The Shock Doctrine

Connecting the Dots (The Shock doctrine-Naomi Klein)
Chap 1:
Capital is religion, and Milton Friedman is its Abd Al-Wahhab (Start with the origin of capitalism).

Since 1960s, Milton Friedman and his followers have been perfecting the strategy to use a crisis to cow down the public to make it politically possible (12) to introduce the trinity of free market, privatization and drastic cutbacks on social services-health, education and welfare.
He first got the opportunity to utilize a terrible upheaval to put his theory into practice when became Guru of General Augusto Pinochet (14), who had overthrown the democratically elected government of Chile, attacked the presidential palace by air and with tanks, killed the president and arrested all the cabinet ministers, he could lay his hands on. President Allende had refused to order troops and guards loyal to him, even after he had credible reports that a coup was in the offing, so the show of overwhelming force was to terrorize the public.
(A line of deception runs clear through recent history when violent events have been orchestrated to mold public opinion to favor a certain course, and if relatively mild ‘happenings’ do not work drastic measure are undertaken.
During early WW II American public opinion was not in favor of US participation in the war against Germany. In fact most Americans felt that England was being punished for its past and current sins of colonization and imperialism. But what was at stake was the very survival of the capitalist system, which the fascists appeared to be on the point of vanquishing completely. It is reported that Churchill had an American plane blown out of air off the coast of Spain and an American ship drowned in mid-Atlantic. Germans were blamed for both. That did change public opinion, but not sufficiently for FDR to commit the country to the War.
Japanese Naval attack on Pearl Harbor came as a godsend. There are credible reports that though the government and FDR had advance knowledge of the impending attack, they let American ships get hit like sitting ducks. It stands to reason that a flotilla sailing all the way from Japan, would be noticed by some one who would inform the US government.
In days gone by, European governments used to send missionaries ostensibly to convert the ‘natives to God’s religion. If the natives did not accept God’s word through the ‘men’ of god, or still worse, they bodily harmed the preachers, gunboats went to proselytize more effectively.
Further back in history, the second Caliph after Muhammad, Umar ibne Khattab sent emissaries to the royal court in Iran. Iran was at the height of its civilization, with glittering court and king. The emissaries, roughly clad and wild in appearance, forced their way into the court and demanded that either Iranians become Muslims, or pay a religious tax or else they would be attacked. The king sent them on their way, and sure enough they were attacked, defeated, cities were razed, men were slaughtered and women taken into captured and offered to the caliph to be distributed to victors as he pleased).
Coming back to the 20th CE, in 1953, the British smarting under the nationalization of oil and other nationalist measures, and unable to destabilize the elected government of Iran, handed over the case to the Americans, who in collaboration with the Iranian army, aided and abetted by Ayatollahs, orchestrated a coup, in the aftermath of which thousands were killed. Iranians had to wait till 1979 to get rid of the Shah who, though allowed megalomaniac celebrations as the 2500th anniversary of the Iranian royalty (his father had risen from a subaltern to head of the state, and had very reluctantly agreed to become the king. He had been exiled by the British as he was not servile enough) had functioned as American satrap.
Further outrages had followed, in Guatemala at the instance of the United Fruit co and in many other countries in Central and Latin America.
France was unable to hold on to its possessions in Indo-China. The US, prodded by the paranoid brothers Allen and John Foster Dulles, respectively at the CIA and state, magnanimously stepped in
So no one may say that Asia was backward Asia, In 1965 the army had overthrown the independence leader Ahmad Soekarno in Indonesia and killed an estimated one and a half million people. The usurper General Suharto was advised by economists from ?Harvard.
The Falklands war in 1982 helped Margaret Thatcher crush the miners strike and dismantle the trade union movement.
The trinity is imposed in a relatively peaceful way too. Loans for extravagant and useless enterprises are thrust on third world, and when they are unable to pay IMF, WB and other international financial institutes countries twist arms to accept what are euphemistically described as conditionalities, which amount to the same deregulation, nationalization and cutbacks in social spending. This was done to Yeltsin’s Russia (1993), Latin America (22) after the mid 1980s crisis and after the later1990s crisis in East Asia (23). It was done democratically in Reagan’s America and more recently in Sokorzky’s France.
But the US capital got its big chance after 9/11. Bush took advantage of it to make war on terror a free market, completely for profit enterprise. The administration, as a first measure towards privatizing the government outsourced health care of the soldiers, interrogation of prisoners and ‘data mining’ on American citizens with out so much as by your leave to FASA courts set up specifically for the purpose of allowing the government to spy on its own citizens.
In 2003, the government handed out over 3500 contracts to private companies to perform security work, and by the end of August 2006, the department of Homeland security had given more than 115,000 such contracts (28). (name Blackwater and others) which have immunity from local laws, and US law did not apply to them in Iraq. Weapon contracts and servicing the military is the fastest growing service economy in the world (29).
Humanitarian relief and reconstruction work, after the society and its whole infrastructure has been demolished as in Iraq and Afghanistan, is done by corporations like Bechtel. Another Halliburton reported revenues of $20.00 billion in 2006, in 2006, the bloodiest year for Iraqis, with 3700 casualties in October alone (33).
Wherever the Chicago school policies of Milton Friedman have been applied a powerful alliance has emerged between elite politicians and multi-national corporations, who function under a revolving door arrangement with each other (give examples of Ruben, Paulson Guitner, Mc Namarra, Cheney and so many others).
Torture has been the inevitable partner of the crusade for global free trade, deregulation. CIA calls it ‘coercive interrogation’. It is a set of techniques which disorients prisoners to the extent of disowning their ideas, family and friends. The idea is explained in details in two CIA manuals declassified in late 1990s, on how to create ‘violent ruptures’ between prisoners and their perception of the world.(36). They are deprived of sensory input with hoods, ear plugs, shackles and isolation and then suddenly exposed to glaring light, blaring music, physical assault and electric shocks with cattle prods.
The prisoners are regress so much and so frightened out of their wits that they are no longer able to think rationally (37).
Coups, mass jailing, public torture in football fields (Chile and Afghanistan under the Taliban), killing create an atmosphere of fear which makes people more amenable to listen to and accept what neo-liberals have planned for long.

Post 9/11 north Americans, not known for knowledge or familiarity with the world outside the continental US (relate stories of driving license bureau in NJ which till the 1960s did not know that Pakistan was not a US state, and accepted Pakistani driving license in exchange for a NJ one, or a similar office in MI which did not know the difference between a learner’s license and a full driving license from Canada, or people in MI asking Pakistani doctors in 1970s, if Pakistan had phones) US citizens fell line, hook and sinker for Clash of civilization, the axis of evil and Islamo-fascism, and became a “clean sheet of paper on which the newest and the most beautiful words can be written”, Mao on his people (38).
The 1929 market crash had created an overwhelming consensus that laissez-faire had failed and people started listening to John Maynard Keynes, the intellectual architect of the modern welfare state (39). Friedman had spent his life fighting the idea. He wrote to Pinochet in 1975 “ the major error, in my opinion was to believe that it was possible to do good with other people’s money.
He got a reprieve when Margaret Thatcher (the milk snatcher-she had as secretary for education in PM Heath’s cabinet, had withdrawn the glass of milk provided to students at lunch time) and Ronald Reagan peacefully liberated the markets.
When the Soviet Union collapsed, they also wanted to join the Friedman revolution, as did the communist inside but capitalist outside Chinese, who had had their own shock treatmen6t in Tiananamen square (don’t forget Shock and Awe of Iraq. Napoleon had demonstrators surrounded. Look up short selling- buy insurance on stocks, (burn them when they go down), buy them when they go down, like robbing a grave does not mean you killed the guy).
This fundamentalist form of capitalism has always been inducted through the most brutal forms of collective and individual torture.

(On the "Daily show" last night I heard the woman (can't recall the name) asking a person about 'selling short'. It is apparently akin to getting a heavy insurance on a property and setting it to fire, without the risk of the insurance co investigating and finding signs of arson. She told him that if you are robbing a grave, it does not mean that you killed the guy too.
She also interviewed some one from overstock.com who said that many companies went bankrupt after short sellers got after them. Could you please look into it.
(Since we are linking torture with economic policy, not as random sadism, but as an instrument to cow down the public and make them amenable to acceptance of certain policies, could we give historical examples of Nero, Muslim attack on Iran during Umar's caliphate, Karbala, sack of Baghdad by Mongol hordes, Nadir Shah, Napoleon, gun boat diplomacy, Pearl Harbor and so on, including the last one 'Shock and Awe'. That way we will be able to link religion to economic policy too).
The corporatist alliance has obtained control over Arab oil, taken over disaster relief, security apparatus, jails and other state business privatization, coercion of the third world into accepting IMF conditionalities. But perhaps the greatest achievement is the perception in the common mind that the devastation of Iraq and Afghanistan. Abu Gharaib and Guantanomo are the consequences of the unique incompetence of Bush regime, and not an essential element in a well thought out policy.
To hold an ideology accountable for the acts of its followers is not far fetched. All intolerant, fundamentalist doctrines which reject other belief systems out of hand, deplore diversity and whose avowed objective is to impose what they think is the perfect system are a danger to mankind. The Chicago school shares this trend with extreme religious and racist groups. Bit is difficult to distinguish between the inspiration of the ideology and its distortions like the Taliban for Islam, Sharon for Zionism, Billy graham for Christianity, BJP for Hinduism, and Stalin for communism.
The coups, wars and massacres have not been regarded as capitalist crimes and need to be identifies as such. Co-existence of capitalism with an egalitarian state is possible as Keynes proposed and did exist in Europe (and in a much more diluted form in the USA), till Thatcher started eroding its base. But neo-liberals want to demolish government except to safeguard their interest, and keep ‘law and ‘order. That is not allow the public any forum of protest. This fundamentalist concept of naked capitalism is not compatible with any other system, as Islamic fundamentalism is incompatible with democracy and representative government.

Medical Roots of ‘Scientific’ Torture:
Were laid in the 1950s, by a Montreal psychiatrist, Dr Ewen Cameron, director of the Allan Memorial institute at McGill university. The study was funded by the CIA through a front organization called the society for investigation of human Ecology.(26). The funding continued from 1957 to 1961 They tried to pass it off as bumbling sci-fi buffoonery, rather than accept funding a torture laboratory They destroyed the files of the $ 25.00 million program.(43). Cameron believed that patients with psychiatric problems had to be regressed to infantile/early childhood age by heavier, more frequent and larger than accepted number of electro-shocks in traditional ECT (electro-convulsive therapy) and drug cocktails of psychedelic LSD and hallucinogenic PCP, huge doses of insulin, drug induced sleep, and prolonged sensory deprivation. He gave 300 electro-shocks to victims in stead of the recommended four treatments per patient totaling 24 individual shocks(27). He put patients in isolation boxes (30), soundproofed the rooms, piped loud noises, kept the room dark, put heavy dark glasses on them, put heavy ear muffs, and put cardboard tubing on hands and arms, so they could not touch their body parts (31).They were kept in this state for 15-20 days (31) He also gave one group the drug Curare which paralyses body muscles. Legions of patients with minor psychiatric problems were so dealt with without their consent or knowledge and regressed to soiling their underwear, thumb chewing, baby talk, and in case of prisoners, telling the interrogators whatever they knew or was suggested to them, to the extent of betraying spouses, parents, siblings, friends and their belief systems. He called it ‘de-patterning’ a patient to make a clean slate on which healthy patterns could be inscribed. I did not work that way. (in 1988, CIA settled the case for substantial damages and the Canadian government followed suit four years later. (3).
In the initial days of cold war hysteria in mid 1950s, CIA ed the techniques. It was codenamed Project Bluebird, later changed to MKUltra (13). The program needed large number of human guinea pigs in several trials, and if it got out that CIA were conducting these studies, public outcry would shut the program down. The relationship started with the tri-national conference of intelligence agents and academics at Montreal’s Ritz-Carlton hotel on June, 01, 1951, attended by among others, Omond Solandt, chairman of Canada’s Defense research board, Sir Henry Tizard, chairman of the British Defense Research Policy committee, and representatives of the CIA (18).
One of the participants was Dr Donald Hebb, director of the department of psychology at McGill university. The defense research Board reporting on Hebb’s findings “sensory deprivation clearly caused extreme confusion as well as hallucinations…and significant temporary lowering of intellectual efficiency…during and after…deprivation (20). The subjects “developed an interest in the occult that lasted weeks”. Hebb had proved that it made people “more open to suggestion “ and eventually came to the realization that he could be draft a ‘how to’ manual for psychological torture (23). Hebb knew that the experiments violated medical ethics. He wrote that more “clear cut results were not available as it was not possible to force (large number) of subjects to spend 30 to 60 days in conditions of perpetual isolation (24).

Fear:
In 1998, Florencio Callabero, an interrogator with Honduras’s brutal Battalion 3-16 told the NY Times that the CIA “…taught us…methods to study fears and weaknesses of prisoners…make him stand…don’t let him sleep…keep him naked and in isolation…put rats and cockroaches in his cell (The most notorious case I heard of was during the days of the tussle between ISI and MQM, they put rats in the shalwar of Nasreen Jalil, a member of Mohajir elite ) (to Taqi upto here 3/18/09)…serve him dead animals, throw cold water, change the temperature. Ines Murrillo, a 24 years old woman interrogated by Callabero “…they spread my legs and stuck the wires (for electroshock) on my genitals (44). That led to a hearing of the Senate’s Select committee on Intelligence, where CIA deputy director Richard Stolz admitted that “Callabero did indeed attend a CIA human resources…interrogation course” (46)attend
The Baltimore Sun filed a request under the Freedom of Information Act for the manual used to train people like Callabero. The CIA stalled for 9 years, and produced a 128 page 1963 handbook under threat of a lawsuit called Kubark Counterintelligence Interrogation (47), which details methods from sensory deprivation in stress positions, from hooding to pain and instructs interrogators to seek “prior Headquarters approval”, under circumstances when bodily harm is to be inflicted, or if medical, chemical, or electrical methods are…used to induce acquiescence (48).
The manual has a large section on the experiments conducted at McGill (51). “The (sensory) deprivation induces regression……tends to make …the subject view the interrogator…father figure” (52). “…Adults can be converted into dependent children…” (55). Prisoners are captured in the most jarring… way possible, late at night or in early morning raids…immediately hooded…stripped and beaten…subjected to…sensory deprivation. Then there always is improvisation…instinct for brutality is unleashed when there is impunity e.g. on the Algerian freedom fighters by the French soldiers, often with the help of psychiatrists (58). The French conducted seminars in fort Bragg, NC in the Algerian techniques (59).
1970s on, the Americans favored the role of trainers (61-62). Torture violates the Geneva conventions and the US army’s Uniform Code of Military justice, yet successive US administrations have sanctioned it (63). The manual states on page 2 that the techniques carry “the grave risk of…lawsuits”.
The effects of 9/11 were remarkably similar to the ones imagined in the pages of the manual: profound disorientation, extreme fear and anxiety and collective regression. (page 51). Bush took advantage of the situation by acting as the ‘father figure’. Torture, in addition to being outsourced, was in-sourced as well with US citizens torturing prisoners in US run prisons or being extra-ordinarily renditioned in US planes. The administration openly demanded the right to torture, and defied own laws. GWB empowered Don Rumsfeld to declare that prisoners captured in Afghanistan were not covered by the Geneva conventions as they were not ‘POWs’, but enemy combatants, the view confirmed by the then white house counsel Alberto Gonzales (66).
Rumsfeld approved a series of special practices like using phobias such as fear of dogs, water boarding (67). US citizen and a former gang member Jose Padilla was arrested at Chicago’s O’Hare airport in May, 2002, classified as enemy combatant, taken to a US Navy prison in Charleston SC, injected with drugs, kept in a darkened tiny cell, and could only leave the cell shackled and with black goggles, and heavy headphones, kept like that for 1,307 days, and during interrogations subjected to bright lights and pounding sounds (70).. He “lacks the capacity to assist in his defense” according to the psychiatrist who examined him ((71).
James Yee, a former Muslim Imam at Guantanamo describing the extreme regression “ I would stop to talk to them, and they would talk to me in a child like voice…”(71). HR groups describe Gitmo as the best of off shore US run prisons. Imagination boggles at the treatment meted out to prisoners in US run jails in foreign countries, and worse condition of those who are outsourced to countries like Morocco and Egypt.

Chap 2
The Department of Economics at the University of Chicago regarded itself as a bulwark against the statist Keynesian thought (2). Friedman envisioned a return of societies to pure capitalism, shorn of all distortions like regulation, trade barriers, and welfarism. The only way to cleanse it was through shocks. The core of the ‘sacred’ teaching was that forces of supply and demand, inflation and unemployment were like forces of nature , and existed in perfect equilibrium, and like ecosystems, if left to its own devices, the market would produce at right prices and in right numbers, with workers getting right wages. Capitalism was “a jeweled set of movements…a celestial clockwork…” (5). Not able to experiment on countries Friedman and co, developed elaborate …mathematical equations and computer models.
Like all zealots, the school premise is that the free market is a true scientific system, correct application of which would make individuals working in their own self interest would produce maximum benefit foot every one. Like their Islamic Wahhabi counterparts, strict and complete application of fundamentals would produce a paradise on earth.
It is true, though, that thorough application of the Friedman methods have made some people extremely wealthy, and rendered them above and beyond the reach of regulation, taxation and borders to make more money.
The Chicago school saw interferences in economies in all Western capitalist countries-fixed price, minimum wage, education, which according to them, were doing untold harm to the market equilibrium. Marxism was not the true enemy (Atheists are not the worst enemy, it is non-conformist Muslims, according to Wahhabis), it was the social democrats (Europe) and Keynesians (USA) and developmentalists (third world). Capitalism in manufacture and distribution, socialism in education and state ownership of water and welfare services was akin to what Wahhabis call “bidaah”, innovation in religion.
Friedrich Hayek was Friedman’s own guru, and had warned that any involvement of government in economy would lead to “road to serfdom” (11). In 1947 Friedman joined Hayek to from Mont Pelerin society, a free market club, named after the town in Switzerland.
The Great depression did not signal the end of capitalism, but as Keynes had predicted, the end of “laissez-faire”.
Post WW II, the third world nationalist economists argued that in order to escape the poverty consequent upon depredations of colonial exploitation and non-development of industry in order to be reduced to the status of a captive market, they would have to pursue an industrialization strategy, and not depend upon export of natural resources, and advocated regulation, nationalization and tariff barriers.
By 1950s, the developmentalists had achieved major successes, especially in the ‘Southern cone’ of Latin America-Chile, Argentina, Uruguay and Brazil. UN Economic Commission for Latin America, base in Santiago, Chile and headed by the economist Raul Prebisch between 1950 and 1963, was the inspiration and epicenter. Argentina’s Juan Peron ( and other leaders a little less vigorously) poured money into public infrastructure projects, gave generous subsidies to local business and erected high tariff walls to protect them.
Powerful unions emerged in the new industries, and negotiated salaries and sent their children to school. By mid 1950s Argentina had developed the largest middle class in the continent, Uruguay had 95% literacy and offered free health care to all.
Chicago School had few takers, but they were among the most powerful.
US MNCs had a rough time in the LDCs, and not much better at home with powerful unions. Profits were high, but a substantial portion had to be given away in taxes and worker salaries. MNCs kept the Chicago School flush with donation money, to give an academic cover to corporate views. Friedman had specifics of advice. Taxes must be low and flat-not income related. Corporations should be able to sell any where, there must not be any protection to local industry or any conditions of local ownership. All prices and wages to be determined by the market, no minimum wage. All-health care, education, post office, pensions, national parks, and water supply be privatized, so state public assets could be auctioned at a fraction of their value. That coincided with the interests of MNCs as it was meant to be.

The War Against Developmentalism:
Eisenhower could not take on the New Deal at home, but did not have any hesitation in defeating the developmentalists abroad.
At the time he assumed presidency in January 1953, Mossadegh was the PM of Iran and had nationalized the oil industry. Soekarno of Indonesia was trying to launch a non-aligned movement to be able to face the capitalist and communist world on equal terms.
In actual fact, for the time when socialism was very attractive, this movement was centrist. But the developmentalist slogans of land reform, nationalization and egalitarianism had alienated the feudal and MNC interests.
The imperial and MNC interests ordered the foreign policy establishments to control the trend, and they tried to divide the third world that democratic center was the first step into the claws of communism. The chief ideologues of the policy were dyed in the wool conservative Dulles brothers-john foster at the state and Allen at the CIA, who had represented J.P Morgan, the International nickel co and the United Fruit co at the legendry NY law firm Sullivan and Cromwell (18).
They staged two coups in quick succession, the first in Iran in 1953, where the CIA orchestrated the overthrow of Mossadegh, through the army and ayatollahs. The second was the 1954 CIA coup in Guatemala, aided and abetted by the local clergy, for the benefit of the United Fruit co. President Jacobo Arbenz Guzman had had the temerity to take over some unused land with full compensation, to transform “…feudal economy into a modern capitalist state” (19).
In 1953, two Americans, Albion Patterson, director of US International Cooperation Administration (soon to be USAID) and Theodore Schultz, Chairman department of economics at the U of Chicago, met in Santiago, Chile and decided “What we need…change the formation of these men -pink economists, (20) and want these countries to work out …by using our way…economic development (21). The plan was simple-the US government would pay for Chilean students to study in the Chicago school, and the professors of the school would be paid to conduct economic research on the ground in Chile.
Albion Patterson approached the dean of the premier University of Chile. The dean turned him down. (US aid workers were conscious and US scholarship holders, perhaps, unwitting agents of the capital). Patterson got his way with a lesser institution, the Catholic university, thus giving birth to “the Chile project” as it came to be known at the Chicago school.
Between 1957 and 1970, 100 Chilean students studied at the school, all expenses paid by US tax payers. In 1965 the program was expanded to include students from all Latin America, especially from Argentina, Brazil and Mexico, this time funded through the Ford Foundation, leading to the Center for Latin American Economic Studies at the school, which hosted 40-50 Latin American students at given time, compared to 4-5 at Harvard/MIT.
A special Chile workshop was created by the head of the program, one Arnold Harberger. All of Chile’s policies-social safety net, and protection of national industry, trade barriers, price control were deemed obstacle, and its health and education program “absurd attempts to live beyond its underdeveloped means”.
With generous USAID, the Chicago boys became enthusiastic ambassadors of neo-liberalism over the whole continent (30).
This was unabashed intellectual imperialism par exellance.
In 1962, Brazil under president Joao Goulart moved to land reform, higher salaries, and to force foreign MNCs to reinvest a percentage of profits into Brazilian economy. In Argentina, the military was trying to defeat similar demands by banning Juan Peron’s party. In Chile’s 1970 election, all the three major political parties were in favor of nationalizing the country’s largest source of revenue, the copper mines controlled by US corporations (33). Salvador Allende had won the 1970 elections on the platform of nationalizing large segments of economy run by local and foreign corporations. Allende was a democrat, who believed that social change should come through the ballot box. On hearing the news of Allende’s election, Nixon ordered CIA director Richard Helms to “make the economy scream” (35).
US MNCs were apprehensive that Allende was the beginning of the end of US control over Latin American economy. By 1968 20% of total US foreign investment was in Latin America. The profits were astounding. Mining industry had invested $ 1 billion, but had sent home $7.2 billion (37).
US corporations declared war on Allende even before his inauguration. The leader of the group Ad hoc committee on Chile was ITT which owned 70% of Chile’s phone co, and joined by US mining companies, Bank of America, and Pfizer Chemical.
The plan was to block US loans and …have large US private banks do the same, delay buying from Chile for six months (39).
Allende appointed a close friend Orlando Letelier as ambassador to DC and in charge of negotiating with the corporations. In March, 1972 a syndicated columnist jack Anderson published aeries of articles that ITT had conspired with the CIA and State to keep Allende from being inaugurated in 1970. The US senate launched an investigated and found that ITT had offered $ 1 million to the opposition and “sought to engage the CIA…manipulate the outcome of…election (41). The report released in June 0973 found that there was relationship between ITT and US government, including NS adviser Henry Kissinger (42).
It all failed to dent Allende’s support. In the mid term election Allende’s party won more support in the parliament than it had in 1970.
They studied two models for regime change in Chile. In Brazil US backed military junta had seized power in 1964. They had tried to impose the neo-liberal agenda relatively peacefully, but when people took to streets, they instituted widespread torture. According to the truth commission established later “killing by the state became routine” (44).
Indonesia was the other model. Sukarno has enraged the West by redistributing the wealth, protecting the country’s economy and throwing out the IMF and the WB. CIA had received instructions from high levels to “ liquidate President Soekarno…” (45).
In October 1965, General Suharto seized power, and with the help of lists prepared by CIA and arms and field radios supplied by the Pentagon, sent his soldiers to kill leftists. The more indiscriminate killing was delegated to religious students trained by the military (48) which they did with relish. In just one month between half to one million were killed (49).
Extraordinary role was played by Indonesian economists trained in Berkeley. The Berkeley mafia had begun training in the US under a program started in 1956, which was funded by the Ford foundation.
The mafia leaders became leaders of campus groups and worked with the military in overthrowing Sukarno.(52).
Suharto packed his cabinet with the members of the Berkeley mafia (56).
The Berkeley mafia were not such anti-state radicals as the Chicago boys, and believed the government had a role to play in providing basic necessities like rice and managing the local economy. But they passed laws allowing foreign companies to own 100% of the country’s mineral and oil resources, awarded tax holidays and with in 2 years copper, nickel, Oil, rubber and hardwood had been captured by Macs.
Suharto, unlike the Brazil junta, had shown that brutal repression applied preemptively could send the country into shock and resistance wiped out, even before the ‘reforms’ were put into effect. It transformed Indonesia into one of the best hosts for MNCs.
In Chile opponents of Allende imitated the Indonesian example in an eerie fashion. The Catholic university became the base for creating a “a coup climate” (59), with many students joining the fascist Patria y Libertad. In September 1971, the top business leaders, members of National Association of Manufacturers held an emergency meeting, generously funded by the CIA and MNCs and decided that “Allende’s government was incompatible with freedom…private enterprise…the only way was to overthrow…”(60).
Over 75% of the funding… was coming directly from CIA (73).
Orlando Letelier saw the coup as an equal partnership between the army and the Chicago boys(66).

Chap 3
Allende refused to organize his supporters into armed defense leagues.
Chile had heretofore enjoyed 160 years of democratic rule..
US trainers had indoctrinated the Chilean military into an anti-communist obsession, brainwashing them into thinking that socialist were Russian spies (Americans think that Socialism is some kind of affliction , and shy away from national health care, they desperately need when some one tells them it was socialism).
Allende died after died in the air and ground attack, where 24 rockets were fired for the 36 supporters inside the president’s house (3). The members of his cabinet were arrested.
The generals knew that their hold on power depended upon terror. 13,500 civilians were arrested (5). Thousands ended up in the Chile Stadium and the huge National stadium in Santiago (like the Taliban trials in football stadium in Kabul later on). Hundreds were executed. More than 3200 were disappeared, and 200,000 fled the country.
For the Chicago boys 9/11/73 was a day of giddy anticipation. On the day of the coup, they were camped out at the printing presses, frantically trying to get the document called “The Brick” for the junta’s first day on the job. The document had the free market trinity in Friedman’s Capitalism and Freedom-privatization, deregulation and cuts to social spending. The Economist would describe it as the first concrete victory…to seize back the gains that had been won under developmentalism and Keynesianism (10).
Pinochet knew next to nothing about economics. There was a power struggle in the junta between those who simply wanted to reinstate the pre-Allende status quo, return to democracy, and others who were pushing for full Chicago treatment. Pinochet favored the latter (13). He immediately named the Chicago boys to senior economic posts. Economics meant forces of nature (14).Pinochet privatized some state owned companies, , allowed speculators in, opened the borders to foreign imports, tore down barriers that had protected Chilean manufacturers, cut government speeding by 10% (not military),and eliminated price controls.
In 1974 inflation reached 375% nearly twice that under Allende (17).
Chicago boys argued that the policy was not being applied strictly enough.
The only people benefiting were foreign companies and a small clique local financiers called ‘piranhas’ who were making a killing in speculation. The man who had brought the Chicago boys into the coup plot Orlando Saenz “one of the greatest failures of our economic history (18).
Chicago boys and the ‘piranhas invited Friedman. He was received like a rock star. He assured Pinochet that if he followed advice-cut government spending by 25% with in six months and adopt policies towards ‘complete free trade’, economic miracle will come (23-24).
Pinochet was converted. They cut and cut again, public spending till in 1980, it was half of what it had been under Allende (27). By mid-1980s, manufacturing fell to WW II levels (31).
In the first year of the shock therapy, the economy contracted by 155, unemployment 3% in Allende time, reached 20% and lasted for years (33-34).
Andre Gunder Frank, a U of Chicago economics PhD, went to Chile to see things for himself and wrote an angry letter to Friedman. Roughly 74% of the’ living wage’ as claimed by Pinochet, went simply to buying bread, forcing families to cut on milk and bus fare to work. Under Allende bread, milk and bus fare to work took 17% (39) of a public employee’s salary. He wrote that Friedman’s prescriptions were so cruel they could not “be imposed …without…military force and political…terror” (41).
Public school system was replaced by vouchers and charter schools, and the social security system was privatized (42).
In 1982 Chilean economy crashed, it faced hyperinflation, and unemployment hit 30%, and the piranhas had bought up country’s assets on borrowed money to the tune of $ 14 million (47). Pinochet was forced to nationalize many of the companies (48).
What saved Chile from complete collapse was that Pinochet had never privatized Codelco, the state copper mine co nationalized by Allende. The co generated 85% of Chile’s export revenues (49).
Chile under Chicago boys was not a capitalist state, but a corporatist one. By 1988, when the economy had stabilized, 45% of the population had fallen below the poverty line (50). The richest Chileans had seen their incomes increase by 93%. Out of 123 countries in the world, Chile was 116 in inequality (52).
The pattern would repeat from Russia to South Africa to Argentina.

Brazil was already under control of a US supported junta.(54). The military had staged a coup in Uruguay in 1973. In Uruguay, a previously egalitarian society, real wages dropped by 28% (56).
In 1976, a junta seized power from Isabel Peron.(to ed up to here)
It did not privatize oil or social security. Though they landed several posts, the top economic job went to Martinez de Hoz, a feudal landowner, who went on to do the usual things, banned strikes, allowed employers t o fire workers at will, opened the country to foreign speculators, privatized and sold hundreds of state companies (59).
With in a year wages lost 40% of their value, poverty spiraled, factories closed (62).
The generals wanted to avoid suffering a…campaign…has been unleashed against Chile (63). They relied more on ‘disappearances’ (64). That turned out to be not only low profile, but more effective as well.(64). By the end of their reign 30,000 had been disappeared (65). The cattle owning junta introduced a most sadistic innovation-prisoners were put on metal beds called parrilla (barbecue) and electric current passed through the frame. They were also subject to the picana (electric cattle prod) (78).
Those hunted by various juntas sought refuge in neighboring countries. Washington provided state of art computer system for the collaborative effort of the regimes called ‘Operation Condor’ eerily similar to later CIA rendition network. (70).
A 1975 US senate investigation of US intervention in Chile revealed that the CIA had provided training to Chile’s military in ‘controlling subversion’ techniques (72-School of Americas).Similar training offered to Brazil-an American police officer Dan Mitrione took beggars off the streets and tortured them in classrooms (73). Mitrione then moved to Uruguay, where he met the fate he so well deserved-abducted and killed by Tupamaro guerillas (74).
Argentina’s legendary investigative reporter Rofoldo Walsh was then living in Argentina. He had intercepted and decoded the CIA telex which had informed Fidel Castro of the Bay of Pigs invasion plans, and helped him prepare for it. Walsh joined the armed Montonero movement. He wrote “An open letter…to the military junta”. “you only have to walk around …Buenos Aires…the speed…such a policy transforms the city into ‘a shantytown’ of ten million people” (81). He signed the letter 03/24/1977. The next morning, he was enticed into a well laid trap, killed his body burned and dumped into a river (82).
In the run up to Chile’s coup, the CIA had funded a massive campaign (Pinochet had been very obsequious of civil leaders, as Zia had been of Bhutto) to depict Allende as a dictator in disguise, on the verge of imposing a soviet style state. In Argentina and Uruguay, the guerillas were presented as such perilous threats that generals did not have any choice, but to take over. US government’s own intelligence reports showed that Allende was no threat to democracy (84).
The National Security Archive in DC released declassified minutes of a meeting held 2 days after the Argentinean coup, in which William Rogers told Kissinger “we…got to expect…a good deal of blood…they…come down very hard on…trade unions and their parties” (86).
The vast majority of the juntas were not armed groups, but non-violent activists (unable to defend themselves as armed groups could-and so favored targets).

Chap 4
In 1976, Orlando Leteliar, once Chilean ambassador to the US under Allende, escaped jail in Chile and arrived in DC, and joined the Institute for Policy Studies, a progressive think tank. He was horrified by the fact that though the world condemned the tortures and executions, yet kept on flooding the junta with loans. He vehemently rejected the separation of tortures from free market creed, and regarded the former as a Chicago school tool. In a searing essay for the Nation, he wrote “this particularly convenient concept of a social system, in which ‘economic freedom’ and ‘political terror’ coexist without touching each other (Zia’s Islamization in Pakistan coexisted with hundreds of arrests, tortures and the crowning achievement-raped women were jailed for having committed adultery). He continued “establishment of a free ‘private economy’ and the control of inflation a la Friedman, could not be done peacefully”.(4).
The article was published at the end of august 1976. On September 21, 1976, he was blown off with a remote control bomb planted under the driver’s seat of his car (The assassin Michael Townley was a senior member of Chile’s police, and had been admitted to the US on a false passport with CIA’s help (6).
On December 11, 1946…the UN General assembly passed a resolution…unanimous vote… genocide “when racial, religious, political and other groups have been destroyed, entirely or in part…” (13). The word ‘political had been excised from the H.R Convention
Two years late at Stalin’s insistence.(14).
In order for the ideal (Friedman’s) to be achieved, there has to be a monopoly on ideology, otherwise the signals get distorted and the whole system thrown out of balance (just like Wahhabis).
By the sixties and early seventies, the left was the dominant culture in Latin America-the poet Pablo Neruda, folk musicians Victor Jara and Mecedez Sosa, the dramatist/theatre Augusto Boal, and the journalists Eduardo Galeano and Walsh, the legendry heroes from Jose’ Gervasio Artigas to Simon Bolivar. The dominant metaphor of the juntas was an echo of the third author Alfred Rosenberg’s call for “a merciless cleansing with an iron broom” (22-an exact parallel of the Muslim and Arab countries in fifties and sixties, with Mossadegh in Iran, Awami League and NAP in Pakistan, Soekarno in Indonesia, Ahmad ben Bella in Algeria, Nasser in Egypt-with the same fate).
In Chile, Argentina and Uruguay, they burnt books by progressive/nationalist writers (as they did in Afghanistan under Taliban and are doing in Swat in Pakistan and will do it in the rest 0f the country in short order once they or JI/Imran get their hooks on power). Hundreds of professor fired (Taliban go the full hog, they burn universities), dozens arrested and some killed 24-25). Under ‘Operation Clarity’ 8,000 leftist educators were purged (27). The singer victor Jara had his both his hands broken, then he was shot 44 times (29-Hasan Nasir in Lahore Fort).Augusto Boal was tortured, exiled and finally murdered.
In Brazil, though the junta did not start off with mass repression, but they did arrest the leadership of trade unions, they “feared the spread of resistance…from labor unions to…economic program…based on tightening salaries…and denationalization” (32). The operations were planned well in advance of takeovers. In 1976, 80% of Chile’s political prisoners were workers and peasants (34).
‘Terrorism’ was a smoke screen to go after non-violent workers The solders…printed leaflets they signed ‘Montoneros’ calling on workers to strike, and used them as ;proof; to kidnap and kill the union leadership 936).
Several MNCs expressed their gratitude, Ford took out celebratory advertisements openly aligning with the Argentina regime.(38). In Brazil, several MNCs got together to finance their own torture squads (OBAN, Operation Bandirantes (39). The role of ford was the most overt. It supplied green Ford falcon sedan which became synonymous with kidnappings and disappearances-a Death Mobile (40).
Before the coup, ford had to make significant concessions to its workers.. all that changed abruptly on the day of the coup. “It looked like we were at war in Ford and it was all directed at…workers” (42). Ford used this to eliminate unionism in the factory (43-All MNCs used outsourcing to suppress unions, and the best chance was the 2008-09 financial meltdown). Soldiers took workers, not to a prison, but to a detention facility set up inside the factory. Workers were beaten and electro-shocked (44).
In 2002, federal prosecutors filed a complaint against Ford Argentina, on behalf of workers, as well as Mercedes-Benz from whose 16 workers were disappeared, 14 permanently as it is alleged, the management collaborated with the military and gave names and addresses of union leaders (48).
Particularly brutal were the attacks on farmers who were involved in the campaign for land reform. The junta’s economic policies were a windfall for landowners and cattle ranchers. The price of meat went up by 700%. (50).
Community leaders were the target in the slums.
A priest who collaborated with the junta in Argentine said “the enemy was Marxism…” (52).
High school students who, in September 1976, asked were attacked. Six were killed.
The pattern of disappearances was indicative of an attempt to remove all relics of collectivism.
Victor Emmanuel, the Burson Marsteller executive in charge of selling the junta’s business friendly regime told the author Marguerite Feitlowitz “a lot of innocent people were killed, but given the situation, immense force was required.
And it worked. Chilean psychiatrist Marco Antonio de la Parra said “we were confused…docile…waiting for orders...people regressed…became…fearful” (58). People coped…feeding their babies mate , a tea which suppressed hunger.

Torture as healing:
Many torturers adopted the posture of doctors and surgeons.. they would heal them of the sickness that was socialism. The treatment was agonizing , might even be even be lethal, but it was for the patient’s good. Pinochet demanded “if you have gangrene…you have to cut it off (60-the story of a village quack in Pakistan. He gave a strong purgative to a patient. The patient got weak. He kept on giving the same, till he died. The relatives demanded an explanation. The quack said “he had so much toxic material inside, that he died in spite of taking out so much. Imagine what would have happened if it had all been left inside).
For most Latin American leftists, solidarity as the Argentinean historian called it was “the only transcendental theology”. Torturers set out to excise the impulse of social connectedness, in achieving betrayal, and suppression of the impulse to help others, rather than information, which in most cases, they already had.
Prisoners were offered the Faustian bargain in the interval between beatings, to choose the torture for another prisoner, or to hold the picana on another prisoner or denounce beliefs on TV.
Friedman likened his role in Chile to that of a physician who offered “…medical advice…to…end …a plague”(66). It was the same construct which allowed Nazis to kill ‘diseased’ members of the society. The Nazi doctor Fritz Klien said “The Jew is the gangrenous appendix in the body of mankind” The Khymer rouge used similar language (67).

Children:
Five hundred babies born in Argentina’s prisons were enlisted to create a new breed of model citizens (69).
The US, Canada and Australia conducted mass thefts of children of indigenous people, sent to residential schools, forbidden to speak their language and brain washed into ‘whiteness’. The Galarias Pacifico is an uipscale mall in Buenos Aires, full of Christian Diors like stores courtesy of Chicago school, built on the secret torture chambers, as the older form of capitalism was built on mass graves of the indigenous people.

Chap 5:
Students of the U of Chicago were disturbed by their professors collaboration with Chile’s murderous junta. Gerhard Tintner, an Austrian economist who had fled European fascism to the USA in 1930s, backed their demand for an academic investigation. He drew parallels between Friedman’s support of Pinochet to the technocrats who had collaborated with the Nazis. (4).
Friedman took credit for the work the Latin American Chicago boys had done. In Newsweek, in 1982 “the…boys combined…intellectual…ability with the courage of their convictions…and dedication to implementing them…” (5).
Friedman claimed that Pinochet tried to run the economy on his own for two years, then turned to the Chicago boys. That was untrue. The boys had been working with the military even before the coup.
Friedman was awarded the 1976 Nobel Prize for economics for his work on the relationship between inflation and unemployment. In his acceptance speech, he completely ignored the fact that the hypothesis for which he was getting the prize had been proven false by the breadlines, typhoid outbreaks and closed factories in the one country which had been ruthless enough to put his ideas into practice (10-as
did the Nobel committee).

Human rights:
The Chicago School refused to acknowledge any connection between the economic policies and the use of terror. The acts of terror were framed as “human rights abuses”, rather than as instruments of political and economic policy. By focusing purely on the abuses, and not the reasons behind them, the HR movement helped the Chicago school escape the opprobrium generated by its first bloody laboratory. In 1967, it was revealed that the International Commission of Jurists, the preeminent HR group focussed on soviet abuses, was being secretly funded by the CIA (12).
It was in this context that Amnesty International decided that its financing would come exclusively from members (13). Amnesty’s position, emblematic of the HR movement as a whole that since HR violations were a universal evil, it was not necessary to determine why they were occurring, but only to document them as meticulously as possible.
Amnesty’s 1976 report on Argentina deserved the Nobel Prize it got, but shed no light why on why the abuses were occurring.(14). Another omission was that it concentrated on the conflict between the military and the left wing extremists, with not a word on role of CIA, local landowners or MNCs.

On Ford:
For many HR groups besides Amnesty, the reason for reticence was that he most significant funding came from the ford Foundation which spent $ 30 million on HR in 0970s and 80s, the beneficiaries included Chile’s Peace Committee and America’s watch.(15). Ford Foundation was the primary funder of U of Chicago’s Latin American Economic Research and Training, and also financed the parallel programs at the Catholic University in Santiago, which was designed to attract economics students from neighboring countries(18).
This was the second time that Ford foundation’s protégés had chosen a violent route to power, the first being the Berkeley’s mafia in Indonesia. Ford had built the department of economics of the university of Indonesia, and nearly all the economics trained in the program were recruited by Suharto.(20).
The Chicago boys and the Berkeley Mafia came to dominate two f the most brutal regimes in the world. In the 1970s Ford decided to transform itself into the leading financier of HR in the third world. And it defined HR in narrow terms., and favored groups which pursued legalistic struggles for ‘rule of law, ‘transparency and ‘good governance and avoided politics, as one Ford officer put its attitude in Chile “how can we…not get involved in politics” (21). In the fifties Ford Foundation often serves as CIA front organization, channeling funds to anti-Marxist organization, documented by Frances Stoner Saunders in the book The Cultural Cold War. The foundation was started in 1936 with donations of stock by Henry and Edsel Ford, and another Ford executive, its divestment of Ford stock not completed till 1974, and had Ford family members on board till 1976 (22).
The Foundations decision to work for HR, but not get involved in politics, made it impossible to look into the underlying cause of the violence it was documenting. Only one HR group Brasil: Nunca Mais declared that repression and economics were a single unified project “since the economic policy was…unpopular, it had to be implemented by force” (23).
The economic model took deep roots. The secret torture centers were eventually destroyed, soldiers returned to barracks, but the economic program continued.
Torture crops up whenever a local or foreign ruler lacks the consent to rule-US and Saddam in Iraq, the French in Algeria and the Israelis in Gaza/West Bank and so on. It is not so reliable in extracting information, but very effective in crushing resistance.
Simone de Beauvoir writing about women raped and tortured in prisons in Algeria “to protest in the name of morality against ‘excesses and ‘abuses’ is an error which hints at active complicity. There are no ‘abuses’ or ‘excesses’ here, simply an all pervasive system.(24).
There is no humane way to rule people against their will, just as there is no gentle way to occupy…against …will. Neo-liberalism is an inherently violent ideology.
By failing to hold the ideology accountable for the crimes committed…this subculture if ideologues was given immunity…

An armed conflict between nations horrifies us. But the economic war is no better…And its ravages are no less terrible…We think nothing of the other because we are so used to its deadly deeds. M.K. Gandhi. “Non-Violence-The Greatest Force” 1926

Chap 6 Thatcherism: Saved by A War
After returning from a visit to Chile, Friedrich Hayek, Friedman’s guru, wrote to Margaret Thatcher to use Chile as a model to transform Britain’s Keynesian economy.
In a private letter in 1982, she wrote a private letter “…in Britain with our democratic traditions…the measures adopted in Chile are quite unacceptable. Our reforms must be in line…our traditions and constitution…the process may seem painfully slow. (2).
Thatcher was in the third year of her first term, highly unpopular, and the political establishment of her party was forlornly looking into defeat in the next elections, which must be called with five years of the last one.
The Latin American experience had generated great wealth for a few. Western countries had far more assets which could be privatized to pass control to the elite.
In 1981, the Fortune magazine ran an article the ‘glittering luxury filled shops’ in Chile, with nary a mention of the explosion of shanty towns (3).
Friedman and co had been disappointed that Nixon, who had helped the Chicago boys overseas, had taken a different line at home (4). In 1971, US economy was in a slump, with high unemployment and inflation. Nixon could not risk the Friedman formula, the US army would be loath to bomb the Houses of Congress, so he put price controls on such things as rent and oil. Friedman raged: of all the ‘distortions’ price controls were absolutely the worst, “a cancer…” (6).
Nixon was reelected with 60% of the popular vote, and proceeded to impose environmental and safety standards in industry. The worst cut of all, he declared “we are all Keynesian now”(9).
For Friedman it was a stark lesson. For him capitalism was synonymous with freedom, yet only dictatorships were ready to put unadulterated free market doctrine to practice-Chile, Argentina, Bolivia, Indonesia and China (11).
Stephen Haggard, a neo-liberal scientist at the University of California conceded that “ some of the widest ranging reforms in the developing world were undertaken following military coups or one party sates (Mexico, HK, Singapore, Taiwan” and “good things-democracy and market oriented economic policy-did not always go together (12).
Policies that directly redistribute land and raise wages, not trickle down economies, are in the self interest of the majority.
Friedman believed passionately (after Adam Smith) that humans are governed by self interest and society works best when self interest is allowed to govern almost all activities, except when it comes to voting. Since most of the people are poor, it is in their ‘short term interest’ to vote for candidates promising to redistribute wealth (13).
Thatcher was attempting the “ownership society. The government owned cheap housing called council homes were filled with people who would not vote for her party. She offered strong incentives to residents to buy the flats at reduced rates. More than half of the new owners became Tory voters (15), while those who could not afford to buy faced rents twice as high as before.
By 1982, the number of unemployed and inflation had doubled (16). Her personal approval rating went down to 25%-lower than for any British PM in history, and her party’s to 18% (17).
It was a bad time for the Wall Street in the early eighties, the terrorist regimes, starting with Iran-Nicaragua, Peru, Ecuador, Bolivia- in 1979 had started collapsing-Samuel Huntington’s third wave of democracy (18). The Islamic regime, not yet the full blown authoritarianism, had nationalized the banks, imposed import and export controls and introduced land reforms ( 20-its core support, besides that from the clerical establishment, was from Bazaaris and the left/progressive elements. The shah, though he had derived his support from the landed class, the army and above all from the US. CIA had reportedly more employees in Teheran, than they had in Langley. Iranians kept on discovering ‘listening posts’ all over Iran for years, though they were able to ‘discover’ most of them after painstakingly putting back together the shredded documents, they had got hold of when they took over the US Embassy).
Falklands/Malvinas war:
On 04/02/1982, Argentina invaded Falkland Islands. Neither country had much interest in it. Argentine writer Jorge Luis Borges the dispute as “a fight between two bald men over a comb” (20). But it was a godsend for the free-market project as a political cover for a the radical capitalist transformation.
Both sides wanted a war. Argentina’s economy was collapsing under its debt and corruption. A new junta under General Leopoldo Galteiri found that anti-imperialist sentiment was more powerful than the one against suppression of democracy.
Thatcher, who had cut grants to the islands and major cutbacks in the Navy, which would affect the ships guarding them, was “practically an invitation to Argentina to invade” (21).Labor MP Tony Benn in Financial times “not only the pride of Argentina is involved…perhaps even the survival of the Tory government in Britain (22).
Neither Britain not Argentina made any serious attempt to come to terms peaceably. The shouts “Ditch the bitch” changed “Up your junta” (24). Thatcher’s poll numbers more than doubled from 25 to 59%, and she won a decisive victory in the following year (26).
The British codename for the war was ‘Operation Corporate’, perhaps chosen deliberately by Thatcher. In 1984, the coal miners went on a strike. Past PMs had not dared to take on the miners. Thatcher declared “…we now have to fight the enemy within…much more dangerous to liberty (27). The police attacked the miners, the injuries climbed into thousands, and Arthur Scargill militant president of the miners union moaned of “the most ambitious counter-surveillance operation ever mounted in Britain” (28). The cost was enormous-three thousand extra policemen a day-Colin Taylor, an acting police sergeant called a “civil war”. There was no inclination to bargain, the sole agenda to break the union. It was reminiscent of Reagan sending 11,400 air-traffic controllers home, and had the same effect of cowing down other trade unions.
Between 1984-88, the British government privatized British-Telecom, Gas, Airways, Airport Authority, Steel, Rail and sold its shares in British Petroleum. (Bush could only privatize security, war and reconstruction, as all else had already been privatized). She provided the first Chicago School style of selling a country without a dictatorship.
In 1982, Milton Friedman wrote a paper “Only a crisis, real or perceived-produces a real change…our basic function is: develop alternatives…until the politically impossible becomes politically inevitable (33). Cris9i are, in a way, democracy free zones.
Leftists, especially communists have long thought that hyper-inflation, by destroying the value of money, takes the masses…to…the destruction of capitalism (35), much as evangelical Christians calibrate signs of the coming Rapture. The Chicago School picked up the Bolshevist idea that crashes could spark right-wing coups too-the crisis hypothesis (36). Friedman and his corporate patron had tried to mimic the victories of Keynesians in the New Deal. They built up right-wing think tanks, like the Heritage foundation and CATO, but the most ignorant indoctrination vehicle was a the ten part PBS series ‘Free to choose’ underwritten by Getty, Oil, firestone Tire and rubber co, Pepsi, GM, Bechtel, General Mills (37).

Chap 7
In 1985, Bolivia was getting a chance to elect its president, after 18 years of dictatorship in the last 21 years.
But the victor would be faced with a debt-interest higher than the entire national budget. In 1984, Reagan had pushed it over the edge by financing an attack on cocoa farmer, which turned a large section of the country (Chapare) into a military zone, and cut off roughly half the country’s export trade. NY Times “…less than a week after the occupation of Chapare, the country was forced to cut the official value of the Peso by more than half, inflation went up ten times, and thousands started leaving the country to neighboring ones for jobs (3).
At the time of the presidential race between former dictator, Hugo Banzer and a former elected president victor Paz Estenssoro Inflation was 14,000%. Banzer’s team, sure of victory engaged the upcoming star of Harvard’s economic department, 30 year old Jeffrey Sachs to develop an economy policy. Sachs had no experience in developmental economics (4).
Sachs had been influenced by Keynes on the connection between hyperinflation and fascism in Germany after WW I. The country had an inflation rate of 3.25 million % in 1923, unemployment rate of 30% and the rage over war reparations.
Keynes had warned that “there was no subtler, no surer way of overturning the basis of a society than to debauch the currency…” (5). Sachs shared the view. But he was also a product of Regan’s America, and Friedman’s philosophy that free market was supreme had overtaken all Ivy League schools, including Harvard (7). He was convinced that Bolivia suffered from ‘Socialist Romanticism’ (8). But he parted from Chicago in that he believed free market policies have to be by debt relief and aid. The core tenet of Keynes is that countries in economic recession should spend out of it. Sachs took the opposite view-austerity and price increases, the recipe that Business Week had called “Dr Strangelove world of deliberately induced depression” in Chile (9).
Sachs proposed raising the price of oil ten times, and several other price deregulations and budget cuts.(10).
Banzer was sure of victory, but Paz had not given up. Bolivians believed that though no socialist, he was no neo-liberal.
One newly elected senator ended up playing a key role in the final selection of the president by the congress. His name was Gonzalo Sanchez de Lozada (known as Goni), who had lived in the US for a long time, was the wealthiest businessman of Bolivia, and had studied at the University of Chicago, though not economics, but was influenced by Friedman.
On 08/06/1985, it was Paz who was appointed the president, and appointed Goni as the chair of a top secret bipartisan emergency economic team. This group would go further than Sachs, and proposed dismantling the entire state based economic model.
For 17 days the team holed up in the living room of Goni(15). They were in a hurry. They wanted to catch the militant unions and peasant groups off guard. Goni recalled “Paz kept saying , if you are going to do it . do it now. I can’t operate twice (16).US ambassador to Bolivia at the time, Edwin Corr, recalled that he had made it to all politicians, that the only way US aid will flow, if they adopted the shock route.
Bedregal, the planning minister offered a draft of shock program, calling for the full shock treatment-elimination of food subsidies, canceling price controls and 300% increase in the price of oil (17), freezing government wages to already low levels, deep cuts to government spending, and open door to unrestricted imports, downsizing state companies.
The idea that policy change should launched like a military attack is a recurring theme. Bush’s Shock and Awe: Achieving rapid dominance, the US doctrine published in 1996, which took practical shape in the 2003 invasion of Iraq “seize control of the environment and paralyze…adversary’s perceptions…that the enemy would be incapable of resistance. (20). Economic shock works on the same theory. Surely one of the reasons of the Iraq war to capture the country’s assets and force the free market dogma on it.
Paz’s economic team bundled the entire revolution into a single decree DS 21060, on the lines of “The Brick” for Chile.
His cabinet was kept in the dark, while all the preparations were being made.
With in two years inflation was down to 10%, But all social cost was shifted to the poor, according Ricardo Grinspun, professor of economics specializing in Latin America at York University. (page186). Real wages were down 40% in 2 years, per capita income went down from $845 to $ 789, but that does not take account of enormous wealth the elite acquired, and which is counted in calculating the per capita income. For example the average peasant was earning only $140 a year, not $789 (25). It also does not take into account the thousands of kids who got a piece of bread and a cup of tea a day (26). Hundreds of thousands of full time jobs were eliminated (27).
One significant effect of the push to free market was that many of the desperately poor workers of Bolivia were driven to Coca farming (29), by 1989, one in ten was involved in coca industry (30).This industry played a significant role in reviving Bolivia’s economy(31). Two years down the line coca was generating more income than all other exports combined, with an estimated 350,000 people dependent on the trade for their living(32).
But thanks to Sachs, “shock therapy had shaken off the stench of dictatorship and death camps”, this from NY Times. In Bolivia, this had been undertaken under a ‘center-left’ government of Paz.(38).
But Paz had no such mandate, it was a backroom deal, imposed abruptly
Free Market economist coined the term “voodoo politics” fit it, others called it lying (39).
As soon as the decree was announced, thousands demonstrated, riot police raided union halls, tanks ran through streets, 15,000 arrested, and shelled with tear gas (41). Top 200 union leaders were taken to remote jails on the Amazon. The senior leadership was sequestrated in remote villages, with a ransom demand to call off protest as the price of letting go(43).
One year later, the government laid off huge number of workers in tin mines, the workers took to streets again, with the same aftermath (44).
So it was not so peaceful after all.
The government crackdown was practically ignored by the international press, as was the tale of triumph of “free market reforms” in Bolivia.

Chap 8:
By mid 1980s, several economists had observed that hyperinflationary crises mimic the effects of a military war. For the hard core Chicago School ideologues, hyperinflation was not a problem, but a golden opportunity to practice their ‘religion’, and there was no lack of opportunity in the 1980s, in Latin America and Asia. Crises resulted from the insistence of IMF/WB and other financial institution, on passing on of the illegitimate debt of dictatorships to the successor democracies, and the US Federal Reserve to allow interest rates to soar (As Fannie May, and Freddie Mac do to student loans).
In 1983, when the junta collapsed in Argentina, Raul Alfonsin was elected as the president. During the junta rule, the country’s debt had ballooned from $ 7.9 billion to $ 45 billion. In Uruguay, the junta expanded $ half a billion to 5 billion. In Brazil, it went from from $ 3 billion in 1964 to $ 103 billion in 1985 (4).
These debts were odious, much had gone into the military and police to enforce IMF/WB Chicago School dicta(5). Much of the rest vanished (6). The rest was spent on shady ‘bail outs’ and in Chile, just before the junta collapsed, president of the central bank Domingo Cavallo announced that the state would take over the debts of MNCs and domestic firms Argentinean-Ford, Chase, Citibank, IBM and Mercedes-Benz (13).
The state department declassified the transcript of a meeting held on 10/7/ 1976 between secretary of state Henry Kissinger and Argentina’s foreign minister admiral Casar Augusto Guzzetti. Kissinger “…apply for as much foreign assistance as possible and fast, before Argentina’s “human rights problem” tied the hand of US administration (14). Those who claimed that lenders should have known better than to lend to such dubious people.
The loans, on their own, were an enormous burden. On top of that Paul Volcker increased the interest rates, which went as high as 21% in 1981, and lasted till mid-1980s (15). The number of people defaulting on their mortgages tripled (18).
Outside the US the debt spiral was born. In Argentina, the $ 45 billion debt accumulated, became $ 65 billion in 1989. In Brazil it went from $ 50 billion to $ 100 billion in six years, and in Nigeria from $ 9 to 29 billion (18).
Price shocks followed the double whammy. It occurs every time the price of an export commodity falls by 10%. IMF estimated that between 1981-84 this happened 25 times in LDCs, and between 1984 and 1987, 140 times (19). The price of Bolivia’s tin fell by 55%.
Friedman’s crisis theory was vindicated. The more the economy followed his dicta of floating interest rates, deregulated prices, export base economy, the more a country became crisis prone, and the more would be amenable to taking his advice.
In a way, crisis is built into the Chicago model. When vast sums of money are free to travel instantaneously, speculators are allowed to bet on everything from drugs to currency, prospects of a firm, sell and buy loans and pay ratings groups to enhance or lower the rating to get a better price, push loans and ‘white elephant’ projects on the third world and force them to rely on export based income, slash social and welfare, reduce salaries of workers, lay them off, dispossess peasants, overthrow governments, jail, torture people and kill them with impunity, increase interest rate at will, crises are bound to follow.
Just as the people were winning the battle for freedom in mid-0980s, they were hit with an avalanche of financial shocks, created by a deregulated global economy.
In the 1980s and 1990s, the developing world was in a kind of terror hangover, few elected governments had the fortitude to risk a US sponsored coup by adopting policies which had provoked the brutality of the 1970s. The military had not been held accountable, but were biding their time for another chance. Crisis stricken, debt strapped elected governments had little choice but to submit to Washington based financial institutions (with the USSR out of the equation, no one could dare play rebel. Saddam paid the price of confrontation, Gadafi is hibernating in his tent. And only the embroilment of the US in Iraq and Afghanistan has saved Eva Morales , Hugo Chavez and Ahmad de Nejad so far).
Thus came the dawn of “Structural Adjustment”, and instead of the ‘dictatorship of proletariat’, came the ‘dictatorship of debt’.

