in a year. Dong Lei, the province's deputy party chief, gave part of the credit to a huge investment in security cameras across the province. "We aim to achieve all day and all-weather monitoring capability," he told the gathering.

Activists in China now find themselves under intense pressure, unable to function even at the limited levels they were able to a year ago. Internet cafes are filled with surveillance cameras, and surfing is carefully watched. At the offices of a labor rights group in Hong Kong, I met the well-known Chinese dissident Jun Tao. He had just fled the mainland in the face of persistent police harassment. After decades of fighting for democracy and human rights, he said the new surveillance technologies had made it "impossible to continue to function in China.

"It's easy to see the dangers of a high tech surveillance state in far off China, since the consequences for people like Jun are so severe. It's harder to see the dangers when these same technologies creep into every day life closer to home-networked cameras on U.S. city streets, "fast lane" biometric cards at airports, dragnet surveillance of email and phone calls. But for the global homeland security sector, China is more than a market; it is also a showroom. In Beijing, where state power is absolute and civil liberties non-existent, American-made surveillance technologies can be taken to absolute limits.

The first test begins today: Can China, despite the enormous unrest boiling under the surface, put on a "harmonious" Olympics? If the answer is yes, like so much else that is made in China, Police State 2.0 will be ready for export.

This article first appeared on the Huffington Post.

To see Thomas Lee's photos that accompany this story, please visit the Huffington Post

Disaster Capitalism: State of Extortion By Naomi Klein

Once oil passed $140 a barrel, even the most rabidly right-wing media hosts had to prove their populist cred by devoting a portion of every show to bashing Big Oil. Some have gone so far as to invite me on for a friendly chat about an insidious new phenomenon: ""disaster capitalism." It usually goes well--until it doesn’t.

For instance, "independent conservative" radio host Jerry Doyle and I were having a perfectly amiable conversation about sleazy insurance companies and inept politicians when this happened: "I think I have a quick way to bring the prices down," Doyle announced. "We've invested $650 billion to liberate a nation of 25 million people. Shouldn't we just demand that they give us oil? There should be tankers after tankers backed up like a traffic jam getting into the Lincoln Tunnel, the Stinkin' Lincoln, at rush hour with thank-you notes from the Iraqi government.... Why don't we just take the oil? We've invested it liberating a country. I can have the problem solved of gas prices coming down in ten days, not ten years."

There were a couple of problems with Doyle's plan, of course. The first was that he was describing the biggest stickup in world history. The second, that he was too late: "We" are already heisting Iraq's oil, or at least are on the cusp of doing so.

It's been ten months since the publication of my book The Shock Doctrine: The Rise of Disaster Capitalism, in which I argue that today's preferred method of reshaping the world in the interest of multinational corporations is to systematically exploit the state of fear and disorientation that accompanies moments of great shock and crisis. With the globe being rocked by multiple shocks, this seems like a good time to see how and where the strategy is being applied.

And the disaster capitalists have been busy--from private firefighters already on the scene in Northern California's wildfires, to land grabs in cyclone-hit Burma, to the housing bill making its way through Congress. The bill contains little in the way of affordable housing, shifts the burden of mortgage default to taxpayers and makes sure that the banks that made bad loans get some payouts. No wonder it is known in the hallways of Congress as "The Credit Suisse Plan," after one of the banks that generously proposed it.

Iraq Disaster: We Broke It, We (Just) Bought It

But these cases of disaster capitalism are amateurish compared with what is unfolding at Iraq's oil ministry. It started with no-bid service contracts announced for ExxonMobil, Chevron, Shell, BP and Total (they have yet to be signed but are still on course). Paying multinationals for their technical expertise is not unusual. What is odd is that such contracts almost invariably go to oil service companies--not to the oil majors, whose work is exploring, producing and owning carbon wealth. As London-based oil expert Greg Muttitt points out, the contracts make sense only in the context of reports that the oil majors have insisted on the right of first refusal on subsequent contracts handed out to manage and produce Iraq's oil fields. In other words, other companies will be free to bid on those future contracts, but these companies will win.

One week after the no-bid service deals were announced, the world caught its first glimpse of the real prize. After years of back-room arm-twisting, Iraq is officially flinging open six of its major oil fields, accounting for around half of its known reserves, to foreign investors. According to Iraq's oil minister, the long-term contracts will be signed within a year. While ostensibly under control of the Iraq National Oil Company, foreign firms will keep 75 percent of the value of the contracts, leaving just 25 percent for their Iraqi partners.

That kind of ratio is unheard of in oil-rich Arab and Persian states, where achieving majority national control over oil was the defining victory of anticolonial struggles. According to Muttitt, the assumption until now was that foreign multinationals would be brought in to develop brand-new fields in Iraq--not to take over ones that are already in production and therefore require minimal technical support. "The policy was always to allocate these fields to the Iraq National Oil Company," he told me. This is a total reversal of that policy, giving INOC a mere 25 percent instead of the planned 100 percent.

So what makes such lousy deals possible in Iraq, which has already suffered so much? Ironically, it is Iraq's suffering--its never-ending crisis--that is the rationale for an arrangement that threatens to drain its treasury of its main source of revenue. The logic goes like this: Iraq's oil industry needs foreign expertise because years of punishing sanctions starved it of new technology and the invasion and continuing violence degraded it further. And Iraq urgently needs to start producing more oil. Why? Again because of the war. The country is shattered, and the billions handed out in no-bid contracts to Western firms have failed to rebuild the country.

And that's where the new no-bid contracts come in: they will raise more money, but Iraq has become such a treacherous place that the oil majors must be induced to take the risk of investing. Thus the invasion of Iraq neatly creates the argument for its subsequent pillage.
Several of the architects of the Iraq War no longer even bother to deny that oil was a major motivator. On National Public Radio's To the Point, Fadhil Chalabi, one of the primary Iraqi advisers to the Bush Administration in the lead-up to the invasion, recently described the war as "a strategic move on the part of the United States of America and the UK to have a military presence in the Gulf in order to secure [oil] supplies in the future." Chalabi, who served as Iraq's oil under secretary and met with the oil majors before the invasion, described this as "a primary objective."

Invading countries to seize their natural resources is illegal under the Geneva Conventions. That means that the huge task of rebuilding Iraq's infrastructure--including its oil infrastructure--is the financial responsibility of Iraq's invaders. They should be forced to pay reparations. (Recall that Saddam Hussein's regime paid $9 billion to Kuwait in reparations for its 1990 invasion.) Instead, Iraq is being forced to sell 75 percent of its national patrimony to pay the bills for its own illegal invasion and occupation.

Oil Price Shock: Give Us the Arctic or Never Drive Again

Iraq isn't the only country in the midst of an oil-related stickup. The Bush Administration is busily using a related crisis--the soaring price of fuel--to revive its dream of drilling in the Arctic National Wildlife Refuge (ANWR). And of drilling offshore. And in the rock-solid shale of the Green River Basin. "Congress must face a hard reality," said George W. Bush on June 18. "Unless members are willing to accept gas prices at today's painful levels--or even higher--our nation must produce more oil."

This is the President as Extortionist in Chief, with gas nozzle pointed to the head of his hostage--which happens to be the entire country. Give me ANWR, or everyone has to spend their summer vacations in the backyard. A final stickup from the cowboy President.

Despite the Drill Here. Drill Now. Pay Less bumper stickers, drilling in ANWR would have little discernible impact on actual global oil supplies, as its advocates well know. The argument that it could nonetheless bring down oil prices is based not on hard economics but on market psychoanalysis: drilling would "send a message" to the oil traders that more oil is on the way, which would cause them to start betting down the price.

Two points follow from this approach. First, trying to psych out hyperactive commodity traders is what passes for governing in the Bush era, even in the midst of a national emergency. Second, it will never work. If there is one thing we can predict from the oil market's recent behavior, it is that the price is going to keep going up regardless of what new supplies are announced.

Take the massive oil boom under way in Alberta's notorious tar sands. The tar sands (sometimes called the oil sands) have the same things going for them as Bush's proposed drill sites: they are nearby and perfectly secure, since the North American Free Trade Agreement contains a provision barring Canada from cutting off supply to the United States. And with little fanfare, oil from this largely untapped source has been pouring into the market, so much so that Canada is now the largest supplier of oil to the United States, surpassing Saudi Arabia. Between 2005 and 2007, Canada increased its exports to the States by almost 100 million barrels. Yet despite this significant increase in secure supplies, oil prices have been going up the entire time.
What is driving the ANWR push is not facts but pure shock doctrine strategy--the oil crisis has created the conditions in which it is possible to sell a previously unsellable (but highly profitable) policy.

Food Price Shock: Genetic Modification or Starvation

Intimately connected to the price of oil is the global food crisis. Not only do high gas prices drive up food costs but the boom in agrofuels has blurred the line between food and fuel, pushing food growers off their land and encouraging rampant speculation. Several Latin American countries have been pushing to re-examine the push for agrofuels and to have food recognized as a human right, not a mere commodity. United States Deputy Secretary of State John Negroponte has other ideas. In the same speech touting the US commitment to emergency food aid, he called on countries to lower their "export restrictions and high tariffs" and eliminate "barriers to use of innovative plant and animal production technologies, including biotechnology." This was an admittedly more subtle stickup, but the message was clear: impoverished countries had better crack open their agricultural markets to American products and genetically modified seeds, or they could risk having their aid cut off.

Genetically modified crops have emerged as the cureall for the food crisis, at least according to the World Bank, the European Commission president (time to "bite the bullet") and Prime Minister of Britain Gordon Brown. And, of course, the agribusiness companies. "You cannot today feed the world without genetically modified organisms," Peter Brabeck, chairman of Nestlé, told the Financial Times recently. The problem with this argument, at least for now, is that there is no evidence that GMOs increase crop yields, and they often decrease them.
But even if there was a simple key to solving the global food crisis, would we really want it in the hands of the Nestlés and Monsantos? What would it cost us to use it? In recent months

Monsanto, Syngenta and BASF have been frenetically buying up patents on so-called "climate ready" seeds--plants that can grow in earth parched from drought and salinated from flooding.
In other words, plants built to survive a future of climate chaos. We already know the lengths Monsanto will go to protect its intellectual property, spying on and suing farmers who dare to save their seeds from one year to the next. We have seen patented AIDS medications fail to treat millions in sub-Saharan Africa. Why would patented "climate ready" crops be any different?

Meanwhile, amid all the talk of exciting new genetic and drilling technologies, the Bush Administration announced a moratorium of up to two years on new solar energy projects on federal lands--due, apparently, to environmental concerns. This is the final frontier for disaster capitalism. Our leaders are failing to invest in technology that will actually prevent a future of climate chaos, choosing instead to work hand in hand with those plotting innovative schemes to profit from the mayhem.

Privatizing Iraq's oil, ensuring global dominance for genetically modified crops, lowering the last of the trade barriers and opening the last of the wildlife refuges... Not so long ago, those goals were pursued through polite trade agreements, under the benign pseudonym "globalization." Now this discredited agenda is forced to ride on the backs of serial crises, selling itself as lifesaving medicine for a world in pain.

July 3rd, 2008

http://www.naomiklein.org/articles/2008/07/disaster-capitalism-state-extortion

Naomi Kiline's Shock Doctrine, The Rise of Disaster Capitalism

I thought Stu Harrison’s review of Naomi Kline’s new book, The Shock Doctrine, The Rise Of Disaster Capitalism From: Cultural Dissent, Green Left Weekly issue #739 13 February 2008. was great, but I think it was far too brief for such a major work and I disagree with him when he wrote, “A must for all economics students and those that are yet to grasp the devastating nature of capitalism.”

Kline’s Shock Doctrine illustrates to me what Karl Marx said — that the highest form of economics is politics. Kline has written an enormous political work that is a must for any socialist, unionist, environmentalist, human rights activist, solidarity activist, and anyone who gives a thought about any concept of justice and humanity’s survival on this planet.

It is in the league of other major political works such as John Pilger’s New Rulers of The World and A Secret Country, Noam Chomsky’s Necessary Illusions and Hegemony or Survival: America’s quest for global dominance and Tariq Ali’s Clash of Fundamentalisms, Bush in Babylon and Pirates of the Caribbean — Axis of Hope.

Kline spent three years researching and writing this book and has 400 footnotes to back up everything she writes, exposing the ruthless and inhumane nature of Milton Friedman’s Chicago school of economic policies that is the ruthless capitalist mantra of privatise, deregulate, cut government services and destroy unions.

I would also encourage people to go on the Facebook group, Shock Doctrine by Naomi Klein — ready to discuss it, where I’ve posted Harrison’s review and http://www.naomiklein.org/shock-doctrine. I look forward to seeing the film Shock Doctrine, by Alfonso Cuaron and Naomi Klein, directed by Jonas Cuaron.

John Tognolini Katoomba, NSW

Milton Friedman’s terrible legacy-review of Naomi Klein's Shock Doctrine By Stu Harrison

Naomi Klein

Naomi Klein's Shock Doctrine, The Rise of Disaster Capitalism
Allen Lane, 2007 576 pages, $32.95 (pb)

Milton Friedman’s death was greeted by a tide of obituaries in the mainstream press in support of the world renown “libertarian” economist. Yet very few cared to mention the various example countries he had made his work over his life. Naomi Klein’s The Shock Doctrine takes a look behind the work of a man that has helped bring neoliberalism into the lives of millions — with devastating results.