Though Friedman did not prescribe to the ‘big government interference’ concept of IMF/WB, his boys took up top positions in the institutions, perhaps to work at undermining them from inside.
Hit with spiraling debts, the countries turned to WB/IMF, only to face the Chicago boys there already to betray the founding principles of the institutions. These institutions had been created post WW II in response to the horrors of the war, at Bretton Woods NH in 1944, financed by 43 initial participant countries, and mandated to prevent the crashes that led destabilization of Weimar Germany and Nazi takeover. The World Bank was charged with long term investment to lift countries out of poverty, and IMF to promote policies which enhanced market stability and reduced speculation.(23).
John Maynard Keynes had led the UK delegation and was confident that the world had finally recognized the perils of leaving the market to regulate itself (24).
But the two bodies were organized along the lines of corporation, with the size of a country’s economy governing the voting strength, with the US wielding a veto power over all the major decisions, and Japan/Europe toeing the line.
The Chicago School infiltrated the IMF/WB stealthily. Take over was completed in 1989, when John Williamson of the school unveiled the “Washington Consensus”.(25)-“all state enterprises should be privatized”, “barriers impeding the entry of foreign firms should be abolished (26). When completed, was born the trinity of privatization, deregulation, and drastic cuts to government spending.
Emboldened by the desperation of LDCs, the agenda morphed into radical free market demands.
The first full “structural adjustment” was issued by the IMF in 1983, and kept on doing it to every country which sought its help over the next 20 years. An UIMF senior official David Budhoo designed the SAPs for Latin America and Africa in the 1980s, admitted that “everything that we did from 1983 onwards was based on…to have the south privatized or die” (29).
The fund’s official mandate, on paper, remains crisis management, not social engineering, so what they did had to be called stabilization. But all they did was to advance Chicago School’s neo-liberal agenda. Doni Rodrik, a famed Columbia University economist described “structural adjustment” as an”ingenious marketing strategy . He wrote in 1994, “The WB must be given credit for having invented and successfully marketed the concept…sold as a process…countries needed to undergo to save their countries from crises. For governments that bought into the package, the distinction between sound macroeconomic policies that maintain external balance and stable prices…and policies that determine openness (like free trade)…was obfuscated” (30).
When privatization, free trade policies and cut backs in spending are packaged with a desperately needed loan, the countries had little choice. The trickery lay in the fact that the economists knew that free trade had nothing to do ending a crisis. That was the pound of flesh that Shakespeare so well described and the kind of loans traditional money lenders in India, and loan sharks in NY practice.
LDCs were submitting to them via a combination of false presentations and overt extortion. Want to save your country, sell it off.
The hyperinflation crisis forced Alfonsin to resign from the presidency of Argentina. Carlos, a Peronist, who wore leather jackets and mutton chop sideburns, and seemed tough enough to take on the military and the creditors. But after a year in office, Menem was forced to follow a course of “voodoo politics”. He appointed the junta time official responsible for bailing out corporate corporate debts as economy minister (33-Obama appointed the Clinton team responsible for deregulation and other mischiefs) to continue his corporatism. Virtually all economic posts again went to the Chicago boys.
By 1999, governments from Israel to Costa Rica could boast of 25 ministers and central bank presidents from the ranks of Chicago boys (35).
Cavallo harnessed the desperation of hyperinflation to pass privatization as an essential part of the rescue mission, cut spending massively and launched a new currency pegged to the dollar. Inflation was down to 17.50% with in a year (37), but the state had to sell off national assets at a pace fester than Chile, a decade earlier-by 1994, 90% had been sold off. Before the sale they fired 700,000 workers, the oil co alone losing 27,000. In January 2006, it came out that the Cavallo plan was not Cavallo’s or even IMF’s, but was written by J.P. Morgan and Citibank (38).
Pegging the local currency with the dollar made it so expensive to produce goods in the country, and local factories could not compete with cheap imports flooding the country.
People, in moments of crisis, are willing to hand over power to anyone who claims to have a cure (Bush post 9/11).
Volcker shock was followed by the Mexican Tequilla crisis in 1994, the Asian one in 1997 and the Russian in 1998.

Chap 9:
People’s Daily after the Tiananmen square massacre “we certainly must not stop eating for fear of choking”, on the need to continue free market reforms.
Lech Walesa, climbing over a steel fence festooned with flowers and flags in Gdansk, Poland antedated the fall of the Berlin wall as the symbol of the collapse of communism. Workers had barricaded themselves to protest the communist party’s decision to raise the price of meat. Workers wanted their own independent union, and did not wait for permission, they voted to form it, and called it Solidarity (4).
Tired of living in a country that idealized the working class, but abused them, solidarity denounced corruption and brutality of party workers. It sparked a mass exodus of its members from the CP.
Solidarity could not be dismissed as stooges of capitalism. They were workers. Solidarity was democratic, dispersed, participatory, everything that the party was not.
It had ten million members, and in September 1981, it was ready for the next stage. 900 delegates gathered in Gdansk for its first national conference and “ we demand a self governing and democratic reform at every…level…a socioeconomic system combining the plan, self government and the market…”. (7).
Walesa’s fear were well founded. Martial law was declared by General Wojciech Jaruzelaki, and tanks rolled to factories, and thousands were arrested.
Solidarity was forced underground, but over the next 8 years of police state, its strength grew more. Walesa was given the Nobel Peace prize.
By 1988, workers were less scared of the police, and were staging huge strikes again. The economy was in free fall, and with Mikhail Gorbachev losing his nerve, the communists gave in, and legalized Solidarity and agreed to hold elections. Solidarity split into two wings, one of which Citizen’s committee solidarity agreed to participate in elections, and ran on a vague program. Solidarity won 260 of the 261 seats it contested. Walesa had one of his henchmen, Tadeusz Mazowiecki, the editor of the Solidarity weekly paper newspaper appointed as the PM.
Like the Latin Americans adopting democracy when their economy was imploding, Poland did too. Inflation was 600%, severe food shortages and a huge black market. Poland needed debt relief and aid to get out of the immediate crisis.
One would have expected that floodgates of aid and comfort would open for the first democracy in Eastern Europe. But nothing was on offer.
US treasury wanted to apply the shock doctrine, which could only follow an economic meltdown and disorientation of a regime change.
IMF, confident that worse the things got, the more the government would be amenable to accept a total conversion, let the country slide into deeper debt and inflation.
Jeffrey Sachs started working as Solidarity adviser (12). George Soros had enlisted Sachs to work in Poland, at his own cost, even before Solidarity’s election victory (13). Sachs, at the time said that solidarity should simply refuse to pay the debts, and extended the hope that he will be able to mobilize $ 3 billion. But the government had first to agree to a course much worse than that imposed on Bolivia-in addition to elimination of price controls, slash subsidies, Sachs advised selling state mines, shipyard and factories, in direct clash with solidarity’s program of worker ownership.(15).
Sachs formed an alliance with Leszek Balcerowicz, the new finance minister, who saw himself as an honorary Chicago boy (22).
Walesa had promised in an interview with Barbara Walters “…it won’t be capitalism…better than capitalism…reject everything that is evil in capitalism”(23)
Finally the decision came down to money. “…But we don’t have time” (28). Sachs helped negotiate with IMF, and was able to secure some debt relief and $ 1 billion, but all was conditional to Poland submitting to shock therapy.
Balcerowicz, the finance minister has since confessed that capitalizing on the emergency was a deliberate strategy (30). Poland was, in what was dubbed a period of “extraordinary politics. Or “in transition.
With in a few years, it seemed as though half the countries of the world were “in transition”. Thomas Carothers, a leader of US governments ‘democracy promotion apparatus’ “…the set of ‘transitional countries swelled dramatically…nearly 100…20 in Latin America, 25 in Eastern Europe and former USSR, 30 in Sub-Sahara Africa, 10 in south Asia and 5 in mid-East…” (33).
Francis Fukuyama, author of The End of history, addressing a gathering in the U of Chicago, in the winter of 1989, “the collapse of communism was leading not …a convergence between capitalism and socialism… but to an unabashed victory of economic and political liberalism…” (35). Fukuyama argued that deregulated markets combined with liberal democracy…represented ”the end point of mankind’s ideological evolution and …final form of human government.
History was taking an exhilarating turn in 1989. It was not coincidental that IMF/WB chose the year to reveal the Washington consensus, to halt discussion about alternatives to free market.
Tiananmen Square:
Fukuyama had claimed in February 1989 that free market and democracy were inseparable. In April 1989, pro-democracy movement exploded in Beijing.
In 1980 Deng Xi-aoping had invited Friedman to China to tutor top level civil servants.(40). In Friedman’s definition of freedom, political freedom was incidental, irrelevant when compared to free market. Chinese were pushing deregulation and free market hard, while resisting calls for free elections. Deng Xi-aoping was determined not to let “Poland” happen in China. Deng wanted to follow in the footsteps of Pinochet.
Mao’s repression had taken place in the name of the working class and against the bourgeoisie. Now the party was asking workers to sacrifice so a tiny elite may collect huge profits. Deng ordered creation of 400,000 strong People’s Armed Police (41).
By 1988, the party was facing a severe backlash, and had been forced to reverse some price deregulations.
Friedman was once again invited.(42). “I emphasized the importance of privatization and free market at one fell stroke” he recalled later (43).
The most visible symbols of opposition were the demonstrations by students in Tiananmen Square (46).
Some of the free marker reformers, General Secretary Zhao Ziyang among them favored a gamble on democracy, but a majority of the politburo wanted to protect reforms by crushing the demonstrators.
On 05/20/ 1989, the government declared martial law. On 06/03/ 1989, tanks rolled into the protesters. The party admitted to hundreds of dead, eyewitnesses put the number at between 2,000-7000. A witch hunt followed in which 40,000 were arrested, thousands jailed, and possibly hundreds executed. Maurice Meisner writes, “Most of those arrested, and nearly all who were executed, were workers” (48).
The massacre was covered in the Western press as communist brutality, not a defense of free market philosophy (49).
Deng, during an address to the nation a few days after the massacre, made it clear that the crackdown was not to protect capitalism, not communism., “perhaps this bad thing will enable us to go ahead with reform…(50-Henry Kissinger defended the massacre in an op-ed piece).
Three months after the massacre, Deng brought back the measures he had been forced to withdraw. Wang Hui, “the violence of 1989 served to check the social upheaval brought about…”(52).
In the following three years China opened to foreign investment, with special export zones (SEZ) through the country (53). The reforms turned the country into the sweatshop of the world.
A 2006 study reveals that 90% of Chinese (Yuan) billionaires are children of the communist party, 2,900 of them-dubbed princelings-control $ 260 billion. There is a revolving door between political and corporate elite, as in the USA and Chile under Pinochet. Foreign MNC media and technology help the state spy on its citizens, as MNCs do in the US.
Tiananmen showed the striking similarity between the tactics of Chinese communists and Chicago boys.
In Poland, as late as 1992, 60% of the people opposed privatization of heavy industries. It caused a full-blown depression, a 30% reduction in industrial production in two years after reforms, unemployment rose to 25% in some areas. Under 24 years of age, 40% were unemployed in 2006. In 1989, 15% Poles were below poverty line. In 2003, 59% had fallen below the line. In 1990 there were 250 strikes, in 1992, there were 6,000. By the end of 1993, there were 7500 protests, even though 62% of the country’s industry was still public (62).
The most dramatic defeat of the free marketers cane on 09/ 19, 1993, when a coalition of left parties, including the former communists, won 66% of the seats in the parliament. Poland was still held up as a model of success of free market make over.

Chap 10: South Africa
Archbishop Desmond Tutu, chair of South Africa’s Truth and Reconciliation commission, “ …What is the point of having made this transition, if the quality of life of these people is not enhanced and improved? If not, the vote is useless. 2001 (1).
Alister Sparks, South African journalist, “before transferring power, the Nationalist power wants to emasculate it. It is trying a …swap…will give up the right to run the country…in exchange for the right to stop the blacks from running it…” (2).
In January 1990, Nelson Mandela wrote from jail, “the nationalization of banks, mines and monopoly industries is the policy of the ANC, and any change…is inconceivable…state control of certain sectors of the economy is unavoidable” (3).
The ANC had started drafting a statement of core principles, the Freedom charter in 1955, based on the opinion obtained by 50,000 volunteers dispatched to villages and towns. Hand written on scraps of paper, “Land to be given to landless…”, “living wages and shorter hours of work, “free and compulsory education..”, “the right to reside and move…freely”. A final document was adopted on 06/20/ 1955, at the Congress of the People, held in Kliptown, a zone to sequestrate the blacks of Soweto from white Johannesburg. The charter enshrines the right to work, decent housing, freedom of thought, and to share in wealth of the country (the largest goldfield in the world-6).
Apartheid was not taken just as a political system, but as an economic system as well which used racism to allow a small white elite to accumulate enormous wealth. In the mines, whites were paid up to ten times as blacks, and industrialists worked closely with the military to disappear people (7).
On February 11, 0990, Mandela walked out of the prison. Mandela had been arrested in 1962. ( PM Patrice Lumumba of Belgian Congo had been killed in 1961). A lot had happened since. Africa had seen nationalism sweeping the continent, now it was torn by war. Che Guevara had been killed in Bolivia in 1967, Salvador Allende in 1973, Samora Machel, liberation hero and president of Mozambique had died in a mysterious plane crash in 1986. Berlin wall fell in 1991.
Mandela had an opportunity to lead a people to freedom peacefully, without an economic collapse, and democratizing the society and redistributing wealth.
In the 1980s, ant-apartheid struggle had become global and Mandela had earned global admiration and support. The most effective weapon was corporate boycott of South African products as well as that of international firms that did business with South Africa. That had given ANC a unique opportunity to reject the free market dogma. There was already widespread agreement that corporations shared responsibility for apartheid rimes, Mandela could have used the argument to say that the debt accumulated under apartheid was odious. As a living saint, he could have faced off IMF, WB and US treasury.
Between the time Mandela wrote the note from prison, and ANCs election sweep, something convinced the leadership that they could nor reclaim and red distribute the country’s robbed wealth. They adopted policies that have further accentuated inequality between the rich and the poor and crime has gone up steeply.
On the way out the Portuguese had destroyed as much in Mozambique, as they could, pouring concrete down elevator shafts and smashing tractors. The sabotage of the South African Nationalist party was subtler and worse, contained in the fine print in transfer of power agreements.
The talks between ANC and the nationalist party were on two fronts, political and economic. On the political front F.W. de Klerk tried breaking the country into a con-federation, getting veto power for the minority, reserving seats in government structure for each ethnic group (9). He did not get away with anything. He need not have.
Economic negotiations were conducted on the ANC side by Thabo Mbeki. Later to be South African president, and still later forced out of office. The de Klerk government portrayed key sectors of economic decision making such as trade policy and central bank as technical/administrative, and used international trade agreements, innovations in the constitution and SAS programs to hand over the supposedly impartial economists and officials from the IMF, WB, GATT, and the National Party, but not to any one in ANC.
What party loyalists did not know that the negotiating team had made concessions which would make implementation of the charter an impossibility. Vishnu Padayachee told Naomi Klein (page 253), “It was dead even before it was launched”. WE got a call from the negotiating team in late 1993, on pros and cons of making the central bank an independent entity, run with total autonomy from the elected government by the next morning. He knew that even among market economists in the US, central bank was regarded as a fringe idea, a dogma of the Chicago School, that the bank should be run as a foreign republic within states (10).
If the Central Bank was not accountable to the ANC government, to whom would it be accountable-the IMF, the Johannesburg stock exchange. The bank would keep its head under apartheid and the finance minister under the old regime would keep his job too (11-for all these concessions, Mandela got a statue in the London parliament square).
Patrick Bond, an economic adviser to Mandela during early years recalled the quip, “Hey, we’ve the state, where is the power”
At the last minute, the negotiators conceded a new clause in the constitution to protect private property, making land reforms impossible. Hundreds of factories were about to close because the ANC had signed on to GATT, which made it illegal to subsidize auto plants, and textile factories. Offering free AIDS drugs was a violation of intellectual property rights under WTO
Welfare measures like housing for the poor, and free electricity to towns could not be undertaken as the budget was being eaten up by servicing the massive debt of the apartheid era. Even free water could not be provided as that militated against privatization of all state services. Currency controls to curb speculation violated the terms of the deal for $ 850 million signed with IMF. Wages could not be raised for the same reason(12).
What ANC activists did not understand was that it was the nature of democracy that was being negotiated away.
Rasool Synman, long time ant-apartheid activist, “ They never freed us. They only took the chain from around our neck and put it on our ankles” (13).
In the first two years of office, ANC did build more than 100,000 homes, and millions got water connections, phone lines and electricity (14). But under IMF pressure to privatize services, the government started to raise rates, a decade into ANC rule millions had their water, phone and electricity cut off, because they could not pay bills (14). Banks, mines and monopoly industry remained in the same four white owned conglomerates, which also controlled 80% of the Johannesburg stock exchange.(16). In 2005, only 4% of the companies listed on the stock exchange were owned/controlled by blacks (17). In 2006, 70% of the country’s land was owned by whites who were 10% of the population (18-Mugabe of Zimbabwe believed in the word of the British government that it would compensate the country, if he left land in control of the 3% whites. (The British, of course, went back on their word, and when Mugabe nationalized farm lands, he was hit by the most obnoxious sanctions). The average life expectancy of for South African since Mandela left the prison in 1990, had dropped by 13 years (20).
The leadership did not have the nerve to launch another liberation movement, when it found that de Klerk’s team would not budge on economic issues. It was not an easy choice though. As soon as Mandela was released, the South African market collapsed, and the currency dropped by 10% (21), and soon afterwards, De Beers diamonds moved their HQ to Switzerland. A few words by him on nationalization would have cause an stampede of the “electronic herd” as NY Times Thomas Friedman calls it (22). Even comments on calling Rugby a white game by Trevor Manuel, an ANC minister hit the Rand (25).
Thabo Mbeki was the one person who seemed to understand how to make the shocks stop. Rather than calling for the nationalization of the mines, he began meeting on a regular basis, with Robert Oppenheimer, former chairman of Anglo-American and De Beers mines, going to the extent of submitting ANC economic program to Oppenheimer for approval (28). In his first interview as the president, Mandela distanced himself from nationalization, “In our economic policies…not single reference to…nationalization…not a single slogan will connect us…Marxist ideology: (29). His inside prison thoughts had become Marxist ideology. The Wall Street journal, “Mr. Mandela…sounded…more like Margaret Thatcher” (30).
In South Africa, few of Mbeki’s colleagues even knew that a new economic program was in the works (32).
In 1996, Mbeki unveiled the neo-liberal shock (34), and quipped, “just call me a Thatcherite” (35).
Yasmin Sooka, a member of the Truth and reconciliation commission made a recommendation, modest by any standards, for a one time 1%’solidarity’ corporate tax to raise money for the victims of apartheid, Mbeki then the president rejected it out of hand, any suggestion of corporate reparation/tax.
Chairman of the commission, Archbishop Tutu offering the report in 2003, observed, “can you explain how a black person wakes up in squalid ghetto to day, ten years after freedom…then he goes to work in a town…largely white…I don’t know why …don’t say to hell with peace, to hell with Tutu and the truth commission” (36).
Reparations in Reverse.
In the first years after takeover, the government had to pay $ 5 billion annually in debt servicing, and only $85 million to 19,000 victims and families of apartheid killing and torture.(37).
Between 1997-2004, the government sold 18 state owned firms to raise $4 billion, half of which went to debt servicing.(38).
De Klerk demanded, and got, that all civil servants be guaranteed their jobs and be given hefty pensions(39). 40% of the government debt payments go to pension funds to former apartheid employees.(40). The victims of apartheid continue to send large paychecks to their victimizers.
Since the 1994 takeover by ANC:
-the number of people living on less than a $ a day has gone from1 million to 2 million
-unemployment rate for blacks has gone up from 23% to 48$ (46).
-Of 35 million blacks, only 5,000 make more than $60,000 a year, among the whites 100,000 of 3.5 million do so, and many make far more (47).
-The government built 1.8 million homes, while 2 million lost theirs(48).
-1 million have been evicted from farms (49).
-number of shack dwellers has grown by 50%, 1 in four of the total (50).

Chap 11 Yeltsin Sells Russia
Gregory Gorin, Russian writer, “For a long time we lived under the dictatorship of the communists, but now we have found out that life under the dictatorship of business people is no better. They couldn’t care less about what country they are in” (1).
Mickhail Gorbachev had won the Nobel peace prize in 1990 (3), and had won over the American public as well.
He had led the USSR through a remarkable process of democratization, 6through his policies of glasnost (openness) and perestroika (restructuring). His end goal was to build a social democracy on the lines of Scandinavian countries, “a socialist beacon for all mankind” (4).
At the G7 meeting in 1991, he was stunned to be told that if he did not embrace radical economic shock therapy, they will let him fall “Their suggestion as to the tempo of transition were astonishing, he wrote later (6).
Later that year when Russia asked for debt forgiveness, it was told that the debts had to be honored (7). Russia like China had to choose between Chicago and democracy. The peaceful process that Gorbachev had started had to be violently suppressed and then reversed. In 1990, The Economist had urged Gorbachev to adopt “strong man rule…to smash the resistance…” (8). In August 1991, The Washington Post ran a headline “Pinochet’s Chile a Pragmatic Model for Soviet Economy”.
On August 19, 1991, a group of communist old guard drove tanks to the White house, the parliament building. Yeltsin stood on one of the tanks and denounced… “a cynical right wing coup…”(10). The tanks retreated, and Yeltsin emerged as a heroic defender of democracy.(11).
In December 1991, Yeltsin formed an alliance with tow other Soviet republics, so in effect the Soviet Union was dissolved, forcing Gorbachev’s resignation. As the political scientist Stephen Cohen put it, “it was the first of the three traumatic shocks that Russians would have to bear in the next three years (12-the way Yeltsin was to behave later, makes one wonder if he was not a CIA ‘agent’ like Pinochet and other junta leaders. Sachs had been invited by Yeltsin as an adviser, and was in the room in Kremlin on the day Yeltsin announced that the soviet union was no more (13-14).
Yeltsin wanted Sachs to raise funds as he had done for Poland, “If Poland can do it, so can Russia” (14). Sachs told Yeltsin that if Moscow was willing to go with the ‘big bang’ approach, in establishing a capitalist economy, he could raise $15 billion (16).
Russia’s conversion to capitalism was akin to the corrupt approach that had led to Tiananmen.. Gavril Popov, Moscow’s mayor on how to break up the centrally controlled economy, “there is the democratic approach…the nomenklatura, apparatchik…(17). Yeltsin took the latter, and in late 1991, he went to the parliament that if they gave him one year f special powers, to issue laws by decree, rather than bring them to the parliament, he would solve the economic crisis. The answer was yes.
He immediately surrounded himself with Russian followers of the free market Chicago School. They had formed a sort of book club with Yegor Gaider as their figurehead, whom Yeltsin named as one of his two deputy PMs.
Russia newspaper Nezavisimaya observed that “ for the first time Russia will get…a team of liberals…followers of Freidrich Hayek…and Milton Friedman…”(19).
The US funded its own team of transition experts to assist Yeltsin’s Chicago boys to write privatization decrees, launch NY style stock exchange, design Russian mutual funds. In the fall USAID awarded $2.1 million to the Harvard Institute of International Development which sent teams to Russia. In May 1995, Harvard named Sachs director of the institute.
On October 28, 1991, Yeltsin announced the lifting of price controls, a week after Gorbachev resigned.(21). The decrees included free trade and the first phase of the privatization of the state’s 225,000 companies (22). It was a well planned surprise. 67% of Russians told pollsters that workers cooperatives were the most equitable way to privatize assets of the state, and 79% felt that maintaining full employment was a core function of the government (24).
Joseph Stiglitz, then the chief economist at the WB summarized the mentality, “Only the blitzkrieg approach during the ‘window of opportunity’…would get the changes…before the population had a chance to organize to protect its…interests” (26).
After only one year, millions of Russians had lost their life’s savings, millions of workers were not paid because of abrupt cuts in subsidies (29). . Russians consumed 40% less in 1992 than they did in 1991, and a 1/3 of the population fell below the poverty line (30). People were forced to sell personal belongings on the street (31).
The people eventually began to demand an end to the cruel economic adventure. In December 1992, the parliament voted to unseat Yegor Gaider, and in March 1993, they voted to repeal the special powers they had given to Yeltsin.
Yeltsin retaliated by announcing a state of emergency on TV. Russia’s independent constitutional court, a creation of Gorbachev, ruled 9-3 that Yeltsin’s power grab was a violation of the constitution, he had sworn to uphold.
The West threw its weight behind Yeltsin (32) The majority of the Western press did too(33).
In the spring of 1993, the parliament brought a budget which did not follow IMF guidelines for austerity. Yeltsin tried to eliminate the parliament through a referendum (Zia/other satrapies fashion). Not enough voters turned out to give the mandate to hold snap elections asked for, but he claimed victory (36).
Lawrence Summers, then US treasury under secretary warned that, “the momentum for…reforms must be reinvigorated…” (37). IMF leaked to the press that $1.5 billion loan was being rescinded…” (38).
Yeltsin, confident of the West’s support issued decree 1400 to dissolve the parliament and abolish the constitution. 2 days later, the parliament voted to impeach him by a vote of 636 to 2.(40). Clinton continued to back him, and the congress voted $2.5billion in aid. Yeltsin sent troops to surround the parliament, cut the power, heat and phones off. Supporters of democracy came in thousands to break the blockade. The only way out would have been to call elections for the parliament and the presidency. Yeltsin was reportedly leaning towards elections, when he heard that voters had turned out Solidarity from power. Election in Russia would be too risky. Too much wealth-huge oil fields, and 30% of world’s gas deposits, 20% of its nickel, weapons factories, media-were at stake.
Yeltsin attacked the parliament with thousands of interior ministry troops, barbed wires and water cannons (41). On 10/03 crowds of parliament supporters “marched to the TV center…there were children in the crowd…they were met with machine gun fire. One hundred demonstrators and one soldier were killed. Yeltsin dissolved all city and regional councils of the country.
On 10/04/0993, Yeltsin ordered the army to storm the parliament, and setting it on fire. At 4.15 pm, about 300 deputies, staff workers and guards marched single file out of the building with their hands up (44).
500 had been killed and 1000 wounded, more violence than since 1917(45).
The US secretary of state traveled to Moscow to show support to Yeltsin (48).
The Chicago boys went on a law-making binge (53). The communist state was simply replaced with a corporatist state. A clique of nouveaux billionaires, also known as oligarchs, teamed up with Chicago boys and stripped the county of nearly everything of value, moving the loot ashore at the rate of $2 billion a month. Before the shock therapy, Russia had no millionaires. By 2003, it had 17 billionaires, according to Forbes (57). In a rare departure from the Chicago School dogma, Yeltsin and co had not allowed foreign MNCs to buy the assets directly.
The only problem for the oligarchs and foreign investors was the extreme unpopularity of Yeltsin.
In December 1994, Yeltsin started a war in Chechnya. Starting a war is the favorite desperate measure of failing dictators. The defense minister predicted it would be “…in a matter of hours, a cakewalk (59). It did work in the short term. But in 1996, when he faced reelection, he was still very unpopular. He toyed with idea of canceling the election-the Pinochet option, favored by his privatization minister, Sachs protégé Anatoly Chubais (60-61).
Yeltsin won, funded by $100 million financing by the oligarchs-33 times the legal limits, and 800 times more coverage than for his rivals on oligarch controlled TV stations (63).
In return, he sold 40% of an oil co, the size of Franc’s Total( Total sales in 2006 $193 billion) for $88 million, Norlisk Nickel which produced 1/5th of world’s nickel (annual profits $1.5 billion), for $170 million, Yukos with more oil than Kuwait (annual income more than $3 billion) for $309 million, 51% of oil Sidanko (valued at $2.8 billion) for $130 million. (64). The banks which ran the auctions, bid in them too.
And all these were purchased, not with corporate, but with public money (65). Communists had made an exchange of power with property (66).
It was an oversight that IMF and WB did not force MNCs in the initial loot. They would not forget the lesson in Bolivia, Argentina and Iraq.
Gates were now open for foreign investors. In 1997, royal Dutch/shell entered into partnership with two oil co-Gazprom and Sidnako (67).
Several of Yeltsin’s ministers would later be found guilty of corruption. Two from Harvard’s Russia project economics professor Andrei Shleifer and his wife, and his deputy Jonathan Hay were discovered to have been directly profiting from the market(70).US department of justice sued Harvard. Harvard paid a $26.5 million settlement (72).
There are honest neo-liberals, but the Chicago boys do seem to be particularly inclined to corruption.
George Soros, the world’s most powerful currency trader (implicated in the rumors which led to the Asian T iger’s downfall, he had withdrawn $ in billions) profited from his philanthropic work in Eastern Europe, when the countries implemented convertible currencies and lifted capital controls.
In 1999 Russia was hit with a series of terrorist attacks (76). The country was had been hit by the Asian crisis the year before. Vladmir Putin, Russia’s PM was made in charge of dealing with terrorists (77). In 09/1999, he launched air attacks on Chechnya.
With the conflict overshadowing all other discussion, on 12/31/1999, the oligarchs quietly arranged a hand over of power to Putin from Yeltsin who was by now drunk almost all the time Was shown so on US TV), and returned the compliment by conferring legal immunity on his predecessor.
Wars in Chechnya have killed 100,000(78). In contrast to Pinochet’s, Yeltsin’s massacres occurred in slow motion, and not so widely noticed.
By 1998, more than 80% of the Russians had gone bankrupt, 70,000 factories closed causing huge unemployment. Before 1989, 2 million Russians Federation residents were living in poverty. By mid-nineties, 74 million were doing so. By 1996, 25% were living in ‘desperate’ poverty (79).
Under the communists, Russians were alt least housed . In 2006, the government admitted to 715,000 homeless, while UNICEF put the number at 3.5 million children alone (80).
Under communism, Russians needed large quantities of vodka to get through the day. Under capitalism, they drink twice as much. Russia’s drug czar, Aleksadr Mikhailov says that the number of drug user has gone up 900% from 1994 to 2004, to 4 million, many of them on heroin, and as an aftereffect, the number of AIDS victims has gone up from 5,3000 to double that in 2 years, and in ten years according to UNAID, nearly 1 million were HIV positive (81).
Russia’s already high suicide rate reached about double of what it had been 8 years before. Violent crime had risen 4 times by 1994 (82). Russia’s population is falling by 700,000 per year, losing 6.6 million between the shock therapy peak year of 1992 to 2006 (83).
While the elite flaunt their wealth like the Emirs of oil Sheikhdoms, a 17 year old provincial girl read by candlelight (84).
Corruption Blame Game:
Clinton, EU, IMF, WB wanted to erase the pre-existing state for the capitalist feeding frenzy-Iraq without cruise missiles. Harvard’s Richard Pipes “for Russia to keep on disintegrating…till nothing remains…institutional structures” (86).
Cover for Russia’s failure was provided by its “culture of corruption” (88).
The entire drama will be repeated to explain billions in Iraq, with Saddam and Radical Islam, filling in for communism and czarism.
Rather than journeying through Adam Smith’s “savage and barbarous nations”, Milton Friedman’s troops systematically dismantled existing laws to recreate that earlier lawlessness. Smith’s colonists seized ‘wastelands’ by force or ‘for a trifle’, Friedman’s hordes, the MNCs see government assets and programs as ‘wasteland’ to be conquered.
Culture of corruption is endemic in the world. Friedman’s acolytes offered what was beyond the wildest dreams of third world minions (and first world partners).
Colonial times are often called the first pillage-land was seized from natives. In the second pillage, the state was stripped.

Chap 13 : (do 12 later) The Trashing of Asian Tigers.
Asian Tigers, Thailand, the Philippines Indonesia, Malaysia and South Korea, had been held up as examples of economic vitality. Stockbrokers were telling their clients that there was no surer way to increase wealth.
Then it all seemed to go wrong. They started to cash out in droves, traders attacked the currencies.
Indonesia was the worst hit. Its currency dropped between the morning and night and kept on doing it. The market crash was dubbed ‘the Asian flu’, later renamed ‘the Asian contagion, when it spread to Latin America and Russia.
Nothing tangible had changed. The same set ran the economies, deficits were not that much, no physical disaster had hit the region, they were still producing shoes to cars, with sales as strong as ever. In 1996, investors had put in $1000 billon in SK, but had taken out $120 billion in 1997.
Some one started a rumor that Thailand did not have enough $ to back up its currency. The electronic hers was triggered into a stampede. Real estate market which had been booming crashed. Construction halted, banks called in their loans.
Mutual funds had marketed all the countries as a package, so all went down.
The government tried to stem the outward flow with their reserves. That led to more panic. $600 billion disappeared from Asian Markets in one year (5).
In Indonesia people stormed stores (6). In south Korea, TV stations ran a campaign for citizens to donate gold jewelry. 200 tons were offered, but the currency continued to plummet (7).
It led to a wave of suicides. In SK, it went up by 50%(8).
No loans were forthcoming as in the case of the Tequila crisis of 1994, as the US treasury won’t let Mexico crash (9).
Milton Friedman, in his mid eighties made an appearance on CNN to talk to the anchor man, Lou Dobbs that he opposed any kind of bail out. He was echoed by Walter Wriston, former head of Citibank, George Shultz of Hoover Institute and Charles Schwab (10), and the Wall Street (11).
While addressing Asia Pacific Economic Cooperation Council held in November 1997 in Vancouver, Bill Clinton taken the cue called the crisis “ a few little glitches on the road” (12).
IMF took a do-nothing approach, then came up with a list demands.
Whether the crisis was inadvertently started by a rumor, or the rumor was started deliberately (George Soros had withdrawn billions, reported to have $5 billion over 2 weeks and more in the east European crisis-check this-read somewhere). But the IMF grabbed as an opportunity to strip the countries of assets and transfer them to MNCs, under the Chicago School dogma.
The Tigers had not grown on free trade. Malaysia, Thailand and South Korea were highly protectionist, and had maintained a significant role for the state, keeping control of energy and transportation. They had also blocked certain imports from Japan, Europe and North America to build up domestic markets.
The situation was an anathema to Japan, the West and MNCs. They saw the consumer market explode, and longed for unrestricted access. They also wanted to grab the best of the tiger’s corporations, and had cast greedy eyes on SK’s Daewoo, Hyundai, Samsung and LG.
In the mid-nineties, IMF and WB had coerced the countries to lift barriers to financial sector. That was to be their undoing.
In 1997, the hot money reversed current. Jay Pelosky of Morgan Stanley was forthright, “if the crisis was left to worsen, all foreign currency would be drained…Asian owned companies would either…close or…sell to western firms…(13).
Jose Pinera, Pinochet’s financial hatchet man, rewarded with a job in Washington DC’s Cato Institute, said the fall of tigers represented , “the fall of a second Berlin Wall” , the collapse of the notion that there is a third way between market…capitalism and socialist…” (14). The view was shared by Alan Greenspan, chairman of the Fed (15).
Michel Camdessus, head of IMF spoke of the crisis as an opportunity (16).
The only country to be able to resist was Malaysia, which had a relatively small debt, and had immediately put them back up. currency controls. PM Mahathir Muhammad did not think should have to, “destroy the economy in order that it should become better” (17)Rest of the Tigers came to the table with their hands out for loans. Stanley Fischer, negotiator for the IMF, “…when it is out of money, it hasn’t got many places to turn (18-old time usurers in India, used to wait for calamities, sometimes enticed peasants with loans, and at the end of the day, the loan would double every month or week, and they would take away cows, goats, household belongings and even women against the loan. Conditionalities are equivalent to the pound of flesh immortalized by Shylock of Shakespeare)..
Several countries suggested that since capital flight had caused the crisis, perhaps it was time to put back ‘capital controls. China had kept them on, and Malaysia was quick on its feet, and had escaped the crisis.
IMF team rejected the idea out of hand. They were focused on how to use the crisis as a leverage to beggar the countries. The first step was to denude the countries of all trade and investment barriers and state intervention that had created the ‘Asian miracle’, so the countries would never get out of bondage (20).. they also demanded deep budget cuts, massive lay offs in public sector. Fischer confessed later than in SK and Indonesia, the crisis was unrelated to government overspending, but that did not deter him from the sadistic measures(21).
Thailand would allow foreigners to buy large stakes in banks, Indonesia would cut food subsidies, and SK would lift regulations against massive layoffs. (22).MNCs wanted to downsize the firms they were about to buy.
Thailand’s reform package was pushed through with 4 emergency decrees, and not through the parliament (24). In south Korea, IMF demanded that money would not be released till all the candidates in the forthcoming presidential elections, commit to the rules in writing. Two of the anti-IMF candidates capitulated (25), though the day they signed was dubbed ‘humiliation day (26).
Suharto who had ruled for 30 years was more used to taking care of himself, kith and kin, resisted for a while (Camdessus of IMF reportedly chewed him out in public-find the source), but a senior IMF official, on condition of anonymity, told the Washington Post that, “the markets are asking… how committed…Indonesian leadership is…” As soon as the news was published, the currency lost 25%…in a day(28).
Suharto gave in.(29). He brought back the Berkeley mafia. The IMF got 140 adjustments (31)
IMF thought all was going well. When it revealed the extreme makeover package (32), the market panicked, yanked out more money and currency. SK was losing $ 1billion a day. IMF had turned a crisis into a catastrophe. Sachs, now an open dissident, “instead of dousing the fire, IMF…screamed fire in the theatre” (33).
ILO estimated that 24 million lost their jobs, Indonesia unemployment went up from 4 to 12%. Thailand was losing 60,000 jobs a day. SK was firing 300,000 workers every month. In 1996, 63.7% identified as middle class; by 1999 it was down to 38.4%. WB , 20 million Asian were thrown into poverty(34), all thanks to IMF extortionists.
Women and children suffered the most. Philippines and SK sold their daughters to traffickers. Child prostitution in Thailand increased by 20%.(35). US secretary of state, Madleine Albright, herself the daughter of refugees, on a visit to Thailand in March 1999, insensitively scolded the public for turning to prostitution and drugs. She could not see any connection between the austerity policies and the sex trade (36).
The fund’s Independent Evaluation office concluded that SAS demands were “ill advise” and “ broader than seemed necessary, as well as “not critical to resolving the crisis”, and that “crisis should not be used as an opportunity…” but that was akin to an assassin’s regrets at the funeral(37-the report was not released till 2003, 5 years after the crisis).
While IMF failed the Asians, it did not fail the Wall Street.
Pretty much everything in Asia was for sale. The Wall Street journal ran an article “Wall Street Scavenging in Asia-Pacific” and reported that Morgan Stanley, among other such houses, had dispatched armies of bankers…to scout for brokerage…asset management…even banks…that they can snap up at bargain prices…” (39).
Several major sales went through: Merrill Lynch bought Japan’s Yamaichi securities, as well as Thailand’s largest securities firms. AIG bought Bangkok Investments. JP Morgan bought a big stake in Kia Motors, Travelers and Solomon Smith Barney bought one of Korea’s largest textile and several other companies. (The chairman of Solomon…International Advisory Board was Don Rumsfeld. Dick Cheney was also on the board. Carlyle (Former Secretary if state James Baker, former UK PM john Major, Bush Sr) snapped up Daewoo’s telecom division (40), all for fire sale price.
The Korean Samsung was broken up and sold-Heavy Industry Division to Volvo, Pharmaceutical to SC Johnson, lighting division to General Electric. Car division worth $ 6 billion for $400 million to GM (43). The list is long (page 348-44).
The NY Times called it, “the world’s biggest going out of business sale” and a business buying Bazaar by the Business Week.
Governments had also to sell public service . US Trade reprehensive Charlene Barshefsky while asking the US congress to authorize billions to IMF, offered assurances that the agreements would “create new business opportunities for US firms…”(46).
The crisis set off a storm of privatizations-Bechtel got water and sewage system in eastern Manila…(47).
There were 186 mergers and acquisitions with in 20 months.
Asia’s crisis is still not over. 24 million lost their jobs. Their desperation id reflected in the rise of religious extremism and trafficking in flesh, and unabated wave of suicides and violent death (50).
In Indonesia Chinese were the unwitting victims of IMF depredations. Being a business community, they were blamed for the rise of the price of basic necessities imposed on Suharto by the UMF. Riots targeted the ethnic minority. 1200 hundred were killed and scores of Chinese women were gang raped (52).
Financial Times wrote an unusually balanced editorial, Asia was a “warning signal that public unease with capitalism and the forces of globalization is reaching a worrying level…the crisis showed that even the most successful countries…brought to their knees by a sudden outflow of capital…outraged…how whims of …hedge funds could cause mass poverty…”54).
The defiant mood made its global debut in 1999 WTO talks in Seattle, LDCs formed a voting block and turned down demands for further concessions, while EU and the USA continued to subsidize…their domestic industries and agriculture, while students and activists outside hogged the media coverage. The US government’s dream of a unified free trade zones in Asia-Pacific, and a free trade area of the America were smashed by third world resistance.
The anti-globalization movement exposed the Chicago School dogma to international debate. Capitalism’s monopoly period lasted only from 1991-collapse pf the USSR to the collapse of the Seattle talks in 1999.

Chap 14: the Homeland Security Enterprise.
Rumsfeld joined the cabinet of GWB in 2000, it was with a personal mission to reinvent warfare, more spectacle than struggle, far more profitable than it had ever been before. He wanted ‘transformation’. Senior military officials derided it. Beneath the slogan of modernization, it was simply an attempt to bring outsourcing of the corporate world into the military. In the 1990s, many traditional manufactories, which had maintained stable work forces at home took to the ‘Nike model; no factories, produce through a web of contractors, our resources in design and marketing. The other model was ‘Microsoft: maintain tight control over employees who perform ‘core competency’ work, and outsource all else, including code writing.
Fortune said, “Mr. CEO was about to restructure as he done to corporations” (8). Rumsfeld wanted the army to shed large numbers of full-time troops with a small core of officers, supported by cheaper temporary soldiers from the Reserves and National Guard. Contractors like Blackwater and Halliburton would do such work as high risk chauffeuring, prisoner interrogation, and health care. He would spend the savings into the latest satellite and nano-technology in the private sector(9).
The generals became very hostile to the concept of a hollow military.
Rumsfeld called a ‘town hall’ meeting of hundreds of senior Pentagon staff, “…adversary that poses a threat…is one of the last bastions of central planning…is closer to home. It’s Pentagon bureaucracy (10).
He wanted less spent on the staff…far more…directly to…private companies. “Every department…to slash its staff by 15%…” (11).
Proto-disaster Capitalism:
The job of the government was not to govern, but to subcontract to…more efficient…private sector.
By the time Bush took over, The privatization mania, fully embraced by Clinton, had sold off or outsourced public co in several sectors like water, electricity, highway management and garbage collection. What was left were such services as the military, police, fire department, prisons, border control, intelligence, disease control, public schools and government bureaucracies, privatizing which would be tantamount to compromising the nation-state.
By late 1990s, the unthinkable was deemed practical. Like Russia’s oil fields, Latin America’s telecom, and Asia’s industry, the US government would be privatized for private profit, especially urgent due to the backlash in Asia drying up the profit lake. The crisis exploiting methods learned over the last 3 decades in Latin America, Asia and Russia would be put to use in US heartland.
As its CEO, Rumsfeld had used his contacts to get the highly lucrative FDA approval for Searle Pharmaceutical’s aspartame (NutraSweet). When he sold Searle to Monsanto, he earned $12 million (15). That sale earned him seats on the boards of blue chip Sears and Kellogg’s and Gulf stream aircraft manufacturers. He was paid $190,000 a year for swerving on the board of ASEA Brown Boveri, the Swiss engineering firm which gained notoriety when it was revealed that it had sold nuclear technology, including the technique to produce plutonium, to North Korea (16).
In 1997, he was named the chairman of the board of biotech firm Gilead Sciences, which had registered Tamiflu, meant to treat ,many types of influenza, and the preferred drug for avian flu. If there ever was an outbreak, or the threat of one, the governments will be forced to buy billions worth from Gilead. Jonas Salk developed the first polio vaccine in 1952, he refused to apply for a patent, telling the broadcaster Edward R Murrow “Could you patent the sun?-this might put ideas in Rumsfeld’s head (17). Gilead also owns the patents on 4 AIDS drugs, and spends a lot of time, money and energy to block distribution of cheaper generic versions. Its key medicines have been developed on public grants (18).
While Rumsfeld saw riches in future epidemics, his protégé in ford administration Dick Cheney saw it in wars, and as secretary defense under bush Sr scaled down the number of troops on active duty and increased hiring of private contractors. He hired Brown & Root, a division of Halliburton to identify tasks performed by troops, which could be taken over by private firms, and make profit. It did and Cheney created Logistics Civil Augmentation Program to serve the military as manager for its operations (20). No dollar value was attached to contracts, the cost would be covered, plus Pentagon will guarantee a profit-cost plus contract. Halliburton, “beat out 36 other bidders to win a 5 year contract, not surprising…given that…it was the co…drew up the plan.” Los Angles Time’s T.Christian Miller.
In 1995, with Clinton in the White House, Halliburton hired Cheney as its new boss. Thanks to the loosely worded contract that the company and Cheney had drawn up, when Cheney was defense secretary, that it was able to stretch…the meaning of ‘logistical support till Halliburton was able to take over the entire infrastructure of US military operations overseas.
In the Balkans, a Halliburton spokesman said, “The first person to greet our soldiers as they arrive…, and the last one to wave goodbye is one of our employees”, making it sound like a holiday cruise (21).Clinton had deployed 19,000 soldiers in the Balkans. Halliburton created neat, gated suburbs, run entirely by the company, as US bases, with fast food shops, supermarkets, movie theaters, and gyms (22).The saying made famous in the Green zone in Baghdad was “don’t worry, it is cost plus, but deluxe war was invented by Clinton Cheney, in just under 5 years, nearly doubled the amount of money Halliburton collected from the US Treasury, from $1.2 billion to $2.3 billion, and federal loans and loan guarantees went up 15 times (23). He made millions for himself (24).
Cheney’s wife Lynne, was making money hand over fist as a member of the board of Lockheed Martin (25). With the cold war ended, and defense spending dropping, they developed a new strategy-running the government for a fee. In mid-1990s, Lockheed began taking over IT divisions of the US government. In 2004, the NY Times reported, “Lockheed Martin does not run the US, but it does help…sorts your mail…totals …taxes…cuts social security checks…counts the US census, runs space flights, monitors air traffic, and to make all that happen…writes more computer code than Microsoft (26).
As governor of TX, GWB did not run the state as much as he parceled out state functions to private firms such as security, private prisons. The American Prospect Magazine called TX, “the world capital of private prison industry” (28).
Bush, Cheney and Rumsfeld made up an evil triad, which would hollow out the government.
9/11 and revival of civil service:
When Bush and co took over in 01/2001, the IT bubble had burst, Dow Jones was down in the basement. Bush’s solution was akin to the one neo-liberals had advocated for the rest of the world-give away public wealth to corporations, with tax cuts, lucrative contracts, and plans to privatize everything (31-32).
But 9/11 intervened, and the idea of the government’s self-immolation no longer seemed so good. The security failures of 9/11 exposed the fault lines created by 20 years of nibbling away at the public sector and outsourcing to corporations for their profit. Radio communication for NY police and fire fighters had broken down in the middle of the rescue operation, air traffic controllers did not notice the off course planes and the hijackers passed through security check points manned by people who made less than the employees of the food courts at the airports did.
Ronald Reagan had emasculated the air traffic controllers union, and deregulated the airlines-a clear victory for Friedman counterrevolution. The entire air traffic control system had been over the next 20 years privatized, deregulated and the security work performed by underpaid, poorly trained, non-union contractors. After the attack, the inspector general of the department of transportation testified that the airlines responsible for security had skimped a great deal to keep costs down. It was OK on 09/10/2001, but it hiring $6.00 an hour airport security guard did seem like criminal negligence on 9/11.
In October 2001, envelopes containing a white powder were sent to congressmen. Bioport, a private lab had the exclusive contract to produce the Anthrax vaccine had failed a series of safety inspections, and the FDA had denied it permission to distribute the vaccine (35). It was still in business.
The backlash against whole sale privatizations became acute with corporate scandals like Enron going bankrupt three months after 9/11. Employees lost their retirement, while executives cashed out. Then it came out that Enron had manipulated energy prices, which had led to massive blackouts in CA (36).
Trust in government had gone up (37). The blue-collar workers of NY had performed the best (403 lost lives).Bush had to praise not only security services, but also teachers. Postal employees and health care workers.
A Corporate New Deal
Bush was planning to spend large amounts of public money to stimulate the economy, but it was all earmarked for corporations
( as Obama is doing now), with no competition, which was a hallmark of Bush/Cheney regime, and virtually no oversight.
9/11 served the agenda of a huge domestic shock therapy, which bush moved quickly to exploit to hand over war to disaster management to for profit firms. The regime invented a new framework foot its scheme of privatization-the War on Terror. In order to enhance the already existing feeling of paranoia, they first increased to a previously unheard of ands unimaginable level, the policing, surveillance, detentions and launched a power grab, called “a rolling coup” by the military historian Andrew Bacevich (40). The net effect was a full fledged new economy in private hands in homeland security, war, reconstruction, at home and abroad.
The most effective camouflage for the privatization agenda was that economic ideology was no longer a primary motivator of foreign and domestic policy. War on terror was. The NY times February 2007, “ Without a public debate or formal policy decisions, contractors have become a virtual fourth branch of the government” (42).
In November 2001, the department of defense brought together , “a small group of dot.com venture capitalist consultants” to identify “emergency technology solutions…assist…in Global war on terrorism”, so the government, in stead of providing security was proposing to buy it. By early 2006, it has been incorporated in the Pentagon as the Defense Venture Catalyst Initiative (43). (One must compliment the US for coming up with the weirdest terminology).
The Department of Homeland Security is the clearest expression of wholly outsourced kind of government. (44).Another is Counter Intelligence Field Activity, created by Rumsfeld, independent of CIA. This agency outsources 70% of its budget to private contractors. Ken Minihan, a former director of NSA tells it, “Homeland security is too important to be left to the government”. Minihan and hundreds of Bush staffers, left the government to work in private security industry, which Minihan helped create (45).
The “1% doctrine of Cheney”, that even if there is a 1% chance, the US has to respond as though it was a 100% certainty, has been a boon for high tech detection services. Because a small pox attack can be conceived, homeland Security handed over$ ½ billion to private companies to develop and install detection equipment…against an unproven threat (46).
From a military perspective, these myriad of names, the wars-on terror, the war on radical Islam, on Islamo-fascism, the long war-make the war unwinnable, and untenable from an economic perspective.
After 9/11, Bush funneled $270.00 billion from the Pentagon, $42 billion from CIA, (nearly twice that Clinton did in both instances), and $130 billion from homeland Security. In 2003, Bush spent $327 billion on private contracts, nearly 40% of every discretionary dollar (47).
DC suburbs became dotted with security start ups, and “incubator companies. The industry also gave birth to new lobby firms to hook up companies to the ‘right people’ on the Hill. In 2001, there were 2 such companies, in mid-2006, they were 543 (48).
Terrorism Market:
One of the first booms was in surveillance cameras, 4.2 million in Britain, and 30 million in the US. That created 4 billion hours of footage, so a new market for ‘analytic software’ emerged (49). Another was digital enhancement, because facial recognition software can make a positive ID only if people offer front and center to the cameras (50).
Cell phone and Web surfing companies have been turned into tools of the state, akin to Yahoo collaborating with the Chinese government and AT&T, with the US.
Many technologies in use on the war on terror had been developed to build detailed customer profiles. So now the information collected from credit cards, can be sold, not only to travel agencies or shopping chains, but to FBI as well flagging an interest, for instance, in calls or travel to mid-East.
The p[potential for error, and being branded a terrorist, is enormous. As of June, 2007, there were ½ a million names on ATS (automated targeting system) list, and tens of millions were assigned a ‘risk assessment’ rating (54).
Any one could be declared ‘enemy combatant’, and if non-US citizen, they will never know what they were detained for as Bush had abolished “habeas corpus”.
Halliburton runs maximum security prisons in Guantnamo, Boeing, the CIA’s travel agent, designed special 737s for the 1245 extraordinary rendition flights (55).
“Over half of the qualified interrogators work for contractors (56).
They paid $3,000 to $25,000 for Al-Qaida/Taliban fighters handed over to them (57).
Pentagon: 86% of the prisoners at Gitmo were handed over by Afghan/Pak agents after the bounties were announced, and the majority of them were found to have no link or connection with either group (58).
There is an unprecedented convergence of unchecked police powers and greater corporate power. The industry not only creates an incentive to spy and torture, but also perpetuates the fear, which created it in the first place.
What passes for debate, is restricted individual cases of corruption or was profiteering, and the failure of government to properly oversee contractors, but not the consequences of a fully privatized war.
“Since the ‘war on terror’ CEOs of the top 34 defense contractor’s salary is double of what they got before 9/11 (60).
Unlike the dot.com one, the disaster industry does have CIA level of discretion (61).
Peter Swire, a Clinton regime privacy counselor, describes the convergence as, “ you have a government on a holy mission to ramp up information gathering, and you have an IT industry desperate for new markets” (62).

Chap 15: Removing the Revolving Door
During the midterm 2006 elections, bush signed the Defense Authorization Act in a private ceremony in the Oval office (three weeks before Rumsfeld resigned) , with a rider hidden in its 1400 pages, which gave him the power to declare martial law overriding state governors, in the event of a public emergency to restore public order. Before this, the president had the right only in the face of an insurrection (4).
Senator Patrick Leahy was the sole voice of dissent.
One clear winner was the Pharmaceutical industry. In case of an epidemic, the army and national guard could be called to protect their labs and assets, their and impose quarantine, the long standing desire of Rumsfeld’s former employer, Gilead Sciences, which owns the patent on Tamiflu. The law and Avian Flu scares (and now swine flu) sent its stock soaring by 24%, in five months after Rumsfeld left office(6).
It is pertinent to ask the question, what roles do MNCs play in shaping law, or for that matter Halliburton and Bechtel, and oil companies did in promoting invasion of Iraq. People involved are known for conflating corporate interest with national interest.
In his 2006 book Overthrow, former NY Times correspondent Stephen Kinzer, tried to get to the bottom of what motivated US rulers to order and orchestrate coups in foreign countries over the last hundred years. From Hawaii in 1893 to Iraq in 2003, he notes that there is often a three stage process, first a US MNC faces a financial setback due to the action of a foreign government, ranging “ pay taxes, follow labor/environmental laws, sell some of its assets, or it is nationalized. Second the politicians interpret it as an attack on the US (which it actually is-MNCs own the US, much more than they do other Western countries). Third the process of selling an invasion starts as a struggle between the good and the bad, and “ a chance to free the oppressed nation…from…brutality of the regime…” (7). It is an exercise in mass projection of the interest of a tiny elite to those of all humanity’s good.
This tendency is more pronounced among politicians who move directly from a corporate to public office. John foster Dulles was a high powered international corporate lawyer, representing some of the biggest corporation in their conflicts with foreign countries, before he was picked up by Eisenhower as his secretary of state. He was incapable of distinguishing between corporate and national interest. Kinzer writes “Dulles had two…obsessions: fighting communism and protecting… MNCs (8). The actions off Guatemalan government against the United Fruit Company was a defacto attack on America and required an invasion.
Bush with a cabinet packed with former CEOs pursues its twin goals of fighting ‘terror’ and protecting MNCs in similar way. But the critical difference between Dulles and Bush is that the former only wanted a stable and profitable environment, the latter takes the invasions as the primary goal. Cheney are a different breed. What is good for Lockheed, Halliburton, Carlyle and Gilead –wars, epidemics, disasters-is good for the US, and the whole world. They have ushered in an era of privatized war and disaster response, profiting from the disasters they unleashed.
Rumsfeld retired in 2006. Press reported that he was returning to the private sector. He never left it. He was required to divest himself of all holdings- security or defense related. He claimed that it was impossible to disentangle himself in time. He was still looking for suitable buyer for a lot of his holdings even after six months into his term as defense secretary (9).
As far Gilead, the Tamiflu firm, though epidemics are national security issues and with in purview of defense, he did not sell Gliead stocks for his entire term (10).
Rumsfeld’s refusal to divest himself of his holding affected his job performance. According to AP report He had to recuse himself from a great number of critical policy decisions “He avoided meetings in which AIDS was discussed. When high profile mergers like General Electric, Honeywell, Northrop Grumman, were discussed, he had to recuse himself.(12).
His colleagues took care of his interests. In July, 2005, the Pentagon bought $58 worth of Tamiflu and department of Health&H declared its intention to buy up to a $ billion’s worth later (14).
It paid off. If he had sold his Gilead shares in January , 2001 for $7.45 a share, he would not have received $67045 per share he received when he left office , a 807% increase. (15).
Cheney was equally reluctant to leave Halliburton. Before stepping down as CEO to be Bush’s running mate, he negotiated with Halliburton for a lot of stocks and options. After press questions, he sold some shares, making $18.50 million in profit. But according to Wall Street Journal, he hung on to 189,000 shares and 500,000 unvested options.
He maintained such a huge number of shares during his term as VP, that he made millions every year, and was paid deferred $ $211,000 every year as well. The company’s stock price rose from $10.00 before Iraq war to $41.00 three years later (17).
Saddam did not pose a threat to US security, but did to US oil companies as he had signed contracts with Russian oil companies and was negotiating with ‘Total’ of France (18).
Rumsfeld and Cheney, asked to choose private profit and public life, chose profit, forcing government ethics committees to cave in.
In the Bush administration, the war profiteers were not clamoring to get access to government, they were the government.
Among other ‘scandals’ of Bush administration, Jack Abramoff bribes to congress, and Randy ‘Duke’ Cunningham serving 8 years for offering his Yacht on official congressional letterhead…courtesy prostitutes (21).
Whirling revolving door (between corporations and the government) has always been there, but in other administrations, political figures waited till their administration was out of office before moving on to corporations. Eric Lipton, tracking the exodus from Homeland security for NY Times “ veteran Washington Lobbyist…the exodus of such a sizable share of an agency’s senior management before the end of administration has few modern parallels” (22).
John Ashcroft, an architect of the war on ‘Terror’ after resigning from Attorney General’s office became the head of the Ashcroft group, many years before Bush left office, specializes in homeland security firm procure federal contracts. Tom Ridge, the first head of homeland Security is at Ridge Global, Rudy Gulliani, hero of 9/11 response as the mayor of NY, started his firm, Gulliani Partners FOUR MONTHS AFTER 9/11 TO SELL HIS SERVICES AS CRISIS CONSULTANT.
Michael Brown head of FEMA during Katrina, started his firm specializing in disaster preparedness (23), wrote an e-mail to a fellow FEMA staffer in the middle of the disaster “Can I quit now”: the philosophy being stay in government long enough to get an impressive title.
The innovation of bush was that many felt entitled to occupy both spaces-corporation and government simultaneously.
James Baker and Richard Perle make policy, while embedded in privatized war, fulfilling the corporatist dream-a total merger of political and corporate elites, with state functioning as a business guild. It is where the Chicago School crusade, with its privatization, deregulation, open borders and union busting has been leading.
Former Officials:
Bush has exceeded all other presidents in using former official-James Baker, Paul Bremer, Henry Kissinger, George Schultz, Richard Perle-as advisers and envoys for key functions, while the congress played the role of a rubber stamp.
James Baker, like Cheney made a fortune after leaving office, particularly on his contacts in Saudi Arabia and Kuwait, he made during Gulf1. his Houston law firm represents the Saudi Royal family as well as Halliburton, Gazprom oil of Russia, he is an equity partner in the Carlyle group. The war in Iraq translated into a record breaking $6.6 billion payments to Carlyle’s investors (27). When bush made Baker his special envoy on Iraq’s debts, the NY times in an editorial wrote “Mr. baker is far too entangled…in lucrative private business…leave him looking like a potentially interested party in any debt restructuring…to perform honorably…must give up private ones” (28). Baker simply refused…did exactly opposite of what Baker was supposed to be doing as envoy…collect $27 billion from Iraq in unpaid debt to Kuwait-in stead of convincing governments to cancel Saddam era debts (29). But there was a price-Kuwait would have to invest $ 1 billion into the Carlyle group.
George Schultz became the head of the Committee for the Liberation of Iraq, at he request of Bush to build the case for the invasion in public opinion. He did not disclose that he was a member of the board of Bechtel, which would collect $ 2.3 billion to ‘reconstruct’ Iraq (31).
According to Danielle Brain of the Project on Government Oversight “it’s impossible to tell where the government ends and Lockheed begins” It is harder to tell where Lockheed ends and the Committee for Liberation of Iraq begins-Bruce Jackson, till very lately vice president for strategy and planning at Lockheed had convened the committee.
Kissinger had kicked off the counterrevolution by orchestrating the Pinochet coup in Chile. Bush named him to the chair of 9/11 commission, but when the families of victims asked him to produce a list of his corporate clients, pointing to a potential conflict of interest, he refused and elected to step down from the chair (35).
Rumsfeld named Richard Perle to chair Defense Policy Board, argued forcefully for the attack on Iraq, was one of the first Disaster post 9/11 Capitalists, launching his venture capital firm Trireme Partners, just two months after 9/11. Boeing had kicked in $20 million to start the partnership. Perle wrote an op-ed supporting Boeing’s $17 billion tanker contract with the Pentagon (37-the tanker deal landed a senior defense official and a Boeing executive in jail).
Wolf Blitzer of CNN confronted Perle with Samuel Hirsh’s observation “he has set up a company that may gain in a war”. Perle blew up, calling Hersh “the closest thing American journalism has to a terrorist…”(39).
The right limitless profit seeking has always been the center of neocon ideology (40).