Klein tracks the history of Friedman and his Chicago school’s exploits throughout the world, as they attempted to create a blank slate model country on which to impose their neoliberal agenda. A comparison is drawn between the use of shock therapy on humans to what the Friedmanites tried to impose on nations.

The idea of “disaster capitalism” comes from the way Western capitalists now use disasters like hurricanes, tsunamis and war as an opportunity to create more business for themselves. Today, many industries, like vultures on a dead carcass, thrive on such misfortune and therefore have an interest in its continuation.

Despite the rhetoric of libertarianism, implementing Friedman’s policies relied on a scared population and often required dictatorships, like that of General Augusto Pinochet in Chile from 1973 to 1990. Millions have been murdered or disappeared in the efforts to implement this very anti-democratic prescription. Despite this, Friedman is held up as a demi-god to economics students throughout the world to this day.

As Klein points out, many people would like us to believe that these shocking examples of capitalism at its greediest, from Iraq to New Orleans to Russia to South Africa and beyond, are simply caused by a few bad apples or maybe even be part of an elaborate conspiracy. But these excuses give too little credit to those who developed the ideas and to those whose interests they were serving. The ramifications of disaster capitalism have also been used as an opening by the International Monetary Fund and World Bank.

The Shock Doctrine shows us how far capitalism has come and how unsustainable the idea of unlimited growth has proved. I would be surprised if someone could walk away from this book and not want to change the world in which we live. A must for all economics students and those that are yet to grasp the devastating nature of capitalism.

From: Cultural Dissent, Green Left Weekly issue #739 13 February 2008.

Disowned by the Ownership Society by Naomi Klein

Naomi Klein

Remember the “ownership society,” fixture of major George W. Bush addresses for the first four years of his presidency? “We’re creating…an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property,” Bush said in October 2004. Washington think-tanker Grover Norquist predicted that the ownership society would be Bush’s greatest legacy, remembered “long after people can no longer pronounce or spell Fallujah.” Yet in Bush’s final State of the Union address, the once-ubiquitous phrase was conspicuously absent. And little wonder: rather than its proud father, Bush has turned out to be the ownership society’s undertaker.

Well before the ownership society had a neat label, its creation was central to the success of the right-wing economic revolution around the world. The idea was simple: if working-class people owned a small piece of the market–a home mortgage, a stock portfolio, a private pension–they would cease to identify as workers and start to see themselves as owners, with the same interests as their bosses. That meant they could vote for politicians promising to improve stock performance rather than job conditions. Class consciousness would be a relic.

It was always tempting to dismiss the ownership society as an empty slogan–”hokum” as former Labor Secretary Robert Reich put it. But the ownership society was quite real. It was the answer to a roadblock long faced by politicians favoring policies to benefit the wealthy. The problem boiled down to this: people tend to vote their economic interests. Even in the wealthy United States, most people earn less than the average income. That means it is in the interest of the majority to vote for politicians promising to redistribute wealth from the top down.

So what to do? It was Margaret Thatcher who pioneered a solution. The effort centered on Britain’s public housing, or council estates, which were filled with die-hard Labour Party supporters. In a bold move, Thatcher offered strong incentives to residents to buy their council estate flats at reduced rates (much as Bush did decades later by promoting subprime mortgages). Those who could afford it became homeowners while those who couldn’t faced rents almost twice as high as before, leading to an explosion of homelessness.

As a political strategy, it worked: the renters continued to oppose Thatcher, but polls showed that more than half of the newly minted owners did indeed switch their party affiliation to the Tories. The key was a psychological shift: they now thought like owners, and owners tend to vote Tory. The ownership society as a political project was born.

Across the Atlantic, Reagan ushered in a range of policies that similarly convinced the public that class divisions no longer existed. In 1988 only 26 percent of Americans told pollsters that they lived in a society bifurcated into “haves” and “have-nots”–71 percent rejected the whole idea of class. The real breakthrough, however, came in the 1990s, with the “democratization” of stock ownership, eventually leading to nearly half of American households owning stock.

Stock watching became a national pastime, with tickers on TV screens becoming more common than weather forecasts. Main Street, we were told, had stormed the elite enclaves of Wall Street.
Once again, the shift was psychological. Stock ownership made up a relatively minor part of the average American’s earnings, but in the era of frenetic downsizing and offshoring, this new class of amateur investor had a distinct shift in consciousness. Whenever a new round of layoffs was announced, sending another stock price soaring, many responded not by identifying with those who had lost their jobs, or by protesting the policies that had led to the layoffs, but by calling their brokers with instructions to buy.

Bush came to office determined to take these trends even further, to deliver Social Security accounts to Wall Street and target minority communities–traditionally out of the Republican Party’s reach–for easy homeownership. “Under 50 percent of African Americans and Hispanic Americans own a home,” Bush observed in 2002. “That’s just too few.” He called on Fannie Mae and the private sector “to unlock millions of dollars, to make it available for the purchase of a home”–an important reminder that subprime lenders were taking their cue straight from the top.

Today, the basic promises of the ownership society have been broken. First the dot-com bubble burst; then employees watched their stock-heavy pensions melt away with Enron and WorldCom. Now we have the subprime mortgage crisis, with more than 2 million homeowners facing foreclosure on their homes. Many are raiding their 401(k)s–their piece of the stock market–to pay their mortgage. Wall Street, meanwhile, has fallen out of love with Main Street. To avoid regulatory scrutiny, the new trend is away from publicly traded stocks and toward private equity. In November Nasdaq joined forces with several private banks, including Goldman Sachs, to form Portal Alliance, a private equity stock market open only to investors with assets upward of $100 million. In short order yesterday’s ownership society has morphed into today’s members-only society.

The mass eviction from the ownership society has profound political implications. According to a September Pew Research poll, 48 percent of Americans say they live in a society carved into haves and have-nots–nearly twice the number of 1988. Only 45 percent see themselves as part of the haves. In other words, we are seeing a return of the very class consciousness that the ownership society was supposed to erase. The free-market ideologues have lost an extremely potent psychological tool–and progressives have gained one. Now that John Edwards is out of the presidential race, the question is, will anyone dare to use it?


Published on Friday, February 1, 2008 by The Nation

Naomi Klein is the author of many books, including her most recent, The Shock Doctrine: The Rise of Disaster Capitalism. Visit Naomi’s website at http://www.naomiklein.org/, or to learn more about her new book, visit http://www.shockdoctrine.com/

Why The Right Loves a Disaster by Naomi Klein

Naomi Klein

Moody’s, the credit-rating agency, claims the key to solving the United States’ economic woes is slashing spending on Social Security. The National Assn. of Manufacturers says the fix is for the federal government to adopt the organization’s wish-list of new tax cuts. For Investor’s Business Daily, it is oil drilling in the Arctic National Wildlife Refuge, “perhaps the most important stimulus of all.”

But of all the cynical scrambles to package pro-business cash grabs as “economic stimulus,” the prize has to go to Lawrence B. Lindsey, formerly President Bush’s assistant for economic policy and his advisor during the 2001 recession. Lindsey’s plan is to solve a crisis set off by bad lending by extending lots more questionable credit. “One of the easiest things to do would be to allow manufacturers and retailers” — notably Wal-Mart — “to open their own financial institutions, through which they could borrow and lend money,” he wrote recently in the Wall Street Journal.

Never mind that that an increasing number of Americans are defaulting on their credit card payments, raiding their 401(k) accounts and losing their homes. If Lindsey had his way, Wal-Mart, rather than lose sales, could just loan out money to keep its customers shopping, effectively turning the big-box chain into an old-style company store to which Americans can owe their souls.

If this kind of crisis opportunism feels familiar, it’s because it is. Over the last four years, I have been researching a little-explored area of economic history: the way that crises have paved the way for the march of the right-wing economic revolution across the globe. A crisis hits, panic spreads and the ideologues fill the breach, rapidly reengineering societies in the interests of large corporate players. It’s a maneuver I call “disaster capitalism.”

Sometimes the enabling national disasters have been physical blows to countries: wars, terrorist attacks, natural disasters. More often they have been economic crises: debt spirals, hyperinflation, currency shocks, recessions.

More than a decade ago, economist Dani Rodrik, then at Columbia University, studied the circumstances in which governments adopted free-trade policies. His findings were striking: “No significant case of trade reform in a developing country in the 1980s took place outside the context of a serious economic crisis.” The 1990s proved him right in dramatic fashion. In Russia, an economic meltdown set the stage for fire-sale privatizations. Next, the Asian crisis in 1997-98 cracked open the “Asian tigers” to a frenzy of foreign takeovers, a process the New York Times dubbed “the world’s biggest going-out-of-business sale.”

To be sure, desperate countries will generally do what it takes to get a bailout. An atmosphere of panic also frees the hands of politicians to quickly push through radical changes that would otherwise be too unpopular, such as privatization of essential services, weakening of worker protections and free-trade deals. In a crisis, debate and democratic process can be handily dismissed as unaffordable luxuries.

Do the free-market policies packaged as emergency cures actually fix the crises at hand? For the ideologues involved, that has mattered little. What matters is that, as a political tactic, disaster capitalism works. It was the late free-market economist Milton Friedman, writing in the preface to the 1982 reissue of his manifesto, “Capitalism and Freedom,” who articulated the strategy most succinctly. “Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.”

A decade later, John Williamson, a key advisor to the International Monetary Fund and the World Bank (and who coined the phrase “the Washington consensus”), went even further. He asked a conference of top-level policymakers “whether it could conceivably make sense to think of deliberately provoking a crisis so as to remove the political logjam to reform.”

Again and again, the Bush administration has seized on crises to break logjams blocking the more radical pieces of its economic agenda. First, a recession provided the excuse for sweeping tax cuts. Next, the “war on terror” ushered in an era of unprecedented military and homeland security privatization. After Hurricane Katrina, the administration handed out tax holidays, rolled back labor standards, closed public housing projects and helped turn New Orleans into a laboratory for charter schools — all in the name of disaster “reconstruction.”

Given this track record, Washington lobbyists had every reason to believe that the current recession fears would provoke a new round of corporate gift-giving. Yet it seems that the public is getting wise to the tactics of disaster capitalism. Sure, the proposed $150-billion economic stimulus package is little more than a dressed-up tax cut, including a new batch of “incentives” to business. But the Democrats nixed the more ambitious GOP attempt to leverage the crisis to lock in the Bush tax cuts and go after Social Security. For the time being, it seems that a crisis created by a dogged refusal to regulate markets will not be “fixed” by giving Wall Street more public money with which to gamble.

Yet while managing (barely) to hold the line, the House Democrats appear to have given up on extending unemployment benefits and increasing funding for food stamps and Medicaid as part of the stimulus package. More important, they are failing utterly to use the crisis to propose alternative solutions to a status quo marked by serial crises, whether environmental, social or economic.

The problem is not a lack of ideas “alive and available” — to borrow Friedman’s phrase. There are plenty available, from single-payer healthcare to legislating a living wage. Hundreds of thousands of jobs can be created by rebuilding the ailing public infrastructure and making it more friendly to public transit and renewable energy. Need start-up funds? Close the loophole that lets billionaire hedge fund managers pay 15% capital gains instead of 35% income tax, and adopt a long-proposed tax on international currency trading. The bonus? A less volatile, crisis-prone market.

The way we respond to crises is always highly political, a lesson progressives appear to have forgotten. There’s a historical irony to that: Crises have ushered in some of America’s great progressive policies. Most notably, after the dramatic market failure of 1929, the left was ready and waiting with its ideas — full employment, huge public works, mass union drives. The Social Security system that Moody’s is so eager to dismantle was a direct response to the Depression.

Every crisis is an opportunity; someone will exploit it. The question we face is this: Will the current turmoil become an excuse to transfer yet more public wealth into private hands, to wipe out the last vestiges of the welfare state, all in the name of economic growth? Or will this latest failure of unfettered markets be the catalyst that is needed to revive a spirit of public interest, to get serious about the pressing crises of our time, from gaping inequality to global warming to failing infrastructure?

The disaster capitalists have held the reins for three decades. The time has come, once again, for disaster populism.

Published on Sunday, January 27, 2008 by The Los Angeles Times

Naomi Klein is the author of many books, including her most recent, The Shock Doctrine: The Rise of Disaster Capitalism, which will be published in September.Visit Naomi’s website at http://www.naomiklein.org/, or to learn more about her new book, visit http://www.shockdoctrine.com/. --

Alan Greenspan vs. Naomi Klein on the Iraq War, Bush’s Tax Cuts, Economic Populism, Crony Capitalism and More

Naomi Klein

Alan Greenspan

In a Democracy Now! exclusive debate, former federal reserve chairman Alan Greenspan and journalist Naomi Klein square off on the Iraq war, oil, President Bush tax cuts, social security, economic populism in Latin America, corruption and crony capitalism. Greenspan headed the central bank in the United States for almost two decades. He has written a new 500-page memoir titled, “The Age of Turbulence: Adventures in a New World.” At one point in the debate, Klein asks Greenspan, " The policies that you pursued—deregulation, privatization, free trade—have contributed to this extraordinary division of income that is really the fuel for this economic populism that you’re now denouncing. Aren’t you the one that has caused this crisis of faith in capitalism?"