Chap 20: Disaster Apartheid-Katrina
“Katrina was not unforeseeable. It was the result of a political structure that subcontracts its responsibility to private contractors and abdicates its responsibility altogether” Harry Bellefonte.
Our car spun out of into a traffic light…I was aware that wherever the ambulance was going, it wouldn’t be good. I had visions of the horrific scene at the makeshift health clinic at the New Orleans airport…so few doctors and nurses that elderly evacuees were being left unattended for hours, slumped in their wheel chairs.
In Canada, I usually wait for forty minutes to see my general practitioner. And this was downtown New Orleans…largest public health emergency in recent US history. A polite administrator came into my room “in America we pay for health care. I am sorry…we wish we had your system. Just fill out this form.”
Within a couple of hours, I would have been free to go, were it not for the curfew. A private security guard told me “The biggest problem is all the junkies; they are jonesing and want to get into the pharmacy”.
A medical intern was kind enough to slip me a few painkillers. When I asked him if he had gone to any of the shelters to help, he seemed…taken aback…embarrassed” I had not thought of that”. I…changed the subject…to the fate of Charity hospital…it was barely functioning before the storm… it might never reopen “They’d better reopen it,” he said “we can’t treat those people here”
It occurred to me that this affable doctor and the spa like medical care I had just received were the embodiment of the culture that had made the horrors of Katrina possible. As a graduate of a private medical school and an intern at a private hospital, he had been trained simply not to see New Orleans’ uninsured, overwhelmingly Afro-American residents as potential patients.
When Katrina hit, the sharp divide between…Ochsner Hospital and Charity hospital played out…”the economically secure drove out of town, checked out of hotels and called their insurance companies. The 120,000…without cars…waited for help that did not arrive…even if most of us had resigned ourselves to daily inequalities…access to health care…decent schools, disasters were supposed to be different…New Orleans showed that the general belief that disasters are…time out for cut throat capitalism…all pull together…state switches into higher gear…had already been abandoned, with no public debate.
“The storm exposed the consequences of neo-liberalism’s lies…in a single locale and all at once” the political scientist and New Orleans native (3). The levees were never repaired, the under funded public transit system…failed…the city’ idea of disaster preparedness was passing out videos…if hurricane came…get out of town.
The Federal Emergency Management Agency (FEMA)…Bush… vision of government run by corporations. In the summer of 2004, more than a year before Katrina, …Louisiana put in a request for funding to…develop emergency plan…a powerful hurricane. The request was refused. Disaster mitigation…advance measures to make…disasters less devastating, was…gutted under Bush. The same year FEMA awarded $ 500,000…to a private firm…Innovative emergency Management to come up with…” …hurricane disaster plan for South east Louisiana and the city of New Orleans” (4).
The company went back to FEMA for more money, eventually it came to $ 1 billion…came up with everything from delivering water…to identify empty lots…be transformed into trailer parks for evacuees... eight months after the contractor submitted the report, no action was taken. Michael Brown, head of FEMA “Money was not available to do the follow up.” (5).
FEMA could not…locate the New Orleans superdome, where 23,000…stranded without food or water…the media had been there for days.
Even neocon stalwarts like Jonah Goldberg …were begging,
“When a city is sinking…rioting runs rampant, government PROABABLY should saddle up.” (6).
Milton Friedman wrote in his Wall Street Journal op-ed “it was also an opportunity”. On September 13, 2005, two weeks after Katrina, the Heritage Foundation hosted a meeting of right wing ideologues and Republican Lawmakers. They came up with a list of “Pro-Free Market Ideas for responding to Katrina and high Gas Prices-32 in number…the first three…”automatically suspend Davis-Bacon prevailing wage laws in disaster areas…federal contractors required to pay a living wage, “make the entire…area a flat-tax free-enterprise zone” “make the entire region an economic competitive zone…waive regulations…give parents vouchers to use at charter schools (7). Bush announced all the measures, though he was forced to reinstate labor laws.
The group at the Heritage Foundation called upon the congress to repeal environmental regulation on the gulf coast…for new oil refineries and “drilling in the Arctic national wildlife Refuge, in spite of the fact that climate scientists have linked the increased intensity of hurricanes to increasing ocean temperatures (8&9).
With in weeks the Gulf coast became the domestic laboratory for the same kind of government run by contractors…pioneered in Iraq. The Baghdad gang-Halliburton’s KBR unit got 60 million to reconstruct military bases. Blackwater hired to protect FEMA employees from looters. Parsons, notorious for doing sloppy work in Iraq, was brought in for bridge construction in Mississippi. Flour, Shaw, Bechtel, CH2M, all Iraq contractors, were given contracts to build mobile homes, just 10 days after levees broke. The contracts were worth $3.4 billion and there no open bidding (10).
The parallels with Baghdad’s Green zone were uncanny. Shaw hired the former head of the army’s Iraq reconstruction office. Flour sent its senior project manager from Iraq to New Orleans. Joe Allbaugh, who had promised to bring Wal-Mart and 7-Eleven to Iraq was the lobbyist for many of the deals. David Enders, a reporter asked, asked an armed guard outside a New Orleans hotel if he seen much action, he replied “…it is pretty much Green Zone here”(11).
Like the Green Zone, congressional investigators found “ significant over charges, wasteful spending or mismanagement” in contracts worth $3.75 billion (12).
Kenyon, a division of the massive funeral conglomerate, Service Corporation International and a major Bush campaign donor, was given the work of collecting dead bodies from homes and streets. They worked slowly, local emergency workers and volunteer morticians were not allowed, bodies often under blazing sun for days. Kenyon charged the state, on the average $12,500 per body, and for almost a year after Katrina, decayed bodies were still being found in attics. (13).
Experience did not have any effect on award of contracts. AshBitt was given half a billion to remove debris, did not own a single dump truck and outsourced the work (14).A company/religious group, Lighthouse Disaster relief was given 5.2 million to build a camp for emergency workers in suburb of the city. The work was never finished. The director Pastor Gary Heldreth confessed “ …the closest thing I have done…organize a youth camp…”(15).
According to The New York times ‘the top 20 contractors …spent nearly 300 million since 2000 on lobbying and 23 million to political campaigns”.
As in Iraq, they were averse to hiring locals.
After the contractors and sub-contractors had taken their cut, little was left for the people. The author, Mike Davis discovered that FEMA paid Shaw $ 175 per square foot to install blue tarp on damaged roofs, with the government supplying the tarps. Workers who hammered the tarp were paid $ 2.00 per square foot (17).
In November, 2005, to offset the billion going to the contractors, Republican dominated congress wanted to cut $40.00 billion from the budget, from student loans, Medicaid and food stamps (19).
From being social levelers that they were long ago, they now provide an inkling into the cruelly divided future. Baghdad’s Green Zone provides the best example-it has its own electric, phone and sewage systems and a state of the art hospital, all protected by 5 ft thick walls, poolside drinks, Hollywood movies and Nautilus exercise machines.
Green Zones are not exclusive to Baghdad. They emerged in New Orleans, Green Zones amidst Red Zones of , consequence of “free market economy, Bush refused to allow payment of public sector salaries from emergency funds. The city which could not collect taxes had to fire 3,000 workers. Millions went to outside consultants, many of whom were real estate developers (20).thousands of teachers were fired paving the way to privatize education.
Nearly two years later, Charity hospital was still closed, court system was barely functional and private energy company, Entetrgy had failed to supply electricity to the whole city. It threatened to raise rates and was gifted $200.00 million from the federal government. The public transport system lost half its workers, and the vast majority of publicly owned houses stood boarded and empty. (21) and the tourist lobby was eying the prime land close to the French Quarter.
New Orleans public sphere was being erased. Like Detroit and other manufacturing cities lost outsourcing of globalization, New Orleans provides the first example of post disaster wastage of cities.
In 2007, The American Society of Civil Engineers reported that the USA was falling behind in maintaining its public infrastructure, and it would take $ a trillion and a half to bring them back to safe standards. The expenditure was actually being cut back (23).
In 2006, the Red Cross signed a new disaster response partnership with Wal-Mart. “It is going to be private enterprise” said Billy Wagner, the chief of emergency management for Florida Keys (25).
Much of the parallel disaster economy has been built with tax-payer money spent in privatized war zone work. The overhead (euphemism for diverting funds for corporate/personal use) of contractors in Iraq and Afghanistan ranges from 20% to 55%.
Blackwater, (now named…after the exposure of the murders and other atrocities perpetrated on Iraqi civilians and bystanders by its criminal gangs) founded in 1996, built up an a mercenary army of 20,000 and a huge military base in North Carolina, worth $50 million. Its Florida wing boasts of helicopter gun ships, a Boeing 767, a Zeppelin, a 20 acre man made lake to train boarding a hostile ship, a 1200 yard firing range for sniper training, all courtesy Bush with public funds (27). A journal described it “al Qaeda for the good guys” (28).
The state has lost its ability to perform its functions. FEMA had to hire a contractor to award contracts to sub-contractors during Katrina. To update the army manual on the rules dealing with contractors, it had to hand over the job to one of its major contractors-MPRI. The CIA had to bar recruiter from luring its staff away from its own premises. Michael Jackson, deputy secretary of Homeland Security explained “the department does not have the capacity …to plan…oversee the ‘border initiative program (to build virtual fences on US borders with Mexico and Canada(30).
Once a market is created, it does not fold up with the termination of the term of one president.
A year after Katrina, CEOs of 30 largest US corporation joined hands under a ‘Business roundtable and complained of “Mission Creep” by NGOs in disaster relief as it infringed on their franchise. They claim to be better equipped than the UN to deal with Darfur (they will indiscriminately massacre both sides, and bring the peace of the grave yard).
Perhaps the main reason the elite are so sanguine about climate change is that they think they will be able to buy their way out of it. Christian end-timers (and Muslims too) actually favor disasters as paving the way to bring Rapture ( day of Qayamat for Muslims) sooner.
Paul Brenner, before he went to Iraq used to disaster proof corporations-turning Multinationals into security bubbles, to continue to function even the state around them crumbled. Early work can be glimpsed in the lobbies of major corporations in London and NY, equipped with airport style check in and scanners. They would like to proceed to privatized global communications, emergency health and energy supply and transportation for corporate personnel and their favorite minions among the politicians. What they can do for the military in Felluja, they can do for the police in Reno (35).
John Robb, a former force Delta commander, turned consultant says “Wealthy individuals and MNCs will be the first to bail out of our collective (security and transport) systems (36). The future Robb described looks very much like what went on in post Katrina New Orleans, with gate communities private hospitals, charter schools, water supply and emergency generators for the rich and out of the way trailer parks for the poor where they were treated like virtual criminals (37).
In a wealthy republican suburb of Atlanta, they were tired of their tax subsidizing schools and police in the poor sections of the county. They voted to incorporate their own city, called Sandy springs. In September 2005 (the month Katrina struck), consulting mammoth, offered to run the government for them at $ 27 million a yearCH2M, making it the first ‘contract’ city. Only four people worked for the new municipality, all others for the contractor (400. Neighboring communities took their cue from Sandy springs, one new city Milton hired, what else-CH2M Hill. Soon a campaign gathered for the corporate cities to band together. Politicians from the poor areas opposed the move fiercely (41).
CH2M Hill is one of the ‘primes’ of Iraq. It was granted contract to build ports and bridges and oversee all infrastructure programs in post tsunami Sri Lanka, and was awarded $ 500 million contract to build FEMA villas in post Katrina New Orleans.

































Connecting the Dots (The Shock doctrine-Naomi Klein)
Chap 1:
Capital is religion, and Milton Friedman is its Abd Al-Wahhab (Start with the origin of capitalism).

Since 1960s, Milton Friedman and his followers have been perfecting the strategy to use a crisis to cow down the public to make it politically possible (12) to introduce the trinity of free market, privatization and drastic cutbacks on social services-health, education and welfare.
He first got the opportunity to utilize a terrible upheaval to put his theory into practice when became Guru of General Augusto Pinochet (14), who had overthrown the democratically elected government of Chile, attacked the presidential palace by air and with tanks, killed the president and arrested all the cabinet ministers, he could lay his hands on. President Allende had refused to order troops and guards loyal to him, even after he had credible reports that a coup was in the offing, so the show of overwhelming force was to terrorize the public.
(A line of deception runs clear through recent history when violent events have been orchestrated to mold public opinion to favor a certain course, and if relatively mild ‘happenings’ do not work drastic measure are undertaken.
During early WW II American public opinion was not in favor of US participation in the war against Germany. In fact most Americans felt that England was being punished for its past and current sins of colonization and imperialism. But what was at stake was the very survival of the capitalist system, which the fascists appeared to be on the point of vanquishing completely. It is reported that Churchill had an American plane blown out of air off the coast of Spain and an American ship drowned in mid-Atlantic. Germans were blamed for both. That did change public opinion, but not sufficiently for FDR to commit the country to the War.
Japanese Naval attack on Pearl Harbor came as a godsend. There are credible reports that though the government and FDR had advance knowledge of the impending attack, they let American ships get hit like sitting ducks. It stands to reason that a flotilla sailing all the way from Japan, would be noticed by some one who would inform the US government.
In days gone by, European governments used to send missionaries ostensibly to convert the ‘natives to God’s religion. If the natives did not accept God’s word through the ‘men’ of god, or still worse, they bodily harmed the preachers, gunboats went to proselytize more effectively.
Further back in history, the second Caliph after Muhammad, Umar ibne Khattab sent emissaries to the royal court in Iran. Iran was at the height of its civilization, with glittering court and king. The emissaries, roughly clad and wild in appearance, forced their way into the court and demanded that either Iranians become Muslims, or pay a religious tax or else they would be attacked. The king sent them on their way, and sure enough they were attacked, defeated, cities were razed, men were slaughtered and women taken into captured and offered to the caliph to be distributed to victors as he pleased).
Coming back to the 20th CE, in 1953, the British smarting under the nationalization of oil and other nationalist measures, and unable to destabilize the elected government of Iran, handed over the case to the Americans, who in collaboration with the Iranian army, aided and abetted by Ayatollahs, orchestrated a coup, in the aftermath of which thousands were killed. Iranians had to wait till 1979 to get rid of the Shah who, though allowed megalomaniac celebrations as the 2500th anniversary of the Iranian royalty (his father had risen from a subaltern to head of the state, and had very reluctantly agreed to become the king. He had been exiled by the British as he was not servile enough) had functioned as American satrap.
Further outrages had followed, in Guatemala at the instance of the United Fruit co and in many other countries in Central and Latin America.
France was unable to hold on to its possessions in Indo-China. The US, prodded by the paranoid brothers Allen and John Foster Dulles, respectively at the CIA and state, magnanimously stepped in
So no one may say that Asia was backward Asia, In 1965 the army had overthrown the independence leader Ahmad Soekarno in Indonesia and killed an estimated one and a half million people. The usurper General Suharto was advised by economists from ?Harvard.
The Falklands war in 1982 helped Margaret Thatcher crush the miners strike and dismantle the trade union movement.
The trinity is imposed in a relatively peaceful way too. Loans for extravagant and useless enterprises are thrust on third world, and when they are unable to pay IMF, WB and other international financial institutes countries twist arms to accept what are euphemistically described as conditionalities, which amount to the same deregulation, nationalization and cutbacks in social spending. This was done to Yeltsin’s Russia (1993), Latin America (22) after the mid 1980s crisis and after the later1990s crisis in East Asia (23). It was done democratically in Reagan’s America and more recently in Sokorzky’s France.
But the US capital got its big chance after 9/11. Bush took advantage of it to make war on terror a free market, completely for profit enterprise. The administration, as a first measure towards privatizing the government outsourced health care of the soldiers, interrogation of prisoners and ‘data mining’ on American citizens with out so much as by your leave to FASA courts set up specifically for the purpose of allowing the government to spy on its own citizens.
In 2003, the government handed out over 3500 contracts to private companies to perform security work, and by the end of August 2006, the department of Homeland security had given more than 115,000 such contracts (28). (name Blackwater and others) which have immunity from local laws, and US law did not apply to them in Iraq. Weapon contracts and servicing the military is the fastest growing service economy in the world (29).
Humanitarian relief and reconstruction work, after the society and its whole infrastructure has been demolished as in Iraq and Afghanistan, is done by corporations like Bechtel. Another Halliburton reported revenues of $20.00 billion in 2006, in 2006, the bloodiest year for Iraqis, with 3700 casualties in October alone (33).
Wherever the Chicago school policies of Milton Friedman have been applied a powerful alliance has emerged between elite politicians and multi-national corporations, who function under a revolving door arrangement with each other (give examples of Ruben, Paulson Guitner, Mc Namarra, Cheney and so many others).
Torture has been the inevitable partner of the crusade for global free trade, deregulation. CIA calls it ‘coercive interrogation’. It is a set of techniques which disorients prisoners to the extent of disowning their ideas, family and friends. The idea is explained in details in two CIA manuals declassified in late 1990s, on how to create ‘violent ruptures’ between prisoners and their perception of the world.(36). They are deprived of sensory input with hoods, ear plugs, shackles and isolation and then suddenly exposed to glaring light, blaring music, physical assault and electric shocks with cattle prods.
The prisoners are regress so much and so frightened out of their wits that they are no longer able to think rationally (37).
Coups, mass jailing, public torture in football fields (Chile and Afghanistan under the Taliban), killing create an atmosphere of fear which makes people more amenable to listen to and accept what neo-liberals have planned for long.

Post 9/11 north Americans, not known for knowledge or familiarity with the world outside the continental US (relate stories of driving license bureau in NJ which till the 1960s did not know that Pakistan was not a US state, and accepted Pakistani driving license in exchange for a NJ one, or a similar office in MI which did not know the difference between a learner’s license and a full driving license from Canada, or people in MI asking Pakistani doctors in 1970s, if Pakistan had phones) US citizens fell line, hook and sinker for Clash of civilization, the axis of evil and Islamo-fascism, and became a “clean sheet of paper on which the newest and the most beautiful words can be written”, Mao on his people (38).
The 1929 market crash had created an overwhelming consensus that laissez-faire had failed and people started listening to John Maynard Keynes, the intellectual architect of the modern welfare state (39). Friedman had spent his life fighting the idea. He wrote to Pinochet in 1975 “ the major error, in my opinion was to believe that it was possible to do good with other people’s money.
He got a reprieve when Margaret Thatcher (the milk snatcher-she had as secretary for education in PM Heath’s cabinet, had withdrawn the glass of milk provided to students at lunch time) and Ronald Reagan peacefully liberated the markets.
When the Soviet Union collapsed, they also wanted to join the Friedman revolution, as did the communist inside but capitalist outside Chinese, who had had their own shock treatmen6t in Tiananamen square (don’t forget Shock and Awe of Iraq. Napoleon had demonstrators surrounded. Look up short selling- buy insurance on stocks, (burn them when they go down), buy them when they go down, like robbing a grave does not mean you killed the guy).
This fundamentalist form of capitalism has always been inducted through the most brutal forms of collective and individual torture.

(On the "Daily show" last night I heard the woman (can't recall the name) asking a person about 'selling short'. It is apparently akin to getting a heavy insurance on a property and setting it to fire, without the risk of the insurance co investigating and finding signs of arson. She told him that if you are robbing a grave, it does not mean that you killed the guy too.
She also interviewed some one from overstock.com who said that many companies went bankrupt after short sellers got after them. Could you please look into it.
(Since we are linking torture with economic policy, not as random sadism, but as an instrument to cow down the public and make them amenable to acceptance of certain policies, could we give historical examples of Nero, Muslim attack on Iran during Umar's caliphate, Karbala, sack of Baghdad by Mongol hordes, Nadir Shah, Napoleon, gun boat diplomacy, Pearl Harbor and so on, including the last one 'Shock and Awe'. That way we will be able to link religion to economic policy too).
The corporatist alliance has obtained control over Arab oil, taken over disaster relief, security apparatus, jails and other state business privatization, coercion of the third world into accepting IMF conditionalities. But perhaps the greatest achievement is the perception in the common mind that the devastation of Iraq and Afghanistan. Abu Gharaib and Guantanomo are the consequences of the unique incompetence of Bush regime, and not an essential element in a well thought out policy.
To hold an ideology accountable for the acts of its followers is not far fetched. All intolerant, fundamentalist doctrines which reject other belief systems out of hand, deplore diversity and whose avowed objective is to impose what they think is the perfect system are a danger to mankind. The Chicago school shares this trend with extreme religious and racist groups. Bit is difficult to distinguish between the inspiration of the ideology and its distortions like the Taliban for Islam, Sharon for Zionism, Billy graham for Christianity, BJP for Hinduism, and Stalin for communism.
The coups, wars and massacres have not been regarded as capitalist crimes and need to be identifies as such. Co-existence of capitalism with an egalitarian state is possible as Keynes proposed and did exist in Europe (and in a much more diluted form in the USA), till Thatcher started eroding its base. But neo-liberals want to demolish government except to safeguard their interest, and keep ‘law and ‘order. That is not allow the public any forum of protest. This fundamentalist concept of naked capitalism is not compatible with any other system, as Islamic fundamentalism is incompatible with democracy and representative government.

Medical Roots of ‘Scientific’ Torture:
Were laid in the 1950s, by a Montreal psychiatrist, Dr Ewen Cameron, director of the Allan Memorial institute at McGill university. The study was funded by the CIA through a front organization called the society for investigation of human Ecology.(26). The funding continued from 1957 to 1961 They tried to pass it off as bumbling sci-fi buffoonery, rather than accept funding a torture laboratory They destroyed the files of the $ 25.00 million program.(43). Cameron believed that patients with psychiatric problems had to be regressed to infantile/early childhood age by heavier, more frequent and larger than accepted number of electro-shocks in traditional ECT (electro-convulsive therapy) and drug cocktails of psychedelic LSD and hallucinogenic PCP, huge doses of insulin, drug induced sleep, and prolonged sensory deprivation. He gave 300 electro-shocks to victims in stead of the recommended four treatments per patient totaling 24 individual shocks(27). He put patients in isolation boxes (30), soundproofed the rooms, piped loud noises, kept the room dark, put heavy dark glasses on them, put heavy ear muffs, and put cardboard tubing on hands and arms, so they could not touch their body parts (31).They were kept in this state for 15-20 days (31) He also gave one group the drug Curare which paralyses body muscles. Legions of patients with minor psychiatric problems were so dealt with without their consent or knowledge and regressed to soiling their underwear, thumb chewing, baby talk, and in case of prisoners, telling the interrogators whatever they knew or was suggested to them, to the extent of betraying spouses, parents, siblings, friends and their belief systems. He called it ‘de-patterning’ a patient to make a clean slate on which healthy patterns could be inscribed. I did not work that way. (in 1988, CIA settled the case for substantial damages and the Canadian government followed suit four years later. (3).
In the initial days of cold war hysteria in mid 1950s, CIA ed the techniques. It was codenamed Project Bluebird, later changed to MKUltra (13). The program needed large number of human guinea pigs in several trials, and if it got out that CIA were conducting these studies, public outcry would shut the program down. The relationship started with the tri-national conference of intelligence agents and academics at Montreal’s Ritz-Carlton hotel on June, 01, 1951, attended by among others, Omond Solandt, chairman of Canada’s Defense research board, Sir Henry Tizard, chairman of the British Defense Research Policy committee, and representatives of the CIA (18).
One of the participants was Dr Donald Hebb, director of the department of psychology at McGill university. The defense research Board reporting on Hebb’s findings “sensory deprivation clearly caused extreme confusion as well as hallucinations…and significant temporary lowering of intellectual efficiency…during and after…deprivation (20). The subjects “developed an interest in the occult that lasted weeks”. Hebb had proved that it made people “more open to suggestion “ and eventually came to the realization that he could be draft a ‘how to’ manual for psychological torture (23). Hebb knew that the experiments violated medical ethics. He wrote that more “clear cut results were not available as it was not possible to force (large number) of subjects to spend 30 to 60 days in conditions of perpetual isolation (24).

Fear:
In 1998, Florencio Callabero, an interrogator with Honduras’s brutal Battalion 3-16 told the NY Times that the CIA “…taught us…methods to study fears and weaknesses of prisoners…make him stand…don’t let him sleep…keep him naked and in isolation…put rats and cockroaches in his cell (The most notorious case I heard of was during the days of the tussle between ISI and MQM, they put rats in the shalwar of Nasreen Jalil, a member of Mohajir elite ) (to Taqi upto here 3/18/09)…serve him dead animals, throw cold water, change the temperature. Ines Murrillo, a 24 years old woman interrogated by Callabero “…they spread my legs and stuck the wires (for electroshock) on my genitals (44). That led to a hearing of the Senate’s Select committee on Intelligence, where CIA deputy director Richard Stolz admitted that “Callabero did indeed attend a CIA human resources…interrogation course” (46)attend
The Baltimore Sun filed a request under the Freedom of Information Act for the manual used to train people like Callabero. The CIA stalled for 9 years, and produced a 128 page 1963 handbook under threat of a lawsuit called Kubark Counterintelligence Interrogation (47), which details methods from sensory deprivation in stress positions, from hooding to pain and instructs interrogators to seek “prior Headquarters approval”, under circumstances when bodily harm is to be inflicted, or if medical, chemical, or electrical methods are…used to induce acquiescence (48).
The manual has a large section on the experiments conducted at McGill (51). “The (sensory) deprivation induces regression……tends to make …the subject view the interrogator…father figure” (52). “…Adults can be converted into dependent children…” (55). Prisoners are captured in the most jarring… way possible, late at night or in early morning raids…immediately hooded…stripped and beaten…subjected to…sensory deprivation. Then there always is improvisation…instinct for brutality is unleashed when there is impunity e.g. on the Algerian freedom fighters by the French soldiers, often with the help of psychiatrists (58). The French conducted seminars in fort Bragg, NC in the Algerian techniques (59).
1970s on, the Americans favored the role of trainers (61-62). Torture violates the Geneva conventions and the US army’s Uniform Code of Military justice, yet successive US administrations have sanctioned it (63). The manual states on page 2 that the techniques carry “the grave risk of…lawsuits”.
The effects of 9/11 were remarkably similar to the ones imagined in the pages of the manual: profound disorientation, extreme fear and anxiety and collective regression. (page 51). Bush took advantage of the situation by acting as the ‘father figure’. Torture, in addition to being outsourced, was in-sourced as well with US citizens torturing prisoners in US run prisons or being extra-ordinarily renditioned in US planes. The administration openly demanded the right to torture, and defied own laws. GWB empowered Don Rumsfeld to declare that prisoners captured in Afghanistan were not covered by the Geneva conventions as they were not ‘POWs’, but enemy combatants, the view confirmed by the then white house counsel Alberto Gonzales (66).
Rumsfeld approved a series of special practices like using phobias such as fear of dogs, water boarding (67). US citizen and a former gang member Jose Padilla was arrested at Chicago’s O’Hare airport in May, 2002, classified as enemy combatant, taken to a US Navy prison in Charleston SC, injected with drugs, kept in a darkened tiny cell, and could only leave the cell shackled and with black goggles, and heavy headphones, kept like that for 1,307 days, and during interrogations subjected to bright lights and pounding sounds (70).. He “lacks the capacity to assist in his defense” according to the psychiatrist who examined him ((71).
James Yee, a former Muslim Imam at Guantanamo describing the extreme regression “ I would stop to talk to them, and they would talk to me in a child like voice…”(71). HR groups describe Gitmo as the best of off shore US run prisons. Imagination boggles at the treatment meted out to prisoners in US run jails in foreign countries, and worse condition of those who are outsourced to countries like Morocco and Egypt.

Chap 2
The Department of Economics at the University of Chicago regarded itself as a bulwark against the statist Keynesian thought (2). Friedman envisioned a return of societies to pure capitalism, shorn of all distortions like regulation, trade barriers, and welfarism. The only way to cleanse it was through shocks. The core of the ‘sacred’ teaching was that forces of supply and demand, inflation and unemployment were like forces of nature , and existed in perfect equilibrium, and like ecosystems, if left to its own devices, the market would produce at right prices and in right numbers, with workers getting right wages. Capitalism was “a jeweled set of movements…a celestial clockwork…” (5). Not able to experiment on countries Friedman and co, developed elaborate …mathematical equations and computer models.
Like all zealots, the school premise is that the free market is a true scientific system, correct application of which would make individuals working in their own self interest would produce maximum benefit foot every one. Like their Islamic Wahhabi counterparts, strict and complete application of fundamentals would produce a paradise on earth.
It is true, though, that thorough application of the Friedman methods have made some people extremely wealthy, and rendered them above and beyond the reach of regulation, taxation and borders to make more money.
The Chicago school saw interferences in economies in all Western capitalist countries-fixed price, minimum wage, education, which according to them, were doing untold harm to the market equilibrium. Marxism was not the true enemy (Atheists are not the worst enemy, it is non-conformist Muslims, according to Wahhabis), it was the social democrats (Europe) and Keynesians (USA) and developmentalists (third world). Capitalism in manufacture and distribution, socialism in education and state ownership of water and welfare services was akin to what Wahhabis call “bidaah”, innovation in religion.
Friedrich Hayek was Friedman’s own guru, and had warned that any involvement of government in economy would lead to “road to serfdom” (11). In 1947 Friedman joined Hayek to from Mont Pelerin society, a free market club, named after the town in Switzerland.
The Great depression did not signal the end of capitalism, but as Keynes had predicted, the end of “laissez-faire”.
Post WW II, the third world nationalist economists argued that in order to escape the poverty consequent upon depredations of colonial exploitation and non-development of industry in order to be reduced to the status of a captive market, they would have to pursue an industrialization strategy, and not depend upon export of natural resources, and advocated regulation, nationalization and tariff barriers.
By 1950s, the developmentalists had achieved major successes, especially in the ‘Southern cone’ of Latin America-Chile, Argentina, Uruguay and Brazil. UN Economic Commission for Latin America, base in Santiago, Chile and headed by the economist Raul Prebisch between 1950 and 1963, was the inspiration and epicenter. Argentina’s Juan Peron ( and other leaders a little less vigorously) poured money into public infrastructure projects, gave generous subsidies to local business and erected high tariff walls to protect them.
Powerful unions emerged in the new industries, and negotiated salaries and sent their children to school. By mid 1950s Argentina had developed the largest middle class in the continent, Uruguay had 95% literacy and offered free health care to all.
Chicago School had few takers, but they were among the most powerful.
US MNCs had a rough time in the LDCs, and not much better at home with powerful unions. Profits were high, but a substantial portion had to be given away in taxes and worker salaries. MNCs kept the Chicago School flush with donation money, to give an academic cover to corporate views. Friedman had specifics of advice. Taxes must be low and flat-not income related. Corporations should be able to sell any where, there must not be any protection to local industry or any conditions of local ownership. All prices and wages to be determined by the market, no minimum wage. All-health care, education, post office, pensions, national parks, and water supply be privatized, so state public assets could be auctioned at a fraction of their value. That coincided with the interests of MNCs as it was meant to be.

The War Against Developmentalism:
Eisenhower could not take on the New Deal at home, but did not have any hesitation in defeating the developmentalists abroad.
At the time he assumed presidency in January 1953, Mossadegh was the PM of Iran and had nationalized the oil industry. Soekarno of Indonesia was trying to launch a non-aligned movement to be able to face the capitalist and communist world on equal terms.
In actual fact, for the time when socialism was very attractive, this movement was centrist. But the developmentalist slogans of land reform, nationalization and egalitarianism had alienated the feudal and MNC interests.
The imperial and MNC interests ordered the foreign policy establishments to control the trend, and they tried to divide the third world that democratic center was the first step into the claws of communism. The chief ideologues of the policy were dyed in the wool conservative Dulles brothers-john foster at the state and Allen at the CIA, who had represented J.P Morgan, the International nickel co and the United Fruit co at the legendry NY law firm Sullivan and Cromwell (18).
They staged two coups in quick succession, the first in Iran in 1953, where the CIA orchestrated the overthrow of Mossadegh, through the army and ayatollahs. The second was the 1954 CIA coup in Guatemala, aided and abetted by the local clergy, for the benefit of the United Fruit co. President Jacobo Arbenz Guzman had had the temerity to take over some unused land with full compensation, to transform “…feudal economy into a modern capitalist state” (19).
In 1953, two Americans, Albion Patterson, director of US International Cooperation Administration (soon to be USAID) and Theodore Schultz, Chairman department of economics at the U of Chicago, met in Santiago, Chile and decided “What we need…change the formation of these men -pink economists, (20) and want these countries to work out …by using our way…economic development (21). The plan was simple-the US government would pay for Chilean students to study in the Chicago school, and the professors of the school would be paid to conduct economic research on the ground in Chile.
Albion Patterson approached the dean of the premier University of Chile. The dean turned him down. (US aid workers were conscious and US scholarship holders, perhaps, unwitting agents of the capital). Patterson got his way with a lesser institution, the Catholic university, thus giving birth to “the Chile project” as it came to be known at the Chicago school.
Between 1957 and 1970, 100 Chilean students studied at the school, all expenses paid by US tax payers. In 1965 the program was expanded to include students from all Latin America, especially from Argentina, Brazil and Mexico, this time funded through the Ford Foundation, leading to the Center for Latin American Economic Studies at the school, which hosted 40-50 Latin American students at given time, compared to 4-5 at Harvard/MIT.
A special Chile workshop was created by the head of the program, one Arnold Harberger. All of Chile’s policies-social safety net, and protection of national industry, trade barriers, price control were deemed obstacle, and its health and education program “absurd attempts to live beyond its underdeveloped means”.
With generous USAID, the Chicago boys became enthusiastic ambassadors of neo-liberalism over the whole continent (30).
This was unabashed intellectual imperialism par exellance.
In 1962, Brazil under president Joao Goulart moved to land reform, higher salaries, and to force foreign MNCs to reinvest a percentage of profits into Brazilian economy. In Argentina, the military was trying to defeat similar demands by banning Juan Peron’s party. In Chile’s 1970 election, all the three major political parties were in favor of nationalizing the country’s largest source of revenue, the copper mines controlled by US corporations (33). Salvador Allende had won the 1970 elections on the platform of nationalizing large segments of economy run by local and foreign corporations. Allende was a democrat, who believed that social change should come through the ballot box. On hearing the news of Allende’s election, Nixon ordered CIA director Richard Helms to “make the economy scream” (35).
US MNCs were apprehensive that Allende was the beginning of the end of US control over Latin American economy. By 1968 20% of total US foreign investment was in Latin America. The profits were astounding. Mining industry had invested $ 1 billion, but had sent home $7.2 billion (37).
US corporations declared war on Allende even before his inauguration. The leader of the group Ad hoc committee on Chile was ITT which owned 70% of Chile’s phone co, and joined by US mining companies, Bank of America, and Pfizer Chemical.
The plan was to block US loans and …have large US private banks do the same, delay buying from Chile for six months (39).
Allende appointed a close friend Orlando Letelier as ambassador to DC and in charge of negotiating with the corporations. In March, 1972 a syndicated columnist jack Anderson published aeries of articles that ITT had conspired with the CIA and State to keep Allende from being inaugurated in 1970. The US senate launched an investigated and found that ITT had offered $ 1 million to the opposition and “sought to engage the CIA…manipulate the outcome of…election (41). The report released in June 0973 found that there was relationship between ITT and US government, including NS adviser Henry Kissinger (42).
It all failed to dent Allende’s support. In the mid term election Allende’s party won more support in the parliament than it had in 1970.
They studied two models for regime change in Chile. In Brazil US backed military junta had seized power in 1964. They had tried to impose the neo-liberal agenda relatively peacefully, but when people took to streets, they instituted widespread torture. According to the truth commission established later “killing by the state became routine” (44).
Indonesia was the other model. Sukarno has enraged the West by redistributing the wealth, protecting the country’s economy and throwing out the IMF and the WB. CIA had received instructions from high levels to “ liquidate President Soekarno…” (45).
In October 1965, General Suharto seized power, and with the help of lists prepared by CIA and arms and field radios supplied by the Pentagon, sent his soldiers to kill leftists. The more indiscriminate killing was delegated to religious students trained by the military (48) which they did with relish. In just one month between half to one million were killed (49).
Extraordinary role was played by Indonesian economists trained in Berkeley. The Berkeley mafia had begun training in the US under a program started in 1956, which was funded by the Ford foundation.
The mafia leaders became leaders of campus groups and worked with the military in overthrowing Sukarno.(52).
Suharto packed his cabinet with the members of the Berkeley mafia (56).
The Berkeley mafia were not such anti-state radicals as the Chicago boys, and believed the government had a role to play in providing basic necessities like rice and managing the local economy. But they passed laws allowing foreign companies to own 100% of the country’s mineral and oil resources, awarded tax holidays and with in 2 years copper, nickel, Oil, rubber and hardwood had been captured by Macs.
Suharto, unlike the Brazil junta, had shown that brutal repression applied preemptively could send the country into shock and resistance wiped out, even before the ‘reforms’ were put into effect. It transformed Indonesia into one of the best hosts for MNCs.
In Chile opponents of Allende imitated the Indonesian example in an eerie fashion. The Catholic university became the base for creating a “a coup climate” (59), with many students joining the fascist Patria y Libertad. In September 1971, the top business leaders, members of National Association of Manufacturers held an emergency meeting, generously funded by the CIA and MNCs and decided that “Allende’s government was incompatible with freedom…private enterprise…the only way was to overthrow…”(60).
Over 75% of the funding… was coming directly from CIA (73).
Orlando Letelier saw the coup as an equal partnership between the army and the Chicago boys(66).

Chap 3
Allende refused to organize his supporters into armed defense leagues.
Chile had heretofore enjoyed 160 years of democratic rule..
US trainers had indoctrinated the Chilean military into an anti-communist obsession, brainwashing them into thinking that socialist were Russian spies (Americans think that Socialism is some kind of affliction , and shy away from national health care, they desperately need when some one tells them it was socialism).
Allende died after died in the air and ground attack, where 24 rockets were fired for the 36 supporters inside the president’s house (3). The members of his cabinet were arrested.
The generals knew that their hold on power depended upon terror. 13,500 civilians were arrested (5). Thousands ended up in the Chile Stadium and the huge National stadium in Santiago (like the Taliban trials in football stadium in Kabul later on). Hundreds were executed. More than 3200 were disappeared, and 200,000 fled the country.
For the Chicago boys 9/11/73 was a day of giddy anticipation. On the day of the coup, they were camped out at the printing presses, frantically trying to get the document called “The Brick” for the junta’s first day on the job. The document had the free market trinity in Friedman’s Capitalism and Freedom-privatization, deregulation and cuts to social spending. The Economist would describe it as the first concrete victory…to seize back the gains that had been won under developmentalism and Keynesianism (10).
Pinochet knew next to nothing about economics. There was a power struggle in the junta between those who simply wanted to reinstate the pre-Allende status quo, return to democracy, and others who were pushing for full Chicago treatment. Pinochet favored the latter (13). He immediately named the Chicago boys to senior economic posts. Economics meant forces of nature (14).Pinochet privatized some state owned companies, , allowed speculators in, opened the borders to foreign imports, tore down barriers that had protected Chilean manufacturers, cut government speeding by 10% (not military),and eliminated price controls.
In 1974 inflation reached 375% nearly twice that under Allende (17).
Chicago boys argued that the policy was not being applied strictly enough.
The only people benefiting were foreign companies and a small clique local financiers called ‘piranhas’ who were making a killing in speculation. The man who had brought the Chicago boys into the coup plot Orlando Saenz “one of the greatest failures of our economic history (18).
Chicago boys and the ‘piranhas invited Friedman. He was received like a rock star. He assured Pinochet that if he followed advice-cut government spending by 25% with in six months and adopt policies towards ‘complete free trade’, economic miracle will come (23-24).
Pinochet was converted. They cut and cut again, public spending till in 1980, it was half of what it had been under Allende (27). By mid-1980s, manufacturing fell to WW II levels (31).
In the first year of the shock therapy, the economy contracted by 155, unemployment 3% in Allende time, reached 20% and lasted for years (33-34).
Andre Gunder Frank, a U of Chicago economics PhD, went to Chile to see things for himself and wrote an angry letter to Friedman. Roughly 74% of the’ living wage’ as claimed by Pinochet, went simply to buying bread, forcing families to cut on milk and bus fare to work. Under Allende bread, milk and bus fare to work took 17% (39) of a public employee’s salary. He wrote that Friedman’s prescriptions were so cruel they could not “be imposed …without…military force and political…terror” (41).
Public school system was replaced by vouchers and charter schools, and the social security system was privatized (42).
In 1982 Chilean economy crashed, it faced hyperinflation, and unemployment hit 30%, and the piranhas had bought up country’s assets on borrowed money to the tune of $ 14 million (47). Pinochet was forced to nationalize many of the companies (48).
What saved Chile from complete collapse was that Pinochet had never privatized Codelco, the state copper mine co nationalized by Allende. The co generated 85% of Chile’s export revenues (49).
Chile under Chicago boys was not a capitalist state, but a corporatist one. By 1988, when the economy had stabilized, 45% of the population had fallen below the poverty line (50). The richest Chileans had seen their incomes increase by 93%. Out of 123 countries in the world, Chile was 116 in inequality (52).
The pattern would repeat from Russia to South Africa to Argentina.

Brazil was already under control of a US supported junta.(54). The military had staged a coup in Uruguay in 1973. In Uruguay, a previously egalitarian society, real wages dropped by 28% (56).
In 1976, a junta seized power from Isabel Peron.(to ed up to here)
It did not privatize oil or social security. Though they landed several posts, the top economic job went to Martinez de Hoz, a feudal landowner, who went on to do the usual things, banned strikes, allowed employers t o fire workers at will, opened the country to foreign speculators, privatized and sold hundreds of state companies (59).
With in a year wages lost 40% of their value, poverty spiraled, factories closed (62).
The generals wanted to avoid suffering a…campaign…has been unleashed against Chile (63). They relied more on ‘disappearances’ (64). That turned out to be not only low profile, but more effective as well.(64). By the end of their reign 30,000 had been disappeared (65). The cattle owning junta introduced a most sadistic innovation-prisoners were put on metal beds called parrilla (barbecue) and electric current passed through the frame. They were also subject to the picana (electric cattle prod) (78).
Those hunted by various juntas sought refuge in neighboring countries. Washington provided state of art computer system for the collaborative effort of the regimes called ‘Operation Condor’ eerily similar to later CIA rendition network. (70).
A 1975 US senate investigation of US intervention in Chile revealed that the CIA had provided training to Chile’s military in ‘controlling subversion’ techniques (72-School of Americas).Similar training offered to Brazil-an American police officer Dan Mitrione took beggars off the streets and tortured them in classrooms (73). Mitrione then moved to Uruguay, where he met the fate he so well deserved-abducted and killed by Tupamaro guerillas (74).
Argentina’s legendary investigative reporter Rofoldo Walsh was then living in Argentina. He had intercepted and decoded the CIA telex which had informed Fidel Castro of the Bay of Pigs invasion plans, and helped him prepare for it. Walsh joined the armed Montonero movement. He wrote “An open letter…to the military junta”. “you only have to walk around …Buenos Aires…the speed…such a policy transforms the city into ‘a shantytown’ of ten million people” (81). He signed the letter 03/24/1977. The next morning, he was enticed into a well laid trap, killed his body burned and dumped into a river (82).
In the run up to Chile’s coup, the CIA had funded a massive campaign (Pinochet had been very obsequious of civil leaders, as Zia had been of Bhutto) to depict Allende as a dictator in disguise, on the verge of imposing a soviet style state. In Argentina and Uruguay, the guerillas were presented as such perilous threats that generals did not have any choice, but to take over. US government’s own intelligence reports showed that Allende was no threat to democracy (84).
The National Security Archive in DC released declassified minutes of a meeting held 2 days after the Argentinean coup, in which William Rogers told Kissinger “we…got to expect…a good deal of blood…they…come down very hard on…trade unions and their parties” (86).
The vast majority of the juntas were not armed groups, but non-violent activists (unable to defend themselves as armed groups could-and so favored targets).

Chap 4
In 1976, Orlando Leteliar, once Chilean ambassador to the US under Allende, escaped jail in Chile and arrived in DC, and joined the Institute for Policy Studies, a progressive think tank. He was horrified by the fact that though the world condemned the tortures and executions, yet kept on flooding the junta with loans. He vehemently rejected the separation of tortures from free market creed, and regarded the former as a Chicago school tool. In a searing essay for the Nation, he wrote “this particularly convenient concept of a social system, in which ‘economic freedom’ and ‘political terror’ coexist without touching each other (Zia’s Islamization in Pakistan coexisted with hundreds of arrests, tortures and the crowning achievement-raped women were jailed for having committed adultery). He continued “establishment of a free ‘private economy’ and the control of inflation a la Friedman, could not be done peacefully”.(4).
The article was published at the end of august 1976. On September 21, 1976, he was blown off with a remote control bomb planted under the driver’s seat of his car (The assassin Michael Townley was a senior member of Chile’s police, and had been admitted to the US on a false passport with CIA’s help (6).
On December 11, 1946…the UN General assembly passed a resolution…unanimous vote… genocide “when racial, religious, political and other groups have been destroyed, entirely or in part…” (13). The word ‘political had been excised from the H.R Convention
Two years late at Stalin’s insistence.(14).
In order for the ideal (Friedman’s) to be achieved, there has to be a monopoly on ideology, otherwise the signals get distorted and the whole system thrown out of balance (just like Wahhabis).
By the sixties and early seventies, the left was the dominant culture in Latin America-the poet Pablo Neruda, folk musicians Victor Jara and Mecedez Sosa, the dramatist/theatre Augusto Boal, and the journalists Eduardo Galeano and Walsh, the legendry heroes from Jose’ Gervasio Artigas to Simon Bolivar. The dominant metaphor of the juntas was an echo of the third author Alfred Rosenberg’s call for “a merciless cleansing with an iron broom” (22-an exact parallel of the Muslim and Arab countries in fifties and sixties, with Mossadegh in Iran, Awami League and NAP in Pakistan, Soekarno in Indonesia, Ahmad ben Bella in Algeria, Nasser in Egypt-with the same fate).
In Chile, Argentina and Uruguay, they burnt books by progressive/nationalist writers (as they did in Afghanistan under Taliban and are doing in Swat in Pakistan and will do it in the rest 0f the country in short order once they or JI/Imran get their hooks on power). Hundreds of professor fired (Taliban go the full hog, they burn universities), dozens arrested and some killed 24-25). Under ‘Operation Clarity’ 8,000 leftist educators were purged (27). The singer victor Jara had his both his hands broken, then he was shot 44 times (29-Hasan Nasir in Lahore Fort).Augusto Boal was tortured, exiled and finally murdered.
In Brazil, though the junta did not start off with mass repression, but they did arrest the leadership of trade unions, they “feared the spread of resistance…from labor unions to…economic program…based on tightening salaries…and denationalization” (32). The operations were planned well in advance of takeovers. In 1976, 80% of Chile’s political prisoners were workers and peasants (34).
‘Terrorism’ was a smoke screen to go after non-violent workers The solders…printed leaflets they signed ‘Montoneros’ calling on workers to strike, and used them as ;proof; to kidnap and kill the union leadership 936).
Several MNCs expressed their gratitude, Ford took out celebratory advertisements openly aligning with the Argentina regime.(38). In Brazil, several MNCs got together to finance their own torture squads (OBAN, Operation Bandirantes (39). The role of ford was the most overt. It supplied green Ford falcon sedan which became synonymous with kidnappings and disappearances-a Death Mobile (40).
Before the coup, ford had to make significant concessions to its workers.. all that changed abruptly on the day of the coup. “It looked like we were at war in Ford and it was all directed at…workers” (42). Ford used this to eliminate unionism in the factory (43-All MNCs used outsourcing to suppress unions, and the best chance was the 2008-09 financial meltdown). Soldiers took workers, not to a prison, but to a detention facility set up inside the factory. Workers were beaten and electro-shocked (44).
In 2002, federal prosecutors filed a complaint against Ford Argentina, on behalf of workers, as well as Mercedes-Benz from whose 16 workers were disappeared, 14 permanently as it is alleged, the management collaborated with the military and gave names and addresses of union leaders (48).
Particularly brutal were the attacks on farmers who were involved in the campaign for land reform. The junta’s economic policies were a windfall for landowners and cattle ranchers. The price of meat went up by 700%. (50).
Community leaders were the target in the slums.
A priest who collaborated with the junta in Argentine said “the enemy was Marxism…” (52).
High school students who, in September 1976, asked were attacked. Six were killed.
The pattern of disappearances was indicative of an attempt to remove all relics of collectivism.
Victor Emmanuel, the Burson Marsteller executive in charge of selling the junta’s business friendly regime told the author Marguerite Feitlowitz “a lot of innocent people were killed, but given the situation, immense force was required.
And it worked. Chilean psychiatrist Marco Antonio de la Parra said “we were confused…docile…waiting for orders...people regressed…became…fearful” (58). People coped…feeding their babies mate , a tea which suppressed hunger.

Torture as healing:
Many torturers adopted the posture of doctors and surgeons.. they would heal them of the sickness that was socialism. The treatment was agonizing , might even be even be lethal, but it was for the patient’s good. Pinochet demanded “if you have gangrene…you have to cut it off (60-the story of a village quack in Pakistan. He gave a strong purgative to a patient. The patient got weak. He kept on giving the same, till he died. The relatives demanded an explanation. The quack said “he had so much toxic material inside, that he died in spite of taking out so much. Imagine what would have happened if it had all been left inside).
For most Latin American leftists, solidarity as the Argentinean historian called it was “the only transcendental theology”. Torturers set out to excise the impulse of social connectedness, in achieving betrayal, and suppression of the impulse to help others, rather than information, which in most cases, they already had.
Prisoners were offered the Faustian bargain in the interval between beatings, to choose the torture for another prisoner, or to hold the picana on another prisoner or denounce beliefs on TV.
Friedman likened his role in Chile to that of a physician who offered “…medical advice…to…end …a plague”(66). It was the same construct which allowed Nazis to kill ‘diseased’ members of the society. The Nazi doctor Fritz Klien said “The Jew is the gangrenous appendix in the body of mankind” The Khymer rouge used similar language (67).

Children:
Five hundred babies born in Argentina’s prisons were enlisted to create a new breed of model citizens (69).
The US, Canada and Australia conducted mass thefts of children of indigenous people, sent to residential schools, forbidden to speak their language and brain washed into ‘whiteness’. The Galarias Pacifico is an uipscale mall in Buenos Aires, full of Christian Diors like stores courtesy of Chicago school, built on the secret torture chambers, as the older form of capitalism was built on mass graves of the indigenous people.

Chap 5:
Students of the U of Chicago were disturbed by their professors collaboration with Chile’s murderous junta. Gerhard Tintner, an Austrian economist who had fled European fascism to the USA in 1930s, backed their demand for an academic investigation. He drew parallels between Friedman’s support of Pinochet to the technocrats who had collaborated with the Nazis. (4).
Friedman took credit for the work the Latin American Chicago boys had done. In Newsweek, in 1982 “the…boys combined…intellectual…ability with the courage of their convictions…and dedication to implementing them…” (5).
Friedman claimed that Pinochet tried to run the economy on his own for two years, then turned to the Chicago boys. That was untrue. The boys had been working with the military even before the coup.
Friedman was awarded the 1976 Nobel Prize for economics for his work on the relationship between inflation and unemployment. In his acceptance speech, he completely ignored the fact that the hypothesis for which he was getting the prize had been proven false by the breadlines, typhoid outbreaks and closed factories in the one country which had been ruthless enough to put his ideas into practice (10-as
did the Nobel committee).

Human rights:
The Chicago School refused to acknowledge any connection between the economic policies and the use of terror. The acts of terror were framed as “human rights abuses”, rather than as instruments of political and economic policy. By focusing purely on the abuses, and not the reasons behind them, the HR movement helped the Chicago school escape the opprobrium generated by its first bloody laboratory. In 1967, it was revealed that the International Commission of Jurists, the preeminent HR group focussed on soviet abuses, was being secretly funded by the CIA (12).
It was in this context that Amnesty International decided that its financing would come exclusively from members (13). Amnesty’s position, emblematic of the HR movement as a whole that since HR violations were a universal evil, it was not necessary to determine why they were occurring, but only to document them as meticulously as possible.
Amnesty’s 1976 report on Argentina deserved the Nobel Prize it got, but shed no light why on why the abuses were occurring.(14). Another omission was that it concentrated on the conflict between the military and the left wing extremists, with not a word on role of CIA, local landowners or MNCs.