As the credit crisis continues to grow and the US dollar hits a new low, we turn today to the former Chairman of the Federal Reserve Alan Greenspan. Greenspan headed the central bank in the United States for almost two decades. He was first appointed to this position in 1987 by President Ronald Reagan. Greenspan retired in January 2006 after deciding the fate of national interest rates under four different Presidents. Dubbed “The Maestro,” he was widely regarded as one of the world’s most influential economic policymakers.

He has just written a new 500-page memoir. It’s called “The Age of Turbulence: Adventures in a New World.” Alan Greenspan joins us on the telephone. And we are joined in studio by journalist Naomi Klein, author of “The Shock Doctrine.”

Alan Greenspan, Chairman of the Federal Reserve from 1987 to 2006. His new memoir is “The Age of Turbulence: Adventures in a New World.”

Naomi Klein, award-winning investigative journalist, the bestselling author of “No Logo” and the co-director of “The Take.” Her latest book is called “The Shock Doctrine: The Rise of Disaster Capitalism.”

AMY GOODMAN: As the credit crisis continues to grow and the US dollar hits a new low, we turn today to the former Chair of the Federal Reserve, Alan Greenspan. Alan Greenspan headed the central bank in the United States for almost two decades. He was first appointed to this position in 1987 by President Ronald Reagan. Greenspan retired in January 2006, after deciding the fate of national interest rates under four different presidents. Dubbed “the Maestro,” he was widely regarded as one of the world’s most influential economic policymakers. He has just written a new 500-page memoir; it’s called The Age of Turbulence: Adventures in a New World.
Alan Greenspan joins us now on the phone. And in our studio we’re joined again by journalist Naomi Klein, author of The Shock Doctrine. We welcome you both to Democracy Now! Welcome, Alan Greenspan.

ALAN GREENSPAN: Thank you very much. I’m delighted.

AMY GOODMAN: It’s good to have you with us. You worked with six presidents, with President Reagan, with both President Bushes. You worked with President Ford, and you worked with Bill Clinton, who you have called a Republican president; why?

ALAN GREENSPAN: That was supposed to be a quasi-joke.

AMY GOODMAN: Talk about it.

ALAN GREENSPAN: Well, Clinton?

AMY GOODMAN: Yes.

ALAN GREENSPAN: Well, I stated that I’m a libertarian Republican, which means I believe in a series of issues, such as smaller government, constraint on budget deficits, free markets, globalization, and a whole series of other things, including welfare reform. And as you may remember, Bill Clinton was pretty much in the same—was doing much that same agenda. And so, I got to consider him as someone—as he described it, we were both an odd couple, because he is a centrist Democrat. And that’s not all that far from libertarian Republicanism.

AMY GOODMAN: About how much would you say you agreed with him?

ALAN GREENSPAN: On economic issues, I would say probably 80%.

AMY GOODMAN: And what about President Bush?

ALAN GREENSPAN: President Bush had the wonderful characteristic of knowing that it was not to his advantage or to ours to interfere with the actions of the Federal Reserve. And I must say, through all of his years, he never once second-guessed what the Fed was doing. And that was very important to us, and we’ve been very much appreciative of that.
But, as I say in the book, he did not clamp down, as I thought was necessary, on what was a wayward Republican-controlled Congress, which I thought lost its way and started to spend and create all sorts of fiscal imbalances. And, essentially, what I hold—where I thought the administration could have done far better is if the veto were employed. And as you may remember, he did not use the veto at all. And that, what I thought, would have created a much more balanced procedure in the Congress. So it’s a mixed case in this regard.

AMY GOODMAN: Alan Greenspan, let’s talk about the war in Iraq. You said what for many in your circles is the unspeakable, that the war in Iraq was for oil. Can you explain?

ALAN GREENSPAN: Yes. The point I was making was that if there were no oil under the sands of Iraq, Saddam Hussein would have never been able to accumulate the resources which enabled him to threaten his neighbors, Iran, Kuwait, Saudi Arabia. And having watched him for thirty years, I was very fearful that he, if he ever achieved—and I thought he might very well be able to buy one—an atomic device, he would have essentially endeavored and perhaps succeeded in controlling the flow of oil through the Straits of Hormuz, which is the channel through which eighteen or nineteen million barrels a day of the world eighty-five million barrel crude oil production flows. Had he decided to shut down, say, seven million barrels a day, which he could have done if he controlled, he could have essentially also shut down a significant part of economic activity throughout the world.

The size of the threat that he posed, as I saw it emerging, I thought was scary. And so, getting him out of office or getting him out of the control position he was in, I thought, was essential. And whether that be done by one means or another was not as important, but it’s clear to me that were there not the oil resources in Iraq, the whole picture of how that part of the Middle East developed would have been different.

AMY GOODMAN: We’re also joined in studio by Naomi Klein, author of the book The Shock Doctrine: The Rise of Disaster Capitalism. Your response to that, Naomi Klein?

NAOMI KLEIN: Well, I’m just wondering if it troubles Mr. Greenspan at all that wars over resources in other countries are actually illegal. Mr. Greenspan has praised the rule of law, the importance of the rule of law, in his book. But in his statements about the reasons why this has not been publicly discussed, he has said that it’s not politically expedient at this moment. But it’s not just that it’s not politically expedient, Mr. Greenspan. Are you aware that, according to the Hague Regulations and the Geneva Conventions, it is illegal for one country to invade another over its natural resources?

ALAN GREENSPAN: No. What I was saying is that the issue which, as you know, most people who were pressing for the war were concerned with were weapons of mass destruction. I personally believed that Saddam was behaving in a way that he probably very well had, almost certainly had, weapons of mass destruction. I was surprised, as most, that he didn’t. But what I was saying is that my reason for being pleased to see Saddam out of office had nothing to do with the weapons of mass destruction. It had to do with the potential threat that he could create to the rest of the world.

NAOMI KLEIN: Yes, I realize that, but he was not simply deposed. The US invaded Iraq, occupied it and took control over its resources. And under international law, that it is illegal to wage wars to gain access to other countries’, sovereign countries’, natural resources.

ALAN GREENSPAN: Yes. No, I’m fully aware of the fact that that is a highly, terribly important issue. And as I said in other commentaries, I have always thought the issue of what essentially amounts to what is often called pre-emptive, preventive action on the part of some countries to secure resources or something else like that, it’s an issue that goes back to the Cold War, when we had the very difficult moral dilemma of what do you do when you think a missile is coming in our direction and you’re not sure whether it’s an accident or not an accident. And that is a problem which I think is a deep moral problem in civilized society. And the issue is one which I don’t think we’re going to resolve very easily. And as you point out, yes, I am a believer in the rule of law, and I think it is a critical issue, not only for domestic economies, but for the world economy as a whole.

AMY GOODMAN: Naomi Klein?