On Ford:
For many HR groups besides Amnesty, the reason for reticence was that he most significant funding came from the ford Foundation which spent $ 30 million on HR in 0970s and 80s, the beneficiaries included Chile’s Peace Committee and America’s watch.(15). Ford Foundation was the primary funder of U of Chicago’s Latin American Economic Research and Training, and also financed the parallel programs at the Catholic University in Santiago, which was designed to attract economics students from neighboring countries(18).
This was the second time that Ford foundation’s protégés had chosen a violent route to power, the first being the Berkeley’s mafia in Indonesia. Ford had built the department of economics of the university of Indonesia, and nearly all the economics trained in the program were recruited by Suharto.(20).
The Chicago boys and the Berkeley Mafia came to dominate two f the most brutal regimes in the world. In the 1970s Ford decided to transform itself into the leading financier of HR in the third world. And it defined HR in narrow terms., and favored groups which pursued legalistic struggles for ‘rule of law, ‘transparency and ‘good governance and avoided politics, as one Ford officer put its attitude in Chile “how can we…not get involved in politics” (21). In the fifties Ford Foundation often serves as CIA front organization, channeling funds to anti-Marxist organization, documented by Frances Stoner Saunders in the book The Cultural Cold War. The foundation was started in 1936 with donations of stock by Henry and Edsel Ford, and another Ford executive, its divestment of Ford stock not completed till 1974, and had Ford family members on board till 1976 (22).
The Foundations decision to work for HR, but not get involved in politics, made it impossible to look into the underlying cause of the violence it was documenting. Only one HR group Brasil: Nunca Mais declared that repression and economics were a single unified project “since the economic policy was…unpopular, it had to be implemented by force” (23).
The economic model took deep roots. The secret torture centers were eventually destroyed, soldiers returned to barracks, but the economic program continued.
Torture crops up whenever a local or foreign ruler lacks the consent to rule-US and Saddam in Iraq, the French in Algeria and the Israelis in Gaza/West Bank and so on. It is not so reliable in extracting information, but very effective in crushing resistance.
Simone de Beauvoir writing about women raped and tortured in prisons in Algeria “to protest in the name of morality against ‘excesses and ‘abuses’ is an error which hints at active complicity. There are no ‘abuses’ or ‘excesses’ here, simply an all pervasive system.(24).
There is no humane way to rule people against their will, just as there is no gentle way to occupy…against …will. Neo-liberalism is an inherently violent ideology.
By failing to hold the ideology accountable for the crimes committed…this subculture if ideologues was given immunity…

An armed conflict between nations horrifies us. But the economic war is no better…And its ravages are no less terrible…We think nothing of the other because we are so used to its deadly deeds. M.K. Gandhi. “Non-Violence-The Greatest Force” 1926

Chap 6 Thatcherism: Saved by A War
After returning from a visit to Chile, Friedrich Hayek, Friedman’s guru, wrote to Margaret Thatcher to use Chile as a model to transform Britain’s Keynesian economy.
In a private letter in 1982, she wrote a private letter “…in Britain with our democratic traditions…the measures adopted in Chile are quite unacceptable. Our reforms must be in line…our traditions and constitution…the process may seem painfully slow. (2).
Thatcher was in the third year of her first term, highly unpopular, and the political establishment of her party was forlornly looking into defeat in the next elections, which must be called with five years of the last one.
The Latin American experience had generated great wealth for a few. Western countries had far more assets which could be privatized to pass control to the elite.
In 1981, the Fortune magazine ran an article the ‘glittering luxury filled shops’ in Chile, with nary a mention of the explosion of shanty towns (3).
Friedman and co had been disappointed that Nixon, who had helped the Chicago boys overseas, had taken a different line at home (4). In 1971, US economy was in a slump, with high unemployment and inflation. Nixon could not risk the Friedman formula, the US army would be loath to bomb the Houses of Congress, so he put price controls on such things as rent and oil. Friedman raged: of all the ‘distortions’ price controls were absolutely the worst, “a cancer…” (6).
Nixon was reelected with 60% of the popular vote, and proceeded to impose environmental and safety standards in industry. The worst cut of all, he declared “we are all Keynesian now”(9).
For Friedman it was a stark lesson. For him capitalism was synonymous with freedom, yet only dictatorships were ready to put unadulterated free market doctrine to practice-Chile, Argentina, Bolivia, Indonesia and China (11).
Stephen Haggard, a neo-liberal scientist at the University of California conceded that “ some of the widest ranging reforms in the developing world were undertaken following military coups or one party sates (Mexico, HK, Singapore, Taiwan” and “good things-democracy and market oriented economic policy-did not always go together (12).
Policies that directly redistribute land and raise wages, not trickle down economies, are in the self interest of the majority.
Friedman believed passionately (after Adam Smith) that humans are governed by self interest and society works best when self interest is allowed to govern almost all activities, except when it comes to voting. Since most of the people are poor, it is in their ‘short term interest’ to vote for candidates promising to redistribute wealth (13).
Thatcher was attempting the “ownership society. The government owned cheap housing called council homes were filled with people who would not vote for her party. She offered strong incentives to residents to buy the flats at reduced rates. More than half of the new owners became Tory voters (15), while those who could not afford to buy faced rents twice as high as before.
By 1982, the number of unemployed and inflation had doubled (16). Her personal approval rating went down to 25%-lower than for any British PM in history, and her party’s to 18% (17).
It was a bad time for the Wall Street in the early eighties, the terrorist regimes, starting with Iran-Nicaragua, Peru, Ecuador, Bolivia- in 1979 had started collapsing-Samuel Huntington’s third wave of democracy (18). The Islamic regime, not yet the full blown authoritarianism, had nationalized the banks, imposed import and export controls and introduced land reforms ( 20-its core support, besides that from the clerical establishment, was from Bazaaris and the left/progressive elements. The shah, though he had derived his support from the landed class, the army and above all from the US. CIA had reportedly more employees in Teheran, than they had in Langley. Iranians kept on discovering ‘listening posts’ all over Iran for years, though they were able to ‘discover’ most of them after painstakingly putting back together the shredded documents, they had got hold of when they took over the US Embassy).
Falklands/Malvinas war:
On 04/02/1982, Argentina invaded Falkland Islands. Neither country had much interest in it. Argentine writer Jorge Luis Borges the dispute as “a fight between two bald men over a comb” (20). But it was a godsend for the free-market project as a political cover for a the radical capitalist transformation.
Both sides wanted a war. Argentina’s economy was collapsing under its debt and corruption. A new junta under General Leopoldo Galteiri found that anti-imperialist sentiment was more powerful than the one against suppression of democracy.
Thatcher, who had cut grants to the islands and major cutbacks in the Navy, which would affect the ships guarding them, was “practically an invitation to Argentina to invade” (21).Labor MP Tony Benn in Financial times “not only the pride of Argentina is involved…perhaps even the survival of the Tory government in Britain (22).
Neither Britain not Argentina made any serious attempt to come to terms peaceably. The shouts “Ditch the bitch” changed “Up your junta” (24). Thatcher’s poll numbers more than doubled from 25 to 59%, and she won a decisive victory in the following year (26).
The British codename for the war was ‘Operation Corporate’, perhaps chosen deliberately by Thatcher. In 1984, the coal miners went on a strike. Past PMs had not dared to take on the miners. Thatcher declared “…we now have to fight the enemy within…much more dangerous to liberty (27). The police attacked the miners, the injuries climbed into thousands, and Arthur Scargill militant president of the miners union moaned of “the most ambitious counter-surveillance operation ever mounted in Britain” (28). The cost was enormous-three thousand extra policemen a day-Colin Taylor, an acting police sergeant called a “civil war”. There was no inclination to bargain, the sole agenda to break the union. It was reminiscent of Reagan sending 11,400 air-traffic controllers home, and had the same effect of cowing down other trade unions.
Between 1984-88, the British government privatized British-Telecom, Gas, Airways, Airport Authority, Steel, Rail and sold its shares in British Petroleum. (Bush could only privatize security, war and reconstruction, as all else had already been privatized). She provided the first Chicago School style of selling a country without a dictatorship.
In 1982, Milton Friedman wrote a paper “Only a crisis, real or perceived-produces a real change…our basic function is: develop alternatives…until the politically impossible becomes politically inevitable (33). Cris9i are, in a way, democracy free zones.
Leftists, especially communists have long thought that hyper-inflation, by destroying the value of money, takes the masses…to…the destruction of capitalism (35), much as evangelical Christians calibrate signs of the coming Rapture. The Chicago School picked up the Bolshevist idea that crashes could spark right-wing coups too-the crisis hypothesis (36). Friedman and his corporate patron had tried to mimic the victories of Keynesians in the New Deal. They built up right-wing think tanks, like the Heritage foundation and CATO, but the most ignorant indoctrination vehicle was a the ten part PBS series ‘Free to choose’ underwritten by Getty, Oil, firestone Tire and rubber co, Pepsi, GM, Bechtel, General Mills (37).

Chap 7
In 1985, Bolivia was getting a chance to elect its president, after 18 years of dictatorship in the last 21 years.
But the victor would be faced with a debt-interest higher than the entire national budget. In 1984, Reagan had pushed it over the edge by financing an attack on cocoa farmer, which turned a large section of the country (Chapare) into a military zone, and cut off roughly half the country’s export trade. NY Times “…less than a week after the occupation of Chapare, the country was forced to cut the official value of the Peso by more than half, inflation went up ten times, and thousands started leaving the country to neighboring ones for jobs (3).
At the time of the presidential race between former dictator, Hugo Banzer and a former elected president victor Paz Estenssoro Inflation was 14,000%. Banzer’s team, sure of victory engaged the upcoming star of Harvard’s economic department, 30 year old Jeffrey Sachs to develop an economy policy. Sachs had no experience in developmental economics (4).
Sachs had been influenced by Keynes on the connection between hyperinflation and fascism in Germany after WW I. The country had an inflation rate of 3.25 million % in 1923, unemployment rate of 30% and the rage over war reparations.
Keynes had warned that “there was no subtler, no surer way of overturning the basis of a society than to debauch the currency…” (5). Sachs shared the view. But he was also a product of Regan’s America, and Friedman’s philosophy that free market was supreme had overtaken all Ivy League schools, including Harvard (7). He was convinced that Bolivia suffered from ‘Socialist Romanticism’ (8). But he parted from Chicago in that he believed free market policies have to be by debt relief and aid. The core tenet of Keynes is that countries in economic recession should spend out of it. Sachs took the opposite view-austerity and price increases, the recipe that Business Week had called “Dr Strangelove world of deliberately induced depression” in Chile (9).
Sachs proposed raising the price of oil ten times, and several other price deregulations and budget cuts.(10).
Banzer was sure of victory, but Paz had not given up. Bolivians believed that though no socialist, he was no neo-liberal.
One newly elected senator ended up playing a key role in the final selection of the president by the congress. His name was Gonzalo Sanchez de Lozada (known as Goni), who had lived in the US for a long time, was the wealthiest businessman of Bolivia, and had studied at the University of Chicago, though not economics, but was influenced by Friedman.
On 08/06/1985, it was Paz who was appointed the president, and appointed Goni as the chair of a top secret bipartisan emergency economic team. This group would go further than Sachs, and proposed dismantling the entire state based economic model.
For 17 days the team holed up in the living room of Goni(15). They were in a hurry. They wanted to catch the militant unions and peasant groups off guard. Goni recalled “Paz kept saying , if you are going to do it . do it now. I can’t operate twice (16).US ambassador to Bolivia at the time, Edwin Corr, recalled that he had made it to all politicians, that the only way US aid will flow, if they adopted the shock route.
Bedregal, the planning minister offered a draft of shock program, calling for the full shock treatment-elimination of food subsidies, canceling price controls and 300% increase in the price of oil (17), freezing government wages to already low levels, deep cuts to government spending, and open door to unrestricted imports, downsizing state companies.
The idea that policy change should launched like a military attack is a recurring theme. Bush’s Shock and Awe: Achieving rapid dominance, the US doctrine published in 1996, which took practical shape in the 2003 invasion of Iraq “seize control of the environment and paralyze…adversary’s perceptions…that the enemy would be incapable of resistance. (20). Economic shock works on the same theory. Surely one of the reasons of the Iraq war to capture the country’s assets and force the free market dogma on it.
Paz’s economic team bundled the entire revolution into a single decree DS 21060, on the lines of “The Brick” for Chile.
His cabinet was kept in the dark, while all the preparations were being made.
With in two years inflation was down to 10%, But all social cost was shifted to the poor, according Ricardo Grinspun, professor of economics specializing in Latin America at York University. (page186). Real wages were down 40% in 2 years, per capita income went down from $845 to $ 789, but that does not take account of enormous wealth the elite acquired, and which is counted in calculating the per capita income. For example the average peasant was earning only $140 a year, not $789 (25). It also does not take into account the thousands of kids who got a piece of bread and a cup of tea a day (26). Hundreds of thousands of full time jobs were eliminated (27).
One significant effect of the push to free market was that many of the desperately poor workers of Bolivia were driven to Coca farming (29), by 1989, one in ten was involved in coca industry (30).This industry played a significant role in reviving Bolivia’s economy(31). Two years down the line coca was generating more income than all other exports combined, with an estimated 350,000 people dependent on the trade for their living(32).
But thanks to Sachs, “shock therapy had shaken off the stench of dictatorship and death camps”, this from NY Times. In Bolivia, this had been undertaken under a ‘center-left’ government of Paz.(38).
But Paz had no such mandate, it was a backroom deal, imposed abruptly
Free Market economist coined the term “voodoo politics” fit it, others called it lying (39).
As soon as the decree was announced, thousands demonstrated, riot police raided union halls, tanks ran through streets, 15,000 arrested, and shelled with tear gas (41). Top 200 union leaders were taken to remote jails on the Amazon. The senior leadership was sequestrated in remote villages, with a ransom demand to call off protest as the price of letting go(43).
One year later, the government laid off huge number of workers in tin mines, the workers took to streets again, with the same aftermath (44).
So it was not so peaceful after all.
The government crackdown was practically ignored by the international press, as was the tale of triumph of “free market reforms” in Bolivia.

Chap 8:
By mid 1980s, several economists had observed that hyperinflationary crises mimic the effects of a military war. For the hard core Chicago School ideologues, hyperinflation was not a problem, but a golden opportunity to practice their ‘religion’, and there was no lack of opportunity in the 1980s, in Latin America and Asia. Crises resulted from the insistence of IMF/WB and other financial institution, on passing on of the illegitimate debt of dictatorships to the successor democracies, and the US Federal Reserve to allow interest rates to soar (As Fannie May, and Freddie Mac do to student loans).
In 1983, when the junta collapsed in Argentina, Raul Alfonsin was elected as the president. During the junta rule, the country’s debt had ballooned from $ 7.9 billion to $ 45 billion. In Uruguay, the junta expanded $ half a billion to 5 billion. In Brazil, it went from from $ 3 billion in 1964 to $ 103 billion in 1985 (4).
These debts were odious, much had gone into the military and police to enforce IMF/WB Chicago School dicta(5). Much of the rest vanished (6). The rest was spent on shady ‘bail outs’ and in Chile, just before the junta collapsed, president of the central bank Domingo Cavallo announced that the state would take over the debts of MNCs and domestic firms Argentinean-Ford, Chase, Citibank, IBM and Mercedes-Benz (13).
The state department declassified the transcript of a meeting held on 10/7/ 1976 between secretary of state Henry Kissinger and Argentina’s foreign minister admiral Casar Augusto Guzzetti. Kissinger “…apply for as much foreign assistance as possible and fast, before Argentina’s “human rights problem” tied the hand of US administration (14). Those who claimed that lenders should have known better than to lend to such dubious people.
The loans, on their own, were an enormous burden. On top of that Paul Volcker increased the interest rates, which went as high as 21% in 1981, and lasted till mid-1980s (15). The number of people defaulting on their mortgages tripled (18).
Outside the US the debt spiral was born. In Argentina, the $ 45 billion debt accumulated, became $ 65 billion in 1989. In Brazil it went from $ 50 billion to $ 100 billion in six years, and in Nigeria from $ 9 to 29 billion (18).
Price shocks followed the double whammy. It occurs every time the price of an export commodity falls by 10%. IMF estimated that between 1981-84 this happened 25 times in LDCs, and between 1984 and 1987, 140 times (19). The price of Bolivia’s tin fell by 55%.
Friedman’s crisis theory was vindicated. The more the economy followed his dicta of floating interest rates, deregulated prices, export base economy, the more a country became crisis prone, and the more would be amenable to taking his advice.
In a way, crisis is built into the Chicago model. When vast sums of money are free to travel instantaneously, speculators are allowed to bet on everything from drugs to currency, prospects of a firm, sell and buy loans and pay ratings groups to enhance or lower the rating to get a better price, push loans and ‘white elephant’ projects on the third world and force them to rely on export based income, slash social and welfare, reduce salaries of workers, lay them off, dispossess peasants, overthrow governments, jail, torture people and kill them with impunity, increase interest rate at will, crises are bound to follow.
Just as the people were winning the battle for freedom in mid-0980s, they were hit with an avalanche of financial shocks, created by a deregulated global economy.
In the 1980s and 1990s, the developing world was in a kind of terror hangover, few elected governments had the fortitude to risk a US sponsored coup by adopting policies which had provoked the brutality of the 1970s. The military had not been held accountable, but were biding their time for another chance. Crisis stricken, debt strapped elected governments had little choice but to submit to Washington based financial institutions (with the USSR out of the equation, no one could dare play rebel. Saddam paid the price of confrontation, Gadafi is hibernating in his tent. And only the embroilment of the US in Iraq and Afghanistan has saved Eva Morales , Hugo Chavez and Ahmad de Nejad so far).
Thus came the dawn of “Structural Adjustment”, and instead of the ‘dictatorship of proletariat’, came the ‘dictatorship of debt’.

Though Friedman did not prescribe to the ‘big government interference’ concept of IMF/WB, his boys took up top positions in the institutions, perhaps to work at undermining them from inside.
Hit with spiraling debts, the countries turned to WB/IMF, only to face the Chicago boys there already to betray the founding principles of the institutions. These institutions had been created post WW II in response to the horrors of the war, at Bretton Woods NH in 1944, financed by 43 initial participant countries, and mandated to prevent the crashes that led destabilization of Weimar Germany and Nazi takeover. The World Bank was charged with long term investment to lift countries out of poverty, and IMF to promote policies which enhanced market stability and reduced speculation.(23).
John Maynard Keynes had led the UK delegation and was confident that the world had finally recognized the perils of leaving the market to regulate itself (24).
But the two bodies were organized along the lines of corporation, with the size of a country’s economy governing the voting strength, with the US wielding a veto power over all the major decisions, and Japan/Europe toeing the line.
The Chicago School infiltrated the IMF/WB stealthily. Take over was completed in 1989, when John Williamson of the school unveiled the “Washington Consensus”.(25)-“all state enterprises should be privatized”, “barriers impeding the entry of foreign firms should be abolished (26). When completed, was born the trinity of privatization, deregulation, and drastic cuts to government spending.
Emboldened by the desperation of LDCs, the agenda morphed into radical free market demands.
The first full “structural adjustment” was issued by the IMF in 1983, and kept on doing it to every country which sought its help over the next 20 years. An UIMF senior official David Budhoo designed the SAPs for Latin America and Africa in the 1980s, admitted that “everything that we did from 1983 onwards was based on…to have the south privatized or die” (29).
The fund’s official mandate, on paper, remains crisis management, not social engineering, so what they did had to be called stabilization. But all they did was to advance Chicago School’s neo-liberal agenda. Doni Rodrik, a famed Columbia University economist described “structural adjustment” as an”ingenious marketing strategy . He wrote in 1994, “The WB must be given credit for having invented and successfully marketed the concept…sold as a process…countries needed to undergo to save their countries from crises. For governments that bought into the package, the distinction between sound macroeconomic policies that maintain external balance and stable prices…and policies that determine openness (like free trade)…was obfuscated” (30).
When privatization, free trade policies and cut backs in spending are packaged with a desperately needed loan, the countries had little choice. The trickery lay in the fact that the economists knew that free trade had nothing to do ending a crisis. That was the pound of flesh that Shakespeare so well described and the kind of loans traditional money lenders in India, and loan sharks in NY practice.
LDCs were submitting to them via a combination of false presentations and overt extortion. Want to save your country, sell it off.
The hyperinflation crisis forced Alfonsin to resign from the presidency of Argentina. Carlos, a Peronist, who wore leather jackets and mutton chop sideburns, and seemed tough enough to take on the military and the creditors. But after a year in office, Menem was forced to follow a course of “voodoo politics”. He appointed the junta time official responsible for bailing out corporate corporate debts as economy minister (33-Obama appointed the Clinton team responsible for deregulation and other mischiefs) to continue his corporatism. Virtually all economic posts again went to the Chicago boys.
By 1999, governments from Israel to Costa Rica could boast of 25 ministers and central bank presidents from the ranks of Chicago boys (35).
Cavallo harnessed the desperation of hyperinflation to pass privatization as an essential part of the rescue mission, cut spending massively and launched a new currency pegged to the dollar. Inflation was down to 17.50% with in a year (37), but the state had to sell off national assets at a pace fester than Chile, a decade earlier-by 1994, 90% had been sold off. Before the sale they fired 700,000 workers, the oil co alone losing 27,000. In January 2006, it came out that the Cavallo plan was not Cavallo’s or even IMF’s, but was written by J.P. Morgan and Citibank (38).
Pegging the local currency with the dollar made it so expensive to produce goods in the country, and local factories could not compete with cheap imports flooding the country.
People, in moments of crisis, are willing to hand over power to anyone who claims to have a cure (Bush post 9/11).
Volcker shock was followed by the Mexican Tequilla crisis in 1994, the Asian one in 1997 and the Russian in 1998.

Chap 9:
People’s Daily after the Tiananmen square massacre “we certainly must not stop eating for fear of choking”, on the need to continue free market reforms.
Lech Walesa, climbing over a steel fence festooned with flowers and flags in Gdansk, Poland antedated the fall of the Berlin wall as the symbol of the collapse of communism. Workers had barricaded themselves to protest the communist party’s decision to raise the price of meat. Workers wanted their own independent union, and did not wait for permission, they voted to form it, and called it Solidarity (4).
Tired of living in a country that idealized the working class, but abused them, solidarity denounced corruption and brutality of party workers. It sparked a mass exodus of its members from the CP.
Solidarity could not be dismissed as stooges of capitalism. They were workers. Solidarity was democratic, dispersed, participatory, everything that the party was not.
It had ten million members, and in September 1981, it was ready for the next stage. 900 delegates gathered in Gdansk for its first national conference and “ we demand a self governing and democratic reform at every…level…a socioeconomic system combining the plan, self government and the market…”. (7).
Walesa’s fear were well founded. Martial law was declared by General Wojciech Jaruzelaki, and tanks rolled to factories, and thousands were arrested.
Solidarity was forced underground, but over the next 8 years of police state, its strength grew more. Walesa was given the Nobel Peace prize.
By 1988, workers were less scared of the police, and were staging huge strikes again. The economy was in free fall, and with Mikhail Gorbachev losing his nerve, the communists gave in, and legalized Solidarity and agreed to hold elections. Solidarity split into two wings, one of which Citizen’s committee solidarity agreed to participate in elections, and ran on a vague program. Solidarity won 260 of the 261 seats it contested. Walesa had one of his henchmen, Tadeusz Mazowiecki, the editor of the Solidarity weekly paper newspaper appointed as the PM.
Like the Latin Americans adopting democracy when their economy was imploding, Poland did too. Inflation was 600%, severe food shortages and a huge black market. Poland needed debt relief and aid to get out of the immediate crisis.
One would have expected that floodgates of aid and comfort would open for the first democracy in Eastern Europe. But nothing was on offer.
US treasury wanted to apply the shock doctrine, which could only follow an economic meltdown and disorientation of a regime change.
IMF, confident that worse the things got, the more the government would be amenable to accept a total conversion, let the country slide into deeper debt and inflation.
Jeffrey Sachs started working as Solidarity adviser (12). George Soros had enlisted Sachs to work in Poland, at his own cost, even before Solidarity’s election victory (13). Sachs, at the time said that solidarity should simply refuse to pay the debts, and extended the hope that he will be able to mobilize $ 3 billion. But the government had first to agree to a course much worse than that imposed on Bolivia-in addition to elimination of price controls, slash subsidies, Sachs advised selling state mines, shipyard and factories, in direct clash with solidarity’s program of worker ownership.(15).
Sachs formed an alliance with Leszek Balcerowicz, the new finance minister, who saw himself as an honorary Chicago boy (22).
Walesa had promised in an interview with Barbara Walters “…it won’t be capitalism…better than capitalism…reject everything that is evil in capitalism”(23)
Finally the decision came down to money. “…But we don’t have time” (28). Sachs helped negotiate with IMF, and was able to secure some debt relief and $ 1 billion, but all was conditional to Poland submitting to shock therapy.
Balcerowicz, the finance minister has since confessed that capitalizing on the emergency was a deliberate strategy (30). Poland was, in what was dubbed a period of “extraordinary politics. Or “in transition.
With in a few years, it seemed as though half the countries of the world were “in transition”. Thomas Carothers, a leader of US governments ‘democracy promotion apparatus’ “…the set of ‘transitional countries swelled dramatically…nearly 100…20 in Latin America, 25 in Eastern Europe and former USSR, 30 in Sub-Sahara Africa, 10 in south Asia and 5 in mid-East…” (33).
Francis Fukuyama, author of The End of history, addressing a gathering in the U of Chicago, in the winter of 1989, “the collapse of communism was leading not …a convergence between capitalism and socialism… but to an unabashed victory of economic and political liberalism…” (35). Fukuyama argued that deregulated markets combined with liberal democracy…represented ”the end point of mankind’s ideological evolution and …final form of human government.
History was taking an exhilarating turn in 1989. It was not coincidental that IMF/WB chose the year to reveal the Washington consensus, to halt discussion about alternatives to free market.
Tiananmen Square:
Fukuyama had claimed in February 1989 that free market and democracy were inseparable. In April 1989, pro-democracy movement exploded in Beijing.
In 1980 Deng Xi-aoping had invited Friedman to China to tutor top level civil servants.(40). In Friedman’s definition of freedom, political freedom was incidental, irrelevant when compared to free market. Chinese were pushing deregulation and free market hard, while resisting calls for free elections. Deng Xi-aoping was determined not to let “Poland” happen in China. Deng wanted to follow in the footsteps of Pinochet.
Mao’s repression had taken place in the name of the working class and against the bourgeoisie. Now the party was asking workers to sacrifice so a tiny elite may collect huge profits. Deng ordered creation of 400,000 strong People’s Armed Police (41).
By 1988, the party was facing a severe backlash, and had been forced to reverse some price deregulations.
Friedman was once again invited.(42). “I emphasized the importance of privatization and free market at one fell stroke” he recalled later (43).
The most visible symbols of opposition were the demonstrations by students in Tiananmen Square (46).
Some of the free marker reformers, General Secretary Zhao Ziyang among them favored a gamble on democracy, but a majority of the politburo wanted to protect reforms by crushing the demonstrators.
On 05/20/ 1989, the government declared martial law. On 06/03/ 1989, tanks rolled into the protesters. The party admitted to hundreds of dead, eyewitnesses put the number at between 2,000-7000. A witch hunt followed in which 40,000 were arrested, thousands jailed, and possibly hundreds executed. Maurice Meisner writes, “Most of those arrested, and nearly all who were executed, were workers” (48).
The massacre was covered in the Western press as communist brutality, not a defense of free market philosophy (49).
Deng, during an address to the nation a few days after the massacre, made it clear that the crackdown was not to protect capitalism, not communism., “perhaps this bad thing will enable us to go ahead with reform…(50-Henry Kissinger defended the massacre in an op-ed piece).
Three months after the massacre, Deng brought back the measures he had been forced to withdraw. Wang Hui, “the violence of 1989 served to check the social upheaval brought about…”(52).
In the following three years China opened to foreign investment, with special export zones (SEZ) through the country (53). The reforms turned the country into the sweatshop of the world.
A 2006 study reveals that 90% of Chinese (Yuan) billionaires are children of the communist party, 2,900 of them-dubbed princelings-control $ 260 billion. There is a revolving door between political and corporate elite, as in the USA and Chile under Pinochet. Foreign MNC media and technology help the state spy on its citizens, as MNCs do in the US.
Tiananmen showed the striking similarity between the tactics of Chinese communists and Chicago boys.
In Poland, as late as 1992, 60% of the people opposed privatization of heavy industries. It caused a full-blown depression, a 30% reduction in industrial production in two years after reforms, unemployment rose to 25% in some areas. Under 24 years of age, 40% were unemployed in 2006. In 1989, 15% Poles were below poverty line. In 2003, 59% had fallen below the line. In 1990 there were 250 strikes, in 1992, there were 6,000. By the end of 1993, there were 7500 protests, even though 62% of the country’s industry was still public (62).
The most dramatic defeat of the free marketers cane on 09/ 19, 1993, when a coalition of left parties, including the former communists, won 66% of the seats in the parliament. Poland was still held up as a model of success of free market make over.

Chap 10: South Africa
Archbishop Desmond Tutu, chair of South Africa’s Truth and Reconciliation commission, “ …What is the point of having made this transition, if the quality of life of these people is not enhanced and improved? If not, the vote is useless. 2001 (1).
Alister Sparks, South African journalist, “before transferring power, the Nationalist power wants to emasculate it. It is trying a …swap…will give up the right to run the country…in exchange for the right to stop the blacks from running it…” (2).
In January 1990, Nelson Mandela wrote from jail, “the nationalization of banks, mines and monopoly industries is the policy of the ANC, and any change…is inconceivable…state control of certain sectors of the economy is unavoidable” (3).
The ANC had started drafting a statement of core principles, the Freedom charter in 1955, based on the opinion obtained by 50,000 volunteers dispatched to villages and towns. Hand written on scraps of paper, “Land to be given to landless…”, “living wages and shorter hours of work, “free and compulsory education..”, “the right to reside and move…freely”. A final document was adopted on 06/20/ 1955, at the Congress of the People, held in Kliptown, a zone to sequestrate the blacks of Soweto from white Johannesburg. The charter enshrines the right to work, decent housing, freedom of thought, and to share in wealth of the country (the largest goldfield in the world-6).
Apartheid was not taken just as a political system, but as an economic system as well which used racism to allow a small white elite to accumulate enormous wealth. In the mines, whites were paid up to ten times as blacks, and industrialists worked closely with the military to disappear people (7).
On February 11, 0990, Mandela walked out of the prison. Mandela had been arrested in 1962. ( PM Patrice Lumumba of Belgian Congo had been killed in 1961). A lot had happened since. Africa had seen nationalism sweeping the continent, now it was torn by war. Che Guevara had been killed in Bolivia in 1967, Salvador Allende in 1973, Samora Machel, liberation hero and president of Mozambique had died in a mysterious plane crash in 1986. Berlin wall fell in 1991.
Mandela had an opportunity to lead a people to freedom peacefully, without an economic collapse, and democratizing the society and redistributing wealth.
In the 1980s, ant-apartheid struggle had become global and Mandela had earned global admiration and support. The most effective weapon was corporate boycott of South African products as well as that of international firms that did business with South Africa. That had given ANC a unique opportunity to reject the free market dogma. There was already widespread agreement that corporations shared responsibility for apartheid rimes, Mandela could have used the argument to say that the debt accumulated under apartheid was odious. As a living saint, he could have faced off IMF, WB and US treasury.
Between the time Mandela wrote the note from prison, and ANCs election sweep, something convinced the leadership that they could nor reclaim and red distribute the country’s robbed wealth. They adopted policies that have further accentuated inequality between the rich and the poor and crime has gone up steeply.
On the way out the Portuguese had destroyed as much in Mozambique, as they could, pouring concrete down elevator shafts and smashing tractors. The sabotage of the South African Nationalist party was subtler and worse, contained in the fine print in transfer of power agreements.
The talks between ANC and the nationalist party were on two fronts, political and economic. On the political front F.W. de Klerk tried breaking the country into a con-federation, getting veto power for the minority, reserving seats in government structure for each ethnic group (9). He did not get away with anything. He need not have.
Economic negotiations were conducted on the ANC side by Thabo Mbeki. Later to be South African president, and still later forced out of office. The de Klerk government portrayed key sectors of economic decision making such as trade policy and central bank as technical/administrative, and used international trade agreements, innovations in the constitution and SAS programs to hand over the supposedly impartial economists and officials from the IMF, WB, GATT, and the National Party, but not to any one in ANC.
What party loyalists did not know that the negotiating team had made concessions which would make implementation of the charter an impossibility. Vishnu Padayachee told Naomi Klein (page 253), “It was dead even before it was launched”. WE got a call from the negotiating team in late 1993, on pros and cons of making the central bank an independent entity, run with total autonomy from the elected government by the next morning. He knew that even among market economists in the US, central bank was regarded as a fringe idea, a dogma of the Chicago School, that the bank should be run as a foreign republic within states (10).
If the Central Bank was not accountable to the ANC government, to whom would it be accountable-the IMF, the Johannesburg stock exchange. The bank would keep its head under apartheid and the finance minister under the old regime would keep his job too (11-for all these concessions, Mandela got a statue in the London parliament square).
Patrick Bond, an economic adviser to Mandela during early years recalled the quip, “Hey, we’ve the state, where is the power”
At the last minute, the negotiators conceded a new clause in the constitution to protect private property, making land reforms impossible. Hundreds of factories were about to close because the ANC had signed on to GATT, which made it illegal to subsidize auto plants, and textile factories. Offering free AIDS drugs was a violation of intellectual property rights under WTO
Welfare measures like housing for the poor, and free electricity to towns could not be undertaken as the budget was being eaten up by servicing the massive debt of the apartheid era. Even free water could not be provided as that militated against privatization of all state services. Currency controls to curb speculation violated the terms of the deal for $ 850 million signed with IMF. Wages could not be raised for the same reason(12).
What ANC activists did not understand was that it was the nature of democracy that was being negotiated away.
Rasool Synman, long time ant-apartheid activist, “ They never freed us. They only took the chain from around our neck and put it on our ankles” (13).
In the first two years of office, ANC did build more than 100,000 homes, and millions got water connections, phone lines and electricity (14). But under IMF pressure to privatize services, the government started to raise rates, a decade into ANC rule millions had their water, phone and electricity cut off, because they could not pay bills (14). Banks, mines and monopoly industry remained in the same four white owned conglomerates, which also controlled 80% of the Johannesburg stock exchange.(16). In 2005, only 4% of the companies listed on the stock exchange were owned/controlled by blacks (17). In 2006, 70% of the country’s land was owned by whites who were 10% of the population (18-Mugabe of Zimbabwe believed in the word of the British government that it would compensate the country, if he left land in control of the 3% whites. (The British, of course, went back on their word, and when Mugabe nationalized farm lands, he was hit by the most obnoxious sanctions). The average life expectancy of for South African since Mandela left the prison in 1990, had dropped by 13 years (20).
The leadership did not have the nerve to launch another liberation movement, when it found that de Klerk’s team would not budge on economic issues. It was not an easy choice though. As soon as Mandela was released, the South African market collapsed, and the currency dropped by 10% (21), and soon afterwards, De Beers diamonds moved their HQ to Switzerland. A few words by him on nationalization would have cause an stampede of the “electronic herd” as NY Times Thomas Friedman calls it (22). Even comments on calling Rugby a white game by Trevor Manuel, an ANC minister hit the Rand (25).
Thabo Mbeki was the one person who seemed to understand how to make the shocks stop. Rather than calling for the nationalization of the mines, he began meeting on a regular basis, with Robert Oppenheimer, former chairman of Anglo-American and De Beers mines, going to the extent of submitting ANC economic program to Oppenheimer for approval (28). In his first interview as the president, Mandela distanced himself from nationalization, “In our economic policies…not single reference to…nationalization…not a single slogan will connect us…Marxist ideology: (29). His inside prison thoughts had become Marxist ideology. The Wall Street journal, “Mr. Mandela…sounded…more like Margaret Thatcher” (30).
In South Africa, few of Mbeki’s colleagues even knew that a new economic program was in the works (32).
In 1996, Mbeki unveiled the neo-liberal shock (34), and quipped, “just call me a Thatcherite” (35).
Yasmin Sooka, a member of the Truth and reconciliation commission made a recommendation, modest by any standards, for a one time 1%’solidarity’ corporate tax to raise money for the victims of apartheid, Mbeki then the president rejected it out of hand, any suggestion of corporate reparation/tax.
Chairman of the commission, Archbishop Tutu offering the report in 2003, observed, “can you explain how a black person wakes up in squalid ghetto to day, ten years after freedom…then he goes to work in a town…largely white…I don’t know why …don’t say to hell with peace, to hell with Tutu and the truth commission” (36).
Reparations in Reverse.
In the first years after takeover, the government had to pay $ 5 billion annually in debt servicing, and only $85 million to 19,000 victims and families of apartheid killing and torture.(37).
Between 1997-2004, the government sold 18 state owned firms to raise $4 billion, half of which went to debt servicing.(38).
De Klerk demanded, and got, that all civil servants be guaranteed their jobs and be given hefty pensions(39). 40% of the government debt payments go to pension funds to former apartheid employees.(40). The victims of apartheid continue to send large paychecks to their victimizers.
Since the 1994 takeover by ANC:
-the number of people living on less than a $ a day has gone from1 million to 2 million
-unemployment rate for blacks has gone up from 23% to 48$ (46).
-Of 35 million blacks, only 5,000 make more than $60,000 a year, among the whites 100,000 of 3.5 million do so, and many make far more (47).
-The government built 1.8 million homes, while 2 million lost theirs(48).
-1 million have been evicted from farms (49).
-number of shack dwellers has grown by 50%, 1 in four of the total (50).

Chap 11 Yeltsin Sells Russia
Gregory Gorin, Russian writer, “For a long time we lived under the dictatorship of the communists, but now we have found out that life under the dictatorship of business people is no better. They couldn’t care less about what country they are in” (1).
Mickhail Gorbachev had won the Nobel peace prize in 1990 (3), and had won over the American public as well.
He had led the USSR through a remarkable process of democratization, 6through his policies of glasnost (openness) and perestroika (restructuring). His end goal was to build a social democracy on the lines of Scandinavian countries, “a socialist beacon for all mankind” (4).
At the G7 meeting in 1991, he was stunned to be told that if he did not embrace radical economic shock therapy, they will let him fall “Their suggestion as to the tempo of transition were astonishing, he wrote later (6).
Later that year when Russia asked for debt forgiveness, it was told that the debts had to be honored (7). Russia like China had to choose between Chicago and democracy. The peaceful process that Gorbachev had started had to be violently suppressed and then reversed. In 1990, The Economist had urged Gorbachev to adopt “strong man rule…to smash the resistance…” (8). In August 1991, The Washington Post ran a headline “Pinochet’s Chile a Pragmatic Model for Soviet Economy”.
On August 19, 1991, a group of communist old guard drove tanks to the White house, the parliament building. Yeltsin stood on one of the tanks and denounced… “a cynical right wing coup…”(10). The tanks retreated, and Yeltsin emerged as a heroic defender of democracy.(11).
In December 1991, Yeltsin formed an alliance with tow other Soviet republics, so in effect the Soviet Union was dissolved, forcing Gorbachev’s resignation. As the political scientist Stephen Cohen put it, “it was the first of the three traumatic shocks that Russians would have to bear in the next three years (12-the way Yeltsin was to behave later, makes one wonder if he was not a CIA ‘agent’ like Pinochet and other junta leaders. Sachs had been invited by Yeltsin as an adviser, and was in the room in Kremlin on the day Yeltsin announced that the soviet union was no more (13-14).
Yeltsin wanted Sachs to raise funds as he had done for Poland, “If Poland can do it, so can Russia” (14). Sachs told Yeltsin that if Moscow was willing to go with the ‘big bang’ approach, in establishing a capitalist economy, he could raise $15 billion (16).
Russia’s conversion to capitalism was akin to the corrupt approach that had led to Tiananmen.. Gavril Popov, Moscow’s mayor on how to break up the centrally controlled economy, “there is the democratic approach…the nomenklatura, apparatchik…(17). Yeltsin took the latter, and in late 1991, he went to the parliament that if they gave him one year f special powers, to issue laws by decree, rather than bring them to the parliament, he would solve the economic crisis. The answer was yes.
He immediately surrounded himself with Russian followers of the free market Chicago School. They had formed a sort of book club with Yegor Gaider as their figurehead, whom Yeltsin named as one of his two deputy PMs.
Russia newspaper Nezavisimaya observed that “ for the first time Russia will get…a team of liberals…followers of Freidrich Hayek…and Milton Friedman…”(19).
The US funded its own team of transition experts to assist Yeltsin’s Chicago boys to write privatization decrees, launch NY style stock exchange, design Russian mutual funds. In the fall USAID awarded $2.1 million to the Harvard Institute of International Development which sent teams to Russia. In May 1995, Harvard named Sachs director of the institute.
On October 28, 1991, Yeltsin announced the lifting of price controls, a week after Gorbachev resigned.(21). The decrees included free trade and the first phase of the privatization of the state’s 225,000 companies (22). It was a well planned surprise. 67% of Russians told pollsters that workers cooperatives were the most equitable way to privatize assets of the state, and 79% felt that maintaining full employment was a core function of the government (24).
Joseph Stiglitz, then the chief economist at the WB summarized the mentality, “Only the blitzkrieg approach during the ‘window of opportunity’…would get the changes…before the population had a chance to organize to protect its…interests” (26).
After only one year, millions of Russians had lost their life’s savings, millions of workers were not paid because of abrupt cuts in subsidies (29). . Russians consumed 40% less in 1992 than they did in 1991, and a 1/3 of the population fell below the poverty line (30). People were forced to sell personal belongings on the street (31).
The people eventually began to demand an end to the cruel economic adventure. In December 1992, the parliament voted to unseat Yegor Gaider, and in March 1993, they voted to repeal the special powers they had given to Yeltsin.
Yeltsin retaliated by announcing a state of emergency on TV. Russia’s independent constitutional court, a creation of Gorbachev, ruled 9-3 that Yeltsin’s power grab was a violation of the constitution, he had sworn to uphold.
The West threw its weight behind Yeltsin (32) The majority of the Western press did too(33).
In the spring of 1993, the parliament brought a budget which did not follow IMF guidelines for austerity. Yeltsin tried to eliminate the parliament through a referendum (Zia/other satrapies fashion). Not enough voters turned out to give the mandate to hold snap elections asked for, but he claimed victory (36).
Lawrence Summers, then US treasury under secretary warned that, “the momentum for…reforms must be reinvigorated…” (37). IMF leaked to the press that $1.5 billion loan was being rescinded…” (38).
Yeltsin, confident of the West’s support issued decree 1400 to dissolve the parliament and abolish the constitution. 2 days later, the parliament voted to impeach him by a vote of 636 to 2.(40). Clinton continued to back him, and the congress voted $2.5billion in aid. Yeltsin sent troops to surround the parliament, cut the power, heat and phones off. Supporters of democracy came in thousands to break the blockade. The only way out would have been to call elections for the parliament and the presidency. Yeltsin was reportedly leaning towards elections, when he heard that voters had turned out Solidarity from power. Election in Russia would be too risky. Too much wealth-huge oil fields, and 30% of world’s gas deposits, 20% of its nickel, weapons factories, media-were at stake.
Yeltsin attacked the parliament with thousands of interior ministry troops, barbed wires and water cannons (41). On 10/03 crowds of parliament supporters “marched to the TV center…there were children in the crowd…they were met with machine gun fire. One hundred demonstrators and one soldier were killed. Yeltsin dissolved all city and regional councils of the country.
On 10/04/0993, Yeltsin ordered the army to storm the parliament, and setting it on fire. At 4.15 pm, about 300 deputies, staff workers and guards marched single file out of the building with their hands up (44).
500 had been killed and 1000 wounded, more violence than since 1917(45).
The US secretary of state traveled to Moscow to show support to Yeltsin (48).
The Chicago boys went on a law-making binge (53). The communist state was simply replaced with a corporatist state. A clique of nouveaux billionaires, also known as oligarchs, teamed up with Chicago boys and stripped the county of nearly everything of value, moving the loot ashore at the rate of $2 billion a month. Before the shock therapy, Russia had no millionaires. By 2003, it had 17 billionaires, according to Forbes (57). In a rare departure from the Chicago School dogma, Yeltsin and co had not allowed foreign MNCs to buy the assets directly.
The only problem for the oligarchs and foreign investors was the extreme unpopularity of Yeltsin.
In December 1994, Yeltsin started a war in Chechnya. Starting a war is the favorite desperate measure of failing dictators. The defense minister predicted it would be “…in a matter of hours, a cakewalk (59). It did work in the short term. But in 1996, when he faced reelection, he was still very unpopular. He toyed with idea of canceling the election-the Pinochet option, favored by his privatization minister, Sachs protégé Anatoly Chubais (60-61).
Yeltsin won, funded by $100 million financing by the oligarchs-33 times the legal limits, and 800 times more coverage than for his rivals on oligarch controlled TV stations (63).
In return, he sold 40% of an oil co, the size of Franc’s Total( Total sales in 2006 $193 billion) for $88 million, Norlisk Nickel which produced 1/5th of world’s nickel (annual profits $1.5 billion), for $170 million, Yukos with more oil than Kuwait (annual income more than $3 billion) for $309 million, 51% of oil Sidanko (valued at $2.8 billion) for $130 million. (64). The banks which ran the auctions, bid in them too.
And all these were purchased, not with corporate, but with public money (65). Communists had made an exchange of power with property (66).
It was an oversight that IMF and WB did not force MNCs in the initial loot. They would not forget the lesson in Bolivia, Argentina and Iraq.
Gates were now open for foreign investors. In 1997, royal Dutch/shell entered into partnership with two oil co-Gazprom and Sidnako (67).
Several of Yeltsin’s ministers would later be found guilty of corruption. Two from Harvard’s Russia project economics professor Andrei Shleifer and his wife, and his deputy Jonathan Hay were discovered to have been directly profiting from the market(70).US department of justice sued Harvard. Harvard paid a $26.5 million settlement (72).
There are honest neo-liberals, but the Chicago boys do seem to be particularly inclined to corruption.
George Soros, the world’s most powerful currency trader (implicated in the rumors which led to the Asian T iger’s downfall, he had withdrawn $ in billions) profited from his philanthropic work in Eastern Europe, when the countries implemented convertible currencies and lifted capital controls.
In 1999 Russia was hit with a series of terrorist attacks (76). The country was had been hit by the Asian crisis the year before. Vladmir Putin, Russia’s PM was made in charge of dealing with terrorists (77). In 09/1999, he launched air attacks on Chechnya.
With the conflict overshadowing all other discussion, on 12/31/1999, the oligarchs quietly arranged a hand over of power to Putin from Yeltsin who was by now drunk almost all the time Was shown so on US TV), and returned the compliment by conferring legal immunity on his predecessor.
Wars in Chechnya have killed 100,000(78). In contrast to Pinochet’s, Yeltsin’s massacres occurred in slow motion, and not so widely noticed.
By 1998, more than 80% of the Russians had gone bankrupt, 70,000 factories closed causing huge unemployment. Before 1989, 2 million Russians Federation residents were living in poverty. By mid-nineties, 74 million were doing so. By 1996, 25% were living in ‘desperate’ poverty (79).
Under the communists, Russians were alt least housed . In 2006, the government admitted to 715,000 homeless, while UNICEF put the number at 3.5 million children alone (80).
Under communism, Russians needed large quantities of vodka to get through the day. Under capitalism, they drink twice as much. Russia’s drug czar, Aleksadr Mikhailov says that the number of drug user has gone up 900% from 1994 to 2004, to 4 million, many of them on heroin, and as an aftereffect, the number of AIDS victims has gone up from 5,3000 to double that in 2 years, and in ten years according to UNAID, nearly 1 million were HIV positive (81).
Russia’s already high suicide rate reached about double of what it had been 8 years before. Violent crime had risen 4 times by 1994 (82). Russia’s population is falling by 700,000 per year, losing 6.6 million between the shock therapy peak year of 1992 to 2006 (83).
While the elite flaunt their wealth like the Emirs of oil Sheikhdoms, a 17 year old provincial girl read by candlelight (84).
Corruption Blame Game:
Clinton, EU, IMF, WB wanted to erase the pre-existing state for the capitalist feeding frenzy-Iraq without cruise missiles. Harvard’s Richard Pipes “for Russia to keep on disintegrating…till nothing remains…institutional structures” (86).
Cover for Russia’s failure was provided by its “culture of corruption” (88).
The entire drama will be repeated to explain billions in Iraq, with Saddam and Radical Islam, filling in for communism and czarism.
Rather than journeying through Adam Smith’s “savage and barbarous nations”, Milton Friedman’s troops systematically dismantled existing laws to recreate that earlier lawlessness. Smith’s colonists seized ‘wastelands’ by force or ‘for a trifle’, Friedman’s hordes, the MNCs see government assets and programs as ‘wasteland’ to be conquered.
Culture of corruption is endemic in the world. Friedman’s acolytes offered what was beyond the wildest dreams of third world minions (and first world partners).
Colonial times are often called the first pillage-land was seized from natives. In the second pillage, the state was stripped.

Chap 13 : (do 12 later) The Trashing of Asian Tigers.
Asian Tigers, Thailand, the Philippines Indonesia, Malaysia and South Korea, had been held up as examples of economic vitality. Stockbrokers were telling their clients that there was no surer way to increase wealth.
Then it all seemed to go wrong. They started to cash out in droves, traders attacked the currencies.
Indonesia was the worst hit. Its currency dropped between the morning and night and kept on doing it. The market crash was dubbed ‘the Asian flu’, later renamed ‘the Asian contagion, when it spread to Latin America and Russia.
Nothing tangible had changed. The same set ran the economies, deficits were not that much, no physical disaster had hit the region, they were still producing shoes to cars, with sales as strong as ever. In 1996, investors had put in $1000 billon in SK, but had taken out $120 billion in 1997.
Some one started a rumor that Thailand did not have enough $ to back up its currency. The electronic hers was triggered into a stampede. Real estate market which had been booming crashed. Construction halted, banks called in their loans.
Mutual funds had marketed all the countries as a package, so all went down.
The government tried to stem the outward flow with their reserves. That led to more panic. $600 billion disappeared from Asian Markets in one year (5).
In Indonesia people stormed stores (6). In south Korea, TV stations ran a campaign for citizens to donate gold jewelry. 200 tons were offered, but the currency continued to plummet (7).
It led to a wave of suicides. In SK, it went up by 50%(8).
No loans were forthcoming as in the case of the Tequila crisis of 1994, as the US treasury won’t let Mexico crash (9).
Milton Friedman, in his mid eighties made an appearance on CNN to talk to the anchor man, Lou Dobbs that he opposed any kind of bail out. He was echoed by Walter Wriston, former head of Citibank, George Shultz of Hoover Institute and Charles Schwab (10), and the Wall Street (11).
While addressing Asia Pacific Economic Cooperation Council held in November 1997 in Vancouver, Bill Clinton taken the cue called the crisis “ a few little glitches on the road” (12).
IMF took a do-nothing approach, then came up with a list demands.
Whether the crisis was inadvertently started by a rumor, or the rumor was started deliberately (George Soros had withdrawn billions, reported to have $5 billion over 2 weeks and more in the east European crisis-check this-read somewhere). But the IMF grabbed as an opportunity to strip the countries of assets and transfer them to MNCs, under the Chicago School dogma.
The Tigers had not grown on free trade. Malaysia, Thailand and South Korea were highly protectionist, and had maintained a significant role for the state, keeping control of energy and transportation. They had also blocked certain imports from Japan, Europe and North America to build up domestic markets.
The situation was an anathema to Japan, the West and MNCs. They saw the consumer market explode, and longed for unrestricted access. They also wanted to grab the best of the tiger’s corporations, and had cast greedy eyes on SK’s Daewoo, Hyundai, Samsung and LG.
In the mid-nineties, IMF and WB had coerced the countries to lift barriers to financial sector. That was to be their undoing.
In 1997, the hot money reversed current. Jay Pelosky of Morgan Stanley was forthright, “if the crisis was left to worsen, all foreign currency would be drained…Asian owned companies would either…close or…sell to western firms…(13).
Jose Pinera, Pinochet’s financial hatchet man, rewarded with a job in Washington DC’s Cato Institute, said the fall of tigers represented , “the fall of a second Berlin Wall” , the collapse of the notion that there is a third way between market…capitalism and socialist…” (14). The view was shared by Alan Greenspan, chairman of the Fed (15).
Michel Camdessus, head of IMF spoke of the crisis as an opportunity (16).
The only country to be able to resist was Malaysia, which had a relatively small debt, and had immediately put them back up. currency controls. PM Mahathir Muhammad did not think should have to, “destroy the economy in order that it should become better” (17)Rest of the Tigers came to the table with their hands out for loans. Stanley Fischer, negotiator for the IMF, “…when it is out of money, it hasn’t got many places to turn (18-old time usurers in India, used to wait for calamities, sometimes enticed peasants with loans, and at the end of the day, the loan would double every month or week, and they would take away cows, goats, household belongings and even women against the loan. Conditionalities are equivalent to the pound of flesh immortalized by Shylock of Shakespeare)..
Several countries suggested that since capital flight had caused the crisis, perhaps it was time to put back ‘capital controls. China had kept them on, and Malaysia was quick on its feet, and had escaped the crisis.
IMF team rejected the idea out of hand. They were focused on how to use the crisis as a leverage to beggar the countries. The first step was to denude the countries of all trade and investment barriers and state intervention that had created the ‘Asian miracle’, so the countries would never get out of bondage (20).. they also demanded deep budget cuts, massive lay offs in public sector. Fischer confessed later than in SK and Indonesia, the crisis was unrelated to government overspending, but that did not deter him from the sadistic measures(21).
Thailand would allow foreigners to buy large stakes in banks, Indonesia would cut food subsidies, and SK would lift regulations against massive layoffs. (22).MNCs wanted to downsize the firms they were about to buy.
Thailand’s reform package was pushed through with 4 emergency decrees, and not through the parliament (24). In south Korea, IMF demanded that money would not be released till all the candidates in the forthcoming presidential elections, commit to the rules in writing. Two of the anti-IMF candidates capitulated (25), though the day they signed was dubbed ‘humiliation day (26).
Suharto who had ruled for 30 years was more used to taking care of himself, kith and kin, resisted for a while (Camdessus of IMF reportedly chewed him out in public-find the source), but a senior IMF official, on condition of anonymity, told the Washington Post that, “the markets are asking… how committed…Indonesian leadership is…” As soon as the news was published, the currency lost 25%…in a day(28).
Suharto gave in.(29). He brought back the Berkeley mafia. The IMF got 140 adjustments (31)
IMF thought all was going well. When it revealed the extreme makeover package (32), the market panicked, yanked out more money and currency. SK was losing $ 1billion a day. IMF had turned a crisis into a catastrophe. Sachs, now an open dissident, “instead of dousing the fire, IMF…screamed fire in the theatre” (33).
ILO estimated that 24 million lost their jobs, Indonesia unemployment went up from 4 to 12%. Thailand was losing 60,000 jobs a day. SK was firing 300,000 workers every month. In 1996, 63.7% identified as middle class; by 1999 it was down to 38.4%. WB , 20 million Asian were thrown into poverty(34), all thanks to IMF extortionists.
Women and children suffered the most. Philippines and SK sold their daughters to traffickers. Child prostitution in Thailand increased by 20%.(35). US secretary of state, Madleine Albright, herself the daughter of refugees, on a visit to Thailand in March 1999, insensitively scolded the public for turning to prostitution and drugs. She could not see any connection between the austerity policies and the sex trade (36).
The fund’s Independent Evaluation office concluded that SAS demands were “ill advise” and “ broader than seemed necessary, as well as “not critical to resolving the crisis”, and that “crisis should not be used as an opportunity…” but that was akin to an assassin’s regrets at the funeral(37-the report was not released till 2003, 5 years after the crisis).
While IMF failed the Asians, it did not fail the Wall Street.
Pretty much everything in Asia was for sale. The Wall Street journal ran an article “Wall Street Scavenging in Asia-Pacific” and reported that Morgan Stanley, among other such houses, had dispatched armies of bankers…to scout for brokerage…asset management…even banks…that they can snap up at bargain prices…” (39).
Several major sales went through: Merrill Lynch bought Japan’s Yamaichi securities, as well as Thailand’s largest securities firms. AIG bought Bangkok Investments. JP Morgan bought a big stake in Kia Motors, Travelers and Solomon Smith Barney bought one of Korea’s largest textile and several other companies. (The chairman of Solomon…International Advisory Board was Don Rumsfeld. Dick Cheney was also on the board. Carlyle (Former Secretary if state James Baker, former UK PM john Major, Bush Sr) snapped up Daewoo’s telecom division (40), all for fire sale price.
The Korean Samsung was broken up and sold-Heavy Industry Division to Volvo, Pharmaceutical to SC Johnson, lighting division to General Electric. Car division worth $ 6 billion for $400 million to GM (43). The list is long (page 348-44).
The NY Times called it, “the world’s biggest going out of business sale” and a business buying Bazaar by the Business Week.
Governments had also to sell public service . US Trade reprehensive Charlene Barshefsky while asking the US congress to authorize billions to IMF, offered assurances that the agreements would “create new business opportunities for US firms…”(46).
The crisis set off a storm of privatizations-Bechtel got water and sewage system in eastern Manila…(47).
There were 186 mergers and acquisitions with in 20 months.
Asia’s crisis is still not over. 24 million lost their jobs. Their desperation id reflected in the rise of religious extremism and trafficking in flesh, and unabated wave of suicides and violent death (50).
In Indonesia Chinese were the unwitting victims of IMF depredations. Being a business community, they were blamed for the rise of the price of basic necessities imposed on Suharto by the UMF. Riots targeted the ethnic minority. 1200 hundred were killed and scores of Chinese women were gang raped (52).
Financial Times wrote an unusually balanced editorial, Asia was a “warning signal that public unease with capitalism and the forces of globalization is reaching a worrying level…the crisis showed that even the most successful countries…brought to their knees by a sudden outflow of capital…outraged…how whims of …hedge funds could cause mass poverty…”54).
The defiant mood made its global debut in 1999 WTO talks in Seattle, LDCs formed a voting block and turned down demands for further concessions, while EU and the USA continued to subsidize…their domestic industries and agriculture, while students and activists outside hogged the media coverage. The US government’s dream of a unified free trade zones in Asia-Pacific, and a free trade area of the America were smashed by third world resistance.
The anti-globalization movement exposed the Chicago School dogma to international debate. Capitalism’s monopoly period lasted only from 1991-collapse pf the USSR to the collapse of the Seattle talks in 1999.

Chap 14: the Homeland Security Enterprise.
Rumsfeld joined the cabinet of GWB in 2000, it was with a personal mission to reinvent warfare, more spectacle than struggle, far more profitable than it had ever been before. He wanted ‘transformation’. Senior military officials derided it. Beneath the slogan of modernization, it was simply an attempt to bring outsourcing of the corporate world into the military. In the 1990s, many traditional manufactories, which had maintained stable work forces at home took to the ‘Nike model; no factories, produce through a web of contractors, our resources in design and marketing. The other model was ‘Microsoft: maintain tight control over employees who perform ‘core competency’ work, and outsource all else, including code writing.
Fortune said, “Mr. CEO was about to restructure as he done to corporations” (8). Rumsfeld wanted the army to shed large numbers of full-time troops with a small core of officers, supported by cheaper temporary soldiers from the Reserves and National Guard. Contractors like Blackwater and Halliburton would do such work as high risk chauffeuring, prisoner interrogation, and health care. He would spend the savings into the latest satellite and nano-technology in the private sector(9).
The generals became very hostile to the concept of a hollow military.
Rumsfeld called a ‘town hall’ meeting of hundreds of senior Pentagon staff, “…adversary that poses a threat…is one of the last bastions of central planning…is closer to home. It’s Pentagon bureaucracy (10).
He wanted less spent on the staff…far more…directly to…private companies. “Every department…to slash its staff by 15%…” (11).
Proto-disaster Capitalism:
The job of the government was not to govern, but to subcontract to…more efficient…private sector.
By the time Bush took over, The privatization mania, fully embraced by Clinton, had sold off or outsourced public co in several sectors like water, electricity, highway management and garbage collection. What was left were such services as the military, police, fire department, prisons, border control, intelligence, disease control, public schools and government bureaucracies, privatizing which would be tantamount to compromising the nation-state.
By late 1990s, the unthinkable was deemed practical. Like Russia’s oil fields, Latin America’s telecom, and Asia’s industry, the US government would be privatized for private profit, especially urgent due to the backlash in Asia drying up the profit lake. The crisis exploiting methods learned over the last 3 decades in Latin America, Asia and Russia would be put to use in US heartland.
As its CEO, Rumsfeld had used his contacts to get the highly lucrative FDA approval for Searle Pharmaceutical’s aspartame (NutraSweet). When he sold Searle to Monsanto, he earned $12 million (15). That sale earned him seats on the boards of blue chip Sears and Kellogg’s and Gulf stream aircraft manufacturers. He was paid $190,000 a year for swerving on the board of ASEA Brown Boveri, the Swiss engineering firm which gained notoriety when it was revealed that it had sold nuclear technology, including the technique to produce plutonium, to North Korea (16).
In 1997, he was named the chairman of the board of biotech firm Gilead Sciences, which had registered Tamiflu, meant to treat ,many types of influenza, and the preferred drug for avian flu. If there ever was an outbreak, or the threat of one, the governments will be forced to buy billions worth from Gilead. Jonas Salk developed the first polio vaccine in 1952, he refused to apply for a patent, telling the broadcaster Edward R Murrow “Could you patent the sun?-this might put ideas in Rumsfeld’s head (17). Gilead also owns the patents on 4 AIDS drugs, and spends a lot of time, money and energy to block distribution of cheaper generic versions. Its key medicines have been developed on public grants (18).
While Rumsfeld saw riches in future epidemics, his protégé in ford administration Dick Cheney saw it in wars, and as secretary defense under bush Sr scaled down the number of troops on active duty and increased hiring of private contractors. He hired Brown & Root, a division of Halliburton to identify tasks performed by troops, which could be taken over by private firms, and make profit. It did and Cheney created Logistics Civil Augmentation Program to serve the military as manager for its operations (20). No dollar value was attached to contracts, the cost would be covered, plus Pentagon will guarantee a profit-cost plus contract. Halliburton, “beat out 36 other bidders to win a 5 year contract, not surprising…given that…it was the co…drew up the plan.” Los Angles Time’s T.Christian Miller.
In 1995, with Clinton in the White House, Halliburton hired Cheney as its new boss. Thanks to the loosely worded contract that the company and Cheney had drawn up, when Cheney was defense secretary, that it was able to stretch…the meaning of ‘logistical support till Halliburton was able to take over the entire infrastructure of US military operations overseas.
In the Balkans, a Halliburton spokesman said, “The first person to greet our soldiers as they arrive…, and the last one to wave goodbye is one of our employees”, making it sound like a holiday cruise (21).Clinton had deployed 19,000 soldiers in the Balkans. Halliburton created neat, gated suburbs, run entirely by the company, as US bases, with fast food shops, supermarkets, movie theaters, and gyms (22).The saying made famous in the Green zone in Baghdad was “don’t worry, it is cost plus, but deluxe war was invented by Clinton Cheney, in just under 5 years, nearly doubled the amount of money Halliburton collected from the US Treasury, from $1.2 billion to $2.3 billion, and federal loans and loan guarantees went up 15 times (23). He made millions for himself (24).
Cheney’s wife Lynne, was making money hand over fist as a member of the board of Lockheed Martin (25). With the cold war ended, and defense spending dropping, they developed a new strategy-running the government for a fee. In mid-1990s, Lockheed began taking over IT divisions of the US government. In 2004, the NY Times reported, “Lockheed Martin does not run the US, but it does help…sorts your mail…totals …taxes…cuts social security checks…counts the US census, runs space flights, monitors air traffic, and to make all that happen…writes more computer code than Microsoft (26).
As governor of TX, GWB did not run the state as much as he parceled out state functions to private firms such as security, private prisons. The American Prospect Magazine called TX, “the world capital of private prison industry” (28).
Bush, Cheney and Rumsfeld made up an evil triad, which would hollow out the government.
9/11 and revival of civil service:
When Bush and co took over in 01/2001, the IT bubble had burst, Dow Jones was down in the basement. Bush’s solution was akin to the one neo-liberals had advocated for the rest of the world-give away public wealth to corporations, with tax cuts, lucrative contracts, and plans to privatize everything (31-32).
But 9/11 intervened, and the idea of the government’s self-immolation no longer seemed so good. The security failures of 9/11 exposed the fault lines created by 20 years of nibbling away at the public sector and outsourcing to corporations for their profit. Radio communication for NY police and fire fighters had broken down in the middle of the rescue operation, air traffic controllers did not notice the off course planes and the hijackers passed through security check points manned by people who made less than the employees of the food courts at the airports did.
Ronald Reagan had emasculated the air traffic controllers union, and deregulated the airlines-a clear victory for Friedman counterrevolution. The entire air traffic control system had been over the next 20 years privatized, deregulated and the security work performed by underpaid, poorly trained, non-union contractors. After the attack, the inspector general of the department of transportation testified that the airlines responsible for security had skimped a great deal to keep costs down. It was OK on 09/10/2001, but it hiring $6.00 an hour airport security guard did seem like criminal negligence on 9/11.
In October 2001, envelopes containing a white powder were sent to congressmen. Bioport, a private lab had the exclusive contract to produce the Anthrax vaccine had failed a series of safety inspections, and the FDA had denied it permission to distribute the vaccine (35). It was still in business.
The backlash against whole sale privatizations became acute with corporate scandals like Enron going bankrupt three months after 9/11. Employees lost their retirement, while executives cashed out. Then it came out that Enron had manipulated energy prices, which had led to massive blackouts in CA (36).
Trust in government had gone up (37). The blue-collar workers of NY had performed the best (403 lost lives).Bush had to praise not only security services, but also teachers. Postal employees and health care workers.
A Corporate New Deal
Bush was planning to spend large amounts of public money to stimulate the economy, but it was all earmarked for corporations
( as Obama is doing now), with no competition, which was a hallmark of Bush/Cheney regime, and virtually no oversight.
9/11 served the agenda of a huge domestic shock therapy, which bush moved quickly to exploit to hand over war to disaster management to for profit firms. The regime invented a new framework foot its scheme of privatization-the War on Terror. In order to enhance the already existing feeling of paranoia, they first increased to a previously unheard of ands unimaginable level, the policing, surveillance, detentions and launched a power grab, called “a rolling coup” by the military historian Andrew Bacevich (40). The net effect was a full fledged new economy in private hands in homeland security, war, reconstruction, at home and abroad.
The most effective camouflage for the privatization agenda was that economic ideology was no longer a primary motivator of foreign and domestic policy. War on terror was. The NY times February 2007, “ Without a public debate or formal policy decisions, contractors have become a virtual fourth branch of the government” (42).
In November 2001, the department of defense brought together , “a small group of dot.com venture capitalist consultants” to identify “emergency technology solutions…assist…in Global war on terrorism”, so the government, in stead of providing security was proposing to buy it. By early 2006, it has been incorporated in the Pentagon as the Defense Venture Catalyst Initiative (43). (One must compliment the US for coming up with the weirdest terminology).
The Department of Homeland Security is the clearest expression of wholly outsourced kind of government. (44).Another is Counter Intelligence Field Activity, created by Rumsfeld, independent of CIA. This agency outsources 70% of its budget to private contractors. Ken Minihan, a former director of NSA tells it, “Homeland security is too important to be left to the government”. Minihan and hundreds of Bush staffers, left the government to work in private security industry, which Minihan helped create (45).
The “1% doctrine of Cheney”, that even if there is a 1% chance, the US has to respond as though it was a 100% certainty, has been a boon for high tech detection services. Because a small pox attack can be conceived, homeland Security handed over$ ½ billion to private companies to develop and install detection equipment…against an unproven threat (46).
From a military perspective, these myriad of names, the wars-on terror, the war on radical Islam, on Islamo-fascism, the long war-make the war unwinnable, and untenable from an economic perspective.
After 9/11, Bush funneled $270.00 billion from the Pentagon, $42 billion from CIA, (nearly twice that Clinton did in both instances), and $130 billion from homeland Security. In 2003, Bush spent $327 billion on private contracts, nearly 40% of every discretionary dollar (47).
DC suburbs became dotted with security start ups, and “incubator companies. The industry also gave birth to new lobby firms to hook up companies to the ‘right people’ on the Hill. In 2001, there were 2 such companies, in mid-2006, they were 543 (48).
Terrorism Market:
One of the first booms was in surveillance cameras, 4.2 million in Britain, and 30 million in the US. That created 4 billion hours of footage, so a new market for ‘analytic software’ emerged (49). Another was digital enhancement, because facial recognition software can make a positive ID only if people offer front and center to the cameras (50).
Cell phone and Web surfing companies have been turned into tools of the state, akin to Yahoo collaborating with the Chinese government and AT&T, with the US.
Many technologies in use on the war on terror had been developed to build detailed customer profiles. So now the information collected from credit cards, can be sold, not only to travel agencies or shopping chains, but to FBI as well flagging an interest, for instance, in calls or travel to mid-East.
The p[potential for error, and being branded a terrorist, is enormous. As of June, 2007, there were ½ a million names on ATS (automated targeting system) list, and tens of millions were assigned a ‘risk assessment’ rating (54).
Any one could be declared ‘enemy combatant’, and if non-US citizen, they will never know what they were detained for as Bush had abolished “habeas corpus”.
Halliburton runs maximum security prisons in Guantnamo, Boeing, the CIA’s travel agent, designed special 737s for the 1245 extraordinary rendition flights (55).
“Over half of the qualified interrogators work for contractors (56).
They paid $3,000 to $25,000 for Al-Qaida/Taliban fighters handed over to them (57).
Pentagon: 86% of the prisoners at Gitmo were handed over by Afghan/Pak agents after the bounties were announced, and the majority of them were found to have no link or connection with either group (58).
There is an unprecedented convergence of unchecked police powers and greater corporate power. The industry not only creates an incentive to spy and torture, but also perpetuates the fear, which created it in the first place.
What passes for debate, is restricted individual cases of corruption or was profiteering, and the failure of government to properly oversee contractors, but not the consequences of a fully privatized war.
“Since the ‘war on terror’ CEOs of the top 34 defense contractor’s salary is double of what they got before 9/11 (60).
Unlike the dot.com one, the disaster industry does have CIA level of discretion (61).
Peter Swire, a Clinton regime privacy counselor, describes the convergence as, “ you have a government on a holy mission to ramp up information gathering, and you have an IT industry desperate for new markets” (62).

Chap 15: Removing the Revolving Door
During the midterm 2006 elections, bush signed the Defense Authorization Act in a private ceremony in the Oval office (three weeks before Rumsfeld resigned) , with a rider hidden in its 1400 pages, which gave him the power to declare martial law overriding state governors, in the event of a public emergency to restore public order. Before this, the president had the right only in the face of an insurrection (4).
Senator Patrick Leahy was the sole voice of dissent.
One clear winner was the Pharmaceutical industry. In case of an epidemic, the army and national guard could be called to protect their labs and assets, their and impose quarantine, the long standing desire of Rumsfeld’s former employer, Gilead Sciences, which owns the patent on Tamiflu. The law and Avian Flu scares (and now swine flu) sent its stock soaring by 24%, in five months after Rumsfeld left office(6).
It is pertinent to ask the question, what roles do MNCs play in shaping law, or for that matter Halliburton and Bechtel, and oil companies did in promoting invasion of Iraq. People involved are known for conflating corporate interest with national interest.
In his 2006 book Overthrow, former NY Times correspondent Stephen Kinzer, tried to get to the bottom of what motivated US rulers to order and orchestrate coups in foreign countries over the last hundred years. From Hawaii in 1893 to Iraq in 2003, he notes that there is often a three stage process, first a US MNC faces a financial setback due to the action of a foreign government, ranging “ pay taxes, follow labor/environmental laws, sell some of its assets, or it is nationalized. Second the politicians interpret it as an attack on the US (which it actually is-MNCs own the US, much more than they do other Western countries). Third the process of selling an invasion starts as a struggle between the good and the bad, and “ a chance to free the oppressed nation…from…brutality of the regime…” (7). It is an exercise in mass projection of the interest of a tiny elite to those of all humanity’s good.
This tendency is more pronounced among politicians who move directly from a corporate to public office. John foster Dulles was a high powered international corporate lawyer, representing some of the biggest corporation in their conflicts with foreign countries, before he was picked up by Eisenhower as his secretary of state. He was incapable of distinguishing between corporate and national interest. Kinzer writes “Dulles had two…obsessions: fighting communism and protecting… MNCs (8). The actions off Guatemalan government against the United Fruit Company was a defacto attack on America and required an invasion.
Bush with a cabinet packed with former CEOs pursues its twin goals of fighting ‘terror’ and protecting MNCs in similar way. But the critical difference between Dulles and Bush is that the former only wanted a stable and profitable environment, the latter takes the invasions as the primary goal. Cheney are a different breed. What is good for Lockheed, Halliburton, Carlyle and Gilead –wars, epidemics, disasters-is good for the US, and the whole world. They have ushered in an era of privatized war and disaster response, profiting from the disasters they unleashed.
Rumsfeld retired in 2006. Press reported that he was returning to the private sector. He never left it. He was required to divest himself of all holdings- security or defense related. He claimed that it was impossible to disentangle himself in time. He was still looking for suitable buyer for a lot of his holdings even after six months into his term as defense secretary (9).
As far Gilead, the Tamiflu firm, though epidemics are national security issues and with in purview of defense, he did not sell Gliead stocks for his entire term (10).
Rumsfeld’s refusal to divest himself of his holding affected his job performance. According to AP report He had to recuse himself from a great number of critical policy decisions “He avoided meetings in which AIDS was discussed. When high profile mergers like General Electric, Honeywell, Northrop Grumman, were discussed, he had to recuse himself.(12).
His colleagues took care of his interests. In July, 2005, the Pentagon bought $58 worth of Tamiflu and department of Health&H declared its intention to buy up to a $ billion’s worth later (14).
It paid off. If he had sold his Gilead shares in January , 2001 for $7.45 a share, he would not have received $67045 per share he received when he left office , a 807% increase. (15).
Cheney was equally reluctant to leave Halliburton. Before stepping down as CEO to be Bush’s running mate, he negotiated with Halliburton for a lot of stocks and options. After press questions, he sold some shares, making $18.50 million in profit. But according to Wall Street Journal, he hung on to 189,000 shares and 500,000 unvested options.
He maintained such a huge number of shares during his term as VP, that he made millions every year, and was paid deferred $ $211,000 every year as well. The company’s stock price rose from $10.00 before Iraq war to $41.00 three years later (17).
Saddam did not pose a threat to US security, but did to US oil companies as he had signed contracts with Russian oil companies and was negotiating with ‘Total’ of France (18).
Rumsfeld and Cheney, asked to choose private profit and public life, chose profit, forcing government ethics committees to cave in.
In the Bush administration, the war profiteers were not clamoring to get access to government, they were the government.
Among other ‘scandals’ of Bush administration, Jack Abramoff bribes to congress, and Randy ‘Duke’ Cunningham serving 8 years for offering his Yacht on official congressional letterhead…courtesy prostitutes (21).
Whirling revolving door (between corporations and the government) has always been there, but in other administrations, political figures waited till their administration was out of office before moving on to corporations. Eric Lipton, tracking the exodus from Homeland security for NY Times “ veteran Washington Lobbyist…the exodus of such a sizable share of an agency’s senior management before the end of administration has few modern parallels” (22).
John Ashcroft, an architect of the war on ‘Terror’ after resigning from Attorney General’s office became the head of the Ashcroft group, many years before Bush left office, specializes in homeland security firm procure federal contracts. Tom Ridge, the first head of homeland Security is at Ridge Global, Rudy Gulliani, hero of 9/11 response as the mayor of NY, started his firm, Gulliani Partners FOUR MONTHS AFTER 9/11 TO SELL HIS SERVICES AS CRISIS CONSULTANT.
Michael Brown head of FEMA during Katrina, started his firm specializing in disaster preparedness (23), wrote an e-mail to a fellow FEMA staffer in the middle of the disaster “Can I quit now”: the philosophy being stay in government long enough to get an impressive title.
The innovation of bush was that many felt entitled to occupy both spaces-corporation and government simultaneously.
James Baker and Richard Perle make policy, while embedded in privatized war, fulfilling the corporatist dream-a total merger of political and corporate elites, with state functioning as a business guild. It is where the Chicago School crusade, with its privatization, deregulation, open borders and union busting has been leading.
Former Officials:
Bush has exceeded all other presidents in using former official-James Baker, Paul Bremer, Henry Kissinger, George Schultz, Richard Perle-as advisers and envoys for key functions, while the congress played the role of a rubber stamp.
James Baker, like Cheney made a fortune after leaving office, particularly on his contacts in Saudi Arabia and Kuwait, he made during Gulf1. his Houston law firm represents the Saudi Royal family as well as Halliburton, Gazprom oil of Russia, he is an equity partner in the Carlyle group. The war in Iraq translated into a record breaking $6.6 billion payments to Carlyle’s investors (27). When bush made Baker his special envoy on Iraq’s debts, the NY times in an editorial wrote “Mr. baker is far too entangled…in lucrative private business…leave him looking like a potentially interested party in any debt restructuring…to perform honorably…must give up private ones” (28). Baker simply refused…did exactly opposite of what Baker was supposed to be doing as envoy…collect $27 billion from Iraq in unpaid debt to Kuwait-in stead of convincing governments to cancel Saddam era debts (29). But there was a price-Kuwait would have to invest $ 1 billion into the Carlyle group.
George Schultz became the head of the Committee for the Liberation of Iraq, at he request of Bush to build the case for the invasion in public opinion. He did not disclose that he was a member of the board of Bechtel, which would collect $ 2.3 billion to ‘reconstruct’ Iraq (31).
According to Danielle Brain of the Project on Government Oversight “it’s impossible to tell where the government ends and Lockheed begins” It is harder to tell where Lockheed ends and the Committee for Liberation of Iraq begins-Bruce Jackson, till very lately vice president for strategy and planning at Lockheed had convened the committee.
Kissinger had kicked off the counterrevolution by orchestrating the Pinochet coup in Chile. Bush named him to the chair of 9/11 commission, but when the families of victims asked him to produce a list of his corporate clients, pointing to a potential conflict of interest, he refused and elected to step down from the chair (35).
Rumsfeld named Richard Perle to chair Defense Policy Board, argued forcefully for the attack on Iraq, was one of the first Disaster post 9/11 Capitalists, launching his venture capital firm Trireme Partners, just two months after 9/11. Boeing had kicked in $20 million to start the partnership. Perle wrote an op-ed supporting Boeing’s $17 billion tanker contract with the Pentagon (37-the tanker deal landed a senior defense official and a Boeing executive in jail).
Wolf Blitzer of CNN confronted Perle with Samuel Hirsh’s observation “he has set up a company that may gain in a war”. Perle blew up, calling Hersh “the closest thing American journalism has to a terrorist…”(39).
The right limitless profit seeking has always been the center of neocon ideology (40).



Chap 20: Disaster Apartheid-Katrina
“Katrina was not unforeseeable. It was the result of a political structure that subcontracts its responsibility to private contractors and abdicates its responsibility altogether” Harry Bellefonte.
Our car spun out of into a traffic light…I was aware that wherever the ambulance was going, it wouldn’t be good. I had visions of the horrific scene at the makeshift health clinic at the New Orleans airport…so few doctors and nurses that elderly evacuees were being left unattended for hours, slumped in their wheel chairs.
In Canada, I usually wait for forty minutes to see my general practitioner. And this was downtown New Orleans…largest public health emergency in recent US history. A polite administrator came into my room “in America we pay for health care. I am sorry…we wish we had your system. Just fill out this form.”
Within a couple of hours, I would have been free to go, were it not for the curfew. A private security guard told me “The biggest problem is all the junkies; they are jonesing and want to get into the pharmacy”.
A medical intern was kind enough to slip me a few painkillers. When I asked him if he had gone to any of the shelters to help, he seemed…taken aback…embarrassed” I had not thought of that”. I…changed the subject…to the fate of Charity hospital…it was barely functioning before the storm… it might never reopen “They’d better reopen it,” he said “we can’t treat those people here”
It occurred to me that this affable doctor and the spa like medical care I had just received were the embodiment of the culture that had made the horrors of Katrina possible. As a graduate of a private medical school and an intern at a private hospital, he had been trained simply not to see New Orleans’ uninsured, overwhelmingly Afro-American residents as potential patients.
When Katrina hit, the sharp divide between…Ochsner Hospital and Charity hospital played out…”the economically secure drove out of town, checked out of hotels and called their insurance companies. The 120,000…without cars…waited for help that did not arrive…even if most of us had resigned ourselves to daily inequalities…access to health care…decent schools, disasters were supposed to be different…New Orleans showed that the general belief that disasters are…time out for cut throat capitalism…all pull together…state switches into higher gear…had already been abandoned, with no public debate.
“The storm exposed the consequences of neo-liberalism’s lies…in a single locale and all at once” the political scientist and New Orleans native (3). The levees were never repaired, the under funded public transit system…failed…the city’ idea of disaster preparedness was passing out videos…if hurricane came…get out of town.
The Federal Emergency Management Agency (FEMA)…Bush… vision of government run by corporations. In the summer of 2004, more than a year before Katrina, …Louisiana put in a request for funding to…develop emergency plan…a powerful hurricane. The request was refused. Disaster mitigation…advance measures to make…disasters less devastating, was…gutted under Bush. The same year FEMA awarded $ 500,000…to a private firm…Innovative emergency Management to come up with…” …hurricane disaster plan for South east Louisiana and the city of New Orleans” (4).
The company went back to FEMA for more money, eventually it came to $ 1 billion…came up with everything from delivering water…to identify empty lots…be transformed into trailer parks for evacuees... eight months after the contractor submitted the report, no action was taken. Michael Brown, head of FEMA “Money was not available to do the follow up.” (5).
FEMA could not…locate the New Orleans superdome, where 23,000…stranded without food or water…the media had been there for days.
Even neocon stalwarts like Jonah Goldberg …were begging,
“When a city is sinking…rioting runs rampant, government PROABABLY should saddle up.” (6).
Milton Friedman wrote in his Wall Street Journal op-ed “it was also an opportunity”. On September 13, 2005, two weeks after Katrina, the Heritage Foundation hosted a meeting of right wing ideologues and Republican Lawmakers. They came up with a list of “Pro-Free Market Ideas for responding to Katrina and high Gas Prices-32 in number…the first three…”automatically suspend Davis-Bacon prevailing wage laws in disaster areas…federal contractors required to pay a living wage, “make the entire…area a flat-tax free-enterprise zone” “make the entire region an economic competitive zone…waive regulations…give parents vouchers to use at charter schools (7). Bush announced all the measures, though he was forced to reinstate labor laws.
The group at the Heritage Foundation called upon the congress to repeal environmental regulation on the gulf coast…for new oil refineries and “drilling in the Arctic national wildlife Refuge, in spite of the fact that climate scientists have linked the increased intensity of hurricanes to increasing ocean temperatures (8&9).
With in weeks the Gulf coast became the domestic laboratory for the same kind of government run by contractors…pioneered in Iraq. The Baghdad gang-Halliburton’s KBR unit got 60 million to reconstruct military bases. Blackwater hired to protect FEMA employees from looters. Parsons, notorious for doing sloppy work in Iraq, was brought in for bridge construction in Mississippi. Flour, Shaw, Bechtel, CH2M, all Iraq contractors, were given contracts to build mobile homes, just 10 days after levees broke. The contracts were worth $3.4 billion and there no open bidding (10).
The parallels with Baghdad’s Green zone were uncanny. Shaw hired the former head of the army’s Iraq reconstruction office. Flour sent its senior project manager from Iraq to New Orleans. Joe Allbaugh, who had promised to bring Wal-Mart and 7-Eleven to Iraq was the lobbyist for many of the deals. David Enders, a reporter asked, asked an armed guard outside a New Orleans hotel if he seen much action, he replied “…it is pretty much Green Zone here”(11).
Like the Green Zone, congressional investigators found “ significant over charges, wasteful spending or mismanagement” in contracts worth $3.75 billion (12).
Kenyon, a division of the massive funeral conglomerate, Service Corporation International and a major Bush campaign donor, was given the work of collecting dead bodies from homes and streets. They worked slowly, local emergency workers and volunteer morticians were not allowed, bodies often under blazing sun for days. Kenyon charged the state, on the average $12,500 per body, and for almost a year after Katrina, decayed bodies were still being found in attics. (13).
Experience did not have any effect on award of contracts. AshBitt was given half a billion to remove debris, did not own a single dump truck and outsourced the work (14).A company/religious group, Lighthouse Disaster relief was given 5.2 million to build a camp for emergency workers in suburb of the city. The work was never finished. The director Pastor Gary Heldreth confessed “ …the closest thing I have done…organize a youth camp…”(15).
According to The New York times ‘the top 20 contractors …spent nearly 300 million since 2000 on lobbying and 23 million to political campaigns”.
As in Iraq, they were averse to hiring locals.
After the contractors and sub-contractors had taken their cut, little was left for the people. The author, Mike Davis discovered that FEMA paid Shaw $ 175 per square foot to install blue tarp on damaged roofs, with the government supplying the tarps. Workers who hammered the tarp were paid $ 2.00 per square foot (17).
In November, 2005, to offset the billion going to the contractors, Republican dominated congress wanted to cut $40.00 billion from the budget, from student loans, Medicaid and food stamps (19).
From being social levelers that they were long ago, they now provide an inkling into the cruelly divided future. Baghdad’s Green Zone provides the best example-it has its own electric, phone and sewage systems and a state of the art hospital, all protected by 5 ft thick walls, poolside drinks, Hollywood movies and Nautilus exercise machines.
Green Zones are not exclusive to Baghdad. They emerged in New Orleans, Green Zones amidst Red Zones of , consequence of “free market economy, Bush refused to allow payment of public sector salaries from emergency funds. The city which could not collect taxes had to fire 3,000 workers. Millions went to outside consultants, many of whom were real estate developers (20).thousands of teachers were fired paving the way to privatize education.
Nearly two years later, Charity hospital was still closed, court system was barely functional and private energy company, Entetrgy had failed to supply electricity to the whole city. It threatened to raise rates and was gifted $200.00 million from the federal government. The public transport system lost half its workers, and the vast majority of publicly owned houses stood boarded and empty. (21) and the tourist lobby was eying the prime land close to the French Quarter.
New Orleans public sphere was being erased. Like Detroit and other manufacturing cities lost outsourcing of globalization, New Orleans provides the first example of post disaster wastage of cities.
In 2007, The American Society of Civil Engineers reported that the USA was falling behind in maintaining its public infrastructure, and it would take $ a trillion and a half to bring them back to safe standards. The expenditure was actually being cut back (23).
In 2006, the Red Cross signed a new disaster response partnership with Wal-Mart. “It is going to be private enterprise” said Billy Wagner, the chief of emergency management for Florida Keys (25).
Much of the parallel disaster economy has been built with tax-payer money spent in privatized war zone work. The overhead (euphemism for diverting funds for corporate/personal use) of contractors in Iraq and Afghanistan ranges from 20% to 55%.
Blackwater, (now named…after the exposure of the murders and other atrocities perpetrated on Iraqi civilians and bystanders by its criminal gangs) founded in 1996, built up an a mercenary army of 20,000 and a huge military base in North Carolina, worth $50 million. Its Florida wing boasts of helicopter gun ships, a Boeing 767, a Zeppelin, a 20 acre man made lake to train boarding a hostile ship, a 1200 yard firing range for sniper training, all courtesy Bush with public funds (27). A journal described it “al Qaeda for the good guys” (28).
The state has lost its ability to perform its functions. FEMA had to hire a contractor to award contracts to sub-contractors during Katrina. To update the army manual on the rules dealing with contractors, it had to hand over the job to one of its major contractors-MPRI. The CIA had to bar recruiter from luring its staff away from its own premises. Michael Jackson, deputy secretary of Homeland Security explained “the department does not have the capacity …to plan…oversee the ‘border initiative program (to build virtual fences on US borders with Mexico and Canada(30).
Once a market is created, it does not fold up with the termination of the term of one president.
A year after Katrina, CEOs of 30 largest US corporation joined hands under a ‘Business roundtable and complained of “Mission Creep” by NGOs in disaster relief as it infringed on their franchise. They claim to be better equipped than the UN to deal with Darfur (they will indiscriminately massacre both sides, and bring the peace of the grave yard).
Perhaps the main reason the elite are so sanguine about climate change is that they think they will be able to buy their way out of it. Christian end-timers (and Muslims too) actually favor disasters as paving the way to bring Rapture ( day of Qayamat for Muslims) sooner.
Paul Brenner, before he went to Iraq used to disaster proof corporations-turning Multinationals into security bubbles, to continue to function even the state around them crumbled. Early work can be glimpsed in the lobbies of major corporations in London and NY, equipped with airport style check in and scanners. They would like to proceed to privatized global communications, emergency health and energy supply and transportation for corporate personnel and their favorite minions among the politicians. What they can do for the military in Felluja, they can do for the police in Reno (35).
John Robb, a former force Delta commander, turned consultant says “Wealthy individuals and MNCs will be the first to bail out of our collective (security and transport) systems (36). The future Robb described looks very much like what went on in post Katrina New Orleans, with gate communities private hospitals, charter schools, water supply and emergency generators for the rich and out of the way trailer parks for the poor where they were treated like virtual criminals (37).
In a wealthy republican suburb of Atlanta, they were tired of their tax subsidizing schools and police in the poor sections of the county. They voted to incorporate their own city, called Sandy springs. In September 2005 (the month Katrina struck), consulting mammoth, offered to run the government for them at $ 27 million a yearCH2M, making it the first ‘contract’ city. Only four people worked for the new municipality, all others for the contractor (400. Neighboring communities took their cue from Sandy springs, one new city Milton hired, what else-CH2M Hill. Soon a campaign gathered for the corporate cities to band together. Politicians from the poor areas opposed the move fiercely (41).
CH2M Hill is one of the ‘primes’ of Iraq. It was granted contract to build ports and bridges and oversee all infrastructure programs in post tsunami Sri Lanka, and was awarded $ 500 million contract to build FEMA villas in post Katrina New Orleans.

































Connecting the Dots (The Shock doctrine-Naomi Klein)
Chap 1:
Capital is religion, and Milton Friedman is its Abd Al-Wahhab (Start with the origin of capitalism).

Since 1960s, Milton Friedman and his followers have been perfecting the strategy to use a crisis to cow down the public to make it politically possible (12) to introduce the trinity of free market, privatization and drastic cutbacks on social services-health, education and welfare.
He first got the opportunity to utilize a terrible upheaval to put his theory into practice when became Guru of General Augusto Pinochet (14), who had overthrown the democratically elected government of Chile, attacked the presidential palace by air and with tanks, killed the president and arrested all the cabinet ministers, he could lay his hands on. President Allende had refused to order troops and guards loyal to him, even after he had credible reports that a coup was in the offing, so the show of overwhelming force was to terrorize the public.
(A line of deception runs clear through recent history when violent events have been orchestrated to mold public opinion to favor a certain course, and if relatively mild ‘happenings’ do not work drastic measure are undertaken.
During early WW II American public opinion was not in favor of US participation in the war against Germany. In fact most Americans felt that England was being punished for its past and current sins of colonization and imperialism. But what was at stake was the very survival of the capitalist system, which the fascists appeared to be on the point of vanquishing completely. It is reported that Churchill had an American plane blown out of air off the coast of Spain and an American ship drowned in mid-Atlantic. Germans were blamed for both. That did change public opinion, but not sufficiently for FDR to commit the country to the War.
Japanese Naval attack on Pearl Harbor came as a godsend. There are credible reports that though the government and FDR had advance knowledge of the impending attack, they let American ships get hit like sitting ducks. It stands to reason that a flotilla sailing all the way from Japan, would be noticed by some one who would inform the US government.
In days gone by, European governments used to send missionaries ostensibly to convert the ‘natives to God’s religion. If the natives did not accept God’s word through the ‘men’ of god, or still worse, they bodily harmed the preachers, gunboats went to proselytize more effectively.
Further back in history, the second Caliph after Muhammad, Umar ibne Khattab sent emissaries to the royal court in Iran. Iran was at the height of its civilization, with glittering court and king. The emissaries, roughly clad and wild in appearance, forced their way into the court and demanded that either Iranians become Muslims, or pay a religious tax or else they would be attacked. The king sent them on their way, and sure enough they were attacked, defeated, cities were razed, men were slaughtered and women taken into captured and offered to the caliph to be distributed to victors as he pleased).
Coming back to the 20th CE, in 1953, the British smarting under the nationalization of oil and other nationalist measures, and unable to destabilize the elected government of Iran, handed over the case to the Americans, who in collaboration with the Iranian army, aided and abetted by Ayatollahs, orchestrated a coup, in the aftermath of which thousands were killed. Iranians had to wait till 1979 to get rid of the Shah who, though allowed megalomaniac celebrations as the 2500th anniversary of the Iranian royalty (his father had risen from a subaltern to head of the state, and had very reluctantly agreed to become the king. He had been exiled by the British as he was not servile enough) had functioned as American satrap.
Further outrages had followed, in Guatemala at the instance of the United Fruit co and in many other countries in Central and Latin America.
France was unable to hold on to its possessions in Indo-China. The US, prodded by the paranoid brothers Allen and John Foster Dulles, respectively at the CIA and state, magnanimously stepped in
So no one may say that Asia was backward Asia, In 1965 the army had overthrown the independence leader Ahmad Soekarno in Indonesia and killed an estimated one and a half million people. The usurper General Suharto was advised by economists from ?Harvard.
The Falklands war in 1982 helped Margaret Thatcher crush the miners strike and dismantle the trade union movement.
The trinity is imposed in a relatively peaceful way too. Loans for extravagant and useless enterprises are thrust on third world, and when they are unable to pay IMF, WB and other international financial institutes countries twist arms to accept what are euphemistically described as conditionalities, which amount to the same deregulation, nationalization and cutbacks in social spending. This was done to Yeltsin’s Russia (1993), Latin America (22) after the mid 1980s crisis and after the later1990s crisis in East Asia (23). It was done democratically in Reagan’s America and more recently in Sokorzky’s France.
But the US capital got its big chance after 9/11. Bush took advantage of it to make war on terror a free market, completely for profit enterprise. The administration, as a first measure towards privatizing the government outsourced health care of the soldiers, interrogation of prisoners and ‘data mining’ on American citizens with out so much as by your leave to FASA courts set up specifically for the purpose of allowing the government to spy on its own citizens.
In 2003, the government handed out over 3500 contracts to private companies to perform security work, and by the end of August 2006, the department of Homeland security had given more than 115,000 such contracts (28). (name Blackwater and others) which have immunity from local laws, and US law did not apply to them in Iraq. Weapon contracts and servicing the military is the fastest growing service economy in the world (29).
Humanitarian relief and reconstruction work, after the society and its whole infrastructure has been demolished as in Iraq and Afghanistan, is done by corporations like Bechtel. Another Halliburton reported revenues of $20.00 billion in 2006, in 2006, the bloodiest year for Iraqis, with 3700 casualties in October alone (33).
Wherever the Chicago school policies of Milton Friedman have been applied a powerful alliance has emerged between elite politicians and multi-national corporations, who function under a revolving door arrangement with each other (give examples of Ruben, Paulson Guitner, Mc Namarra, Cheney and so many others).
Torture has been the inevitable partner of the crusade for global free trade, deregulation. CIA calls it ‘coercive interrogation’. It is a set of techniques which disorients prisoners to the extent of disowning their ideas, family and friends. The idea is explained in details in two CIA manuals declassified in late 1990s, on how to create ‘violent ruptures’ between prisoners and their perception of the world.(36). They are deprived of sensory input with hoods, ear plugs, shackles and isolation and then suddenly exposed to glaring light, blaring music, physical assault and electric shocks with cattle prods.
The prisoners are regress so much and so frightened out of their wits that they are no longer able to think rationally (37).
Coups, mass jailing, public torture in football fields (Chile and Afghanistan under the Taliban), killing create an atmosphere of fear which makes people more amenable to listen to and accept what neo-liberals have planned for long.

Post 9/11 north Americans, not known for knowledge or familiarity with the world outside the continental US (relate stories of driving license bureau in NJ which till the 1960s did not know that Pakistan was not a US state, and accepted Pakistani driving license in exchange for a NJ one, or a similar office in MI which did not know the difference between a learner’s license and a full driving license from Canada, or people in MI asking Pakistani doctors in 1970s, if Pakistan had phones) US citizens fell line, hook and sinker for Clash of civilization, the axis of evil and Islamo-fascism, and became a “clean sheet of paper on which the newest and the most beautiful words can be written”, Mao on his people (38).
The 1929 market crash had created an overwhelming consensus that laissez-faire had failed and people started listening to John Maynard Keynes, the intellectual architect of the modern welfare state (39). Friedman had spent his life fighting the idea. He wrote to Pinochet in 1975 “ the major error, in my opinion was to believe that it was possible to do good with other people’s money.
He got a reprieve when Margaret Thatcher (the milk snatcher-she had as secretary for education in PM Heath’s cabinet, had withdrawn the glass of milk provided to students at lunch time) and Ronald Reagan peacefully liberated the markets.
When the Soviet Union collapsed, they also wanted to join the Friedman revolution, as did the communist inside but capitalist outside Chinese, who had had their own shock treatmen6t in Tiananamen square (don’t forget Shock and Awe of Iraq. Napoleon had demonstrators surrounded. Look up short selling- buy insurance on stocks, (burn them when they go down), buy them when they go down, like robbing a grave does not mean you killed the guy).
This fundamentalist form of capitalism has always been inducted through the most brutal forms of collective and individual torture.

(On the "Daily show" last night I heard the woman (can't recall the name) asking a person about 'selling short'. It is apparently akin to getting a heavy insurance on a property and setting it to fire, without the risk of the insurance co investigating and finding signs of arson. She told him that if you are robbing a grave, it does not mean that you killed the guy too.
She also interviewed some one from overstock.com who said that many companies went bankrupt after short sellers got after them. Could you please look into it.
(Since we are linking torture with economic policy, not as random sadism, but as an instrument to cow down the public and make them amenable to acceptance of certain policies, could we give historical examples of Nero, Muslim attack on Iran during Umar's caliphate, Karbala, sack of Baghdad by Mongol hordes, Nadir Shah, Napoleon, gun boat diplomacy, Pearl Harbor and so on, including the last one 'Shock and Awe'. That way we will be able to link religion to economic policy too).
The corporatist alliance has obtained control over Arab oil, taken over disaster relief, security apparatus, jails and other state business privatization, coercion of the third world into accepting IMF conditionalities. But perhaps the greatest achievement is the perception in the common mind that the devastation of Iraq and Afghanistan. Abu Gharaib and Guantanomo are the consequences of the unique incompetence of Bush regime, and not an essential element in a well thought out policy.
To hold an ideology accountable for the acts of its followers is not far fetched. All intolerant, fundamentalist doctrines which reject other belief systems out of hand, deplore diversity and whose avowed objective is to impose what they think is the perfect system are a danger to mankind. The Chicago school shares this trend with extreme religious and racist groups. Bit is difficult to distinguish between the inspiration of the ideology and its distortions like the Taliban for Islam, Sharon for Zionism, Billy graham for Christianity, BJP for Hinduism, and Stalin for communism.
The coups, wars and massacres have not been regarded as capitalist crimes and need to be identifies as such. Co-existence of capitalism with an egalitarian state is possible as Keynes proposed and did exist in Europe (and in a much more diluted form in the USA), till Thatcher started eroding its base. But neo-liberals want to demolish government except to safeguard their interest, and keep ‘law and ‘order. That is not allow the public any forum of protest. This fundamentalist concept of naked capitalism is not compatible with any other system, as Islamic fundamentalism is incompatible with democracy and representative government.

Medical Roots of ‘Scientific’ Torture:
Were laid in the 1950s, by a Montreal psychiatrist, Dr Ewen Cameron, director of the Allan Memorial institute at McGill university. The study was funded by the CIA through a front organization called the society for investigation of human Ecology.(26). The funding continued from 1957 to 1961 They tried to pass it off as bumbling sci-fi buffoonery, rather than accept funding a torture laboratory They destroyed the files of the $ 25.00 million program.(43). Cameron believed that patients with psychiatric problems had to be regressed to infantile/early childhood age by heavier, more frequent and larger than accepted number of electro-shocks in traditional ECT (electro-convulsive therapy) and drug cocktails of psychedelic LSD and hallucinogenic PCP, huge doses of insulin, drug induced sleep, and prolonged sensory deprivation. He gave 300 electro-shocks to victims in stead of the recommended four treatments per patient totaling 24 individual shocks(27). He put patients in isolation boxes (30), soundproofed the rooms, piped loud noises, kept the room dark, put heavy dark glasses on them, put heavy ear muffs, and put cardboard tubing on hands and arms, so they could not touch their body parts (31).They were kept in this state for 15-20 days (31) He also gave one group the drug Curare which paralyses body muscles. Legions of patients with minor psychiatric problems were so dealt with without their consent or knowledge and regressed to soiling their underwear, thumb chewing, baby talk, and in case of prisoners, telling the interrogators whatever they knew or was suggested to them, to the extent of betraying spouses, parents, siblings, friends and their belief systems. He called it ‘de-patterning’ a patient to make a clean slate on which healthy patterns could be inscribed. I did not work that way. (in 1988, CIA settled the case for substantial damages and the Canadian government followed suit four years later. (3).
In the initial days of cold war hysteria in mid 1950s, CIA ed the techniques. It was codenamed Project Bluebird, later changed to MKUltra (13). The program needed large number of human guinea pigs in several trials, and if it got out that CIA were conducting these studies, public outcry would shut the program down. The relationship started with the tri-national conference of intelligence agents and academics at Montreal’s Ritz-Carlton hotel on June, 01, 1951, attended by among others, Omond Solandt, chairman of Canada’s Defense research board, Sir Henry Tizard, chairman of the British Defense Research Policy committee, and representatives of the CIA (18).
One of the participants was Dr Donald Hebb, director of the department of psychology at McGill university. The defense research Board reporting on Hebb’s findings “sensory deprivation clearly caused extreme confusion as well as hallucinations…and significant temporary lowering of intellectual efficiency…during and after…deprivation (20). The subjects “developed an interest in the occult that lasted weeks”. Hebb had proved that it made people “more open to suggestion “ and eventually came to the realization that he could be draft a ‘how to’ manual for psychological torture (23). Hebb knew that the experiments violated medical ethics. He wrote that more “clear cut results were not available as it was not possible to force (large number) of subjects to spend 30 to 60 days in conditions of perpetual isolation (24).

Fear:
In 1998, Florencio Callabero, an interrogator with Honduras’s brutal Battalion 3-16 told the NY Times that the CIA “…taught us…methods to study fears and weaknesses of prisoners…make him stand…don’t let him sleep…keep him naked and in isolation…put rats and cockroaches in his cell (The most notorious case I heard of was during the days of the tussle between ISI and MQM, they put rats in the shalwar of Nasreen Jalil, a member of Mohajir elite ) (to Taqi upto here 3/18/09)…serve him dead animals, throw cold water, change the temperature. Ines Murrillo, a 24 years old woman interrogated by Callabero “…they spread my legs and stuck the wires (for electroshock) on my genitals (44). That led to a hearing of the Senate’s Select committee on Intelligence, where CIA deputy director Richard Stolz admitted that “Callabero did indeed attend a CIA human resources…interrogation course” (46)attend
The Baltimore Sun filed a request under the Freedom of Information Act for the manual used to train people like Callabero. The CIA stalled for 9 years, and produced a 128 page 1963 handbook under threat of a lawsuit called Kubark Counterintelligence Interrogation (47), which details methods from sensory deprivation in stress positions, from hooding to pain and instructs interrogators to seek “prior Headquarters approval”, under circumstances when bodily harm is to be inflicted, or if medical, chemical, or electrical methods are…used to induce acquiescence (48).
The manual has a large section on the experiments conducted at McGill (51). “The (sensory) deprivation induces regression……tends to make …the subject view the interrogator…father figure” (52). “…Adults can be converted into dependent children…” (55). Prisoners are captured in the most jarring… way possible, late at night or in early morning raids…immediately hooded…stripped and beaten…subjected to…sensory deprivation. Then there always is improvisation…instinct for brutality is unleashed when there is impunity e.g. on the Algerian freedom fighters by the French soldiers, often with the help of psychiatrists (58). The French conducted seminars in fort Bragg, NC in the Algerian techniques (59).
1970s on, the Americans favored the role of trainers (61-62). Torture violates the Geneva conventions and the US army’s Uniform Code of Military justice, yet successive US administrations have sanctioned it (63). The manual states on page 2 that the techniques carry “the grave risk of…lawsuits”.
The effects of 9/11 were remarkably similar to the ones imagined in the pages of the manual: profound disorientation, extreme fear and anxiety and collective regression. (page 51). Bush took advantage of the situation by acting as the ‘father figure’. Torture, in addition to being outsourced, was in-sourced as well with US citizens torturing prisoners in US run prisons or being extra-ordinarily renditioned in US planes. The administration openly demanded the right to torture, and defied own laws. GWB empowered Don Rumsfeld to declare that prisoners captured in Afghanistan were not covered by the Geneva conventions as they were not ‘POWs’, but enemy combatants, the view confirmed by the then white house counsel Alberto Gonzales (66).
Rumsfeld approved a series of special practices like using phobias such as fear of dogs, water boarding (67). US citizen and a former gang member Jose Padilla was arrested at Chicago’s O’Hare airport in May, 2002, classified as enemy combatant, taken to a US Navy prison in Charleston SC, injected with drugs, kept in a darkened tiny cell, and could only leave the cell shackled and with black goggles, and heavy headphones, kept like that for 1,307 days, and during interrogations subjected to bright lights and pounding sounds (70).. He “lacks the capacity to assist in his defense” according to the psychiatrist who examined him ((71).
James Yee, a former Muslim Imam at Guantanamo describing the extreme regression “ I would stop to talk to them, and they would talk to me in a child like voice…”(71). HR groups describe Gitmo as the best of off shore US run prisons. Imagination boggles at the treatment meted out to prisoners in US run jails in foreign countries, and worse condition of those who are outsourced to countries like Morocco and Egypt.

Chap 2
The Department of Economics at the University of Chicago regarded itself as a bulwark against the statist Keynesian thought (2). Friedman envisioned a return of societies to pure capitalism, shorn of all distortions like regulation, trade barriers, and welfarism. The only way to cleanse it was through shocks. The core of the ‘sacred’ teaching was that forces of supply and demand, inflation and unemployment were like forces of nature , and existed in perfect equilibrium, and like ecosystems, if left to its own devices, the market would produce at right prices and in right numbers, with workers getting right wages. Capitalism was “a jeweled set of movements…a celestial clockwork…” (5). Not able to experiment on countries Friedman and co, developed elaborate …mathematical equations and computer models.
Like all zealots, the school premise is that the free market is a true scientific system, correct application of which would make individuals working in their own self interest would produce maximum benefit foot every one. Like their Islamic Wahhabi counterparts, strict and complete application of fundamentals would produce a paradise on earth.
It is true, though, that thorough application of the Friedman methods have made some people extremely wealthy, and rendered them above and beyond the reach of regulation, taxation and borders to make more money.
The Chicago school saw interferences in economies in all Western capitalist countries-fixed price, minimum wage, education, which according to them, were doing untold harm to the market equilibrium. Marxism was not the true enemy (Atheists are not the worst enemy, it is non-conformist Muslims, according to Wahhabis), it was the social democrats (Europe) and Keynesians (USA) and developmentalists (third world). Capitalism in manufacture and distribution, socialism in education and state ownership of water and welfare services was akin to what Wahhabis call “bidaah”, innovation in religion.
Friedrich Hayek was Friedman’s own guru, and had warned that any involvement of government in economy would lead to “road to serfdom” (11). In 1947 Friedman joined Hayek to from Mont Pelerin society, a free market club, named after the town in Switzerland.
The Great depression did not signal the end of capitalism, but as Keynes had predicted, the end of “laissez-faire”.
Post WW II, the third world nationalist economists argued that in order to escape the poverty consequent upon depredations of colonial exploitation and non-development of industry in order to be reduced to the status of a captive market, they would have to pursue an industrialization strategy, and not depend upon export of natural resources, and advocated regulation, nationalization and tariff barriers.
By 1950s, the developmentalists had achieved major successes, especially in the ‘Southern cone’ of Latin America-Chile, Argentina, Uruguay and Brazil. UN Economic Commission for Latin America, base in Santiago, Chile and headed by the economist Raul Prebisch between 1950 and 1963, was the inspiration and epicenter. Argentina’s Juan Peron ( and other leaders a little less vigorously) poured money into public infrastructure projects, gave generous subsidies to local business and erected high tariff walls to protect them.
Powerful unions emerged in the new industries, and negotiated salaries and sent their children to school. By mid 1950s Argentina had developed the largest middle class in the continent, Uruguay had 95% literacy and offered free health care to all.
Chicago School had few takers, but they were among the most powerful.
US MNCs had a rough time in the LDCs, and not much better at home with powerful unions. Profits were high, but a substantial portion had to be given away in taxes and worker salaries. MNCs kept the Chicago School flush with donation money, to give an academic cover to corporate views. Friedman had specifics of advice. Taxes must be low and flat-not income related. Corporations should be able to sell any where, there must not be any protection to local industry or any conditions of local ownership. All prices and wages to be determined by the market, no minimum wage. All-health care, education, post office, pensions, national parks, and water supply be privatized, so state public assets could be auctioned at a fraction of their value. That coincided with the interests of MNCs as it was meant to be.

The War Against Developmentalism:
Eisenhower could not take on the New Deal at home, but did not have any hesitation in defeating the developmentalists abroad.
At the time he assumed presidency in January 1953, Mossadegh was the PM of Iran and had nationalized the oil industry. Soekarno of Indonesia was trying to launch a non-aligned movement to be able to face the capitalist and communist world on equal terms.
In actual fact, for the time when socialism was very attractive, this movement was centrist. But the developmentalist slogans of land reform, nationalization and egalitarianism had alienated the feudal and MNC interests.
The imperial and MNC interests ordered the foreign policy establishments to control the trend, and they tried to divide the third world that democratic center was the first step into the claws of communism. The chief ideologues of the policy were dyed in the wool conservative Dulles brothers-john foster at the state and Allen at the CIA, who had represented J.P Morgan, the International nickel co and the United Fruit co at the legendry NY law firm Sullivan and Cromwell (18).
They staged two coups in quick succession, the first in Iran in 1953, where the CIA orchestrated the overthrow of Mossadegh, through the army and ayatollahs. The second was the 1954 CIA coup in Guatemala, aided and abetted by the local clergy, for the benefit of the United Fruit co. President Jacobo Arbenz Guzman had had the temerity to take over some unused land with full compensation, to transform “…feudal economy into a modern capitalist state” (19).
In 1953, two Americans, Albion Patterson, director of US International Cooperation Administration (soon to be USAID) and Theodore Schultz, Chairman department of economics at the U of Chicago, met in Santiago, Chile and decided “What we need…change the formation of these men -pink economists, (20) and want these countries to work out …by using our way…economic development (21). The plan was simple-the US government would pay for Chilean students to study in the Chicago school, and the professors of the school would be paid to conduct economic research on the ground in Chile.
Albion Patterson approached the dean of the premier University of Chile. The dean turned him down. (US aid workers were conscious and US scholarship holders, perhaps, unwitting agents of the capital). Patterson got his way with a lesser institution, the Catholic university, thus giving birth to “the Chile project” as it came to be known at the Chicago school.
Between 1957 and 1970, 100 Chilean students studied at the school, all expenses paid by US tax payers. In 1965 the program was expanded to include students from all Latin America, especially from Argentina, Brazil and Mexico, this time funded through the Ford Foundation, leading to the Center for Latin American Economic Studies at the school, which hosted 40-50 Latin American students at given time, compared to 4-5 at Harvard/MIT.
A special Chile workshop was created by the head of the program, one Arnold Harberger. All of Chile’s policies-social safety net, and protection of national industry, trade barriers, price control were deemed obstacle, and its health and education program “absurd attempts to live beyond its underdeveloped means”.
With generous USAID, the Chicago boys became enthusiastic ambassadors of neo-liberalism over the whole continent (30).
This was unabashed intellectual imperialism par exellance.
In 1962, Brazil under president Joao Goulart moved to land reform, higher salaries, and to force foreign MNCs to reinvest a percentage of profits into Brazilian economy. In Argentina, the military was trying to defeat similar demands by banning Juan Peron’s party. In Chile’s 1970 election, all the three major political parties were in favor of nationalizing the country’s largest source of revenue, the copper mines controlled by US corporations (33). Salvador Allende had won the 1970 elections on the platform of nationalizing large segments of economy run by local and foreign corporations. Allende was a democrat, who believed that social change should come through the ballot box. On hearing the news of Allende’s election, Nixon ordered CIA director Richard Helms to “make the economy scream” (35).
US MNCs were apprehensive that Allende was the beginning of the end of US control over Latin American economy. By 1968 20% of total US foreign investment was in Latin America. The profits were astounding. Mining industry had invested $ 1 billion, but had sent home $7.2 billion (37).
US corporations declared war on Allende even before his inauguration. The leader of the group Ad hoc committee on Chile was ITT which owned 70% of Chile’s phone co, and joined by US mining companies, Bank of America, and Pfizer Chemical.
The plan was to block US loans and …have large US private banks do the same, delay buying from Chile for six months (39).
Allende appointed a close friend Orlando Letelier as ambassador to DC and in charge of negotiating with the corporations. In March, 1972 a syndicated columnist jack Anderson published aeries of articles that ITT had conspired with the CIA and State to keep Allende from being inaugurated in 1970. The US senate launched an investigated and found that ITT had offered $ 1 million to the opposition and “sought to engage the CIA…manipulate the outcome of…election (41). The report released in June 0973 found that there was relationship between ITT and US government, including NS adviser Henry Kissinger (42).
It all failed to dent Allende’s support. In the mid term election Allende’s party won more support in the parliament than it had in 1970.
They studied two models for regime change in Chile. In Brazil US backed military junta had seized power in 1964. They had tried to impose the neo-liberal agenda relatively peacefully, but when people took to streets, they instituted widespread torture. According to the truth commission established later “killing by the state became routine” (44).
Indonesia was the other model. Sukarno has enraged the West by redistributing the wealth, protecting the country’s economy and throwing out the IMF and the WB. CIA had received instructions from high levels to “ liquidate President Soekarno…” (45).
In October 1965, General Suharto seized power, and with the help of lists prepared by CIA and arms and field radios supplied by the Pentagon, sent his soldiers to kill leftists. The more indiscriminate killing was delegated to religious students trained by the military (48) which they did with relish. In just one month between half to one million were killed (49).
Extraordinary role was played by Indonesian economists trained in Berkeley. The Berkeley mafia had begun training in the US under a program started in 1956, which was funded by the Ford foundation.
The mafia leaders became leaders of campus groups and worked with the military in overthrowing Sukarno.(52).
Suharto packed his cabinet with the members of the Berkeley mafia (56).
The Berkeley mafia were not such anti-state radicals as the Chicago boys, and believed the government had a role to play in providing basic necessities like rice and managing the local economy. But they passed laws allowing foreign companies to own 100% of the country’s mineral and oil resources, awarded tax holidays and with in 2 years copper, nickel, Oil, rubber and hardwood had been captured by Macs.
Suharto, unlike the Brazil junta, had shown that brutal repression applied preemptively could send the country into shock and resistance wiped out, even before the ‘reforms’ were put into effect. It transformed Indonesia into one of the best hosts for MNCs.
In Chile opponents of Allende imitated the Indonesian example in an eerie fashion. The Catholic university became the base for creating a “a coup climate” (59), with many students joining the fascist Patria y Libertad. In September 1971, the top business leaders, members of National Association of Manufacturers held an emergency meeting, generously funded by the CIA and MNCs and decided that “Allende’s government was incompatible with freedom…private enterprise…the only way was to overthrow…”(60).
Over 75% of the funding… was coming directly from CIA (73).
Orlando Letelier saw the coup as an equal partnership between the army and the Chicago boys(66).