NAOMI KLEIN: You have also advocated economic shock therapy and supported IMF programs that have transformed economies very, very quickly. And then, you say that you are in support of the rule of law. But I’m just wondering how, in a country like Russia, there could be rule of law when it’s being transformed in fast-forward in that way.

ALAN GREENSPAN: Well, remember that you don’t get a market economy merely by eliminating central planning. And remember, when the Berlin Wall came down and the Soviet Union disintegrated, you didn’t have a market economy. What you basically had was a black market economy. And they tried to develop the institutions of the democratic society, and it’s not something which they have had back for generations. And as you can see now, there’s an increasing authoritarianism. It’s a very—it’s a society which has very different trends at different levels of that society. And I don’t know exactly where they’re coming up, but I don’t like the direction it’s been going in in recent years.

AMY GOODMAN: I wanted to go back to Iraq and ask you about, well, a piece by Jim Steele and Don Barlett that came out in Vanity Fair, where they’re talking about the billions lost in Iraq. And they begin their piece by saying, “Between April 2003 and June 2004, [$12 billion] in US currency—much of it belonging to the Iraqi people—was shipped from the Federal Reserve to Baghdad, where it was dispensed by the Coalition Provisional Authority. Some of the cash went to pay for projects and keep ministries afloat, but, incredibly, at least $9 billion has gone missing, unaccounted for, in a frenzy of mismanagement and greed.”
Alan Greenspan, when you were head of the Federal Reserve, how much knowledge do you have of this? And did you investigate this? Were you aware of this at the time?

ALAN GREENSPAN: Well, let me say that what we were involved in was essentially endeavoring to create a viable currency for the central bank of Iraq. And what we did do was—I think very successfully—create what is a viable financial system, even under the circumstances that currently exist. There was, as far as I can judge, a huge drain of the resources into areas which nobody to this day can understand or follow. It had nothing to do with the central bank. In our relationships with them, we were merely acting as an intermediary to assist them in creating a system, which they now have, which is working reasonably well, despite all of the problems that are going on. The issue which you are referring to had nothing to do with the Federal Reserve in any of our relationships with the central bank.

AMY GOODMAN: Well, they are talking about, in one day, for example, the East Rutherford operation center of the Federal Reserve Bank of New York, 100 Orchard Street in East Rutherford, a tractor-trailer truck pulling up, and though accustomed to receiving and shipping large quantities of cash, the vault had never before processed a single order of this magnitude: $2.4 billion in $100 bills. But ultimately, again, $9 billion of $12 billion gone missing in Iraq.

ALAN GREENSPAN: I am not familiar with any such evidence. And it was certainly not brought to my attention. I, frankly, find it very unlikely that those orders of magnitude were involved in any of the numbers that we were dealing with. You have to make certain that—there’s been a lot of confusion about losses, and people have used the dinar, the basic currency unit of Iraq, and assumed they were American dollars. And, of course, that gives you a highly distorted view. There’s been, I’ve seen, several reports fairly recently in which that sort of mistake was being made. But what I can tell you is that no such numbers of any order of magnitude of the type you are discussing came to the attention of the Federal Reserve.

AMY GOODMAN: This is based on that award-winning article in Vanity Fair, or the team who have won—

ALAN GREENSPAN: Let me put it this way, award-winning doesn’t necessarily—

AMY GOODMAN: Well, no, no. I mean Don Barlett and Jim Steele, Pulitzer Prize-winning journalists. I’m sure you know their work. But Naomi Klein?

NAOMI KLEIN: Well, I would just add that it’s quite surprising, actually, that Mr. Greenspan is unaware of this scandal around Iraq’s missing billions, because Paul Bremer had to testify before Congress and was asked directly about those missing billions. It’s been the subject of very high-level investigations. There is a huge paper trail around it. So this is hardly a secret, and it’s hardly just a matter that’s confined to Vanity Fair. This is—

ALAN GREENSPAN: Oh, I’m not saying that the losses are not real. I think they are, because, obviously, we can’t account for all the oil revenues. I’m just merely saying it’s not something which was directly related to any of the actions which the Federal Reserve Bank of New York, to which we were referring, was involved, as far as I know.

AMY GOODMAN: Alan Greenspan, we have to break for sixty seconds, but we’ll be back with you. Alan Greenspan, the former Chair of the Federal Reserve from 1987 to 2006. His memoir is out now; it’s called The Age of Turbulence: Adventures in a New World. We’ll be back with him in one minute.

AMY GOODMAN: Our guests are Naomi Klein, author of The Shock Doctrine, and Alan Greenspan, the former head, Chair, of the Federal Reserve, his book, The Age of Turbulence: Adventures in a New World. In fact, you were a classical and jazz musician, weren’t you, Alan Greenspan, before you went into economics?

ALAN GREENSPAN: Well, I studied at Julliard, which means you’ve become a classical musician. And, indeed, that is still my fundamental interest in music. But I went on as a teenager to play in a dance band and spent a year and a half traveling around the country as a jazz musician.

AMY GOODMAN: Well, I wanted to move forward to your work as head of the Fed, as head of the Federal Reserve Bank, and ask you about that piece by Paul Krugman called “Sad Alan’s Lament,” that goes to that issue of supporting President Bush’s tax cuts. In his piece, Paul Krugman says, "Mr. Greenspan has just published a book in which he castigates the Bush administration for its fiscal irresponsibility.

“Well, I’m sorry,” says Paul Krugman, “but that criticism comes six years late and a trillion dollars short.”

He says that "Mr. Greenspan now says that he didn’t mean to give the Bush tax cuts a green light, [and] that he was surprised at the political reaction to his remarks. "

He goes on to say the first big chance you had to clarify yourself came a few weeks after your initial testimony in 2001, when you appeared before the Senate Committee on Banking, Housing and Urban Affairs.

He says that, again and again you were offered the opportunity to say something that would help rein in runaway tax-cutting; each time evading the question, often replying by reading from your own previous testimony.

He said, “If anyone had doubts about Mr. Greenspan’s determination not to inconvenience the Bush administration, those doubts were resolved two years later, when the administration proposed another round of tax cuts, even though the budget was now deep in deficit. And guess what? The former high priest of fiscal responsibility did not object.”

And he goes on from there. He says in 2004, you “expressed support for making the Bush tax cuts permanent—remember, these are the tax cuts he now says he didn’t endorse—and argued that the budget should be balanced with cuts in entitlement spending, including Social Security benefits, instead. Of course, back in 2001 he specifically assured Congress that cutting taxes would not threaten Social Security.”

Your response, Alan Greenspan?

ALAN GREENSPAN: Well, I find it very unfortunate. Paul is a good economist. I have known him for years. He is wrong as fundamentally in many of the facts—in fact probably all of the ones you’ve just cited.