Chap 3
Allende refused to organize his supporters into armed defense leagues.
Chile had heretofore enjoyed 160 years of democratic rule..
US trainers had indoctrinated the Chilean military into an anti-communist obsession, brainwashing them into thinking that socialist were Russian spies (Americans think that Socialism is some kind of affliction , and shy away from national health care, they desperately need when some one tells them it was socialism).
Allende died after died in the air and ground attack, where 24 rockets were fired for the 36 supporters inside the president’s house (3). The members of his cabinet were arrested.
The generals knew that their hold on power depended upon terror. 13,500 civilians were arrested (5). Thousands ended up in the Chile Stadium and the huge National stadium in Santiago (like the Taliban trials in football stadium in Kabul later on). Hundreds were executed. More than 3200 were disappeared, and 200,000 fled the country.
For the Chicago boys 9/11/73 was a day of giddy anticipation. On the day of the coup, they were camped out at the printing presses, frantically trying to get the document called “The Brick” for the junta’s first day on the job. The document had the free market trinity in Friedman’s Capitalism and Freedom-privatization, deregulation and cuts to social spending. The Economist would describe it as the first concrete victory…to seize back the gains that had been won under developmentalism and Keynesianism (10).
Pinochet knew next to nothing about economics. There was a power struggle in the junta between those who simply wanted to reinstate the pre-Allende status quo, return to democracy, and others who were pushing for full Chicago treatment. Pinochet favored the latter (13). He immediately named the Chicago boys to senior economic posts. Economics meant forces of nature (14).Pinochet privatized some state owned companies, , allowed speculators in, opened the borders to foreign imports, tore down barriers that had protected Chilean manufacturers, cut government speeding by 10% (not military),and eliminated price controls.
In 1974 inflation reached 375% nearly twice that under Allende (17).
Chicago boys argued that the policy was not being applied strictly enough.
The only people benefiting were foreign companies and a small clique local financiers called ‘piranhas’ who were making a killing in speculation. The man who had brought the Chicago boys into the coup plot Orlando Saenz “one of the greatest failures of our economic history (18).
Chicago boys and the ‘piranhas invited Friedman. He was received like a rock star. He assured Pinochet that if he followed advice-cut government spending by 25% with in six months and adopt policies towards ‘complete free trade’, economic miracle will come (23-24).
Pinochet was converted. They cut and cut again, public spending till in 1980, it was half of what it had been under Allende (27). By mid-1980s, manufacturing fell to WW II levels (31).
In the first year of the shock therapy, the economy contracted by 155, unemployment 3% in Allende time, reached 20% and lasted for years (33-34).
Andre Gunder Frank, a U of Chicago economics PhD, went to Chile to see things for himself and wrote an angry letter to Friedman. Roughly 74% of the’ living wage’ as claimed by Pinochet, went simply to buying bread, forcing families to cut on milk and bus fare to work. Under Allende bread, milk and bus fare to work took 17% (39) of a public employee’s salary. He wrote that Friedman’s prescriptions were so cruel they could not “be imposed …without…military force and political…terror” (41).
Public school system was replaced by vouchers and charter schools, and the social security system was privatized (42).
In 1982 Chilean economy crashed, it faced hyperinflation, and unemployment hit 30%, and the piranhas had bought up country’s assets on borrowed money to the tune of $ 14 million (47). Pinochet was forced to nationalize many of the companies (48).
What saved Chile from complete collapse was that Pinochet had never privatized Codelco, the state copper mine co nationalized by Allende. The co generated 85% of Chile’s export revenues (49).
Chile under Chicago boys was not a capitalist state, but a corporatist one. By 1988, when the economy had stabilized, 45% of the population had fallen below the poverty line (50). The richest Chileans had seen their incomes increase by 93%. Out of 123 countries in the world, Chile was 116 in inequality (52).
The pattern would repeat from Russia to South Africa to Argentina.

Brazil was already under control of a US supported junta.(54). The military had staged a coup in Uruguay in 1973. In Uruguay, a previously egalitarian society, real wages dropped by 28% (56).
In 1976, a junta seized power from Isabel Peron.(to ed up to here)
It did not privatize oil or social security. Though they landed several posts, the top economic job went to Martinez de Hoz, a feudal landowner, who went on to do the usual things, banned strikes, allowed employers t o fire workers at will, opened the country to foreign speculators, privatized and sold hundreds of state companies (59).
With in a year wages lost 40% of their value, poverty spiraled, factories closed (62).
The generals wanted to avoid suffering a…campaign…has been unleashed against Chile (63). They relied more on ‘disappearances’ (64). That turned out to be not only low profile, but more effective as well.(64). By the end of their reign 30,000 had been disappeared (65). The cattle owning junta introduced a most sadistic innovation-prisoners were put on metal beds called parrilla (barbecue) and electric current passed through the frame. They were also subject to the picana (electric cattle prod) (78).
Those hunted by various juntas sought refuge in neighboring countries. Washington provided state of art computer system for the collaborative effort of the regimes called ‘Operation Condor’ eerily similar to later CIA rendition network. (70).
A 1975 US senate investigation of US intervention in Chile revealed that the CIA had provided training to Chile’s military in ‘controlling subversion’ techniques (72-School of Americas).Similar training offered to Brazil-an American police officer Dan Mitrione took beggars off the streets and tortured them in classrooms (73). Mitrione then moved to Uruguay, where he met the fate he so well deserved-abducted and killed by Tupamaro guerillas (74).
Argentina’s legendary investigative reporter Rofoldo Walsh was then living in Argentina. He had intercepted and decoded the CIA telex which had informed Fidel Castro of the Bay of Pigs invasion plans, and helped him prepare for it. Walsh joined the armed Montonero movement. He wrote “An open letter…to the military junta”. “you only have to walk around …Buenos Aires…the speed…such a policy transforms the city into ‘a shantytown’ of ten million people” (81). He signed the letter 03/24/1977. The next morning, he was enticed into a well laid trap, killed his body burned and dumped into a river (82).
In the run up to Chile’s coup, the CIA had funded a massive campaign (Pinochet had been very obsequious of civil leaders, as Zia had been of Bhutto) to depict Allende as a dictator in disguise, on the verge of imposing a soviet style state. In Argentina and Uruguay, the guerillas were presented as such perilous threats that generals did not have any choice, but to take over. US government’s own intelligence reports showed that Allende was no threat to democracy (84).
The National Security Archive in DC released declassified minutes of a meeting held 2 days after the Argentinean coup, in which William Rogers told Kissinger “we…got to expect…a good deal of blood…they…come down very hard on…trade unions and their parties” (86).
The vast majority of the juntas were not armed groups, but non-violent activists (unable to defend themselves as armed groups could-and so favored targets).

Chap 4
In 1976, Orlando Leteliar, once Chilean ambassador to the US under Allende, escaped jail in Chile and arrived in DC, and joined the Institute for Policy Studies, a progressive think tank. He was horrified by the fact that though the world condemned the tortures and executions, yet kept on flooding the junta with loans. He vehemently rejected the separation of tortures from free market creed, and regarded the former as a Chicago school tool. In a searing essay for the Nation, he wrote “this particularly convenient concept of a social system, in which ‘economic freedom’ and ‘political terror’ coexist without touching each other (Zia’s Islamization in Pakistan coexisted with hundreds of arrests, tortures and the crowning achievement-raped women were jailed for having committed adultery). He continued “establishment of a free ‘private economy’ and the control of inflation a la Friedman, could not be done peacefully”.(4).
The article was published at the end of august 1976. On September 21, 1976, he was blown off with a remote control bomb planted under the driver’s seat of his car (The assassin Michael Townley was a senior member of Chile’s police, and had been admitted to the US on a false passport with CIA’s help (6).
On December 11, 1946…the UN General assembly passed a resolution…unanimous vote… genocide “when racial, religious, political and other groups have been destroyed, entirely or in part…” (13). The word ‘political had been excised from the H.R Convention
Two years late at Stalin’s insistence.(14).
In order for the ideal (Friedman’s) to be achieved, there has to be a monopoly on ideology, otherwise the signals get distorted and the whole system thrown out of balance (just like Wahhabis).
By the sixties and early seventies, the left was the dominant culture in Latin America-the poet Pablo Neruda, folk musicians Victor Jara and Mecedez Sosa, the dramatist/theatre Augusto Boal, and the journalists Eduardo Galeano and Walsh, the legendry heroes from Jose’ Gervasio Artigas to Simon Bolivar. The dominant metaphor of the juntas was an echo of the third author Alfred Rosenberg’s call for “a merciless cleansing with an iron broom” (22-an exact parallel of the Muslim and Arab countries in fifties and sixties, with Mossadegh in Iran, Awami League and NAP in Pakistan, Soekarno in Indonesia, Ahmad ben Bella in Algeria, Nasser in Egypt-with the same fate).
In Chile, Argentina and Uruguay, they burnt books by progressive/nationalist writers (as they did in Afghanistan under Taliban and are doing in Swat in Pakistan and will do it in the rest 0f the country in short order once they or JI/Imran get their hooks on power). Hundreds of professor fired (Taliban go the full hog, they burn universities), dozens arrested and some killed 24-25). Under ‘Operation Clarity’ 8,000 leftist educators were purged (27). The singer victor Jara had his both his hands broken, then he was shot 44 times (29-Hasan Nasir in Lahore Fort).Augusto Boal was tortured, exiled and finally murdered.
In Brazil, though the junta did not start off with mass repression, but they did arrest the leadership of trade unions, they “feared the spread of resistance…from labor unions to…economic program…based on tightening salaries…and denationalization” (32). The operations were planned well in advance of takeovers. In 1976, 80% of Chile’s political prisoners were workers and peasants (34).
‘Terrorism’ was a smoke screen to go after non-violent workers The solders…printed leaflets they signed ‘Montoneros’ calling on workers to strike, and used them as ;proof; to kidnap and kill the union leadership 936).
Several MNCs expressed their gratitude, Ford took out celebratory advertisements openly aligning with the Argentina regime.(38). In Brazil, several MNCs got together to finance their own torture squads (OBAN, Operation Bandirantes (39). The role of ford was the most overt. It supplied green Ford falcon sedan which became synonymous with kidnappings and disappearances-a Death Mobile (40).
Before the coup, ford had to make significant concessions to its workers.. all that changed abruptly on the day of the coup. “It looked like we were at war in Ford and it was all directed at…workers” (42). Ford used this to eliminate unionism in the factory (43-All MNCs used outsourcing to suppress unions, and the best chance was the 2008-09 financial meltdown). Soldiers took workers, not to a prison, but to a detention facility set up inside the factory. Workers were beaten and electro-shocked (44).
In 2002, federal prosecutors filed a complaint against Ford Argentina, on behalf of workers, as well as Mercedes-Benz from whose 16 workers were disappeared, 14 permanently as it is alleged, the management collaborated with the military and gave names and addresses of union leaders (48).
Particularly brutal were the attacks on farmers who were involved in the campaign for land reform. The junta’s economic policies were a windfall for landowners and cattle ranchers. The price of meat went up by 700%. (50).
Community leaders were the target in the slums.
A priest who collaborated with the junta in Argentine said “the enemy was Marxism…” (52).
High school students who, in September 1976, asked were attacked. Six were killed.
The pattern of disappearances was indicative of an attempt to remove all relics of collectivism.
Victor Emmanuel, the Burson Marsteller executive in charge of selling the junta’s business friendly regime told the author Marguerite Feitlowitz “a lot of innocent people were killed, but given the situation, immense force was required.
And it worked. Chilean psychiatrist Marco Antonio de la Parra said “we were confused…docile…waiting for orders...people regressed…became…fearful” (58). People coped…feeding their babies mate , a tea which suppressed hunger.

Torture as healing:
Many torturers adopted the posture of doctors and surgeons.. they would heal them of the sickness that was socialism. The treatment was agonizing , might even be even be lethal, but it was for the patient’s good. Pinochet demanded “if you have gangrene…you have to cut it off (60-the story of a village quack in Pakistan. He gave a strong purgative to a patient. The patient got weak. He kept on giving the same, till he died. The relatives demanded an explanation. The quack said “he had so much toxic material inside, that he died in spite of taking out so much. Imagine what would have happened if it had all been left inside).
For most Latin American leftists, solidarity as the Argentinean historian called it was “the only transcendental theology”. Torturers set out to excise the impulse of social connectedness, in achieving betrayal, and suppression of the impulse to help others, rather than information, which in most cases, they already had.
Prisoners were offered the Faustian bargain in the interval between beatings, to choose the torture for another prisoner, or to hold the picana on another prisoner or denounce beliefs on TV.
Friedman likened his role in Chile to that of a physician who offered “…medical advice…to…end …a plague”(66). It was the same construct which allowed Nazis to kill ‘diseased’ members of the society. The Nazi doctor Fritz Klien said “The Jew is the gangrenous appendix in the body of mankind” The Khymer rouge used similar language (67).

Children:
Five hundred babies born in Argentina’s prisons were enlisted to create a new breed of model citizens (69).
The US, Canada and Australia conducted mass thefts of children of indigenous people, sent to residential schools, forbidden to speak their language and brain washed into ‘whiteness’. The Galarias Pacifico is an uipscale mall in Buenos Aires, full of Christian Diors like stores courtesy of Chicago school, built on the secret torture chambers, as the older form of capitalism was built on mass graves of the indigenous people.

Chap 5:
Students of the U of Chicago were disturbed by their professors collaboration with Chile’s murderous junta. Gerhard Tintner, an Austrian economist who had fled European fascism to the USA in 1930s, backed their demand for an academic investigation. He drew parallels between Friedman’s support of Pinochet to the technocrats who had collaborated with the Nazis. (4).
Friedman took credit for the work the Latin American Chicago boys had done. In Newsweek, in 1982 “the…boys combined…intellectual…ability with the courage of their convictions…and dedication to implementing them…” (5).
Friedman claimed that Pinochet tried to run the economy on his own for two years, then turned to the Chicago boys. That was untrue. The boys had been working with the military even before the coup.
Friedman was awarded the 1976 Nobel Prize for economics for his work on the relationship between inflation and unemployment. In his acceptance speech, he completely ignored the fact that the hypothesis for which he was getting the prize had been proven false by the breadlines, typhoid outbreaks and closed factories in the one country which had been ruthless enough to put his ideas into practice (10-as
did the Nobel committee).

Human rights:
The Chicago School refused to acknowledge any connection between the economic policies and the use of terror. The acts of terror were framed as “human rights abuses”, rather than as instruments of political and economic policy. By focusing purely on the abuses, and not the reasons behind them, the HR movement helped the Chicago school escape the opprobrium generated by its first bloody laboratory. In 1967, it was revealed that the International Commission of Jurists, the preeminent HR group focussed on soviet abuses, was being secretly funded by the CIA (12).
It was in this context that Amnesty International decided that its financing would come exclusively from members (13). Amnesty’s position, emblematic of the HR movement as a whole that since HR violations were a universal evil, it was not necessary to determine why they were occurring, but only to document them as meticulously as possible.
Amnesty’s 1976 report on Argentina deserved the Nobel Prize it got, but shed no light why on why the abuses were occurring.(14). Another omission was that it concentrated on the conflict between the military and the left wing extremists, with not a word on role of CIA, local landowners or MNCs.

On Ford:
For many HR groups besides Amnesty, the reason for reticence was that he most significant funding came from the ford Foundation which spent $ 30 million on HR in 0970s and 80s, the beneficiaries included Chile’s Peace Committee and America’s watch.(15). Ford Foundation was the primary funder of U of Chicago’s Latin American Economic Research and Training, and also financed the parallel programs at the Catholic University in Santiago, which was designed to attract economics students from neighboring countries(18).
This was the second time that Ford foundation’s protégés had chosen a violent route to power, the first being the Berkeley’s mafia in Indonesia. Ford had built the department of economics of the university of Indonesia, and nearly all the economics trained in the program were recruited by Suharto.(20).
The Chicago boys and the Berkeley Mafia came to dominate two f the most brutal regimes in the world. In the 1970s Ford decided to transform itself into the leading financier of HR in the third world. And it defined HR in narrow terms., and favored groups which pursued legalistic struggles for ‘rule of law, ‘transparency and ‘good governance and avoided politics, as one Ford officer put its attitude in Chile “how can we…not get involved in politics” (21). In the fifties Ford Foundation often serves as CIA front organization, channeling funds to anti-Marxist organization, documented by Frances Stoner Saunders in the book The Cultural Cold War. The foundation was started in 1936 with donations of stock by Henry and Edsel Ford, and another Ford executive, its divestment of Ford stock not completed till 1974, and had Ford family members on board till 1976 (22).
The Foundations decision to work for HR, but not get involved in politics, made it impossible to look into the underlying cause of the violence it was documenting. Only one HR group Brasil: Nunca Mais declared that repression and economics were a single unified project “since the economic policy was…unpopular, it had to be implemented by force” (23).
The economic model took deep roots. The secret torture centers were eventually destroyed, soldiers returned to barracks, but the economic program continued.
Torture crops up whenever a local or foreign ruler lacks the consent to rule-US and Saddam in Iraq, the French in Algeria and the Israelis in Gaza/West Bank and so on. It is not so reliable in extracting information, but very effective in crushing resistance.
Simone de Beauvoir writing about women raped and tortured in prisons in Algeria “to protest in the name of morality against ‘excesses and ‘abuses’ is an error which hints at active complicity. There are no ‘abuses’ or ‘excesses’ here, simply an all pervasive system.(24).
There is no humane way to rule people against their will, just as there is no gentle way to occupy…against …will. Neo-liberalism is an inherently violent ideology.
By failing to hold the ideology accountable for the crimes committed…this subculture if ideologues was given immunity…

An armed conflict between nations horrifies us. But the economic war is no better…And its ravages are no less terrible…We think nothing of the other because we are so used to its deadly deeds. M.K. Gandhi. “Non-Violence-The Greatest Force” 1926

Chap 6 Thatcherism: Saved by A War
After returning from a visit to Chile, Friedrich Hayek, Friedman’s guru, wrote to Margaret Thatcher to use Chile as a model to transform Britain’s Keynesian economy.
In a private letter in 1982, she wrote a private letter “…in Britain with our democratic traditions…the measures adopted in Chile are quite unacceptable. Our reforms must be in line…our traditions and constitution…the process may seem painfully slow. (2).
Thatcher was in the third year of her first term, highly unpopular, and the political establishment of her party was forlornly looking into defeat in the next elections, which must be called with five years of the last one.
The Latin American experience had generated great wealth for a few. Western countries had far more assets which could be privatized to pass control to the elite.
In 1981, the Fortune magazine ran an article the ‘glittering luxury filled shops’ in Chile, with nary a mention of the explosion of shanty towns (3).
Friedman and co had been disappointed that Nixon, who had helped the Chicago boys overseas, had taken a different line at home (4). In 1971, US economy was in a slump, with high unemployment and inflation. Nixon could not risk the Friedman formula, the US army would be loath to bomb the Houses of Congress, so he put price controls on such things as rent and oil. Friedman raged: of all the ‘distortions’ price controls were absolutely the worst, “a cancer…” (6).
Nixon was reelected with 60% of the popular vote, and proceeded to impose environmental and safety standards in industry. The worst cut of all, he declared “we are all Keynesian now”(9).
For Friedman it was a stark lesson. For him capitalism was synonymous with freedom, yet only dictatorships were ready to put unadulterated free market doctrine to practice-Chile, Argentina, Bolivia, Indonesia and China (11).
Stephen Haggard, a neo-liberal scientist at the University of California conceded that “ some of the widest ranging reforms in the developing world were undertaken following military coups or one party sates (Mexico, HK, Singapore, Taiwan” and “good things-democracy and market oriented economic policy-did not always go together (12).
Policies that directly redistribute land and raise wages, not trickle down economies, are in the self interest of the majority.
Friedman believed passionately (after Adam Smith) that humans are governed by self interest and society works best when self interest is allowed to govern almost all activities, except when it comes to voting. Since most of the people are poor, it is in their ‘short term interest’ to vote for candidates promising to redistribute wealth (13).
Thatcher was attempting the “ownership society. The government owned cheap housing called council homes were filled with people who would not vote for her party. She offered strong incentives to residents to buy the flats at reduced rates. More than half of the new owners became Tory voters (15), while those who could not afford to buy faced rents twice as high as before.
By 1982, the number of unemployed and inflation had doubled (16). Her personal approval rating went down to 25%-lower than for any British PM in history, and her party’s to 18% (17).
It was a bad time for the Wall Street in the early eighties, the terrorist regimes, starting with Iran-Nicaragua, Peru, Ecuador, Bolivia- in 1979 had started collapsing-Samuel Huntington’s third wave of democracy (18). The Islamic regime, not yet the full blown authoritarianism, had nationalized the banks, imposed import and export controls and introduced land reforms ( 20-its core support, besides that from the clerical establishment, was from Bazaaris and the left/progressive elements. The shah, though he had derived his support from the landed class, the army and above all from the US. CIA had reportedly more employees in Teheran, than they had in Langley. Iranians kept on discovering ‘listening posts’ all over Iran for years, though they were able to ‘discover’ most of them after painstakingly putting back together the shredded documents, they had got hold of when they took over the US Embassy).
Falklands/Malvinas war:
On 04/02/1982, Argentina invaded Falkland Islands. Neither country had much interest in it. Argentine writer Jorge Luis Borges the dispute as “a fight between two bald men over a comb” (20). But it was a godsend for the free-market project as a political cover for a the radical capitalist transformation.
Both sides wanted a war. Argentina’s economy was collapsing under its debt and corruption. A new junta under General Leopoldo Galteiri found that anti-imperialist sentiment was more powerful than the one against suppression of democracy.
Thatcher, who had cut grants to the islands and major cutbacks in the Navy, which would affect the ships guarding them, was “practically an invitation to Argentina to invade” (21).Labor MP Tony Benn in Financial times “not only the pride of Argentina is involved…perhaps even the survival of the Tory government in Britain (22).
Neither Britain not Argentina made any serious attempt to come to terms peaceably. The shouts “Ditch the bitch” changed “Up your junta” (24). Thatcher’s poll numbers more than doubled from 25 to 59%, and she won a decisive victory in the following year (26).
The British codename for the war was ‘Operation Corporate’, perhaps chosen deliberately by Thatcher. In 1984, the coal miners went on a strike. Past PMs had not dared to take on the miners. Thatcher declared “…we now have to fight the enemy within…much more dangerous to liberty (27). The police attacked the miners, the injuries climbed into thousands, and Arthur Scargill militant president of the miners union moaned of “the most ambitious counter-surveillance operation ever mounted in Britain” (28). The cost was enormous-three thousand extra policemen a day-Colin Taylor, an acting police sergeant called a “civil war”. There was no inclination to bargain, the sole agenda to break the union. It was reminiscent of Reagan sending 11,400 air-traffic controllers home, and had the same effect of cowing down other trade unions.
Between 1984-88, the British government privatized British-Telecom, Gas, Airways, Airport Authority, Steel, Rail and sold its shares in British Petroleum. (Bush could only privatize security, war and reconstruction, as all else had already been privatized). She provided the first Chicago School style of selling a country without a dictatorship.
In 1982, Milton Friedman wrote a paper “Only a crisis, real or perceived-produces a real change…our basic function is: develop alternatives…until the politically impossible becomes politically inevitable (33). Cris9i are, in a way, democracy free zones.
Leftists, especially communists have long thought that hyper-inflation, by destroying the value of money, takes the masses…to…the destruction of capitalism (35), much as evangelical Christians calibrate signs of the coming Rapture. The Chicago School picked up the Bolshevist idea that crashes could spark right-wing coups too-the crisis hypothesis (36). Friedman and his corporate patron had tried to mimic the victories of Keynesians in the New Deal. They built up right-wing think tanks, like the Heritage foundation and CATO, but the most ignorant indoctrination vehicle was a the ten part PBS series ‘Free to choose’ underwritten by Getty, Oil, firestone Tire and rubber co, Pepsi, GM, Bechtel, General Mills (37).

Chap 7
In 1985, Bolivia was getting a chance to elect its president, after 18 years of dictatorship in the last 21 years.
But the victor would be faced with a debt-interest higher than the entire national budget. In 1984, Reagan had pushed it over the edge by financing an attack on cocoa farmer, which turned a large section of the country (Chapare) into a military zone, and cut off roughly half the country’s export trade. NY Times “…less than a week after the occupation of Chapare, the country was forced to cut the official value of the Peso by more than half, inflation went up ten times, and thousands started leaving the country to neighboring ones for jobs (3).
At the time of the presidential race between former dictator, Hugo Banzer and a former elected president victor Paz Estenssoro Inflation was 14,000%. Banzer’s team, sure of victory engaged the upcoming star of Harvard’s economic department, 30 year old Jeffrey Sachs to develop an economy policy. Sachs had no experience in developmental economics (4).
Sachs had been influenced by Keynes on the connection between hyperinflation and fascism in Germany after WW I. The country had an inflation rate of 3.25 million % in 1923, unemployment rate of 30% and the rage over war reparations.
Keynes had warned that “there was no subtler, no surer way of overturning the basis of a society than to debauch the currency…” (5). Sachs shared the view. But he was also a product of Regan’s America, and Friedman’s philosophy that free market was supreme had overtaken all Ivy League schools, including Harvard (7). He was convinced that Bolivia suffered from ‘Socialist Romanticism’ (8). But he parted from Chicago in that he believed free market policies have to be by debt relief and aid. The core tenet of Keynes is that countries in economic recession should spend out of it. Sachs took the opposite view-austerity and price increases, the recipe that Business Week had called “Dr Strangelove world of deliberately induced depression” in Chile (9).
Sachs proposed raising the price of oil ten times, and several other price deregulations and budget cuts.(10).
Banzer was sure of victory, but Paz had not given up. Bolivians believed that though no socialist, he was no neo-liberal.
One newly elected senator ended up playing a key role in the final selection of the president by the congress. His name was Gonzalo Sanchez de Lozada (known as Goni), who had lived in the US for a long time, was the wealthiest businessman of Bolivia, and had studied at the University of Chicago, though not economics, but was influenced by Friedman.
On 08/06/1985, it was Paz who was appointed the president, and appointed Goni as the chair of a top secret bipartisan emergency economic team. This group would go further than Sachs, and proposed dismantling the entire state based economic model.
For 17 days the team holed up in the living room of Goni(15). They were in a hurry. They wanted to catch the militant unions and peasant groups off guard. Goni recalled “Paz kept saying , if you are going to do it . do it now. I can’t operate twice (16).US ambassador to Bolivia at the time, Edwin Corr, recalled that he had made it to all politicians, that the only way US aid will flow, if they adopted the shock route.
Bedregal, the planning minister offered a draft of shock program, calling for the full shock treatment-elimination of food subsidies, canceling price controls and 300% increase in the price of oil (17), freezing government wages to already low levels, deep cuts to government spending, and open door to unrestricted imports, downsizing state companies.
The idea that policy change should launched like a military attack is a recurring theme. Bush’s Shock and Awe: Achieving rapid dominance, the US doctrine published in 1996, which took practical shape in the 2003 invasion of Iraq “seize control of the environment and paralyze…adversary’s perceptions…that the enemy would be incapable of resistance. (20). Economic shock works on the same theory. Surely one of the reasons of the Iraq war to capture the country’s assets and force the free market dogma on it.
Paz’s economic team bundled the entire revolution into a single decree DS 21060, on the lines of “The Brick” for Chile.
His cabinet was kept in the dark, while all the preparations were being made.
With in two years inflation was down to 10%, But all social cost was shifted to the poor, according Ricardo Grinspun, professor of economics specializing in Latin America at York University. (page186). Real wages were down 40% in 2 years, per capita income went down from $845 to $ 789, but that does not take account of enormous wealth the elite acquired, and which is counted in calculating the per capita income. For example the average peasant was earning only $140 a year, not $789 (25). It also does not take into account the thousands of kids who got a piece of bread and a cup of tea a day (26). Hundreds of thousands of full time jobs were eliminated (27).
One significant effect of the push to free market was that many of the desperately poor workers of Bolivia were driven to Coca farming (29), by 1989, one in ten was involved in coca industry (30).This industry played a significant role in reviving Bolivia’s economy(31). Two years down the line coca was generating more income than all other exports combined, with an estimated 350,000 people dependent on the trade for their living(32).
But thanks to Sachs, “shock therapy had shaken off the stench of dictatorship and death camps”, this from NY Times. In Bolivia, this had been undertaken under a ‘center-left’ government of Paz.(38).
But Paz had no such mandate, it was a backroom deal, imposed abruptly
Free Market economist coined the term “voodoo politics” fit it, others called it lying (39).
As soon as the decree was announced, thousands demonstrated, riot police raided union halls, tanks ran through streets, 15,000 arrested, and shelled with tear gas (41). Top 200 union leaders were taken to remote jails on the Amazon. The senior leadership was sequestrated in remote villages, with a ransom demand to call off protest as the price of letting go(43).
One year later, the government laid off huge number of workers in tin mines, the workers took to streets again, with the same aftermath (44).
So it was not so peaceful after all.
The government crackdown was practically ignored by the international press, as was the tale of triumph of “free market reforms” in Bolivia.

Chap 8:
By mid 1980s, several economists had observed that hyperinflationary crises mimic the effects of a military war. For the hard core Chicago School ideologues, hyperinflation was not a problem, but a golden opportunity to practice their ‘religion’, and there was no lack of opportunity in the 1980s, in Latin America and Asia. Crises resulted from the insistence of IMF/WB and other financial institution, on passing on of the illegitimate debt of dictatorships to the successor democracies, and the US Federal Reserve to allow interest rates to soar (As Fannie May, and Freddie Mac do to student loans).
In 1983, when the junta collapsed in Argentina, Raul Alfonsin was elected as the president. During the junta rule, the country’s debt had ballooned from $ 7.9 billion to $ 45 billion. In Uruguay, the junta expanded $ half a billion to 5 billion. In Brazil, it went from from $ 3 billion in 1964 to $ 103 billion in 1985 (4).
These debts were odious, much had gone into the military and police to enforce IMF/WB Chicago School dicta(5). Much of the rest vanished (6). The rest was spent on shady ‘bail outs’ and in Chile, just before the junta collapsed, president of the central bank Domingo Cavallo announced that the state would take over the debts of MNCs and domestic firms Argentinean-Ford, Chase, Citibank, IBM and Mercedes-Benz (13).
The state department declassified the transcript of a meeting held on 10/7/ 1976 between secretary of state Henry Kissinger and Argentina’s foreign minister admiral Casar Augusto Guzzetti. Kissinger “…apply for as much foreign assistance as possible and fast, before Argentina’s “human rights problem” tied the hand of US administration (14). Those who claimed that lenders should have known better than to lend to such dubious people.
The loans, on their own, were an enormous burden. On top of that Paul Volcker increased the interest rates, which went as high as 21% in 1981, and lasted till mid-1980s (15). The number of people defaulting on their mortgages tripled (18).
Outside the US the debt spiral was born. In Argentina, the $ 45 billion debt accumulated, became $ 65 billion in 1989. In Brazil it went from $ 50 billion to $ 100 billion in six years, and in Nigeria from $ 9 to 29 billion (18).
Price shocks followed the double whammy. It occurs every time the price of an export commodity falls by 10%. IMF estimated that between 1981-84 this happened 25 times in LDCs, and between 1984 and 1987, 140 times (19). The price of Bolivia’s tin fell by 55%.
Friedman’s crisis theory was vindicated. The more the economy followed his dicta of floating interest rates, deregulated prices, export base economy, the more a country became crisis prone, and the more would be amenable to taking his advice.
In a way, crisis is built into the Chicago model. When vast sums of money are free to travel instantaneously, speculators are allowed to bet on everything from drugs to currency, prospects of a firm, sell and buy loans and pay ratings groups to enhance or lower the rating to get a better price, push loans and ‘white elephant’ projects on the third world and force them to rely on export based income, slash social and welfare, reduce salaries of workers, lay them off, dispossess peasants, overthrow governments, jail, torture people and kill them with impunity, increase interest rate at will, crises are bound to follow.
Just as the people were winning the battle for freedom in mid-0980s, they were hit with an avalanche of financial shocks, created by a deregulated global economy.
In the 1980s and 1990s, the developing world was in a kind of terror hangover, few elected governments had the fortitude to risk a US sponsored coup by adopting policies which had provoked the brutality of the 1970s. The military had not been held accountable, but were biding their time for another chance. Crisis stricken, debt strapped elected governments had little choice but to submit to Washington based financial institutions (with the USSR out of the equation, no one could dare play rebel. Saddam paid the price of confrontation, Gadafi is hibernating in his tent. And only the embroilment of the US in Iraq and Afghanistan has saved Eva Morales , Hugo Chavez and Ahmad de Nejad so far).
Thus came the dawn of “Structural Adjustment”, and instead of the ‘dictatorship of proletariat’, came the ‘dictatorship of debt’.

Though Friedman did not prescribe to the ‘big government interference’ concept of IMF/WB, his boys took up top positions in the institutions, perhaps to work at undermining them from inside.
Hit with spiraling debts, the countries turned to WB/IMF, only to face the Chicago boys there already to betray the founding principles of the institutions. These institutions had been created post WW II in response to the horrors of the war, at Bretton Woods NH in 1944, financed by 43 initial participant countries, and mandated to prevent the crashes that led destabilization of Weimar Germany and Nazi takeover. The World Bank was charged with long term investment to lift countries out of poverty, and IMF to promote policies which enhanced market stability and reduced speculation.(23).
John Maynard Keynes had led the UK delegation and was confident that the world had finally recognized the perils of leaving the market to regulate itself (24).
But the two bodies were organized along the lines of corporation, with the size of a country’s economy governing the voting strength, with the US wielding a veto power over all the major decisions, and Japan/Europe toeing the line.
The Chicago School infiltrated the IMF/WB stealthily. Take over was completed in 1989, when John Williamson of the school unveiled the “Washington Consensus”.(25)-“all state enterprises should be privatized”, “barriers impeding the entry of foreign firms should be abolished (26). When completed, was born the trinity of privatization, deregulation, and drastic cuts to government spending.
Emboldened by the desperation of LDCs, the agenda morphed into radical free market demands.
The first full “structural adjustment” was issued by the IMF in 1983, and kept on doing it to every country which sought its help over the next 20 years. An UIMF senior official David Budhoo designed the SAPs for Latin America and Africa in the 1980s, admitted that “everything that we did from 1983 onwards was based on…to have the south privatized or die” (29).
The fund’s official mandate, on paper, remains crisis management, not social engineering, so what they did had to be called stabilization. But all they did was to advance Chicago School’s neo-liberal agenda. Doni Rodrik, a famed Columbia University economist described “structural adjustment” as an”ingenious marketing strategy . He wrote in 1994, “The WB must be given credit for having invented and successfully marketed the concept…sold as a process…countries needed to undergo to save their countries from crises. For governments that bought into the package, the distinction between sound macroeconomic policies that maintain external balance and stable prices…and policies that determine openness (like free trade)…was obfuscated” (30).
When privatization, free trade policies and cut backs in spending are packaged with a desperately needed loan, the countries had little choice. The trickery lay in the fact that the economists knew that free trade had nothing to do ending a crisis. That was the pound of flesh that Shakespeare so well described and the kind of loans traditional money lenders in India, and loan sharks in NY practice.
LDCs were submitting to them via a combination of false presentations and overt extortion. Want to save your country, sell it off.
The hyperinflation crisis forced Alfonsin to resign from the presidency of Argentina. Carlos, a Peronist, who wore leather jackets and mutton chop sideburns, and seemed tough enough to take on the military and the creditors. But after a year in office, Menem was forced to follow a course of “voodoo politics”. He appointed the junta time official responsible for bailing out corporate corporate debts as economy minister (33-Obama appointed the Clinton team responsible for deregulation and other mischiefs) to continue his corporatism. Virtually all economic posts again went to the Chicago boys.
By 1999, governments from Israel to Costa Rica could boast of 25 ministers and central bank presidents from the ranks of Chicago boys (35).
Cavallo harnessed the desperation of hyperinflation to pass privatization as an essential part of the rescue mission, cut spending massively and launched a new currency pegged to the dollar. Inflation was down to 17.50% with in a year (37), but the state had to sell off national assets at a pace fester than Chile, a decade earlier-by 1994, 90% had been sold off. Before the sale they fired 700,000 workers, the oil co alone losing 27,000. In January 2006, it came out that the Cavallo plan was not Cavallo’s or even IMF’s, but was written by J.P. Morgan and Citibank (38).
Pegging the local currency with the dollar made it so expensive to produce goods in the country, and local factories could not compete with cheap imports flooding the country.
People, in moments of crisis, are willing to hand over power to anyone who claims to have a cure (Bush post 9/11).
Volcker shock was followed by the Mexican Tequilla crisis in 1994, the Asian one in 1997 and the Russian in 1998.

Chap 9:
People’s Daily after the Tiananmen square massacre “we certainly must not stop eating for fear of choking”, on the need to continue free market reforms.
Lech Walesa, climbing over a steel fence festooned with flowers and flags in Gdansk, Poland antedated the fall of the Berlin wall as the symbol of the collapse of communism. Workers had barricaded themselves to protest the communist party’s decision to raise the price of meat. Workers wanted their own independent union, and did not wait for permission, they voted to form it, and called it Solidarity (4).
Tired of living in a country that idealized the working class, but abused them, solidarity denounced corruption and brutality of party workers. It sparked a mass exodus of its members from the CP.
Solidarity could not be dismissed as stooges of capitalism. They were workers. Solidarity was democratic, dispersed, participatory, everything that the party was not.
It had ten million members, and in September 1981, it was ready for the next stage. 900 delegates gathered in Gdansk for its first national conference and “ we demand a self governing and democratic reform at every…level…a socioeconomic system combining the plan, self government and the market…”. (7).
Walesa’s fear were well founded. Martial law was declared by General Wojciech Jaruzelaki, and tanks rolled to factories, and thousands were arrested.
Solidarity was forced underground, but over the next 8 years of police state, its strength grew more. Walesa was given the Nobel Peace prize.
By 1988, workers were less scared of the police, and were staging huge strikes again. The economy was in free fall, and with Mikhail Gorbachev losing his nerve, the communists gave in, and legalized Solidarity and agreed to hold elections. Solidarity split into two wings, one of which Citizen’s committee solidarity agreed to participate in elections, and ran on a vague program. Solidarity won 260 of the 261 seats it contested. Walesa had one of his henchmen, Tadeusz Mazowiecki, the editor of the Solidarity weekly paper newspaper appointed as the PM.
Like the Latin Americans adopting democracy when their economy was imploding, Poland did too. Inflation was 600%, severe food shortages and a huge black market. Poland needed debt relief and aid to get out of the immediate crisis.
One would have expected that floodgates of aid and comfort would open for the first democracy in Eastern Europe. But nothing was on offer.
US treasury wanted to apply the shock doctrine, which could only follow an economic meltdown and disorientation of a regime change.
IMF, confident that worse the things got, the more the government would be amenable to accept a total conversion, let the country slide into deeper debt and inflation.
Jeffrey Sachs started working as Solidarity adviser (12). George Soros had enlisted Sachs to work in Poland, at his own cost, even before Solidarity’s election victory (13). Sachs, at the time said that solidarity should simply refuse to pay the debts, and extended the hope that he will be able to mobilize $ 3 billion. But the government had first to agree to a course much worse than that imposed on Bolivia-in addition to elimination of price controls, slash subsidies, Sachs advised selling state mines, shipyard and factories, in direct clash with solidarity’s program of worker ownership.(15).
Sachs formed an alliance with Leszek Balcerowicz, the new finance minister, who saw himself as an honorary Chicago boy (22).
Walesa had promised in an interview with Barbara Walters “…it won’t be capitalism…better than capitalism…reject everything that is evil in capitalism”(23)
Finally the decision came down to money. “…But we don’t have time” (28). Sachs helped negotiate with IMF, and was able to secure some debt relief and $ 1 billion, but all was conditional to Poland submitting to shock therapy.
Balcerowicz, the finance minister has since confessed that capitalizing on the emergency was a deliberate strategy (30). Poland was, in what was dubbed a period of “extraordinary politics. Or “in transition.
With in a few years, it seemed as though half the countries of the world were “in transition”. Thomas Carothers, a leader of US governments ‘democracy promotion apparatus’ “…the set of ‘transitional countries swelled dramatically…nearly 100…20 in Latin America, 25 in Eastern Europe and former USSR, 30 in Sub-Sahara Africa, 10 in south Asia and 5 in mid-East…” (33).
Francis Fukuyama, author of The End of history, addressing a gathering in the U of Chicago, in the winter of 1989, “the collapse of communism was leading not …a convergence between capitalism and socialism… but to an unabashed victory of economic and political liberalism…” (35). Fukuyama argued that deregulated markets combined with liberal democracy…represented ”the end point of mankind’s ideological evolution and …final form of human government.
History was taking an exhilarating turn in 1989. It was not coincidental that IMF/WB chose the year to reveal the Washington consensus, to halt discussion about alternatives to free market.
Tiananmen Square:
Fukuyama had claimed in February 1989 that free market and democracy were inseparable. In April 1989, pro-democracy movement exploded in Beijing.
In 1980 Deng Xi-aoping had invited Friedman to China to tutor top level civil servants.(40). In Friedman’s definition of freedom, political freedom was incidental, irrelevant when compared to free market. Chinese were pushing deregulation and free market hard, while resisting calls for free elections. Deng Xi-aoping was determined not to let “Poland” happen in China. Deng wanted to follow in the footsteps of Pinochet.
Mao’s repression had taken place in the name of the working class and against the bourgeoisie. Now the party was asking workers to sacrifice so a tiny elite may collect huge profits. Deng ordered creation of 400,000 strong People’s Armed Police (41).
By 1988, the party was facing a severe backlash, and had been forced to reverse some price deregulations.
Friedman was once again invited.(42). “I emphasized the importance of privatization and free market at one fell stroke” he recalled later (43).
The most visible symbols of opposition were the demonstrations by students in Tiananmen Square (46).
Some of the free marker reformers, General Secretary Zhao Ziyang among them favored a gamble on democracy, but a majority of the politburo wanted to protect reforms by crushing the demonstrators.
On 05/20/ 1989, the government declared martial law. On 06/03/ 1989, tanks rolled into the protesters. The party admitted to hundreds of dead, eyewitnesses put the number at between 2,000-7000. A witch hunt followed in which 40,000 were arrested, thousands jailed, and possibly hundreds executed. Maurice Meisner writes, “Most of those arrested, and nearly all who were executed, were workers” (48).
The massacre was covered in the Western press as communist brutality, not a defense of free market philosophy (49).
Deng, during an address to the nation a few days after the massacre, made it clear that the crackdown was not to protect capitalism, not communism., “perhaps this bad thing will enable us to go ahead with reform…(50-Henry Kissinger defended the massacre in an op-ed piece).
Three months after the massacre, Deng brought back the measures he had been forced to withdraw. Wang Hui, “the violence of 1989 served to check the social upheaval brought about…”(52).
In the following three years China opened to foreign investment, with special export zones (SEZ) through the country (53). The reforms turned the country into the sweatshop of the world.
A 2006 study reveals that 90% of Chinese (Yuan) billionaires are children of the communist party, 2,900 of them-dubbed princelings-control $ 260 billion. There is a revolving door between political and corporate elite, as in the USA and Chile under Pinochet. Foreign MNC media and technology help the state spy on its citizens, as MNCs do in the US.
Tiananmen showed the striking similarity between the tactics of Chinese communists and Chicago boys.
In Poland, as late as 1992, 60% of the people opposed privatization of heavy industries. It caused a full-blown depression, a 30% reduction in industrial production in two years after reforms, unemployment rose to 25% in some areas. Under 24 years of age, 40% were unemployed in 2006. In 1989, 15% Poles were below poverty line. In 2003, 59% had fallen below the line. In 1990 there were 250 strikes, in 1992, there were 6,000. By the end of 1993, there were 7500 protests, even though 62% of the country’s industry was still public (62).
The most dramatic defeat of the free marketers cane on 09/ 19, 1993, when a coalition of left parties, including the former communists, won 66% of the seats in the parliament. Poland was still held up as a model of success of free market make over.

Chap 10: South Africa
Archbishop Desmond Tutu, chair of South Africa’s Truth and Reconciliation commission, “ …What is the point of having made this transition, if the quality of life of these people is not enhanced and improved? If not, the vote is useless. 2001 (1).
Alister Sparks, South African journalist, “before transferring power, the Nationalist power wants to emasculate it. It is trying a …swap…will give up the right to run the country…in exchange for the right to stop the blacks from running it…” (2).
In January 1990, Nelson Mandela wrote from jail, “the nationalization of banks, mines and monopoly industries is the policy of the ANC, and any change…is inconceivable…state control of certain sectors of the economy is unavoidable” (3).
The ANC had started drafting a statement of core principles, the Freedom charter in 1955, based on the opinion obtained by 50,000 volunteers dispatched to villages and towns. Hand written on scraps of paper, “Land to be given to landless…”, “living wages and shorter hours of work, “free and compulsory education..”, “the right to reside and move…freely”. A final document was adopted on 06/20/ 1955, at the Congress of the People, held in Kliptown, a zone to sequestrate the blacks of Soweto from white Johannesburg. The charter enshrines the right to work, decent housing, freedom of thought, and to share in wealth of the country (the largest goldfield in the world-6).
Apartheid was not taken just as a political system, but as an economic system as well which used racism to allow a small white elite to accumulate enormous wealth. In the mines, whites were paid up to ten times as blacks, and industrialists worked closely with the military to disappear people (7).
On February 11, 0990, Mandela walked out of the prison. Mandela had been arrested in 1962. ( PM Patrice Lumumba of Belgian Congo had been killed in 1961). A lot had happened since. Africa had seen nationalism sweeping the continent, now it was torn by war. Che Guevara had been killed in Bolivia in 1967, Salvador Allende in 1973, Samora Machel, liberation hero and president of Mozambique had died in a mysterious plane crash in 1986. Berlin wall fell in 1991.
Mandela had an opportunity to lead a people to freedom peacefully, without an economic collapse, and democratizing the society and redistributing wealth.
In the 1980s, ant-apartheid struggle had become global and Mandela had earned global admiration and support. The most effective weapon was corporate boycott of South African products as well as that of international firms that did business with South Africa. That had given ANC a unique opportunity to reject the free market dogma. There was already widespread agreement that corporations shared responsibility for apartheid rimes, Mandela could have used the argument to say that the debt accumulated under apartheid was odious. As a living saint, he could have faced off IMF, WB and US treasury.
Between the time Mandela wrote the note from prison, and ANCs election sweep, something convinced the leadership that they could nor reclaim and red distribute the country’s robbed wealth. They adopted policies that have further accentuated inequality between the rich and the poor and crime has gone up steeply.
On the way out the Portuguese had destroyed as much in Mozambique, as they could, pouring concrete down elevator shafts and smashing tractors. The sabotage of the South African Nationalist party was subtler and worse, contained in the fine print in transfer of power agreements.
The talks between ANC and the nationalist party were on two fronts, political and economic. On the political front F.W. de Klerk tried breaking the country into a con-federation, getting veto power for the minority, reserving seats in government structure for each ethnic group (9). He did not get away with anything. He need not have.
Economic negotiations were conducted on the ANC side by Thabo Mbeki. Later to be South African president, and still later forced out of office. The de Klerk government portrayed key sectors of economic decision making such as trade policy and central bank as technical/administrative, and used international trade agreements, innovations in the constitution and SAS programs to hand over the supposedly impartial economists and officials from the IMF, WB, GATT, and the National Party, but not to any one in ANC.
What party loyalists did not know that the negotiating team had made concessions which would make implementation of the charter an impossibility. Vishnu Padayachee told Naomi Klein (page 253), “It was dead even before it was launched”. WE got a call from the negotiating team in late 1993, on pros and cons of making the central bank an independent entity, run with total autonomy from the elected government by the next morning. He knew that even among market economists in the US, central bank was regarded as a fringe idea, a dogma of the Chicago School, that the bank should be run as a foreign republic within states (10).
If the Central Bank was not accountable to the ANC government, to whom would it be accountable-the IMF, the Johannesburg stock exchange. The bank would keep its head under apartheid and the finance minister under the old regime would keep his job too (11-for all these concessions, Mandela got a statue in the London parliament square).
Patrick Bond, an economic adviser to Mandela during early years recalled the quip, “Hey, we’ve the state, where is the power”
At the last minute, the negotiators conceded a new clause in the constitution to protect private property, making land reforms impossible. Hundreds of factories were about to close because the ANC had signed on to GATT, which made it illegal to subsidize auto plants, and textile factories. Offering free AIDS drugs was a violation of intellectual property rights under WTO
Welfare measures like housing for the poor, and free electricity to towns could not be undertaken as the budget was being eaten up by servicing the massive debt of the apartheid era. Even free water could not be provided as that militated against privatization of all state services. Currency controls to curb speculation violated the terms of the deal for $ 850 million signed with IMF. Wages could not be raised for the same reason(12).
What ANC activists did not understand was that it was the nature of democracy that was being negotiated away.
Rasool Synman, long time ant-apartheid activist, “ They never freed us. They only took the chain from around our neck and put it on our ankles” (13).
In the first two years of office, ANC did build more than 100,000 homes, and millions got water connections, phone lines and electricity (14). But under IMF pressure to privatize services, the government started to raise rates, a decade into ANC rule millions had their water, phone and electricity cut off, because they could not pay bills (14). Banks, mines and monopoly industry remained in the same four white owned conglomerates, which also controlled 80% of the Johannesburg stock exchange.(16). In 2005, only 4% of the companies listed on the stock exchange were owned/controlled by blacks (17). In 2006, 70% of the country’s land was owned by whites who were 10% of the population (18-Mugabe of Zimbabwe believed in the word of the British government that it would compensate the country, if he left land in control of the 3% whites. (The British, of course, went back on their word, and when Mugabe nationalized farm lands, he was hit by the most obnoxious sanctions). The average life expectancy of for South African since Mandela left the prison in 1990, had dropped by 13 years (20).
The leadership did not have the nerve to launch another liberation movement, when it found that de Klerk’s team would not budge on economic issues. It was not an easy choice though. As soon as Mandela was released, the South African market collapsed, and the currency dropped by 10% (21), and soon afterwards, De Beers diamonds moved their HQ to Switzerland. A few words by him on nationalization would have cause an stampede of the “electronic herd” as NY Times Thomas Friedman calls it (22). Even comments on calling Rugby a white game by Trevor Manuel, an ANC minister hit the Rand (25).
Thabo Mbeki was the one person who seemed to understand how to make the shocks stop. Rather than calling for the nationalization of the mines, he began meeting on a regular basis, with Robert Oppenheimer, former chairman of Anglo-American and De Beers mines, going to the extent of submitting ANC economic program to Oppenheimer for approval (28). In his first interview as the president, Mandela distanced himself from nationalization, “In our economic policies…not single reference to…nationalization…not a single slogan will connect us…Marxist ideology: (29). His inside prison thoughts had become Marxist ideology. The Wall Street journal, “Mr. Mandela…sounded…more like Margaret Thatcher” (30).
In South Africa, few of Mbeki’s colleagues even knew that a new economic program was in the works (32).
In 1996, Mbeki unveiled the neo-liberal shock (34), and quipped, “just call me a Thatcherite” (35).
Yasmin Sooka, a member of the Truth and reconciliation commission made a recommendation, modest by any standards, for a one time 1%’solidarity’ corporate tax to raise money for the victims of apartheid, Mbeki then the president rejected it out of hand, any suggestion of corporate reparation/tax.
Chairman of the commission, Archbishop Tutu offering the report in 2003, observed, “can you explain how a black person wakes up in squalid ghetto to day, ten years after freedom…then he goes to work in a town…largely white…I don’t know why …don’t say to hell with peace, to hell with Tutu and the truth commission” (36).
Reparations in Reverse.
In the first years after takeover, the government had to pay $ 5 billion annually in debt servicing, and only $85 million to 19,000 victims and families of apartheid killing and torture.(37).
Between 1997-2004, the government sold 18 state owned firms to raise $4 billion, half of which went to debt servicing.(38).
De Klerk demanded, and got, that all civil servants be guaranteed their jobs and be given hefty pensions(39). 40% of the government debt payments go to pension funds to former apartheid employees.(40). The victims of apartheid continue to send large paychecks to their victimizers.
Since the 1994 takeover by ANC:
-the number of people living on less than a $ a day has gone from1 million to 2 million
-unemployment rate for blacks has gone up from 23% to 48$ (46).
-Of 35 million blacks, only 5,000 make more than $60,000 a year, among the whites 100,000 of 3.5 million do so, and many make far more (47).
-The government built 1.8 million homes, while 2 million lost theirs(48).
-1 million have been evicted from farms (49).
-number of shack dwellers has grown by 50%, 1 in four of the total (50).

Chap 11 Yeltsin Sells Russia
Gregory Gorin, Russian writer, “For a long time we lived under the dictatorship of the communists, but now we have found out that life under the dictatorship of business people is no better. They couldn’t care less about what country they are in” (1).
Mickhail Gorbachev had won the Nobel peace prize in 1990 (3), and had won over the American public as well.
He had led the USSR through a remarkable process of democratization, 6through his policies of glasnost (openness) and perestroika (restructuring). His end goal was to build a social democracy on the lines of Scandinavian countries, “a socialist beacon for all mankind” (4).
At the G7 meeting in 1991, he was stunned to be told that if he did not embrace radical economic shock therapy, they will let him fall “Their suggestion as to the tempo of transition were astonishing, he wrote later (6).
Later that year when Russia asked for debt forgiveness, it was told that the debts had to be honored (7). Russia like China had to choose between Chicago and democracy. The peaceful process that Gorbachev had started had to be violently suppressed and then reversed. In 1990, The Economist had urged Gorbachev to adopt “strong man rule…to smash the resistance…” (8). In August 1991, The Washington Post ran a headline “Pinochet’s Chile a Pragmatic Model for Soviet Economy”.
On August 19, 1991, a group of communist old guard drove tanks to the White house, the parliament building. Yeltsin stood on one of the tanks and denounced… “a cynical right wing coup…”(10). The tanks retreated, and Yeltsin emerged as a heroic defender of democracy.(11).
In December 1991, Yeltsin formed an alliance with tow other Soviet republics, so in effect the Soviet Union was dissolved, forcing Gorbachev’s resignation. As the political scientist Stephen Cohen put it, “it was the first of the three traumatic shocks that Russians would have to bear in the next three years (12-the way Yeltsin was to behave later, makes one wonder if he was not a CIA ‘agent’ like Pinochet and other junta leaders. Sachs had been invited by Yeltsin as an adviser, and was in the room in Kremlin on the day Yeltsin announced that the soviet union was no more (13-14).
Yeltsin wanted Sachs to raise funds as he had done for Poland, “If Poland can do it, so can Russia” (14). Sachs told Yeltsin that if Moscow was willing to go with the ‘big bang’ approach, in establishing a capitalist economy, he could raise $15 billion (16).
Russia’s conversion to capitalism was akin to the corrupt approach that had led to Tiananmen.. Gavril Popov, Moscow’s mayor on how to break up the centrally controlled economy, “there is the democratic approach…the nomenklatura, apparatchik…(17). Yeltsin took the latter, and in late 1991, he went to the parliament that if they gave him one year f special powers, to issue laws by decree, rather than bring them to the parliament, he would solve the economic crisis. The answer was yes.
He immediately surrounded himself with Russian followers of the free market Chicago School. They had formed a sort of book club with Yegor Gaider as their figurehead, whom Yeltsin named as one of his two deputy PMs.
Russia newspaper Nezavisimaya observed that “ for the first time Russia will get…a team of liberals…followers of Freidrich Hayek…and Milton Friedman…”(19).
The US funded its own team of transition experts to assist Yeltsin’s Chicago boys to write privatization decrees, launch NY style stock exchange, design Russian mutual funds. In the fall USAID awarded $2.1 million to the Harvard Institute of International Development which sent teams to Russia. In May 1995, Harvard named Sachs director of the institute.
On October 28, 1991, Yeltsin announced the lifting of price controls, a week after Gorbachev resigned.(21). The decrees included free trade and the first phase of the privatization of the state’s 225,000 companies (22). It was a well planned surprise. 67% of Russians told pollsters that workers cooperatives were the most equitable way to privatize assets of the state, and 79% felt that maintaining full employment was a core function of the government (24).
Joseph Stiglitz, then the chief economist at the WB summarized the mentality, “Only the blitzkrieg approach during the ‘window of opportunity’…would get the changes…before the population had a chance to organize to protect its…interests” (26).
After only one year, millions of Russians had lost their life’s savings, millions of workers were not paid because of abrupt cuts in subsidies (29). . Russians consumed 40% less in 1992 than they did in 1991, and a 1/3 of the population fell below the poverty line (30). People were forced to sell personal belongings on the street (31).
The people eventually began to demand an end to the cruel economic adventure. In December 1992, the parliament voted to unseat Yegor Gaider, and in March 1993, they voted to repeal the special powers they had given to Yeltsin.
Yeltsin retaliated by announcing a state of emergency on TV. Russia’s independent constitutional court, a creation of Gorbachev, ruled 9-3 that Yeltsin’s power grab was a violation of the constitution, he had sworn to uphold.
The West threw its weight behind Yeltsin (32) The majority of the Western press did too(33).
In the spring of 1993, the parliament brought a budget which did not follow IMF guidelines for austerity. Yeltsin tried to eliminate the parliament through a referendum (Zia/other satrapies fashion). Not enough voters turned out to give the mandate to hold snap elections asked for, but he claimed victory (36).
Lawrence Summers, then US treasury under secretary warned that, “the momentum for…reforms must be reinvigorated…” (37). IMF leaked to the press that $1.5 billion loan was being rescinded…” (38).
Yeltsin, confident of the West’s support issued decree 1400 to dissolve the parliament and abolish the constitution. 2 days later, the parliament voted to impeach him by a vote of 636 to 2.(40). Clinton continued to back him, and the congress voted $2.5billion in aid. Yeltsin sent troops to surround the parliament, cut the power, heat and phones off. Supporters of democracy came in thousands to break the blockade. The only way out would have been to call elections for the parliament and the presidency. Yeltsin was reportedly leaning towards elections, when he heard that voters had turned out Solidarity from power. Election in Russia would be too risky. Too much wealth-huge oil fields, and 30% of world’s gas deposits, 20% of its nickel, weapons factories, media-were at stake.
Yeltsin attacked the parliament with thousands of interior ministry troops, barbed wires and water cannons (41). On 10/03 crowds of parliament supporters “marched to the TV center…there were children in the crowd…they were met with machine gun fire. One hundred demonstrators and one soldier were killed. Yeltsin dissolved all city and regional councils of the country.
On 10/04/0993, Yeltsin ordered the army to storm the parliament, and setting it on fire. At 4.15 pm, about 300 deputies, staff workers and guards marched single file out of the building with their hands up (44).
500 had been killed and 1000 wounded, more violence than since 1917(45).
The US secretary of state traveled to Moscow to show support to Yeltsin (48).
The Chicago boys went on a law-making binge (53). The communist state was simply replaced with a corporatist state. A clique of nouveaux billionaires, also known as oligarchs, teamed up with Chicago boys and stripped the county of nearly everything of value, moving the loot ashore at the rate of $2 billion a month. Before the shock therapy, Russia had no millionaires. By 2003, it had 17 billionaires, according to Forbes (57). In a rare departure from the Chicago School dogma, Yeltsin and co had not allowed foreign MNCs to buy the assets directly.
The only problem for the oligarchs and foreign investors was the extreme unpopularity of Yeltsin.
In December 1994, Yeltsin started a war in Chechnya. Starting a war is the favorite desperate measure of failing dictators. The defense minister predicted it would be “…in a matter of hours, a cakewalk (59). It did work in the short term. But in 1996, when he faced reelection, he was still very unpopular. He toyed with idea of canceling the election-the Pinochet option, favored by his privatization minister, Sachs protégé Anatoly Chubais (60-61).
Yeltsin won, funded by $100 million financing by the oligarchs-33 times the legal limits, and 800 times more coverage than for his rivals on oligarch controlled TV stations (63).
In return, he sold 40% of an oil co, the size of Franc’s Total( Total sales in 2006 $193 billion) for $88 million, Norlisk Nickel which produced 1/5th of world’s nickel (annual profits $1.5 billion), for $170 million, Yukos with more oil than Kuwait (annual income more than $3 billion) for $309 million, 51% of oil Sidanko (valued at $2.8 billion) for $130 million. (64). The banks which ran the auctions, bid in them too.
And all these were purchased, not with corporate, but with public money (65). Communists had made an exchange of power with property (66).
It was an oversight that IMF and WB did not force MNCs in the initial loot. They would not forget the lesson in Bolivia, Argentina and Iraq.
Gates were now open for foreign investors. In 1997, royal Dutch/shell entered into partnership with two oil co-Gazprom and Sidnako (67).
Several of Yeltsin’s ministers would later be found guilty of corruption. Two from Harvard’s Russia project economics professor Andrei Shleifer and his wife, and his deputy Jonathan Hay were discovered to have been directly profiting from the market(70).US department of justice sued Harvard. Harvard paid a $26.5 million settlement (72).
There are honest neo-liberals, but the Chicago boys do seem to be particularly inclined to corruption.
George Soros, the world’s most powerful currency trader (implicated in the rumors which led to the Asian T iger’s downfall, he had withdrawn $ in billions) profited from his philanthropic work in Eastern Europe, when the countries implemented convertible currencies and lifted capital controls.
In 1999 Russia was hit with a series of terrorist attacks (76). The country was had been hit by the Asian crisis the year before. Vladmir Putin, Russia’s PM was made in charge of dealing with terrorists (77). In 09/1999, he launched air attacks on Chechnya.
With the conflict overshadowing all other discussion, on 12/31/1999, the oligarchs quietly arranged a hand over of power to Putin from Yeltsin who was by now drunk almost all the time Was shown so on US TV), and returned the compliment by conferring legal immunity on his predecessor.
Wars in Chechnya have killed 100,000(78). In contrast to Pinochet’s, Yeltsin’s massacres occurred in slow motion, and not so widely noticed.
By 1998, more than 80% of the Russians had gone bankrupt, 70,000 factories closed causing huge unemployment. Before 1989, 2 million Russians Federation residents were living in poverty. By mid-nineties, 74 million were doing so. By 1996, 25% were living in ‘desperate’ poverty (79).
Under the communists, Russians were alt least housed . In 2006, the government admitted to 715,000 homeless, while UNICEF put the number at 3.5 million children alone (80).
Under communism, Russians needed large quantities of vodka to get through the day. Under capitalism, they drink twice as much. Russia’s drug czar, Aleksadr Mikhailov says that the number of drug user has gone up 900% from 1994 to 2004, to 4 million, many of them on heroin, and as an aftereffect, the number of AIDS victims has gone up from 5,3000 to double that in 2 years, and in ten years according to UNAID, nearly 1 million were HIV positive (81).
Russia’s already high suicide rate reached about double of what it had been 8 years before. Violent crime had risen 4 times by 1994 (82). Russia’s population is falling by 700,000 per year, losing 6.6 million between the shock therapy peak year of 1992 to 2006 (83).
While the elite flaunt their wealth like the Emirs of oil Sheikhdoms, a 17 year old provincial girl read by candlelight (84).
Corruption Blame Game:
Clinton, EU, IMF, WB wanted to erase the pre-existing state for the capitalist feeding frenzy-Iraq without cruise missiles. Harvard’s Richard Pipes “for Russia to keep on disintegrating…till nothing remains…institutional structures” (86).
Cover for Russia’s failure was provided by its “culture of corruption” (88).
The entire drama will be repeated to explain billions in Iraq, with Saddam and Radical Islam, filling in for communism and czarism.
Rather than journeying through Adam Smith’s “savage and barbarous nations”, Milton Friedman’s troops systematically dismantled existing laws to recreate that earlier lawlessness. Smith’s colonists seized ‘wastelands’ by force or ‘for a trifle’, Friedman’s hordes, the MNCs see government assets and programs as ‘wasteland’ to be conquered.
Culture of corruption is endemic in the world. Friedman’s acolytes offered what was beyond the wildest dreams of third world minions (and first world partners).
Colonial times are often called the first pillage-land was seized from natives. In the second pillage, the state was stripped.