First of all, I was in favor of tax cuts of any type when it looked as though, according to all the technical experts, we were confronted with very large potential increases in surpluses. If we allowed those surpluses to run when the debt of the United States essentially went to zero, we would find that the federal government was beginning to accumulate huge amounts of assets of corporate business. There was to be no alternative to that. And if you look at the possibilities of what Lyndon Johnson or Richard Nixon would have done under those circumstances, it becomes extremely scary. It was only when it appeared that the forecasts were false, that, indeed, we were not running in—or not likely to run into these large surpluses, and, indeed, they disappeared.

At that point, I reverted to my older position: namely, I was in favor of tax cuts, but only if they are matched by cuts in spending. And I, therefore, reverted to that position in congressional testimony in 2002 and 2003, in fact, to the point where I recall a number of congressmen asked me, “Do I understand you correctly? You’re saying that you are in favor of the tax cuts, but only if spending is cut. If spending is not cut, were we to read from you that you are not supporting the tax cuts?” And I said, ‘That is correct." So Paul Krugman’s view that somehow I didn’t change my mind until after I got out of office is factually false. And, indeed, I did change my mind. I changed my mind in 2002 and 2003, largely because the whole notion of which fundamentally got me in favor of significant tax cuts without offsetting expenditures was a very special event which probably had not occurred in the United States for 150 years—namely, division of our total federal debt effectively going to zero.

AMY GOODMAN: Naomi Klein?

NAOMI KLEIN: Just another piece of the puzzle here that I think is important to remember is that, Alan Greenspan, in your book, you make it clear that you are ideologically very much a supporter of the principle of privatizing Social Security and, in fact, were very disappointed that the Bush administration did not pick this up after the elections in 2000. Even though they hadn’t campaigned on privatization of Social Security, you felt that they should have pushed this forward. So doesn’t creating a shortfall because of tax cuts bolster the case for privatization of Social Security that you have written you are an ideological supporter of?

ALAN GREENSPAN: Well, first of all, ideology is not what I hold. I try to learn what are the facts, and I let my opinions, judged on the facts, not by some preconception, which I regret is what ideology as a notion means.

First of all, let me just suggest something to you. Social Security, as it now exists and is now currently funded, will be a very small part of overall retirement income in the years ahead. There is no—in fact, no alternative, as things now stand, that a very substantial part of the so-called replacement of income that one talks about when one retires is going to have to come from the private sector. And so, no matter what is done with federal Social Security, the average person is going to have to rely ever more increasingly on private sources of income, whether it’s private savings or working or whatever. But if you look at the future of Social Security and the demographics we’re now dealing with, the extent to which it replaces lost income when you retire is decreasing.

AMY GOODMAN: Alan Greenspan, the issue of whether we have enough money in this country, do you think that that also calls into question the war in Iraq, how the US can afford to continue this war?

ALAN GREENSPAN: Well, the issue is, basically, the question of the commitments of Social Security, relative—and Medicare, I might add—relative to the costs of the war. There is no question that a significant amount of money is being wasted in war. That is what happens in war. And that’s—clearly we’re talking hundreds of billions. The issue here is that—
AMY GOODMAN: I believe the figure is in the trillions.

ALAN GREENSPAN:—even if the war spending were not there, we would have these problems. So it’s true that there’s a good deal of waste going on. But the problems to which I’m referring to existed before the war and will continue after the war.

AMY GOODMAN: The sub-prime crisis that we are seeing today, many saying that you seriously contributed to this, laid the foundation with keeping the interest rates low.

ALAN GREENSPAN: Well, the sub-prime crisis did occur as a result of lower interest rates. The lower interest rates, however, are, if one takes a look at the whole context of rising home prices throughout the world, is clearly a global issue. It is the result of fundamental changes that occurred as a consequence of the end of the Cold War, and that housing bubbles appear in more than two dozen countries around the world, which screams for an explanation that is global, not individual. So we in the United States—

AMY GOODMAN: I know that you’re going to have to leave soon.

ALAN GREENSPAN: May I just finish?

AMY GOODMAN: Yes. Go ahead.

ALAN GREENSPAN: We in the United States basically try to get mortgage interest rates up and slow the bubble. And remember, it’s the bubble which created a goodly part of the problem which we have had in the sub-prime market. And we failed. And that tells us, basically, that it’s the global forces that are at play here.

But just going—taking a step back, I think it would be a terrible mistake if we look at the sub-prime market and decide it should be eliminated, because I think it’s been a very successful market to allow many people in this country to have homes, which wouldn’t otherwise be able to have them. The sub-prime market has a lot of technical problems wrong with it, and there are many issues that are involved with financial securitization alike, which created difficulties. I hope in the process we don’t eliminate the sub-prime market.

AMY GOODMAN: Alan Greenspan, you write in the end of your book, “A Federal Reserve System that will be confronted with the challenge of inflation pressure and populist politics that have been relatively quiescent in recent years” is something that is very significant. You say the year—the United States in 2030 is likely to be characterized by populist politics that have been relatively quiescent in recent years. How important is populist politics, and what do you envision those to look like?

ALAN GREENSPAN: Well, remember what populist politics is. It’s a very special brand of short-term focus, which invariably creates very difficult long-term problems. A goodly part of the book, as you know, is written about how populism has gripped, say, many Latin American countries to their detriment. And the term “populist politics” is essentially another way of saying short term versus longer term. And people who emphasize short-term benefits for long-term costs end up with very little in the way of economic growth and prosperity.

AMY GOODMAN: Naomi Klein?

NAOMI KLEIN: Mr. Greenspan, I’m wondering whether you feel that you share any responsibility in the rise of this economic populism, because, of course, you took over the Federal Reserve during the Reagan administration, and when Reagan took office, CEOs earned forty-three times more than their workers, and when you left the Federal Reserve, they made more than 400 times more than their workers. So the policies that you pursued—deregulation, privatization, free trade—have contributed to this extraordinary division of income that is really the fuel for this economic populism that you’re now denouncing. So aren’t you the one that has caused this crisis of faith in capitalism? Or, at least, don’t you share some of that responsibility?

ALAN GREENSPAN: Well, look, the whole issue of what has happened in this country with respect to the increasing inequality of income is an issue I address and abhor in the book, and I point out that what is causing it to a very significant extent is the fact that skilled labor is under extraordinary demand as the technologies increase, and we’ve had a dysfunctional education system in this country, both in primary and secondary schools, which is showing up in all of the studies, which indicate that while our children in the fourth grade are doing fairly well relative to international comparisons, by the end of high school, they are in terrible shape. And as a consequence of that, we are not putting the proper number of people into the education cycle to get them up to skill levels, which creates much less, or would create a good deal less, in the way of income inequality.