Chap 13 : (do 12 later) The Trashing of Asian Tigers.
Asian Tigers, Thailand, the Philippines Indonesia, Malaysia and South Korea, had been held up as examples of economic vitality. Stockbrokers were telling their clients that there was no surer way to increase wealth.
Then it all seemed to go wrong. They started to cash out in droves, traders attacked the currencies.
Indonesia was the worst hit. Its currency dropped between the morning and night and kept on doing it. The market crash was dubbed ‘the Asian flu’, later renamed ‘the Asian contagion, when it spread to Latin America and Russia.
Nothing tangible had changed. The same set ran the economies, deficits were not that much, no physical disaster had hit the region, they were still producing shoes to cars, with sales as strong as ever. In 1996, investors had put in $1000 billon in SK, but had taken out $120 billion in 1997.
Some one started a rumor that Thailand did not have enough $ to back up its currency. The electronic hers was triggered into a stampede. Real estate market which had been booming crashed. Construction halted, banks called in their loans.
Mutual funds had marketed all the countries as a package, so all went down.
The government tried to stem the outward flow with their reserves. That led to more panic. $600 billion disappeared from Asian Markets in one year (5).
In Indonesia people stormed stores (6). In south Korea, TV stations ran a campaign for citizens to donate gold jewelry. 200 tons were offered, but the currency continued to plummet (7).
It led to a wave of suicides. In SK, it went up by 50%(8).
No loans were forthcoming as in the case of the Tequila crisis of 1994, as the US treasury won’t let Mexico crash (9).
Milton Friedman, in his mid eighties made an appearance on CNN to talk to the anchor man, Lou Dobbs that he opposed any kind of bail out. He was echoed by Walter Wriston, former head of Citibank, George Shultz of Hoover Institute and Charles Schwab (10), and the Wall Street (11).
While addressing Asia Pacific Economic Cooperation Council held in November 1997 in Vancouver, Bill Clinton taken the cue called the crisis “ a few little glitches on the road” (12).
IMF took a do-nothing approach, then came up with a list demands.
Whether the crisis was inadvertently started by a rumor, or the rumor was started deliberately (George Soros had withdrawn billions, reported to have $5 billion over 2 weeks and more in the east European crisis-check this-read somewhere). But the IMF grabbed as an opportunity to strip the countries of assets and transfer them to MNCs, under the Chicago School dogma.
The Tigers had not grown on free trade. Malaysia, Thailand and South Korea were highly protectionist, and had maintained a significant role for the state, keeping control of energy and transportation. They had also blocked certain imports from Japan, Europe and North America to build up domestic markets.
The situation was an anathema to Japan, the West and MNCs. They saw the consumer market explode, and longed for unrestricted access. They also wanted to grab the best of the tiger’s corporations, and had cast greedy eyes on SK’s Daewoo, Hyundai, Samsung and LG.
In the mid-nineties, IMF and WB had coerced the countries to lift barriers to financial sector. That was to be their undoing.
In 1997, the hot money reversed current. Jay Pelosky of Morgan Stanley was forthright, “if the crisis was left to worsen, all foreign currency would be drained…Asian owned companies would either…close or…sell to western firms…(13).
Jose Pinera, Pinochet’s financial hatchet man, rewarded with a job in Washington DC’s Cato Institute, said the fall of tigers represented , “the fall of a second Berlin Wall” , the collapse of the notion that there is a third way between market…capitalism and socialist…” (14). The view was shared by Alan Greenspan, chairman of the Fed (15).
Michel Camdessus, head of IMF spoke of the crisis as an opportunity (16).
The only country to be able to resist was Malaysia, which had a relatively small debt, and had immediately put them back up. currency controls. PM Mahathir Muhammad did not think should have to, “destroy the economy in order that it should become better” (17)Rest of the Tigers came to the table with their hands out for loans. Stanley Fischer, negotiator for the IMF, “…when it is out of money, it hasn’t got many places to turn (18-old time usurers in India, used to wait for calamities, sometimes enticed peasants with loans, and at the end of the day, the loan would double every month or week, and they would take away cows, goats, household belongings and even women against the loan. Conditionalities are equivalent to the pound of flesh immortalized by Shylock of Shakespeare)..
Several countries suggested that since capital flight had caused the crisis, perhaps it was time to put back ‘capital controls. China had kept them on, and Malaysia was quick on its feet, and had escaped the crisis.
IMF team rejected the idea out of hand. They were focused on how to use the crisis as a leverage to beggar the countries. The first step was to denude the countries of all trade and investment barriers and state intervention that had created the ‘Asian miracle’, so the countries would never get out of bondage (20).. they also demanded deep budget cuts, massive lay offs in public sector. Fischer confessed later than in SK and Indonesia, the crisis was unrelated to government overspending, but that did not deter him from the sadistic measures(21).
Thailand would allow foreigners to buy large stakes in banks, Indonesia would cut food subsidies, and SK would lift regulations against massive layoffs. (22).MNCs wanted to downsize the firms they were about to buy.
Thailand’s reform package was pushed through with 4 emergency decrees, and not through the parliament (24). In south Korea, IMF demanded that money would not be released till all the candidates in the forthcoming presidential elections, commit to the rules in writing. Two of the anti-IMF candidates capitulated (25), though the day they signed was dubbed ‘humiliation day (26).
Suharto who had ruled for 30 years was more used to taking care of himself, kith and kin, resisted for a while (Camdessus of IMF reportedly chewed him out in public-find the source), but a senior IMF official, on condition of anonymity, told the Washington Post that, “the markets are asking… how committed…Indonesian leadership is…” As soon as the news was published, the currency lost 25%…in a day(28).
Suharto gave in.(29). He brought back the Berkeley mafia. The IMF got 140 adjustments (31)
IMF thought all was going well. When it revealed the extreme makeover package (32), the market panicked, yanked out more money and currency. SK was losing $ 1billion a day. IMF had turned a crisis into a catastrophe. Sachs, now an open dissident, “instead of dousing the fire, IMF…screamed fire in the theatre” (33).
ILO estimated that 24 million lost their jobs, Indonesia unemployment went up from 4 to 12%. Thailand was losing 60,000 jobs a day. SK was firing 300,000 workers every month. In 1996, 63.7% identified as middle class; by 1999 it was down to 38.4%. WB , 20 million Asian were thrown into poverty(34), all thanks to IMF extortionists.
Women and children suffered the most. Philippines and SK sold their daughters to traffickers. Child prostitution in Thailand increased by 20%.(35). US secretary of state, Madleine Albright, herself the daughter of refugees, on a visit to Thailand in March 1999, insensitively scolded the public for turning to prostitution and drugs. She could not see any connection between the austerity policies and the sex trade (36).
The fund’s Independent Evaluation office concluded that SAS demands were “ill advise” and “ broader than seemed necessary, as well as “not critical to resolving the crisis”, and that “crisis should not be used as an opportunity…” but that was akin to an assassin’s regrets at the funeral(37-the report was not released till 2003, 5 years after the crisis).
While IMF failed the Asians, it did not fail the Wall Street.
Pretty much everything in Asia was for sale. The Wall Street journal ran an article “Wall Street Scavenging in Asia-Pacific” and reported that Morgan Stanley, among other such houses, had dispatched armies of bankers…to scout for brokerage…asset management…even banks…that they can snap up at bargain prices…” (39).
Several major sales went through: Merrill Lynch bought Japan’s Yamaichi securities, as well as Thailand’s largest securities firms. AIG bought Bangkok Investments. JP Morgan bought a big stake in Kia Motors, Travelers and Solomon Smith Barney bought one of Korea’s largest textile and several other companies. (The chairman of Solomon…International Advisory Board was Don Rumsfeld. Dick Cheney was also on the board. Carlyle (Former Secretary if state James Baker, former UK PM john Major, Bush Sr) snapped up Daewoo’s telecom division (40), all for fire sale price.
The Korean Samsung was broken up and sold-Heavy Industry Division to Volvo, Pharmaceutical to SC Johnson, lighting division to General Electric. Car division worth $ 6 billion for $400 million to GM (43). The list is long (page 348-44).
The NY Times called it, “the world’s biggest going out of business sale” and a business buying Bazaar by the Business Week.
Governments had also to sell public service . US Trade reprehensive Charlene Barshefsky while asking the US congress to authorize billions to IMF, offered assurances that the agreements would “create new business opportunities for US firms…”(46).
The crisis set off a storm of privatizations-Bechtel got water and sewage system in eastern Manila…(47).
There were 186 mergers and acquisitions with in 20 months.
Asia’s crisis is still not over. 24 million lost their jobs. Their desperation id reflected in the rise of religious extremism and trafficking in flesh, and unabated wave of suicides and violent death (50).
In Indonesia Chinese were the unwitting victims of IMF depredations. Being a business community, they were blamed for the rise of the price of basic necessities imposed on Suharto by the UMF. Riots targeted the ethnic minority. 1200 hundred were killed and scores of Chinese women were gang raped (52).
Financial Times wrote an unusually balanced editorial, Asia was a “warning signal that public unease with capitalism and the forces of globalization is reaching a worrying level…the crisis showed that even the most successful countries…brought to their knees by a sudden outflow of capital…outraged…how whims of …hedge funds could cause mass poverty…”54).
The defiant mood made its global debut in 1999 WTO talks in Seattle, LDCs formed a voting block and turned down demands for further concessions, while EU and the USA continued to subsidize…their domestic industries and agriculture, while students and activists outside hogged the media coverage. The US government’s dream of a unified free trade zones in Asia-Pacific, and a free trade area of the America were smashed by third world resistance.
The anti-globalization movement exposed the Chicago School dogma to international debate. Capitalism’s monopoly period lasted only from 1991-collapse pf the USSR to the collapse of the Seattle talks in 1999.

Chap 14: the Homeland Security Enterprise.
Rumsfeld joined the cabinet of GWB in 2000, it was with a personal mission to reinvent warfare, more spectacle than struggle, far more profitable than it had ever been before. He wanted ‘transformation’. Senior military officials derided it. Beneath the slogan of modernization, it was simply an attempt to bring outsourcing of the corporate world into the military. In the 1990s, many traditional manufactories, which had maintained stable work forces at home took to the ‘Nike model; no factories, produce through a web of contractors, our resources in design and marketing. The other model was ‘Microsoft: maintain tight control over employees who perform ‘core competency’ work, and outsource all else, including code writing.
Fortune said, “Mr. CEO was about to restructure as he done to corporations” (8). Rumsfeld wanted the army to shed large numbers of full-time troops with a small core of officers, supported by cheaper temporary soldiers from the Reserves and National Guard. Contractors like Blackwater and Halliburton would do such work as high risk chauffeuring, prisoner interrogation, and health care. He would spend the savings into the latest satellite and nano-technology in the private sector(9).
The generals became very hostile to the concept of a hollow military.
Rumsfeld called a ‘town hall’ meeting of hundreds of senior Pentagon staff, “…adversary that poses a threat…is one of the last bastions of central planning…is closer to home. It’s Pentagon bureaucracy (10).
He wanted less spent on the staff…far more…directly to…private companies. “Every department…to slash its staff by 15%…” (11).
Proto-disaster Capitalism:
The job of the government was not to govern, but to subcontract to…more efficient…private sector.
By the time Bush took over, The privatization mania, fully embraced by Clinton, had sold off or outsourced public co in several sectors like water, electricity, highway management and garbage collection. What was left were such services as the military, police, fire department, prisons, border control, intelligence, disease control, public schools and government bureaucracies, privatizing which would be tantamount to compromising the nation-state.
By late 1990s, the unthinkable was deemed practical. Like Russia’s oil fields, Latin America’s telecom, and Asia’s industry, the US government would be privatized for private profit, especially urgent due to the backlash in Asia drying up the profit lake. The crisis exploiting methods learned over the last 3 decades in Latin America, Asia and Russia would be put to use in US heartland.
As its CEO, Rumsfeld had used his contacts to get the highly lucrative FDA approval for Searle Pharmaceutical’s aspartame (NutraSweet). When he sold Searle to Monsanto, he earned $12 million (15). That sale earned him seats on the boards of blue chip Sears and Kellogg’s and Gulf stream aircraft manufacturers. He was paid $190,000 a year for swerving on the board of ASEA Brown Boveri, the Swiss engineering firm which gained notoriety when it was revealed that it had sold nuclear technology, including the technique to produce plutonium, to North Korea (16).
In 1997, he was named the chairman of the board of biotech firm Gilead Sciences, which had registered Tamiflu, meant to treat ,many types of influenza, and the preferred drug for avian flu. If there ever was an outbreak, or the threat of one, the governments will be forced to buy billions worth from Gilead. Jonas Salk developed the first polio vaccine in 1952, he refused to apply for a patent, telling the broadcaster Edward R Murrow “Could you patent the sun?-this might put ideas in Rumsfeld’s head (17). Gilead also owns the patents on 4 AIDS drugs, and spends a lot of time, money and energy to block distribution of cheaper generic versions. Its key medicines have been developed on public grants (18).
While Rumsfeld saw riches in future epidemics, his protégé in ford administration Dick Cheney saw it in wars, and as secretary defense under bush Sr scaled down the number of troops on active duty and increased hiring of private contractors. He hired Brown & Root, a division of Halliburton to identify tasks performed by troops, which could be taken over by private firms, and make profit. It did and Cheney created Logistics Civil Augmentation Program to serve the military as manager for its operations (20). No dollar value was attached to contracts, the cost would be covered, plus Pentagon will guarantee a profit-cost plus contract. Halliburton, “beat out 36 other bidders to win a 5 year contract, not surprising…given that…it was the co…drew up the plan.” Los Angles Time’s T.Christian Miller.
In 1995, with Clinton in the White House, Halliburton hired Cheney as its new boss. Thanks to the loosely worded contract that the company and Cheney had drawn up, when Cheney was defense secretary, that it was able to stretch…the meaning of ‘logistical support till Halliburton was able to take over the entire infrastructure of US military operations overseas.
In the Balkans, a Halliburton spokesman said, “The first person to greet our soldiers as they arrive…, and the last one to wave goodbye is one of our employees”, making it sound like a holiday cruise (21).Clinton had deployed 19,000 soldiers in the Balkans. Halliburton created neat, gated suburbs, run entirely by the company, as US bases, with fast food shops, supermarkets, movie theaters, and gyms (22).The saying made famous in the Green zone in Baghdad was “don’t worry, it is cost plus, but deluxe war was invented by Clinton Cheney, in just under 5 years, nearly doubled the amount of money Halliburton collected from the US Treasury, from $1.2 billion to $2.3 billion, and federal loans and loan guarantees went up 15 times (23). He made millions for himself (24).
Cheney’s wife Lynne, was making money hand over fist as a member of the board of Lockheed Martin (25). With the cold war ended, and defense spending dropping, they developed a new strategy-running the government for a fee. In mid-1990s, Lockheed began taking over IT divisions of the US government. In 2004, the NY Times reported, “Lockheed Martin does not run the US, but it does help…sorts your mail…totals …taxes…cuts social security checks…counts the US census, runs space flights, monitors air traffic, and to make all that happen…writes more computer code than Microsoft (26).
As governor of TX, GWB did not run the state as much as he parceled out state functions to private firms such as security, private prisons. The American Prospect Magazine called TX, “the world capital of private prison industry” (28).
Bush, Cheney and Rumsfeld made up an evil triad, which would hollow out the government.
9/11 and revival of civil service:
When Bush and co took over in 01/2001, the IT bubble had burst, Dow Jones was down in the basement. Bush’s solution was akin to the one neo-liberals had advocated for the rest of the world-give away public wealth to corporations, with tax cuts, lucrative contracts, and plans to privatize everything (31-32).
But 9/11 intervened, and the idea of the government’s self-immolation no longer seemed so good. The security failures of 9/11 exposed the fault lines created by 20 years of nibbling away at the public sector and outsourcing to corporations for their profit. Radio communication for NY police and fire fighters had broken down in the middle of the rescue operation, air traffic controllers did not notice the off course planes and the hijackers passed through security check points manned by people who made less than the employees of the food courts at the airports did.
Ronald Reagan had emasculated the air traffic controllers union, and deregulated the airlines-a clear victory for Friedman counterrevolution. The entire air traffic control system had been over the next 20 years privatized, deregulated and the security work performed by underpaid, poorly trained, non-union contractors. After the attack, the inspector general of the department of transportation testified that the airlines responsible for security had skimped a great deal to keep costs down. It was OK on 09/10/2001, but it hiring $6.00 an hour airport security guard did seem like criminal negligence on 9/11.
In October 2001, envelopes containing a white powder were sent to congressmen. Bioport, a private lab had the exclusive contract to produce the Anthrax vaccine had failed a series of safety inspections, and the FDA had denied it permission to distribute the vaccine (35). It was still in business.
The backlash against whole sale privatizations became acute with corporate scandals like Enron going bankrupt three months after 9/11. Employees lost their retirement, while executives cashed out. Then it came out that Enron had manipulated energy prices, which had led to massive blackouts in CA (36).
Trust in government had gone up (37). The blue-collar workers of NY had performed the best (403 lost lives).Bush had to praise not only security services, but also teachers. Postal employees and health care workers.
A Corporate New Deal
Bush was planning to spend large amounts of public money to stimulate the economy, but it was all earmarked for corporations
( as Obama is doing now), with no competition, which was a hallmark of Bush/Cheney regime, and virtually no oversight.
9/11 served the agenda of a huge domestic shock therapy, which bush moved quickly to exploit to hand over war to disaster management to for profit firms. The regime invented a new framework foot its scheme of privatization-the War on Terror. In order to enhance the already existing feeling of paranoia, they first increased to a previously unheard of ands unimaginable level, the policing, surveillance, detentions and launched a power grab, called “a rolling coup” by the military historian Andrew Bacevich (40). The net effect was a full fledged new economy in private hands in homeland security, war, reconstruction, at home and abroad.
The most effective camouflage for the privatization agenda was that economic ideology was no longer a primary motivator of foreign and domestic policy. War on terror was. The NY times February 2007, “ Without a public debate or formal policy decisions, contractors have become a virtual fourth branch of the government” (42).
In November 2001, the department of defense brought together , “a small group of dot.com venture capitalist consultants” to identify “emergency technology solutions…assist…in Global war on terrorism”, so the government, in stead of providing security was proposing to buy it. By early 2006, it has been incorporated in the Pentagon as the Defense Venture Catalyst Initiative (43). (One must compliment the US for coming up with the weirdest terminology).
The Department of Homeland Security is the clearest expression of wholly outsourced kind of government. (44).Another is Counter Intelligence Field Activity, created by Rumsfeld, independent of CIA. This agency outsources 70% of its budget to private contractors. Ken Minihan, a former director of NSA tells it, “Homeland security is too important to be left to the government”. Minihan and hundreds of Bush staffers, left the government to work in private security industry, which Minihan helped create (45).
The “1% doctrine of Cheney”, that even if there is a 1% chance, the US has to respond as though it was a 100% certainty, has been a boon for high tech detection services. Because a small pox attack can be conceived, homeland Security handed over$ ½ billion to private companies to develop and install detection equipment…against an unproven threat (46).
From a military perspective, these myriad of names, the wars-on terror, the war on radical Islam, on Islamo-fascism, the long war-make the war unwinnable, and untenable from an economic perspective.
After 9/11, Bush funneled $270.00 billion from the Pentagon, $42 billion from CIA, (nearly twice that Clinton did in both instances), and $130 billion from homeland Security. In 2003, Bush spent $327 billion on private contracts, nearly 40% of every discretionary dollar (47).
DC suburbs became dotted with security start ups, and “incubator companies. The industry also gave birth to new lobby firms to hook up companies to the ‘right people’ on the Hill. In 2001, there were 2 such companies, in mid-2006, they were 543 (48).
Terrorism Market:
One of the first booms was in surveillance cameras, 4.2 million in Britain, and 30 million in the US. That created 4 billion hours of footage, so a new market for ‘analytic software’ emerged (49). Another was digital enhancement, because facial recognition software can make a positive ID only if people offer front and center to the cameras (50).
Cell phone and Web surfing companies have been turned into tools of the state, akin to Yahoo collaborating with the Chinese government and AT&T, with the US.
Many technologies in use on the war on terror had been developed to build detailed customer profiles. So now the information collected from credit cards, can be sold, not only to travel agencies or shopping chains, but to FBI as well flagging an interest, for instance, in calls or travel to mid-East.
The p[potential for error, and being branded a terrorist, is enormous. As of June, 2007, there were ½ a million names on ATS (automated targeting system) list, and tens of millions were assigned a ‘risk assessment’ rating (54).
Any one could be declared ‘enemy combatant’, and if non-US citizen, they will never know what they were detained for as Bush had abolished “habeas corpus”.
Halliburton runs maximum security prisons in Guantnamo, Boeing, the CIA’s travel agent, designed special 737s for the 1245 extraordinary rendition flights (55).
“Over half of the qualified interrogators work for contractors (56).
They paid $3,000 to $25,000 for Al-Qaida/Taliban fighters handed over to them (57).
Pentagon: 86% of the prisoners at Gitmo were handed over by Afghan/Pak agents after the bounties were announced, and the majority of them were found to have no link or connection with either group (58).
There is an unprecedented convergence of unchecked police powers and greater corporate power. The industry not only creates an incentive to spy and torture, but also perpetuates the fear, which created it in the first place.
What passes for debate, is restricted individual cases of corruption or was profiteering, and the failure of government to properly oversee contractors, but not the consequences of a fully privatized war.
“Since the ‘war on terror’ CEOs of the top 34 defense contractor’s salary is double of what they got before 9/11 (60).
Unlike the dot.com one, the disaster industry does have CIA level of discretion (61).
Peter Swire, a Clinton regime privacy counselor, describes the convergence as, “ you have a government on a holy mission to ramp up information gathering, and you have an IT industry desperate for new markets” (62).

Chap 15: Removing the Revolving Door
During the midterm 2006 elections, bush signed the Defense Authorization Act in a private ceremony in the Oval office (three weeks before Rumsfeld resigned) , with a rider hidden in its 1400 pages, which gave him the power to declare martial law overriding state governors, in the event of a public emergency to restore public order. Before this, the president had the right only in the face of an insurrection (4).
Senator Patrick Leahy was the sole voice of dissent.
One clear winner was the Pharmaceutical industry. In case of an epidemic, the army and national guard could be called to protect their labs and assets, their and impose quarantine, the long standing desire of Rumsfeld’s former employer, Gilead Sciences, which owns the patent on Tamiflu. The law and Avian Flu scares (and now swine flu) sent its stock soaring by 24%, in five months after Rumsfeld left office(6).
It is pertinent to ask the question, what roles do MNCs play in shaping law, or for that matter Halliburton and Bechtel, and oil companies did in promoting invasion of Iraq. People involved are known for conflating corporate interest with national interest.
In his 2006 book Overthrow, former NY Times correspondent Stephen Kinzer, tried to get to the bottom of what motivated US rulers to order and orchestrate coups in foreign countries over the last hundred years. From Hawaii in 1893 to Iraq in 2003, he notes that there is often a three stage process, first a US MNC faces a financial setback due to the action of a foreign government, ranging “ pay taxes, follow labor/environmental laws, sell some of its assets, or it is nationalized. Second the politicians interpret it as an attack on the US (which it actually is-MNCs own the US, much more than they do other Western countries). Third the process of selling an invasion starts as a struggle between the good and the bad, and “ a chance to free the oppressed nation…from…brutality of the regime…” (7). It is an exercise in mass projection of the interest of a tiny elite to those of all humanity’s good.
This tendency is more pronounced among politicians who move directly from a corporate to public office. John foster Dulles was a high powered international corporate lawyer, representing some of the biggest corporation in their conflicts with foreign countries, before he was picked up by Eisenhower as his secretary of state. He was incapable of distinguishing between corporate and national interest. Kinzer writes “Dulles had two…obsessions: fighting communism and protecting… MNCs (8). The actions off Guatemalan government against the United Fruit Company was a defacto attack on America and required an invasion.
Bush with a cabinet packed with former CEOs pursues its twin goals of fighting ‘terror’ and protecting MNCs in similar way. But the critical difference between Dulles and Bush is that the former only wanted a stable and profitable environment, the latter takes the invasions as the primary goal. Cheney are a different breed. What is good for Lockheed, Halliburton, Carlyle and Gilead –wars, epidemics, disasters-is good for the US, and the whole world. They have ushered in an era of privatized war and disaster response, profiting from the disasters they unleashed.
Rumsfeld retired in 2006. Press reported that he was returning to the private sector. He never left it. He was required to divest himself of all holdings- security or defense related. He claimed that it was impossible to disentangle himself in time. He was still looking for suitable buyer for a lot of his holdings even after six months into his term as defense secretary (9).
As far Gilead, the Tamiflu firm, though epidemics are national security issues and with in purview of defense, he did not sell Gliead stocks for his entire term (10).
Rumsfeld’s refusal to divest himself of his holding affected his job performance. According to AP report He had to recuse himself from a great number of critical policy decisions “He avoided meetings in which AIDS was discussed. When high profile mergers like General Electric, Honeywell, Northrop Grumman, were discussed, he had to recuse himself.(12).
His colleagues took care of his interests. In July, 2005, the Pentagon bought $58 worth of Tamiflu and department of Health&H declared its intention to buy up to a $ billion’s worth later (14).
It paid off. If he had sold his Gilead shares in January , 2001 for $7.45 a share, he would not have received $67045 per share he received when he left office , a 807% increase. (15).
Cheney was equally reluctant to leave Halliburton. Before stepping down as CEO to be Bush’s running mate, he negotiated with Halliburton for a lot of stocks and options. After press questions, he sold some shares, making $18.50 million in profit. But according to Wall Street Journal, he hung on to 189,000 shares and 500,000 unvested options.
He maintained such a huge number of shares during his term as VP, that he made millions every year, and was paid deferred $ $211,000 every year as well. The company’s stock price rose from $10.00 before Iraq war to $41.00 three years later (17).
Saddam did not pose a threat to US security, but did to US oil companies as he had signed contracts with Russian oil companies and was negotiating with ‘Total’ of France (18).
Rumsfeld and Cheney, asked to choose private profit and public life, chose profit, forcing government ethics committees to cave in.
In the Bush administration, the war profiteers were not clamoring to get access to government, they were the government.
Among other ‘scandals’ of Bush administration, Jack Abramoff bribes to congress, and Randy ‘Duke’ Cunningham serving 8 years for offering his Yacht on official congressional letterhead…courtesy prostitutes (21).
Whirling revolving door (between corporations and the government) has always been there, but in other administrations, political figures waited till their administration was out of office before moving on to corporations. Eric Lipton, tracking the exodus from Homeland security for NY Times “ veteran Washington Lobbyist…the exodus of such a sizable share of an agency’s senior management before the end of administration has few modern parallels” (22).
John Ashcroft, an architect of the war on ‘Terror’ after resigning from Attorney General’s office became the head of the Ashcroft group, many years before Bush left office, specializes in homeland security firm procure federal contracts. Tom Ridge, the first head of homeland Security is at Ridge Global, Rudy Gulliani, hero of 9/11 response as the mayor of NY, started his firm, Gulliani Partners FOUR MONTHS AFTER 9/11 TO SELL HIS SERVICES AS CRISIS CONSULTANT.
Michael Brown head of FEMA during Katrina, started his firm specializing in disaster preparedness (23), wrote an e-mail to a fellow FEMA staffer in the middle of the disaster “Can I quit now”: the philosophy being stay in government long enough to get an impressive title.
The innovation of bush was that many felt entitled to occupy both spaces-corporation and government simultaneously.
James Baker and Richard Perle make policy, while embedded in privatized war, fulfilling the corporatist dream-a total merger of political and corporate elites, with state functioning as a business guild. It is where the Chicago School crusade, with its privatization, deregulation, open borders and union busting has been leading.
Former Officials:
Bush has exceeded all other presidents in using former official-James Baker, Paul Bremer, Henry Kissinger, George Schultz, Richard Perle-as advisers and envoys for key functions, while the congress played the role of a rubber stamp.
James Baker, like Cheney made a fortune after leaving office, particularly on his contacts in Saudi Arabia and Kuwait, he made during Gulf1. his Houston law firm represents the Saudi Royal family as well as Halliburton, Gazprom oil of Russia, he is an equity partner in the Carlyle group. The war in Iraq translated into a record breaking $6.6 billion payments to Carlyle’s investors (27). When bush made Baker his special envoy on Iraq’s debts, the NY times in an editorial wrote “Mr. baker is far too entangled…in lucrative private business…leave him looking like a potentially interested party in any debt restructuring…to perform honorably…must give up private ones” (28). Baker simply refused…did exactly opposite of what Baker was supposed to be doing as envoy…collect $27 billion from Iraq in unpaid debt to Kuwait-in stead of convincing governments to cancel Saddam era debts (29). But there was a price-Kuwait would have to invest $ 1 billion into the Carlyle group.
George Schultz became the head of the Committee for the Liberation of Iraq, at he request of Bush to build the case for the invasion in public opinion. He did not disclose that he was a member of the board of Bechtel, which would collect $ 2.3 billion to ‘reconstruct’ Iraq (31).
According to Danielle Brain of the Project on Government Oversight “it’s impossible to tell where the government ends and Lockheed begins” It is harder to tell where Lockheed ends and the Committee for Liberation of Iraq begins-Bruce Jackson, till very lately vice president for strategy and planning at Lockheed had convened the committee.
Kissinger had kicked off the counterrevolution by orchestrating the Pinochet coup in Chile. Bush named him to the chair of 9/11 commission, but when the families of victims asked him to produce a list of his corporate clients, pointing to a potential conflict of interest, he refused and elected to step down from the chair (35).
Rumsfeld named Richard Perle to chair Defense Policy Board, argued forcefully for the attack on Iraq, was one of the first Disaster post 9/11 Capitalists, launching his venture capital firm Trireme Partners, just two months after 9/11. Boeing had kicked in $20 million to start the partnership. Perle wrote an op-ed supporting Boeing’s $17 billion tanker contract with the Pentagon (37-the tanker deal landed a senior defense official and a Boeing executive in jail).
Wolf Blitzer of CNN confronted Perle with Samuel Hirsh’s observation “he has set up a company that may gain in a war”. Perle blew up, calling Hersh “the closest thing American journalism has to a terrorist…”(39).
The right limitless profit seeking has always been the center of neocon ideology (40).



Chap 20: Disaster Apartheid-Katrina
“Katrina was not unforeseeable. It was the result of a political structure that subcontracts its responsibility to private contractors and abdicates its responsibility altogether” Harry Bellefonte.
Our car spun out of into a traffic light…I was aware that wherever the ambulance was going, it wouldn’t be good. I had visions of the horrific scene at the makeshift health clinic at the New Orleans airport…so few doctors and nurses that elderly evacuees were being left unattended for hours, slumped in their wheel chairs.
In Canada, I usually wait for forty minutes to see my general practitioner. And this was downtown New Orleans…largest public health emergency in recent US history. A polite administrator came into my room “in America we pay for health care. I am sorry…we wish we had your system. Just fill out this form.”
Within a couple of hours, I would have been free to go, were it not for the curfew. A private security guard told me “The biggest problem is all the junkies; they are jonesing and want to get into the pharmacy”.
A medical intern was kind enough to slip me a few painkillers. When I asked him if he had gone to any of the shelters to help, he seemed…taken aback…embarrassed” I had not thought of that”. I…changed the subject…to the fate of Charity hospital…it was barely functioning before the storm… it might never reopen “They’d better reopen it,” he said “we can’t treat those people here”
It occurred to me that this affable doctor and the spa like medical care I had just received were the embodiment of the culture that had made the horrors of Katrina possible. As a graduate of a private medical school and an intern at a private hospital, he had been trained simply not to see New Orleans’ uninsured, overwhelmingly Afro-American residents as potential patients.
When Katrina hit, the sharp divide between…Ochsner Hospital and Charity hospital played out…”the economically secure drove out of town, checked out of hotels and called their insurance companies. The 120,000…without cars…waited for help that did not arrive…even if most of us had resigned ourselves to daily inequalities…access to health care…decent schools, disasters were supposed to be different…New Orleans showed that the general belief that disasters are…time out for cut throat capitalism…all pull together…state switches into higher gear…had already been abandoned, with no public debate.
“The storm exposed the consequences of neo-liberalism’s lies…in a single locale and all at once” the political scientist and New Orleans native (3). The levees were never repaired, the under funded public transit system…failed…the city’ idea of disaster preparedness was passing out videos…if hurricane came…get out of town.
The Federal Emergency Management Agency (FEMA)…Bush… vision of government run by corporations. In the summer of 2004, more than a year before Katrina, …Louisiana put in a request for funding to…develop emergency plan…a powerful hurricane. The request was refused. Disaster mitigation…advance measures to make…disasters less devastating, was…gutted under Bush. The same year FEMA awarded $ 500,000…to a private firm…Innovative emergency Management to come up with…” …hurricane disaster plan for South east Louisiana and the city of New Orleans” (4).
The company went back to FEMA for more money, eventually it came to $ 1 billion…came up with everything from delivering water…to identify empty lots…be transformed into trailer parks for evacuees... eight months after the contractor submitted the report, no action was taken. Michael Brown, head of FEMA “Money was not available to do the follow up.” (5).
FEMA could not…locate the New Orleans superdome, where 23,000…stranded without food or water…the media had been there for days.
Even neocon stalwarts like Jonah Goldberg …were begging,
“When a city is sinking…rioting runs rampant, government PROABABLY should saddle up.” (6).
Milton Friedman wrote in his Wall Street Journal op-ed “it was also an opportunity”. On September 13, 2005, two weeks after Katrina, the Heritage Foundation hosted a meeting of right wing ideologues and Republican Lawmakers. They came up with a list of “Pro-Free Market Ideas for responding to Katrina and high Gas Prices-32 in number…the first three…”automatically suspend Davis-Bacon prevailing wage laws in disaster areas…federal contractors required to pay a living wage, “make the entire…area a flat-tax free-enterprise zone” “make the entire region an economic competitive zone…waive regulations…give parents vouchers to use at charter schools (7). Bush announced all the measures, though he was forced to reinstate labor laws.
The group at the Heritage Foundation called upon the congress to repeal environmental regulation on the gulf coast…for new oil refineries and “drilling in the Arctic national wildlife Refuge, in spite of the fact that climate scientists have linked the increased intensity of hurricanes to increasing ocean temperatures (8&9).
With in weeks the Gulf coast became the domestic laboratory for the same kind of government run by contractors…pioneered in Iraq. The Baghdad gang-Halliburton’s KBR unit got 60 million to reconstruct military bases. Blackwater hired to protect FEMA employees from looters. Parsons, notorious for doing sloppy work in Iraq, was brought in for bridge construction in Mississippi. Flour, Shaw, Bechtel, CH2M, all Iraq contractors, were given contracts to build mobile homes, just 10 days after levees broke. The contracts were worth $3.4 billion and there no open bidding (10).
The parallels with Baghdad’s Green zone were uncanny. Shaw hired the former head of the army’s Iraq reconstruction office. Flour sent its senior project manager from Iraq to New Orleans. Joe Allbaugh, who had promised to bring Wal-Mart and 7-Eleven to Iraq was the lobbyist for many of the deals. David Enders, a reporter asked, asked an armed guard outside a New Orleans hotel if he seen much action, he replied “…it is pretty much Green Zone here”(11).
Like the Green Zone, congressional investigators found “ significant over charges, wasteful spending or mismanagement” in contracts worth $3.75 billion (12).
Kenyon, a division of the massive funeral conglomerate, Service Corporation International and a major Bush campaign donor, was given the work of collecting dead bodies from homes and streets. They worked slowly, local emergency workers and volunteer morticians were not allowed, bodies often under blazing sun for days. Kenyon charged the state, on the average $12,500 per body, and for almost a year after Katrina, decayed bodies were still being found in attics. (13).
Experience did not have any effect on award of contracts. AshBitt was given half a billion to remove debris, did not own a single dump truck and outsourced the work (14).A company/religious group, Lighthouse Disaster relief was given 5.2 million to build a camp for emergency workers in suburb of the city. The work was never finished. The director Pastor Gary Heldreth confessed “ …the closest thing I have done…organize a youth camp…”(15).
According to The New York times ‘the top 20 contractors …spent nearly 300 million since 2000 on lobbying and 23 million to political campaigns”.
As in Iraq, they were averse to hiring locals.
After the contractors and sub-contractors had taken their cut, little was left for the people. The author, Mike Davis discovered that FEMA paid Shaw $ 175 per square foot to install blue tarp on damaged roofs, with the government supplying the tarps. Workers who hammered the tarp were paid $ 2.00 per square foot (17).
In November, 2005, to offset the billion going to the contractors, Republican dominated congress wanted to cut $40.00 billion from the budget, from student loans, Medicaid and food stamps (19).
From being social levelers that they were long ago, they now provide an inkling into the cruelly divided future. Baghdad’s Green Zone provides the best example-it has its own electric, phone and sewage systems and a state of the art hospital, all protected by 5 ft thick walls, poolside drinks, Hollywood movies and Nautilus exercise machines.
Green Zones are not exclusive to Baghdad. They emerged in New Orleans, Green Zones amidst Red Zones of , consequence of “free market economy, Bush refused to allow payment of public sector salaries from emergency funds. The city which could not collect taxes had to fire 3,000 workers. Millions went to outside consultants, many of whom were real estate developers (20).thousands of teachers were fired paving the way to privatize education.
Nearly two years later, Charity hospital was still closed, court system was barely functional and private energy company, Entetrgy had failed to supply electricity to the whole city. It threatened to raise rates and was gifted $200.00 million from the federal government. The public transport system lost half its workers, and the vast majority of publicly owned houses stood boarded and empty. (21) and the tourist lobby was eying the prime land close to the French Quarter.
New Orleans public sphere was being erased. Like Detroit and other manufacturing cities lost outsourcing of globalization, New Orleans provides the first example of post disaster wastage of cities.
In 2007, The American Society of Civil Engineers reported that the USA was falling behind in maintaining its public infrastructure, and it would take $ a trillion and a half to bring them back to safe standards. The expenditure was actually being cut back (23).
In 2006, the Red Cross signed a new disaster response partnership with Wal-Mart. “It is going to be private enterprise” said Billy Wagner, the chief of emergency management for Florida Keys (25).
Much of the parallel disaster economy has been built with tax-payer money spent in privatized war zone work. The overhead (euphemism for diverting funds for corporate/personal use) of contractors in Iraq and Afghanistan ranges from 20% to 55%.
Blackwater, (now named…after the exposure of the murders and other atrocities perpetrated on Iraqi civilians and bystanders by its criminal gangs) founded in 1996, built up an a mercenary army of 20,000 and a huge military base in North Carolina, worth $50 million. Its Florida wing boasts of helicopter gun ships, a Boeing 767, a Zeppelin, a 20 acre man made lake to train boarding a hostile ship, a 1200 yard firing range for sniper training, all courtesy Bush with public funds (27). A journal described it “al Qaeda for the good guys” (28).
The state has lost its ability to perform its functions. FEMA had to hire a contractor to award contracts to sub-contractors during Katrina. To update the army manual on the rules dealing with contractors, it had to hand over the job to one of its major contractors-MPRI. The CIA had to bar recruiter from luring its staff away from its own premises. Michael Jackson, deputy secretary of Homeland Security explained “the department does not have the capacity …to plan…oversee the ‘border initiative program (to build virtual fences on US borders with Mexico and Canada(30).
Once a market is created, it does not fold up with the termination of the term of one president.
A year after Katrina, CEOs of 30 largest US corporation joined hands under a ‘Business roundtable and complained of “Mission Creep” by NGOs in disaster relief as it infringed on their franchise. They claim to be better equipped than the UN to deal with Darfur (they will indiscriminately massacre both sides, and bring the peace of the grave yard).
Perhaps the main reason the elite are so sanguine about climate change is that they think they will be able to buy their way out of it. Christian end-timers (and Muslims too) actually favor disasters as paving the way to bring Rapture ( day of Qayamat for Muslims) sooner.
Paul Brenner, before he went to Iraq used to disaster proof corporations-turning Multinationals into security bubbles, to continue to function even the state around them crumbled. Early work can be glimpsed in the lobbies of major corporations in London and NY, equipped with airport style check in and scanners. They would like to proceed to privatized global communications, emergency health and energy supply and transportation for corporate personnel and their favorite minions among the politicians. What they can do for the military in Felluja, they can do for the police in Reno (35).
John Robb, a former force Delta commander, turned consultant says “Wealthy individuals and MNCs will be the first to bail out of our collective (security and transport) systems (36). The future Robb described looks very much like what went on in post Katrina New Orleans, with gate communities private hospitals, charter schools, water supply and emergency generators for the rich and out of the way trailer parks for the poor where they were treated like virtual criminals (37).
In a wealthy republican suburb of Atlanta, they were tired of their tax subsidizing schools and police in the poor sections of the county. They voted to incorporate their own city, called Sandy springs. In September 2005 (the month Katrina struck), consulting mammoth, offered to run the government for them at $ 27 million a yearCH2M, making it the first ‘contract’ city. Only four people worked for the new municipality, all others for the contractor (400. Neighboring communities took their cue from Sandy springs, one new city Milton hired, what else-CH2M Hill. Soon a campaign gathered for the corporate cities to band together. Politicians from the poor areas opposed the move fiercely (41).
CH2M Hill is one of the ‘primes’ of Iraq. It was granted contract to build ports and bridges and oversee all infrastructure programs in post tsunami Sri Lanka, and was awarded $ 500 million contract to build FEMA villas in post Katrina New Orleans.

































Connecting the Dots (The Shock doctrine-Naomi Klein)
Chap 1:
Capital is religion, and Milton Friedman is its Abd Al-Wahhab (Start with the origin of capitalism).

Since 1960s, Milton Friedman and his followers have been perfecting the strategy to use a crisis to cow down the public to make it politically possible (12) to introduce the trinity of free market, privatization and drastic cutbacks on social services-health, education and welfare.
He first got the opportunity to utilize a terrible upheaval to put his theory into practice when became Guru of General Augusto Pinochet (14), who had overthrown the democratically elected government of Chile, attacked the presidential palace by air and with tanks, killed the president and arrested all the cabinet ministers, he could lay his hands on. President Allende had refused to order troops and guards loyal to him, even after he had credible reports that a coup was in the offing, so the show of overwhelming force was to terrorize the public.
(A line of deception runs clear through recent history when violent events have been orchestrated to mold public opinion to favor a certain course, and if relatively mild ‘happenings’ do not work drastic measure are undertaken.
During early WW II American public opinion was not in favor of US participation in the war against Germany. In fact most Americans felt that England was being punished for its past and current sins of colonization and imperialism. But what was at stake was the very survival of the capitalist system, which the fascists appeared to be on the point of vanquishing completely. It is reported that Churchill had an American plane blown out of air off the coast of Spain and an American ship drowned in mid-Atlantic. Germans were blamed for both. That did change public opinion, but not sufficiently for FDR to commit the country to the War.
Japanese Naval attack on Pearl Harbor came as a godsend. There are credible reports that though the government and FDR had advance knowledge of the impending attack, they let American ships get hit like sitting ducks. It stands to reason that a flotilla sailing all the way from Japan, would be noticed by some one who would inform the US government.
In days gone by, European governments used to send missionaries ostensibly to convert the ‘natives to God’s religion. If the natives did not accept God’s word through the ‘men’ of god, or still worse, they bodily harmed the preachers, gunboats went to proselytize more effectively.
Further back in history, the second Caliph after Muhammad, Umar ibne Khattab sent emissaries to the royal court in Iran. Iran was at the height of its civilization, with glittering court and king. The emissaries, roughly clad and wild in appearance, forced their way into the court and demanded that either Iranians become Muslims, or pay a religious tax or else they would be attacked. The king sent them on their way, and sure enough they were attacked, defeated, cities were razed, men were slaughtered and women taken into captured and offered to the caliph to be distributed to victors as he pleased).
Coming back to the 20th CE, in 1953, the British smarting under the nationalization of oil and other nationalist measures, and unable to destabilize the elected government of Iran, handed over the case to the Americans, who in collaboration with the Iranian army, aided and abetted by Ayatollahs, orchestrated a coup, in the aftermath of which thousands were killed. Iranians had to wait till 1979 to get rid of the Shah who, though allowed megalomaniac celebrations as the 2500th anniversary of the Iranian royalty (his father had risen from a subaltern to head of the state, and had very reluctantly agreed to become the king. He had been exiled by the British as he was not servile enough) had functioned as American satrap.
Further outrages had followed, in Guatemala at the instance of the United Fruit co and in many other countries in Central and Latin America.
France was unable to hold on to its possessions in Indo-China. The US, prodded by the paranoid brothers Allen and John Foster Dulles, respectively at the CIA and state, magnanimously stepped in
So no one may say that Asia was backward Asia, In 1965 the army had overthrown the independence leader Ahmad Soekarno in Indonesia and killed an estimated one and a half million people. The usurper General Suharto was advised by economists from ?Harvard.
The Falklands war in 1982 helped Margaret Thatcher crush the miners strike and dismantle the trade union movement.
The trinity is imposed in a relatively peaceful way too. Loans for extravagant and useless enterprises are thrust on third world, and when they are unable to pay IMF, WB and other international financial institutes countries twist arms to accept what are euphemistically described as conditionalities, which amount to the same deregulation, nationalization and cutbacks in social spending. This was done to Yeltsin’s Russia (1993), Latin America (22) after the mid 1980s crisis and after the later1990s crisis in East Asia (23). It was done democratically in Reagan’s America and more recently in Sokorzky’s France.
But the US capital got its big chance after 9/11. Bush took advantage of it to make war on terror a free market, completely for profit enterprise. The administration, as a first measure towards privatizing the government outsourced health care of the soldiers, interrogation of prisoners and ‘data mining’ on American citizens with out so much as by your leave to FASA courts set up specifically for the purpose of allowing the government to spy on its own citizens.
In 2003, the government handed out over 3500 contracts to private companies to perform security work, and by the end of August 2006, the department of Homeland security had given more than 115,000 such contracts (28). (name Blackwater and others) which have immunity from local laws, and US law did not apply to them in Iraq. Weapon contracts and servicing the military is the fastest growing service economy in the world (29).
Humanitarian relief and reconstruction work, after the society and its whole infrastructure has been demolished as in Iraq and Afghanistan, is done by corporations like Bechtel. Another Halliburton reported revenues of $20.00 billion in 2006, in 2006, the bloodiest year for Iraqis, with 3700 casualties in October alone (33).
Wherever the Chicago school policies of Milton Friedman have been applied a powerful alliance has emerged between elite politicians and multi-national corporations, who function under a revolving door arrangement with each other (give examples of Ruben, Paulson Guitner, Mc Namarra, Cheney and so many others).
Torture has been the inevitable partner of the crusade for global free trade, deregulation. CIA calls it ‘coercive interrogation’. It is a set of techniques which disorients prisoners to the extent of disowning their ideas, family and friends. The idea is explained in details in two CIA manuals declassified in late 1990s, on how to create ‘violent ruptures’ between prisoners and their perception of the world.(36). They are deprived of sensory input with hoods, ear plugs, shackles and isolation and then suddenly exposed to glaring light, blaring music, physical assault and electric shocks with cattle prods.
The prisoners are regress so much and so frightened out of their wits that they are no longer able to think rationally (37).
Coups, mass jailing, public torture in football fields (Chile and Afghanistan under the Taliban), killing create an atmosphere of fear which makes people more amenable to listen to and accept what neo-liberals have planned for long.

Post 9/11 north Americans, not known for knowledge or familiarity with the world outside the continental US (relate stories of driving license bureau in NJ which till the 1960s did not know that Pakistan was not a US state, and accepted Pakistani driving license in exchange for a NJ one, or a similar office in MI which did not know the difference between a learner’s license and a full driving license from Canada, or people in MI asking Pakistani doctors in 1970s, if Pakistan had phones) US citizens fell line, hook and sinker for Clash of civilization, the axis of evil and Islamo-fascism, and became a “clean sheet of paper on which the newest and the most beautiful words can be written”, Mao on his people (38).
The 1929 market crash had created an overwhelming consensus that laissez-faire had failed and people started listening to John Maynard Keynes, the intellectual architect of the modern welfare state (39). Friedman had spent his life fighting the idea. He wrote to Pinochet in 1975 “ the major error, in my opinion was to believe that it was possible to do good with other people’s money.
He got a reprieve when Margaret Thatcher (the milk snatcher-she had as secretary for education in PM Heath’s cabinet, had withdrawn the glass of milk provided to students at lunch time) and Ronald Reagan peacefully liberated the markets.
When the Soviet Union collapsed, they also wanted to join the Friedman revolution, as did the communist inside but capitalist outside Chinese, who had had their own shock treatmen6t in Tiananamen square (don’t forget Shock and Awe of Iraq. Napoleon had demonstrators surrounded. Look up short selling- buy insurance on stocks, (burn them when they go down), buy them when they go down, like robbing a grave does not mean you killed the guy).
This fundamentalist form of capitalism has always been inducted through the most brutal forms of collective and individual torture.

(On the "Daily show" last night I heard the woman (can't recall the name) asking a person about 'selling short'. It is apparently akin to getting a heavy insurance on a property and setting it to fire, without the risk of the insurance co investigating and finding signs of arson. She told him that if you are robbing a grave, it does not mean that you killed the guy too.
She also interviewed some one from overstock.com who said that many companies went bankrupt after short sellers got after them. Could you please look into it.
(Since we are linking torture with economic policy, not as random sadism, but as an instrument to cow down the public and make them amenable to acceptance of certain policies, could we give historical examples of Nero, Muslim attack on Iran during Umar's caliphate, Karbala, sack of Baghdad by Mongol hordes, Nadir Shah, Napoleon, gun boat diplomacy, Pearl Harbor and so on, including the last one 'Shock and Awe'. That way we will be able to link religion to economic policy too).
The corporatist alliance has obtained control over Arab oil, taken over disaster relief, security apparatus, jails and other state business privatization, coercion of the third world into accepting IMF conditionalities. But perhaps the greatest achievement is the perception in the common mind that the devastation of Iraq and Afghanistan. Abu Gharaib and Guantanomo are the consequences of the unique incompetence of Bush regime, and not an essential element in a well thought out policy.
To hold an ideology accountable for the acts of its followers is not far fetched. All intolerant, fundamentalist doctrines which reject other belief systems out of hand, deplore diversity and whose avowed objective is to impose what they think is the perfect system are a danger to mankind. The Chicago school shares this trend with extreme religious and racist groups. Bit is difficult to distinguish between the inspiration of the ideology and its distortions like the Taliban for Islam, Sharon for Zionism, Billy graham for Christianity, BJP for Hinduism, and Stalin for communism.
The coups, wars and massacres have not been regarded as capitalist crimes and need to be identifies as such. Co-existence of capitalism with an egalitarian state is possible as Keynes proposed and did exist in Europe (and in a much more diluted form in the USA), till Thatcher started eroding its base. But neo-liberals want to demolish government except to safeguard their interest, and keep ‘law and ‘order. That is not allow the public any forum of protest. This fundamentalist concept of naked capitalism is not compatible with any other system, as Islamic fundamentalism is incompatible with democracy and representative government.

Medical Roots of ‘Scientific’ Torture:
Were laid in the 1950s, by a Montreal psychiatrist, Dr Ewen Cameron, director of the Allan Memorial institute at McGill university. The study was funded by the CIA through a front organization called the society for investigation of human Ecology.(26). The funding continued from 1957 to 1961 They tried to pass it off as bumbling sci-fi buffoonery, rather than accept funding a torture laboratory They destroyed the files of the $ 25.00 million program.(43). Cameron believed that patients with psychiatric problems had to be regressed to infantile/early childhood age by heavier, more frequent and larger than accepted number of electro-shocks in traditional ECT (electro-convulsive therapy) and drug cocktails of psychedelic LSD and hallucinogenic PCP, huge doses of insulin, drug induced sleep, and prolonged sensory deprivation. He gave 300 electro-shocks to victims in stead of the recommended four treatments per patient totaling 24 individual shocks(27). He put patients in isolation boxes (30), soundproofed the rooms, piped loud noises, kept the room dark, put heavy dark glasses on them, put heavy ear muffs, and put cardboard tubing on hands and arms, so they could not touch their body parts (31).They were kept in this state for 15-20 days (31) He also gave one group the drug Curare which paralyses body muscles. Legions of patients with minor psychiatric problems were so dealt with without their consent or knowledge and regressed to soiling their underwear, thumb chewing, baby talk, and in case of prisoners, telling the interrogators whatever they knew or was suggested to them, to the extent of betraying spouses, parents, siblings, friends and their belief systems. He called it ‘de-patterning’ a patient to make a clean slate on which healthy patterns could be inscribed. I did not work that way. (in 1988, CIA settled the case for substantial damages and the Canadian government followed suit four years later. (3).
In the initial days of cold war hysteria in mid 1950s, CIA ed the techniques. It was codenamed Project Bluebird, later changed to MKUltra (13). The program needed large number of human guinea pigs in several trials, and if it got out that CIA were conducting these studies, public outcry would shut the program down. The relationship started with the tri-national conference of intelligence agents and academics at Montreal’s Ritz-Carlton hotel on June, 01, 1951, attended by among others, Omond Solandt, chairman of Canada’s Defense research board, Sir Henry Tizard, chairman of the British Defense Research Policy committee, and representatives of the CIA (18).
One of the participants was Dr Donald Hebb, director of the department of psychology at McGill university. The defense research Board reporting on Hebb’s findings “sensory deprivation clearly caused extreme confusion as well as hallucinations…and significant temporary lowering of intellectual efficiency…during and after…deprivation (20). The subjects “developed an interest in the occult that lasted weeks”. Hebb had proved that it made people “more open to suggestion “ and eventually came to the realization that he could be draft a ‘how to’ manual for psychological torture (23). Hebb knew that the experiments violated medical ethics. He wrote that more “clear cut results were not available as it was not possible to force (large number) of subjects to spend 30 to 60 days in conditions of perpetual isolation (24).