And I also argue in the book that we ought to be opening up our borders to skilled labor from all sorts of—from all parts of the world, because if we were to do that, we would increase the supply of skilled workers, which our schools have been unable to create, and as a consequence of that, we would lower the average wage of skills and reduce the degree of income inequality in this country. It’s a very important issue, and it’s a very important issue which I raise in my book. And we have to confront this both at the education level and on the immigration level.
And it’s not anything to do with what I am proposing. And just remember that the type of globalized economy that I support has taken hundreds of millions of people out of poverty. It’s created a standard of living throughout the world which is unprecedented in history. And to assume that that is something we should be apologizing for, I find, is wholly inappropriate.

AMY GOODMAN: Naomi Klein?

NAOMI KLEIN: Well, you mentioned Latin America, and, of course, there is a rise in leftwing political parties and movements in Latin America. But this is after decades of adherence to IMF structural adjustment policies, and it’s precisely because those policies failed to lift people out of poverty in countries like Bolivia that you have this rise of what you’re calling economic populism. It’s because trickle-down economics was seen to have failed. But you also mentioned economic populism in Latin America in your book, and you blame it for inflation episodes and the collapse of regimes and the toppling of governments, and one of your examples was Chile in the 1970s. Was Chile—was Salvador Allende’s regime toppled because of inflation, or didn’t the CIA have something to do with that?

ALAN GREENSPAN: Well, look, let’s—I’m using Latin America as an example. The key question is not Latin America. Let’s get back to the United States. Let’s get back to the world at large and face the issue of populism here. Remember, the populist issue in Latin America goes back to the roots of Spanish and Portuguese colonization.

NAOMI KLEIN: I’m aware of that, Mr. Greenspan, but there are many developmentalist policies that were trying to address those colonial disparities. They were called it import substitutions. And those leaders were systematically eliminated in a series of coups.

ALAN GREENSPAN: Well, let me ask you a question, which—you are just taking the capitalist system, to state it very bluntly, and say it’s deficient here, it’s deficient there, it’s deficient every other place. The capitalist system has created more economic wealth in the last seven or eight years around the world. And as I said before, it’s had huge effects in the developing world. Hundreds of millions of people have come out of poverty. And as a consequence of this, not on the basis of populist policies, but on the basis of policies which relate to markets, it strikes me that—you know, you can say all of the problems that exist in market economies—and in my book, you will find, I am very much aware of all of them in great detail.
The question you have to answer, however, is: what system works better? And I think the evidence going back to the Enlightenment of the early part of the eighteenth century and all of the events that occurred with respect to what’s happened to the world since then has demonstrated that this system is the only one that seems to work well. I mean, all forms of socialist structure, which you seem to be implicitly in favor of, have failed. So the question is—

AMY GOODMAN: Naomi Klein?

NAOMI KLEIN: Actually, I am referring to mixed economies here. I’m not—

ALAN GREENSPAN:—what is [inaudible] issue here?

NAOMI KLEIN: Actually, I’m referring to mixed economies here. I’m not referring to state socialism.

ALAN GREENSPAN: Well, the question is, when you begin to talk in terms of changing what you’re implicitly saying—and I’ve heard this story before—you have to say, what are you changing in favor of? And we’ve had regrettable problems throughout the world every time we’ve moved in the direction you’re implying. The poverty level has gone up, not down.

NAOMI KLEIN: Well, Mr. Greenspan, I think it’s worth remembering that the word “populist” simply means popular. So, obviously, a lot of people disagree with your assessment of the benefits of—

ALAN GREENSPAN: A lot of people disagree with my assessment, a lot of people disagree with yours.

NAOMI KLEIN: And are interested in another economic model.

ALAN GREENSPAN: That’s what makes democracy work.

NAOMI KLEIN: There is something that I was quite interested in in your book, which was your definition of corruption and crony capitalism. You said, “When a government’s leaders or businesses routinely seek out private sector individuals or businesses and, in exchange for political support, bestow favors on them, the society is said to be in the grip of crony capitalism.” You say, “The favors generally take the form of monopoly access to certain markets, preferred access to sales of government assets, and special access to those in power.” I kept thinking about Halliburton, Blackwater, Lockheed and Boeing. You were referring to Indonesia at the time, but I’m wondering, according to your definition—and we’re seeing these extraordinary—we’re seeing contracting emerging, as in the words of the New York Times, a fourth arm of government. Front page of the New York Times talks about $6 billion being investigated for criminal activity in contract allocation in Iraq. I’m wondering whether you think the United States is a crony capitalist economy, according to your definition?

ALAN GREENSPAN: Every economy exists, no matter what the level of democracy, has elements of crony capitalism. It’s—given human nature and given the democratic structures, which we all, I assume, adhere to, that is an inevitable consequence. The major issue is, is it the dominant force within an economy? It was the dominant force under Suharto. It is not the dominant force in this country.

NAOMI KLEIN: Well, how about this: in 2003, when you were head of the Federal Reserve, the US government handed out 3,500 contracts to companies to perform security functions. In 2006, the year that you left the Federal Reserve, they handed out 115,000 such contracts. It seems to me that it is becoming a dominant force.

ALAN GREENSPAN: Are you talking about the contracts that the Federal Reserve put out?

NAOMI KLEIN: I’m talking about the crony capitalist system of a Republican government handing out an extraordinary level of contracts to private companies, who then support these politicians with the political favors that you’re describing in your book, in your definition of crony capitalism.

ALAN GREENSPAN: [inaudible] Federal Reserve is doing this or the government?

NAOMI KLEIN: You’ve overseen an explosion of the contract economy.

AMY GOODMAN: Final word, Alan Greenspan.

ALAN GREENSPAN: I’m sorry. I misunderstand what you’re saying. Are you saying the Federal Reserve is doing that or the government is doing it?

NAOMI KLEIN: I’m saying that the US government is doing it.

ALAN GREENSPAN: Well, the US government has to purchase equipment from the private sector. It doesn’t produce it itself. And you may characterize it in many different ways. And, obviously, I’m not going to deny that there’s all sorts of corruption, which goes on in every country. The problem, essentially, for a democratic society is to maintain the civil liberties of the society and suppress that. Corruption, embezzlement, fraud, these are all characteristics which exist everywhere. It is regrettably the way human nature functions, whether we like it or not. What successful economies do is keep it to a minimum. No one has ever eliminated any of that stuff.

AMY GOODMAN: Well, on that note, we’ll have to wrap up this discussion, because I know you, Alan Greenspan, have to go. But I hope this is just part one of this discussion. Alan Greenspan’s new book is called The Age of Turbulence: Adventures in a New World. Naomi Klein, award-winning investigative journalist, is author of The Shock Doctrine: The Rise of Disaster Capitalism. I want to thank you both for being with us today.

ALAN GREENSPAN: You’re welcome.

AMY GOODMAN: Thank you.

From Democracy Now! September 24, 2007