Fear:
In 1998, Florencio Callabero, an interrogator with Honduras’s brutal Battalion 3-16 told the NY Times that the CIA “…taught us…methods to study fears and weaknesses of prisoners…make him stand…don’t let him sleep…keep him naked and in isolation…put rats and cockroaches in his cell (The most notorious case I heard of was during the days of the tussle between ISI and MQM, they put rats in the shalwar of Nasreen Jalil, a member of Mohajir elite ) (to Taqi upto here 3/18/09)…serve him dead animals, throw cold water, change the temperature. Ines Murrillo, a 24 years old woman interrogated by Callabero “…they spread my legs and stuck the wires (for electroshock) on my genitals (44). That led to a hearing of the Senate’s Select committee on Intelligence, where CIA deputy director Richard Stolz admitted that “Callabero did indeed attend a CIA human resources…interrogation course” (46)attend
The Baltimore Sun filed a request under the Freedom of Information Act for the manual used to train people like Callabero. The CIA stalled for 9 years, and produced a 128 page 1963 handbook under threat of a lawsuit called Kubark Counterintelligence Interrogation (47), which details methods from sensory deprivation in stress positions, from hooding to pain and instructs interrogators to seek “prior Headquarters approval”, under circumstances when bodily harm is to be inflicted, or if medical, chemical, or electrical methods are…used to induce acquiescence (48).
The manual has a large section on the experiments conducted at McGill (51). “The (sensory) deprivation induces regression……tends to make …the subject view the interrogator…father figure” (52). “…Adults can be converted into dependent children…” (55). Prisoners are captured in the most jarring… way possible, late at night or in early morning raids…immediately hooded…stripped and beaten…subjected to…sensory deprivation. Then there always is improvisation…instinct for brutality is unleashed when there is impunity e.g. on the Algerian freedom fighters by the French soldiers, often with the help of psychiatrists (58). The French conducted seminars in fort Bragg, NC in the Algerian techniques (59).
1970s on, the Americans favored the role of trainers (61-62). Torture violates the Geneva conventions and the US army’s Uniform Code of Military justice, yet successive US administrations have sanctioned it (63). The manual states on page 2 that the techniques carry “the grave risk of…lawsuits”.
The effects of 9/11 were remarkably similar to the ones imagined in the pages of the manual: profound disorientation, extreme fear and anxiety and collective regression. (page 51). Bush took advantage of the situation by acting as the ‘father figure’. Torture, in addition to being outsourced, was in-sourced as well with US citizens torturing prisoners in US run prisons or being extra-ordinarily renditioned in US planes. The administration openly demanded the right to torture, and defied own laws. GWB empowered Don Rumsfeld to declare that prisoners captured in Afghanistan were not covered by the Geneva conventions as they were not ‘POWs’, but enemy combatants, the view confirmed by the then white house counsel Alberto Gonzales (66).
Rumsfeld approved a series of special practices like using phobias such as fear of dogs, water boarding (67). US citizen and a former gang member Jose Padilla was arrested at Chicago’s O’Hare airport in May, 2002, classified as enemy combatant, taken to a US Navy prison in Charleston SC, injected with drugs, kept in a darkened tiny cell, and could only leave the cell shackled and with black goggles, and heavy headphones, kept like that for 1,307 days, and during interrogations subjected to bright lights and pounding sounds (70).. He “lacks the capacity to assist in his defense” according to the psychiatrist who examined him ((71).
James Yee, a former Muslim Imam at Guantanamo describing the extreme regression “ I would stop to talk to them, and they would talk to me in a child like voice…”(71). HR groups describe Gitmo as the best of off shore US run prisons. Imagination boggles at the treatment meted out to prisoners in US run jails in foreign countries, and worse condition of those who are outsourced to countries like Morocco and Egypt.

Chap 2
The Department of Economics at the University of Chicago regarded itself as a bulwark against the statist Keynesian thought (2). Friedman envisioned a return of societies to pure capitalism, shorn of all distortions like regulation, trade barriers, and welfarism. The only way to cleanse it was through shocks. The core of the ‘sacred’ teaching was that forces of supply and demand, inflation and unemployment were like forces of nature , and existed in perfect equilibrium, and like ecosystems, if left to its own devices, the market would produce at right prices and in right numbers, with workers getting right wages. Capitalism was “a jeweled set of movements…a celestial clockwork…” (5). Not able to experiment on countries Friedman and co, developed elaborate …mathematical equations and computer models.
Like all zealots, the school premise is that the free market is a true scientific system, correct application of which would make individuals working in their own self interest would produce maximum benefit foot every one. Like their Islamic Wahhabi counterparts, strict and complete application of fundamentals would produce a paradise on earth.
It is true, though, that thorough application of the Friedman methods have made some people extremely wealthy, and rendered them above and beyond the reach of regulation, taxation and borders to make more money.
The Chicago school saw interferences in economies in all Western capitalist countries-fixed price, minimum wage, education, which according to them, were doing untold harm to the market equilibrium. Marxism was not the true enemy (Atheists are not the worst enemy, it is non-conformist Muslims, according to Wahhabis), it was the social democrats (Europe) and Keynesians (USA) and developmentalists (third world). Capitalism in manufacture and distribution, socialism in education and state ownership of water and welfare services was akin to what Wahhabis call “bidaah”, innovation in religion.
Friedrich Hayek was Friedman’s own guru, and had warned that any involvement of government in economy would lead to “road to serfdom” (11). In 1947 Friedman joined Hayek to from Mont Pelerin society, a free market club, named after the town in Switzerland.
The Great depression did not signal the end of capitalism, but as Keynes had predicted, the end of “laissez-faire”.
Post WW II, the third world nationalist economists argued that in order to escape the poverty consequent upon depredations of colonial exploitation and non-development of industry in order to be reduced to the status of a captive market, they would have to pursue an industrialization strategy, and not depend upon export of natural resources, and advocated regulation, nationalization and tariff barriers.
By 1950s, the developmentalists had achieved major successes, especially in the ‘Southern cone’ of Latin America-Chile, Argentina, Uruguay and Brazil. UN Economic Commission for Latin America, base in Santiago, Chile and headed by the economist Raul Prebisch between 1950 and 1963, was the inspiration and epicenter. Argentina’s Juan Peron ( and other leaders a little less vigorously) poured money into public infrastructure projects, gave generous subsidies to local business and erected high tariff walls to protect them.
Powerful unions emerged in the new industries, and negotiated salaries and sent their children to school. By mid 1950s Argentina had developed the largest middle class in the continent, Uruguay had 95% literacy and offered free health care to all.
Chicago School had few takers, but they were among the most powerful.
US MNCs had a rough time in the LDCs, and not much better at home with powerful unions. Profits were high, but a substantial portion had to be given away in taxes and worker salaries. MNCs kept the Chicago School flush with donation money, to give an academic cover to corporate views. Friedman had specifics of advice. Taxes must be low and flat-not income related. Corporations should be able to sell any where, there must not be any protection to local industry or any conditions of local ownership. All prices and wages to be determined by the market, no minimum wage. All-health care, education, post office, pensions, national parks, and water supply be privatized, so state public assets could be auctioned at a fraction of their value. That coincided with the interests of MNCs as it was meant to be.

The War Against Developmentalism:
Eisenhower could not take on the New Deal at home, but did not have any hesitation in defeating the developmentalists abroad.
At the time he assumed presidency in January 1953, Mossadegh was the PM of Iran and had nationalized the oil industry. Soekarno of Indonesia was trying to launch a non-aligned movement to be able to face the capitalist and communist world on equal terms.
In actual fact, for the time when socialism was very attractive, this movement was centrist. But the developmentalist slogans of land reform, nationalization and egalitarianism had alienated the feudal and MNC interests.
The imperial and MNC interests ordered the foreign policy establishments to control the trend, and they tried to divide the third world that democratic center was the first step into the claws of communism. The chief ideologues of the policy were dyed in the wool conservative Dulles brothers-john foster at the state and Allen at the CIA, who had represented J.P Morgan, the International nickel co and the United Fruit co at the legendry NY law firm Sullivan and Cromwell (18).
They staged two coups in quick succession, the first in Iran in 1953, where the CIA orchestrated the overthrow of Mossadegh, through the army and ayatollahs. The second was the 1954 CIA coup in Guatemala, aided and abetted by the local clergy, for the benefit of the United Fruit co. President Jacobo Arbenz Guzman had had the temerity to take over some unused land with full compensation, to transform “…feudal economy into a modern capitalist state” (19).
In 1953, two Americans, Albion Patterson, director of US International Cooperation Administration (soon to be USAID) and Theodore Schultz, Chairman department of economics at the U of Chicago, met in Santiago, Chile and decided “What we need…change the formation of these men -pink economists, (20) and want these countries to work out …by using our way…economic development (21). The plan was simple-the US government would pay for Chilean students to study in the Chicago school, and the professors of the school would be paid to conduct economic research on the ground in Chile.
Albion Patterson approached the dean of the premier University of Chile. The dean turned him down. (US aid workers were conscious and US scholarship holders, perhaps, unwitting agents of the capital). Patterson got his way with a lesser institution, the Catholic university, thus giving birth to “the Chile project” as it came to be known at the Chicago school.
Between 1957 and 1970, 100 Chilean students studied at the school, all expenses paid by US tax payers. In 1965 the program was expanded to include students from all Latin America, especially from Argentina, Brazil and Mexico, this time funded through the Ford Foundation, leading to the Center for Latin American Economic Studies at the school, which hosted 40-50 Latin American students at given time, compared to 4-5 at Harvard/MIT.
A special Chile workshop was created by the head of the program, one Arnold Harberger. All of Chile’s policies-social safety net, and protection of national industry, trade barriers, price control were deemed obstacle, and its health and education program “absurd attempts to live beyond its underdeveloped means”.
With generous USAID, the Chicago boys became enthusiastic ambassadors of neo-liberalism over the whole continent (30).
This was unabashed intellectual imperialism par exellance.
In 1962, Brazil under president Joao Goulart moved to land reform, higher salaries, and to force foreign MNCs to reinvest a percentage of profits into Brazilian economy. In Argentina, the military was trying to defeat similar demands by banning Juan Peron’s party. In Chile’s 1970 election, all the three major political parties were in favor of nationalizing the country’s largest source of revenue, the copper mines controlled by US corporations (33). Salvador Allende had won the 1970 elections on the platform of nationalizing large segments of economy run by local and foreign corporations. Allende was a democrat, who believed that social change should come through the ballot box. On hearing the news of Allende’s election, Nixon ordered CIA director Richard Helms to “make the economy scream” (35).
US MNCs were apprehensive that Allende was the beginning of the end of US control over Latin American economy. By 1968 20% of total US foreign investment was in Latin America. The profits were astounding. Mining industry had invested $ 1 billion, but had sent home $7.2 billion (37).
US corporations declared war on Allende even before his inauguration. The leader of the group Ad hoc committee on Chile was ITT which owned 70% of Chile’s phone co, and joined by US mining companies, Bank of America, and Pfizer Chemical.
The plan was to block US loans and …have large US private banks do the same, delay buying from Chile for six months (39).
Allende appointed a close friend Orlando Letelier as ambassador to DC and in charge of negotiating with the corporations. In March, 1972 a syndicated columnist jack Anderson published aeries of articles that ITT had conspired with the CIA and State to keep Allende from being inaugurated in 1970. The US senate launched an investigated and found that ITT had offered $ 1 million to the opposition and “sought to engage the CIA…manipulate the outcome of…election (41). The report released in June 0973 found that there was relationship between ITT and US government, including NS adviser Henry Kissinger (42).
It all failed to dent Allende’s support. In the mid term election Allende’s party won more support in the parliament than it had in 1970.
They studied two models for regime change in Chile. In Brazil US backed military junta had seized power in 1964. They had tried to impose the neo-liberal agenda relatively peacefully, but when people took to streets, they instituted widespread torture. According to the truth commission established later “killing by the state became routine” (44).
Indonesia was the other model. Sukarno has enraged the West by redistributing the wealth, protecting the country’s economy and throwing out the IMF and the WB. CIA had received instructions from high levels to “ liquidate President Soekarno…” (45).
In October 1965, General Suharto seized power, and with the help of lists prepared by CIA and arms and field radios supplied by the Pentagon, sent his soldiers to kill leftists. The more indiscriminate killing was delegated to religious students trained by the military (48) which they did with relish. In just one month between half to one million were killed (49).
Extraordinary role was played by Indonesian economists trained in Berkeley. The Berkeley mafia had begun training in the US under a program started in 1956, which was funded by the Ford foundation.
The mafia leaders became leaders of campus groups and worked with the military in overthrowing Sukarno.(52).
Suharto packed his cabinet with the members of the Berkeley mafia (56).
The Berkeley mafia were not such anti-state radicals as the Chicago boys, and believed the government had a role to play in providing basic necessities like rice and managing the local economy. But they passed laws allowing foreign companies to own 100% of the country’s mineral and oil resources, awarded tax holidays and with in 2 years copper, nickel, Oil, rubber and hardwood had been captured by Macs.
Suharto, unlike the Brazil junta, had shown that brutal repression applied preemptively could send the country into shock and resistance wiped out, even before the ‘reforms’ were put into effect. It transformed Indonesia into one of the best hosts for MNCs.
In Chile opponents of Allende imitated the Indonesian example in an eerie fashion. The Catholic university became the base for creating a “a coup climate” (59), with many students joining the fascist Patria y Libertad. In September 1971, the top business leaders, members of National Association of Manufacturers held an emergency meeting, generously funded by the CIA and MNCs and decided that “Allende’s government was incompatible with freedom…private enterprise…the only way was to overthrow…”(60).
Over 75% of the funding… was coming directly from CIA (73).
Orlando Letelier saw the coup as an equal partnership between the army and the Chicago boys(66).

Chap 3
Allende refused to organize his supporters into armed defense leagues.
Chile had heretofore enjoyed 160 years of democratic rule..
US trainers had indoctrinated the Chilean military into an anti-communist obsession, brainwashing them into thinking that socialist were Russian spies (Americans think that Socialism is some kind of affliction , and shy away from national health care, they desperately need when some one tells them it was socialism).
Allende died after died in the air and ground attack, where 24 rockets were fired for the 36 supporters inside the president’s house (3). The members of his cabinet were arrested.
The generals knew that their hold on power depended upon terror. 13,500 civilians were arrested (5). Thousands ended up in the Chile Stadium and the huge National stadium in Santiago (like the Taliban trials in football stadium in Kabul later on). Hundreds were executed. More than 3200 were disappeared, and 200,000 fled the country.
For the Chicago boys 9/11/73 was a day of giddy anticipation. On the day of the coup, they were camped out at the printing presses, frantically trying to get the document called “The Brick” for the junta’s first day on the job. The document had the free market trinity in Friedman’s Capitalism and Freedom-privatization, deregulation and cuts to social spending. The Economist would describe it as the first concrete victory…to seize back the gains that had been won under developmentalism and Keynesianism (10).
Pinochet knew next to nothing about economics. There was a power struggle in the junta between those who simply wanted to reinstate the pre-Allende status quo, return to democracy, and others who were pushing for full Chicago treatment. Pinochet favored the latter (13). He immediately named the Chicago boys to senior economic posts. Economics meant forces of nature (14).Pinochet privatized some state owned companies, , allowed speculators in, opened the borders to foreign imports, tore down barriers that had protected Chilean manufacturers, cut government speeding by 10% (not military),and eliminated price controls.
In 1974 inflation reached 375% nearly twice that under Allende (17).
Chicago boys argued that the policy was not being applied strictly enough.
The only people benefiting were foreign companies and a small clique local financiers called ‘piranhas’ who were making a killing in speculation. The man who had brought the Chicago boys into the coup plot Orlando Saenz “one of the greatest failures of our economic history (18).
Chicago boys and the ‘piranhas invited Friedman. He was received like a rock star. He assured Pinochet that if he followed advice-cut government spending by 25% with in six months and adopt policies towards ‘complete free trade’, economic miracle will come (23-24).
Pinochet was converted. They cut and cut again, public spending till in 1980, it was half of what it had been under Allende (27). By mid-1980s, manufacturing fell to WW II levels (31).
In the first year of the shock therapy, the economy contracted by 155, unemployment 3% in Allende time, reached 20% and lasted for years (33-34).
Andre Gunder Frank, a U of Chicago economics PhD, went to Chile to see things for himself and wrote an angry letter to Friedman. Roughly 74% of the’ living wage’ as claimed by Pinochet, went simply to buying bread, forcing families to cut on milk and bus fare to work. Under Allende bread, milk and bus fare to work took 17% (39) of a public employee’s salary. He wrote that Friedman’s prescriptions were so cruel they could not “be imposed …without…military force and political…terror” (41).
Public school system was replaced by vouchers and charter schools, and the social security system was privatized (42).
In 1982 Chilean economy crashed, it faced hyperinflation, and unemployment hit 30%, and the piranhas had bought up country’s assets on borrowed money to the tune of $ 14 million (47). Pinochet was forced to nationalize many of the companies (48).
What saved Chile from complete collapse was that Pinochet had never privatized Codelco, the state copper mine co nationalized by Allende. The co generated 85% of Chile’s export revenues (49).
Chile under Chicago boys was not a capitalist state, but a corporatist one. By 1988, when the economy had stabilized, 45% of the population had fallen below the poverty line (50). The richest Chileans had seen their incomes increase by 93%. Out of 123 countries in the world, Chile was 116 in inequality (52).
The pattern would repeat from Russia to South Africa to Argentina.

Brazil was already under control of a US supported junta.(54). The military had staged a coup in Uruguay in 1973. In Uruguay, a previously egalitarian society, real wages dropped by 28% (56).
In 1976, a junta seized power from Isabel Peron.(to ed up to here)
It did not privatize oil or social security. Though they landed several posts, the top economic job went to Martinez de Hoz, a feudal landowner, who went on to do the usual things, banned strikes, allowed employers t o fire workers at will, opened the country to foreign speculators, privatized and sold hundreds of state companies (59).
With in a year wages lost 40% of their value, poverty spiraled, factories closed (62).
The generals wanted to avoid suffering a…campaign…has been unleashed against Chile (63). They relied more on ‘disappearances’ (64). That turned out to be not only low profile, but more effective as well.(64). By the end of their reign 30,000 had been disappeared (65). The cattle owning junta introduced a most sadistic innovation-prisoners were put on metal beds called parrilla (barbecue) and electric current passed through the frame. They were also subject to the picana (electric cattle prod) (78).
Those hunted by various juntas sought refuge in neighboring countries. Washington provided state of art computer system for the collaborative effort of the regimes called ‘Operation Condor’ eerily similar to later CIA rendition network. (70).
A 1975 US senate investigation of US intervention in Chile revealed that the CIA had provided training to Chile’s military in ‘controlling subversion’ techniques (72-School of Americas).Similar training offered to Brazil-an American police officer Dan Mitrione took beggars off the streets and tortured them in classrooms (73). Mitrione then moved to Uruguay, where he met the fate he so well deserved-abducted and killed by Tupamaro guerillas (74).
Argentina’s legendary investigative reporter Rofoldo Walsh was then living in Argentina. He had intercepted and decoded the CIA telex which had informed Fidel Castro of the Bay of Pigs invasion plans, and helped him prepare for it. Walsh joined the armed Montonero movement. He wrote “An open letter…to the military junta”. “you only have to walk around …Buenos Aires…the speed…such a policy transforms the city into ‘a shantytown’ of ten million people” (81). He signed the letter 03/24/1977. The next morning, he was enticed into a well laid trap, killed his body burned and dumped into a river (82).
In the run up to Chile’s coup, the CIA had funded a massive campaign (Pinochet had been very obsequious of civil leaders, as Zia had been of Bhutto) to depict Allende as a dictator in disguise, on the verge of imposing a soviet style state. In Argentina and Uruguay, the guerillas were presented as such perilous threats that generals did not have any choice, but to take over. US government’s own intelligence reports showed that Allende was no threat to democracy (84).
The National Security Archive in DC released declassified minutes of a meeting held 2 days after the Argentinean coup, in which William Rogers told Kissinger “we…got to expect…a good deal of blood…they…come down very hard on…trade unions and their parties” (86).
The vast majority of the juntas were not armed groups, but non-violent activists (unable to defend themselves as armed groups could-and so favored targets).

Chap 4
In 1976, Orlando Leteliar, once Chilean ambassador to the US under Allende, escaped jail in Chile and arrived in DC, and joined the Institute for Policy Studies, a progressive think tank. He was horrified by the fact that though the world condemned the tortures and executions, yet kept on flooding the junta with loans. He vehemently rejected the separation of tortures from free market creed, and regarded the former as a Chicago school tool. In a searing essay for the Nation, he wrote “this particularly convenient concept of a social system, in which ‘economic freedom’ and ‘political terror’ coexist without touching each other (Zia’s Islamization in Pakistan coexisted with hundreds of arrests, tortures and the crowning achievement-raped women were jailed for having committed adultery). He continued “establishment of a free ‘private economy’ and the control of inflation a la Friedman, could not be done peacefully”.(4).
The article was published at the end of august 1976. On September 21, 1976, he was blown off with a remote control bomb planted under the driver’s seat of his car (The assassin Michael Townley was a senior member of Chile’s police, and had been admitted to the US on a false passport with CIA’s help (6).
On December 11, 1946…the UN General assembly passed a resolution…unanimous vote… genocide “when racial, religious, political and other groups have been destroyed, entirely or in part…” (13). The word ‘political had been excised from the H.R Convention
Two years late at Stalin’s insistence.(14).
In order for the ideal (Friedman’s) to be achieved, there has to be a monopoly on ideology, otherwise the signals get distorted and the whole system thrown out of balance (just like Wahhabis).
By the sixties and early seventies, the left was the dominant culture in Latin America-the poet Pablo Neruda, folk musicians Victor Jara and Mecedez Sosa, the dramatist/theatre Augusto Boal, and the journalists Eduardo Galeano and Walsh, the legendry heroes from Jose’ Gervasio Artigas to Simon Bolivar. The dominant metaphor of the juntas was an echo of the third author Alfred Rosenberg’s call for “a merciless cleansing with an iron broom” (22-an exact parallel of the Muslim and Arab countries in fifties and sixties, with Mossadegh in Iran, Awami League and NAP in Pakistan, Soekarno in Indonesia, Ahmad ben Bella in Algeria, Nasser in Egypt-with the same fate).
In Chile, Argentina and Uruguay, they burnt books by progressive/nationalist writers (as they did in Afghanistan under Taliban and are doing in Swat in Pakistan and will do it in the rest 0f the country in short order once they or JI/Imran get their hooks on power). Hundreds of professor fired (Taliban go the full hog, they burn universities), dozens arrested and some killed 24-25). Under ‘Operation Clarity’ 8,000 leftist educators were purged (27). The singer victor Jara had his both his hands broken, then he was shot 44 times (29-Hasan Nasir in Lahore Fort).Augusto Boal was tortured, exiled and finally murdered.
In Brazil, though the junta did not start off with mass repression, but they did arrest the leadership of trade unions, they “feared the spread of resistance…from labor unions to…economic program…based on tightening salaries…and denationalization” (32). The operations were planned well in advance of takeovers. In 1976, 80% of Chile’s political prisoners were workers and peasants (34).
‘Terrorism’ was a smoke screen to go after non-violent workers The solders…printed leaflets they signed ‘Montoneros’ calling on workers to strike, and used them as ;proof; to kidnap and kill the union leadership 936).
Several MNCs expressed their gratitude, Ford took out celebratory advertisements openly aligning with the Argentina regime.(38). In Brazil, several MNCs got together to finance their own torture squads (OBAN, Operation Bandirantes (39). The role of ford was the most overt. It supplied green Ford falcon sedan which became synonymous with kidnappings and disappearances-a Death Mobile (40).
Before the coup, ford had to make significant concessions to its workers.. all that changed abruptly on the day of the coup. “It looked like we were at war in Ford and it was all directed at…workers” (42). Ford used this to eliminate unionism in the factory (43-All MNCs used outsourcing to suppress unions, and the best chance was the 2008-09 financial meltdown). Soldiers took workers, not to a prison, but to a detention facility set up inside the factory. Workers were beaten and electro-shocked (44).
In 2002, federal prosecutors filed a complaint against Ford Argentina, on behalf of workers, as well as Mercedes-Benz from whose 16 workers were disappeared, 14 permanently as it is alleged, the management collaborated with the military and gave names and addresses of union leaders (48).
Particularly brutal were the attacks on farmers who were involved in the campaign for land reform. The junta’s economic policies were a windfall for landowners and cattle ranchers. The price of meat went up by 700%. (50).
Community leaders were the target in the slums.
A priest who collaborated with the junta in Argentine said “the enemy was Marxism…” (52).
High school students who, in September 1976, asked were attacked. Six were killed.
The pattern of disappearances was indicative of an attempt to remove all relics of collectivism.
Victor Emmanuel, the Burson Marsteller executive in charge of selling the junta’s business friendly regime told the author Marguerite Feitlowitz “a lot of innocent people were killed, but given the situation, immense force was required.
And it worked. Chilean psychiatrist Marco Antonio de la Parra said “we were confused…docile…waiting for orders...people regressed…became…fearful” (58). People coped…feeding their babies mate , a tea which suppressed hunger.

Torture as healing:
Many torturers adopted the posture of doctors and surgeons.. they would heal them of the sickness that was socialism. The treatment was agonizing , might even be even be lethal, but it was for the patient’s good. Pinochet demanded “if you have gangrene…you have to cut it off (60-the story of a village quack in Pakistan. He gave a strong purgative to a patient. The patient got weak. He kept on giving the same, till he died. The relatives demanded an explanation. The quack said “he had so much toxic material inside, that he died in spite of taking out so much. Imagine what would have happened if it had all been left inside).
For most Latin American leftists, solidarity as the Argentinean historian called it was “the only transcendental theology”. Torturers set out to excise the impulse of social connectedness, in achieving betrayal, and suppression of the impulse to help others, rather than information, which in most cases, they already had.
Prisoners were offered the Faustian bargain in the interval between beatings, to choose the torture for another prisoner, or to hold the picana on another prisoner or denounce beliefs on TV.
Friedman likened his role in Chile to that of a physician who offered “…medical advice…to…end …a plague”(66). It was the same construct which allowed Nazis to kill ‘diseased’ members of the society. The Nazi doctor Fritz Klien said “The Jew is the gangrenous appendix in the body of mankind” The Khymer rouge used similar language (67).

Children:
Five hundred babies born in Argentina’s prisons were enlisted to create a new breed of model citizens (69).
The US, Canada and Australia conducted mass thefts of children of indigenous people, sent to residential schools, forbidden to speak their language and brain washed into ‘whiteness’. The Galarias Pacifico is an uipscale mall in Buenos Aires, full of Christian Diors like stores courtesy of Chicago school, built on the secret torture chambers, as the older form of capitalism was built on mass graves of the indigenous people.

Chap 5:
Students of the U of Chicago were disturbed by their professors collaboration with Chile’s murderous junta. Gerhard Tintner, an Austrian economist who had fled European fascism to the USA in 1930s, backed their demand for an academic investigation. He drew parallels between Friedman’s support of Pinochet to the technocrats who had collaborated with the Nazis. (4).
Friedman took credit for the work the Latin American Chicago boys had done. In Newsweek, in 1982 “the…boys combined…intellectual…ability with the courage of their convictions…and dedication to implementing them…” (5).
Friedman claimed that Pinochet tried to run the economy on his own for two years, then turned to the Chicago boys. That was untrue. The boys had been working with the military even before the coup.
Friedman was awarded the 1976 Nobel Prize for economics for his work on the relationship between inflation and unemployment. In his acceptance speech, he completely ignored the fact that the hypothesis for which he was getting the prize had been proven false by the breadlines, typhoid outbreaks and closed factories in the one country which had been ruthless enough to put his ideas into practice (10-as
did the Nobel committee).

Human rights:
The Chicago School refused to acknowledge any connection between the economic policies and the use of terror. The acts of terror were framed as “human rights abuses”, rather than as instruments of political and economic policy. By focusing purely on the abuses, and not the reasons behind them, the HR movement helped the Chicago school escape the opprobrium generated by its first bloody laboratory. In 1967, it was revealed that the International Commission of Jurists, the preeminent HR group focussed on soviet abuses, was being secretly funded by the CIA (12).
It was in this context that Amnesty International decided that its financing would come exclusively from members (13). Amnesty’s position, emblematic of the HR movement as a whole that since HR violations were a universal evil, it was not necessary to determine why they were occurring, but only to document them as meticulously as possible.
Amnesty’s 1976 report on Argentina deserved the Nobel Prize it got, but shed no light why on why the abuses were occurring.(14). Another omission was that it concentrated on the conflict between the military and the left wing extremists, with not a word on role of CIA, local landowners or MNCs.

On Ford:
For many HR groups besides Amnesty, the reason for reticence was that he most significant funding came from the ford Foundation which spent $ 30 million on HR in 0970s and 80s, the beneficiaries included Chile’s Peace Committee and America’s watch.(15). Ford Foundation was the primary funder of U of Chicago’s Latin American Economic Research and Training, and also financed the parallel programs at the Catholic University in Santiago, which was designed to attract economics students from neighboring countries(18).
This was the second time that Ford foundation’s protégés had chosen a violent route to power, the first being the Berkeley’s mafia in Indonesia. Ford had built the department of economics of the university of Indonesia, and nearly all the economics trained in the program were recruited by Suharto.(20).
The Chicago boys and the Berkeley Mafia came to dominate two f the most brutal regimes in the world. In the 1970s Ford decided to transform itself into the leading financier of HR in the third world. And it defined HR in narrow terms., and favored groups which pursued legalistic struggles for ‘rule of law, ‘transparency and ‘good governance and avoided politics, as one Ford officer put its attitude in Chile “how can we…not get involved in politics” (21). In the fifties Ford Foundation often serves as CIA front organization, channeling funds to anti-Marxist organization, documented by Frances Stoner Saunders in the book The Cultural Cold War. The foundation was started in 1936 with donations of stock by Henry and Edsel Ford, and another Ford executive, its divestment of Ford stock not completed till 1974, and had Ford family members on board till 1976 (22).
The Foundations decision to work for HR, but not get involved in politics, made it impossible to look into the underlying cause of the violence it was documenting. Only one HR group Brasil: Nunca Mais declared that repression and economics were a single unified project “since the economic policy was…unpopular, it had to be implemented by force” (23).
The economic model took deep roots. The secret torture centers were eventually destroyed, soldiers returned to barracks, but the economic program continued.
Torture crops up whenever a local or foreign ruler lacks the consent to rule-US and Saddam in Iraq, the French in Algeria and the Israelis in Gaza/West Bank and so on. It is not so reliable in extracting information, but very effective in crushing resistance.
Simone de Beauvoir writing about women raped and tortured in prisons in Algeria “to protest in the name of morality against ‘excesses and ‘abuses’ is an error which hints at active complicity. There are no ‘abuses’ or ‘excesses’ here, simply an all pervasive system.(24).
There is no humane way to rule people against their will, just as there is no gentle way to occupy…against …will. Neo-liberalism is an inherently violent ideology.
By failing to hold the ideology accountable for the crimes committed…this subculture if ideologues was given immunity…

An armed conflict between nations horrifies us. But the economic war is no better…And its ravages are no less terrible…We think nothing of the other because we are so used to its deadly deeds. M.K. Gandhi. “Non-Violence-The Greatest Force” 1926

Chap 6 Thatcherism: Saved by A War
After returning from a visit to Chile, Friedrich Hayek, Friedman’s guru, wrote to Margaret Thatcher to use Chile as a model to transform Britain’s Keynesian economy.
In a private letter in 1982, she wrote a private letter “…in Britain with our democratic traditions…the measures adopted in Chile are quite unacceptable. Our reforms must be in line…our traditions and constitution…the process may seem painfully slow. (2).
Thatcher was in the third year of her first term, highly unpopular, and the political establishment of her party was forlornly looking into defeat in the next elections, which must be called with five years of the last one.
The Latin American experience had generated great wealth for a few. Western countries had far more assets which could be privatized to pass control to the elite.
In 1981, the Fortune magazine ran an article the ‘glittering luxury filled shops’ in Chile, with nary a mention of the explosion of shanty towns (3).
Friedman and co had been disappointed that Nixon, who had helped the Chicago boys overseas, had taken a different line at home (4). In 1971, US economy was in a slump, with high unemployment and inflation. Nixon could not risk the Friedman formula, the US army would be loath to bomb the Houses of Congress, so he put price controls on such things as rent and oil. Friedman raged: of all the ‘distortions’ price controls were absolutely the worst, “a cancer…” (6).
Nixon was reelected with 60% of the popular vote, and proceeded to impose environmental and safety standards in industry. The worst cut of all, he declared “we are all Keynesian now”(9).
For Friedman it was a stark lesson. For him capitalism was synonymous with freedom, yet only dictatorships were ready to put unadulterated free market doctrine to practice-Chile, Argentina, Bolivia, Indonesia and China (11).
Stephen Haggard, a neo-liberal scientist at the University of California conceded that “ some of the widest ranging reforms in the developing world were undertaken following military coups or one party sates (Mexico, HK, Singapore, Taiwan” and “good things-democracy and market oriented economic policy-did not always go together (12).
Policies that directly redistribute land and raise wages, not trickle down economies, are in the self interest of the majority.
Friedman believed passionately (after Adam Smith) that humans are governed by self interest and society works best when self interest is allowed to govern almost all activities, except when it comes to voting. Since most of the people are poor, it is in their ‘short term interest’ to vote for candidates promising to redistribute wealth (13).
Thatcher was attempting the “ownership society. The government owned cheap housing called council homes were filled with people who would not vote for her party. She offered strong incentives to residents to buy the flats at reduced rates. More than half of the new owners became Tory voters (15), while those who could not afford to buy faced rents twice as high as before.
By 1982, the number of unemployed and inflation had doubled (16). Her personal approval rating went down to 25%-lower than for any British PM in history, and her party’s to 18% (17).
It was a bad time for the Wall Street in the early eighties, the terrorist regimes, starting with Iran-Nicaragua, Peru, Ecuador, Bolivia- in 1979 had started collapsing-Samuel Huntington’s third wave of democracy (18). The Islamic regime, not yet the full blown authoritarianism, had nationalized the banks, imposed import and export controls and introduced land reforms ( 20-its core support, besides that from the clerical establishment, was from Bazaaris and the left/progressive elements. The shah, though he had derived his support from the landed class, the army and above all from the US. CIA had reportedly more employees in Teheran, than they had in Langley. Iranians kept on discovering ‘listening posts’ all over Iran for years, though they were able to ‘discover’ most of them after painstakingly putting back together the shredded documents, they had got hold of when they took over the US Embassy).
Falklands/Malvinas war:
On 04/02/1982, Argentina invaded Falkland Islands. Neither country had much interest in it. Argentine writer Jorge Luis Borges the dispute as “a fight between two bald men over a comb” (20). But it was a godsend for the free-market project as a political cover for a the radical capitalist transformation.
Both sides wanted a war. Argentina’s economy was collapsing under its debt and corruption. A new junta under General Leopoldo Galteiri found that anti-imperialist sentiment was more powerful than the one against suppression of democracy.
Thatcher, who had cut grants to the islands and major cutbacks in the Navy, which would affect the ships guarding them, was “practically an invitation to Argentina to invade” (21).Labor MP Tony Benn in Financial times “not only the pride of Argentina is involved…perhaps even the survival of the Tory government in Britain (22).
Neither Britain not Argentina made any serious attempt to come to terms peaceably. The shouts “Ditch the bitch” changed “Up your junta” (24). Thatcher’s poll numbers more than doubled from 25 to 59%, and she won a decisive victory in the following year (26).
The British codename for the war was ‘Operation Corporate’, perhaps chosen deliberately by Thatcher. In 1984, the coal miners went on a strike. Past PMs had not dared to take on the miners. Thatcher declared “…we now have to fight the enemy within…much more dangerous to liberty (27). The police attacked the miners, the injuries climbed into thousands, and Arthur Scargill militant president of the miners union moaned of “the most ambitious counter-surveillance operation ever mounted in Britain” (28). The cost was enormous-three thousand extra policemen a day-Colin Taylor, an acting police sergeant called a “civil war”. There was no inclination to bargain, the sole agenda to break the union. It was reminiscent of Reagan sending 11,400 air-traffic controllers home, and had the same effect of cowing down other trade unions.
Between 1984-88, the British government privatized British-Telecom, Gas, Airways, Airport Authority, Steel, Rail and sold its shares in British Petroleum. (Bush could only privatize security, war and reconstruction, as all else had already been privatized). She provided the first Chicago School style of selling a country without a dictatorship.
In 1982, Milton Friedman wrote a paper “Only a crisis, real or perceived-produces a real change…our basic function is: develop alternatives…until the politically impossible becomes politically inevitable (33). Cris9i are, in a way, democracy free zones.
Leftists, especially communists have long thought that hyper-inflation, by destroying the value of money, takes the masses…to…the destruction of capitalism (35), much as evangelical Christians calibrate signs of the coming Rapture. The Chicago School picked up the Bolshevist idea that crashes could spark right-wing coups too-the crisis hypothesis (36). Friedman and his corporate patron had tried to mimic the victories of Keynesians in the New Deal. They built up right-wing think tanks, like the Heritage foundation and CATO, but the most ignorant indoctrination vehicle was a the ten part PBS series ‘Free to choose’ underwritten by Getty, Oil, firestone Tire and rubber co, Pepsi, GM, Bechtel, General Mills (37).

Chap 7
In 1985, Bolivia was getting a chance to elect its president, after 18 years of dictatorship in the last 21 years.
But the victor would be faced with a debt-interest higher than the entire national budget. In 1984, Reagan had pushed it over the edge by financing an attack on cocoa farmer, which turned a large section of the country (Chapare) into a military zone, and cut off roughly half the country’s export trade. NY Times “…less than a week after the occupation of Chapare, the country was forced to cut the official value of the Peso by more than half, inflation went up ten times, and thousands started leaving the country to neighboring ones for jobs (3).
At the time of the presidential race between former dictator, Hugo Banzer and a former elected president victor Paz Estenssoro Inflation was 14,000%. Banzer’s team, sure of victory engaged the upcoming star of Harvard’s economic department, 30 year old Jeffrey Sachs to develop an economy policy. Sachs had no experience in developmental economics (4).
Sachs had been influenced by Keynes on the connection between hyperinflation and fascism in Germany after WW I. The country had an inflation rate of 3.25 million % in 1923, unemployment rate of 30% and the rage over war reparations.
Keynes had warned that “there was no subtler, no surer way of overturning the basis of a society than to debauch the currency…” (5). Sachs shared the view. But he was also a product of Regan’s America, and Friedman’s philosophy that free market was supreme had overtaken all Ivy League schools, including Harvard (7). He was convinced that Bolivia suffered from ‘Socialist Romanticism’ (8). But he parted from Chicago in that he believed free market policies have to be by debt relief and aid. The core tenet of Keynes is that countries in economic recession should spend out of it. Sachs took the opposite view-austerity and price increases, the recipe that Business Week had called “Dr Strangelove world of deliberately induced depression” in Chile (9).
Sachs proposed raising the price of oil ten times, and several other price deregulations and budget cuts.(10).
Banzer was sure of victory, but Paz had not given up. Bolivians believed that though no socialist, he was no neo-liberal.
One newly elected senator ended up playing a key role in the final selection of the president by the congress. His name was Gonzalo Sanchez de Lozada (known as Goni), who had lived in the US for a long time, was the wealthiest businessman of Bolivia, and had studied at the University of Chicago, though not economics, but was influenced by Friedman.
On 08/06/1985, it was Paz who was appointed the president, and appointed Goni as the chair of a top secret bipartisan emergency economic team. This group would go further than Sachs, and proposed dismantling the entire state based economic model.
For 17 days the team holed up in the living room of Goni(15). They were in a hurry. They wanted to catch the militant unions and peasant groups off guard. Goni recalled “Paz kept saying , if you are going to do it . do it now. I can’t operate twice (16).US ambassador to Bolivia at the time, Edwin Corr, recalled that he had made it to all politicians, that the only way US aid will flow, if they adopted the shock route.
Bedregal, the planning minister offered a draft of shock program, calling for the full shock treatment-elimination of food subsidies, canceling price controls and 300% increase in the price of oil (17), freezing government wages to already low levels, deep cuts to government spending, and open door to unrestricted imports, downsizing state companies.
The idea that policy change should launched like a military attack is a recurring theme. Bush’s Shock and Awe: Achieving rapid dominance, the US doctrine published in 1996, which took practical shape in the 2003 invasion of Iraq “seize control of the environment and paralyze…adversary’s perceptions…that the enemy would be incapable of resistance. (20). Economic shock works on the same theory. Surely one of the reasons of the Iraq war to capture the country’s assets and force the free market dogma on it.
Paz’s economic team bundled the entire revolution into a single decree DS 21060, on the lines of “The Brick” for Chile.
His cabinet was kept in the dark, while all the preparations were being made.
With in two years inflation was down to 10%, But all social cost was shifted to the poor, according Ricardo Grinspun, professor of economics specializing in Latin America at York University. (page186). Real wages were down 40% in 2 years, per capita income went down from $845 to $ 789, but that does not take account of enormous wealth the elite acquired, and which is counted in calculating the per capita income. For example the average peasant was earning only $140 a year, not $789 (25). It also does not take into account the thousands of kids who got a piece of bread and a cup of tea a day (26). Hundreds of thousands of full time jobs were eliminated (27).
One significant effect of the push to free market was that many of the desperately poor workers of Bolivia were driven to Coca farming (29), by 1989, one in ten was involved in coca industry (30).This industry played a significant role in reviving Bolivia’s economy(31). Two years down the line coca was generating more income than all other exports combined, with an estimated 350,000 people dependent on the trade for their living(32).
But thanks to Sachs, “shock therapy had shaken off the stench of dictatorship and death camps”, this from NY Times. In Bolivia, this had been undertaken under a ‘center-left’ government of Paz.(38).
But Paz had no such mandate, it was a backroom deal, imposed abruptly
Free Market economist coined the term “voodoo politics” fit it, others called it lying (39).
As soon as the decree was announced, thousands demonstrated, riot police raided union halls, tanks ran through streets, 15,000 arrested, and shelled with tear gas (41). Top 200 union leaders were taken to remote jails on the Amazon. The senior leadership was sequestrated in remote villages, with a ransom demand to call off protest as the price of letting go(43).
One year later, the government laid off huge number of workers in tin mines, the workers took to streets again, with the same aftermath (44).
So it was not so peaceful after all.
The government crackdown was practically ignored by the international press, as was the tale of triumph of “free market reforms” in Bolivia.

Chap 8:
By mid 1980s, several economists had observed that hyperinflationary crises mimic the effects of a military war. For the hard core Chicago School ideologues, hyperinflation was not a problem, but a golden opportunity to practice their ‘religion’, and there was no lack of opportunity in the 1980s, in Latin America and Asia. Crises resulted from the insistence of IMF/WB and other financial institution, on passing on of the illegitimate debt of dictatorships to the successor democracies, and the US Federal Reserve to allow interest rates to soar (As Fannie May, and Freddie Mac do to student loans).
In 1983, when the junta collapsed in Argentina, Raul Alfonsin was elected as the president. During the junta rule, the country’s debt had ballooned from $ 7.9 billion to $ 45 billion. In Uruguay, the junta expanded $ half a billion to 5 billion. In Brazil, it went from from $ 3 billion in 1964 to $ 103 billion in 1985 (4).
These debts were odious, much had gone into the military and police to enforce IMF/WB Chicago School dicta(5). Much of the rest vanished (6). The rest was spent on shady ‘bail outs’ and in Chile, just before the junta collapsed, president of the central bank Domingo Cavallo announced that the state would take over the debts of MNCs and domestic firms Argentinean-Ford, Chase, Citibank, IBM and Mercedes-Benz (13).
The state department declassified the transcript of a meeting held on 10/7/ 1976 between secretary of state Henry Kissinger and Argentina’s foreign minister admiral Casar Augusto Guzzetti. Kissinger “…apply for as much foreign assistance as possible and fast, before Argentina’s “human rights problem” tied the hand of US administration (14). Those who claimed that lenders should have known better than to lend to such dubious people.
The loans, on their own, were an enormous burden. On top of that Paul Volcker increased the interest rates, which went as high as 21% in 1981, and lasted till mid-1980s (15). The number of people defaulting on their mortgages tripled (18).
Outside the US the debt spiral was born. In Argentina, the $ 45 billion debt accumulated, became $ 65 billion in 1989. In Brazil it went from $ 50 billion to $ 100 billion in six years, and in Nigeria from $ 9 to 29 billion (18).
Price shocks followed the double whammy. It occurs every time the price of an export commodity falls by 10%. IMF estimated that between 1981-84 this happened 25 times in LDCs, and between 1984 and 1987, 140 times (19). The price of Bolivia’s tin fell by 55%.
Friedman’s crisis theory was vindicated. The more the economy followed his dicta of floating interest rates, deregulated prices, export base economy, the more a country became crisis prone, and the more would be amenable to taking his advice.
In a way, crisis is built into the Chicago model. When vast sums of money are free to travel instantaneously, speculators are allowed to bet on everything from drugs to currency, prospects of a firm, sell and buy loans and pay ratings groups to enhance or lower the rating to get a better price, push loans and ‘white elephant’ projects on the third world and force them to rely on export based income, slash social and welfare, reduce salaries of workers, lay them off, dispossess peasants, overthrow governments, jail, torture people and kill them with impunity, increase interest rate at will, crises are bound to follow.
Just as the people were winning the battle for freedom in mid-0980s, they were hit with an avalanche of financial shocks, created by a deregulated global economy.
In the 1980s and 1990s, the developing world was in a kind of terror hangover, few elected governments had the fortitude to risk a US sponsored coup by adopting policies which had provoked the brutality of the 1970s. The military had not been held accountable, but were biding their time for another chance. Crisis stricken, debt strapped elected governments had little choice but to submit to Washington based financial institutions (with the USSR out of the equation, no one could dare play rebel. Saddam paid the price of confrontation, Gadafi is hibernating in his tent. And only the embroilment of the US in Iraq and Afghanistan has saved Eva Morales , Hugo Chavez and Ahmad de Nejad so far).
Thus came the dawn of “Structural Adjustment”, and instead of the ‘dictatorship of proletariat’, came the ‘dictatorship of debt’.

Though Friedman did not prescribe to the ‘big government interference’ concept of IMF/WB, his boys took up top positions in the institutions, perhaps to work at undermining them from inside.
Hit with spiraling debts, the countries turned to WB/IMF, only to face the Chicago boys there already to betray the founding principles of the institutions. These institutions had been created post WW II in response to the horrors of the war, at Bretton Woods NH in 1944, financed by 43 initial participant countries, and mandated to prevent the crashes that led destabilization of Weimar Germany and Nazi takeover. The World Bank was charged with long term investment to lift countries out of poverty, and IMF to promote policies which enhanced market stability and reduced speculation.(23).
John Maynard Keynes had led the UK delegation and was confident that the world had finally recognized the perils of leaving the market to regulate itself (24).
But the two bodies were organized along the lines of corporation, with the size of a country’s economy governing the voting strength, with the US wielding a veto power over all the major decisions, and Japan/Europe toeing the line.
The Chicago School infiltrated the IMF/WB stealthily. Take over was completed in 1989, when John Williamson of the school unveiled the “Washington Consensus”.(25)-“all state enterprises should be privatized”, “barriers impeding the entry of foreign firms should be abolished (26). When completed, was born the trinity of privatization, deregulation, and drastic cuts to government spending.
Emboldened by the desperation of LDCs, the agenda morphed into radical free market demands.
The first full “structural adjustment” was issued by the IMF in 1983, and kept on doing it to every country which sought its help over the next 20 years. An UIMF senior official David Budhoo designed the SAPs for Latin America and Africa in the 1980s, admitted that “everything that we did from 1983 onwards was based on…to have the south privatized or die” (29).
The fund’s official mandate, on paper, remains crisis management, not social engineering, so what they did had to be called stabilization. But all they did was to advance Chicago School’s neo-liberal agenda. Doni Rodrik, a famed Columbia University economist described “structural adjustment” as an”ingenious marketing strategy . He wrote in 1994, “The WB must be given credit for having invented and successfully marketed the concept…sold as a process…countries needed to undergo to save their countries from crises. For governments that bought into the package, the distinction between sound macroeconomic policies that maintain external balance and stable prices…and policies that determine openness (like free trade)…was obfuscated” (30).
When privatization, free trade policies and cut backs in spending are packaged with a desperately needed loan, the countries had little choice. The trickery lay in the fact that the economists knew that free trade had nothing to do ending a crisis. That was the pound of flesh that Shakespeare so well described and the kind of loans traditional money lenders in India, and loan sharks in NY practice.
LDCs were submitting to them via a combination of false presentations and overt extortion. Want to save your country, sell it off.
The hyperinflation crisis forced Alfonsin to resign from the presidency of Argentina. Carlos, a Peronist, who wore leather jackets and mutton chop sideburns, and seemed tough enough to take on the military and the creditors. But after a year in office, Menem was forced to follow a course of “voodoo politics”. He appointed the junta time official responsible for bailing out corporate corporate debts as economy minister (33-Obama appointed the Clinton team responsible for deregulation and other mischiefs) to continue his corporatism. Virtually all economic posts again went to the Chicago boys.
By 1999, governments from Israel to Costa Rica could boast of 25 ministers and central bank presidents from the ranks of Chicago boys (35).
Cavallo harnessed the desperation of hyperinflation to pass privatization as an essential part of the rescue mission, cut spending massively and launched a new currency pegged to the dollar. Inflation was down to 17.50% with in a year (37), but the state had to sell off national assets at a pace fester than Chile, a decade earlier-by 1994, 90% had been sold off. Before the sale they fired 700,000 workers, the oil co alone losing 27,000. In January 2006, it came out that the Cavallo plan was not Cavallo’s or even IMF’s, but was written by J.P. Morgan and Citibank (38).
Pegging the local currency with the dollar made it so expensive to produce goods in the country, and local factories could not compete with cheap imports flooding the country.
People, in moments of crisis, are willing to hand over power to anyone who claims to have a cure (Bush post 9/11).
Volcker shock was followed by the Mexican Tequilla crisis in 1994, the Asian one in 1997 and the Russian in 1998.

Chap 9:
People’s Daily after the Tiananmen square massacre “we certainly must not stop eating for fear of choking”, on the need to continue free market reforms.
Lech Walesa, climbing over a steel fence festooned with flowers and flags in Gdansk, Poland antedated the fall of the Berlin wall as the symbol of the collapse of communism. Workers had barricaded themselves to protest the communist party’s decision to raise the price of meat. Workers wanted their own independent union, and did not wait for permission, they voted to form it, and called it Solidarity (4).
Tired of living in a country that idealized the working class, but abused them, solidarity denounced corruption and brutality of party workers. It sparked a mass exodus of its members from the CP.
Solidarity could not be dismissed as stooges of capitalism. They were workers. Solidarity was democratic, dispersed, participatory, everything that the party was not.
It had ten million members, and in September 1981, it was ready for the next stage. 900 delegates gathered in Gdansk for its first national conference and “ we demand a self governing and democratic reform at every…level…a socioeconomic system combining the plan, self government and the market…”. (7).
Walesa’s fear were well founded. Martial law was declared by General Wojciech Jaruzelaki, and tanks rolled to factories, and thousands were arrested.
Solidarity was forced underground, but over the next 8 years of police state, its strength grew more. Walesa was given the Nobel Peace prize.
By 1988, workers were less scared of the police, and were staging huge strikes again. The economy was in free fall, and with Mikhail Gorbachev losing his nerve, the communists gave in, and legalized Solidarity and agreed to hold elections. Solidarity split into two wings, one of which Citizen’s committee solidarity agreed to participate in elections, and ran on a vague program. Solidarity won 260 of the 261 seats it contested. Walesa had one of his henchmen, Tadeusz Mazowiecki, the editor of the Solidarity weekly paper newspaper appointed as the PM.
Like the Latin Americans adopting democracy when their economy was imploding, Poland did too. Inflation was 600%, severe food shortages and a huge black market. Poland needed debt relief and aid to get out of the immediate crisis.
One would have expected that floodgates of aid and comfort would open for the first democracy in Eastern Europe. But nothing was on offer.
US treasury wanted to apply the shock doctrine, which could only follow an economic meltdown and disorientation of a regime change.
IMF, confident that worse the things got, the more the government would be amenable to accept a total conversion, let the country slide into deeper debt and inflation.
Jeffrey Sachs started working as Solidarity adviser (12). George Soros had enlisted Sachs to work in Poland, at his own cost, even before Solidarity’s election victory (13). Sachs, at the time said that solidarity should simply refuse to pay the debts, and extended the hope that he will be able to mobilize $ 3 billion. But the government had first to agree to a course much worse than that imposed on Bolivia-in addition to elimination of price controls, slash subsidies, Sachs advised selling state mines, shipyard and factories, in direct clash with solidarity’s program of worker ownership.(15).
Sachs formed an alliance with Leszek Balcerowicz, the new finance minister, who saw himself as an honorary Chicago boy (22).
Walesa had promised in an interview with Barbara Walters “…it won’t be capitalism…better than capitalism…reject everything that is evil in capitalism”(23)
Finally the decision came down to money. “…But we don’t have time” (28). Sachs helped negotiate with IMF, and was able to secure some debt relief and $ 1 billion, but all was conditional to Poland submitting to shock therapy.
Balcerowicz, the finance minister has since confessed that capitalizing on the emergency was a deliberate strategy (30). Poland was, in what was dubbed a period of “extraordinary politics. Or “in transition.
With in a few years, it seemed as though half the countries of the world were “in transition”. Thomas Carothers, a leader of US governments ‘democracy promotion apparatus’ “…the set of ‘transitional countries swelled dramatically…nearly 100…20 in Latin America, 25 in Eastern Europe and former USSR, 30 in Sub-Sahara Africa, 10 in south Asia and 5 in mid-East…” (33).
Francis Fukuyama, author of The End of history, addressing a gathering in the U of Chicago, in the winter of 1989, “the collapse of communism was leading not …a convergence between capitalism and socialism… but to an unabashed victory of economic and political liberalism…” (35). Fukuyama argued that deregulated markets combined with liberal democracy…represented ”the end point of mankind’s ideological evolution and …final form of human government.
History was taking an exhilarating turn in 1989. It was not coincidental that IMF/WB chose the year to reveal the Washington consensus, to halt discussion about alternatives to free market.
Tiananmen Square:
Fukuyama had claimed in February 1989 that free market and democracy were inseparable. In April 1989, pro-democracy movement exploded in Beijing.
In 1980 Deng Xi-aoping had invited Friedman to China to tutor top level civil servants.(40). In Friedman’s definition of freedom, political freedom was incidental, irrelevant when compared to free market. Chinese were pushing deregulation and free market hard, while resisting calls for free elections. Deng Xi-aoping was determined not to let “Poland” happen in China. Deng wanted to follow in the footsteps of Pinochet.
Mao’s repression had taken place in the name of the working class and against the bourgeoisie. Now the party was asking workers to sacrifice so a tiny elite may collect huge profits. Deng ordered creation of 400,000 strong People’s Armed Police (41).
By 1988, the party was facing a severe backlash, and had been forced to reverse some price deregulations.
Friedman was once again invited.(42). “I emphasized the importance of privatization and free market at one fell stroke” he recalled later (43).
The most visible symbols of opposition were the demonstrations by students in Tiananmen Square (46).
Some of the free marker reformers, General Secretary Zhao Ziyang among them favored a gamble on democracy, but a majority of the politburo wanted to protect reforms by crushing the demonstrators.
On 05/20/ 1989, the government declared martial law. On 06/03/ 1989, tanks rolled into the protesters. The party admitted to hundreds of dead, eyewitnesses put the number at between 2,000-7000. A witch hunt followed in which 40,000 were arrested, thousands jailed, and possibly hundreds executed. Maurice Meisner writes, “Most of those arrested, and nearly all who were executed, were workers” (48).
The massacre was covered in the Western press as communist brutality, not a defense of free market philosophy (49).
Deng, during an address to the nation a few days after the massacre, made it clear that the crackdown was not to protect capitalism, not communism., “perhaps this bad thing will enable us to go ahead with reform…(50-Henry Kissinger defended the massacre in an op-ed piece).
Three months after the massacre, Deng brought back the measures he had been forced to withdraw. Wang Hui, “the violence of 1989 served to check the social upheaval brought about…”(52).
In the following three years China opened to foreign investment, with special export zones (SEZ) through the country (53). The reforms turned the country into the sweatshop of the world.
A 2006 study reveals that 90% of Chinese (Yuan) billionaires are children of the communist party, 2,900 of them-dubbed princelings-control $ 260 billion. There is a revolving door between political and corporate elite, as in the USA and Chile under Pinochet. Foreign MNC media and technology help the state spy on its citizens, as MNCs do in the US.
Tiananmen showed the striking similarity between the tactics of Chinese communists and Chicago boys.
In Poland, as late as 1992, 60% of the people opposed privatization of heavy industries. It caused a full-blown depression, a 30% reduction in industrial production in two years after reforms, unemployment rose to 25% in some areas. Under 24 years of age, 40% were unemployed in 2006. In 1989, 15% Poles were below poverty line. In 2003, 59% had fallen below the line. In 1990 there were 250 strikes, in 1992, there were 6,000. By the end of 1993, there were 7500 protests, even though 62% of the country’s industry was still public (62).
The most dramatic defeat of the free marketers cane on 09/ 19, 1993, when a coalition of left parties, including the former communists, won 66% of the seats in the parliament. Poland was still held up as a model of success of free market make over.

Chap 10: South Africa
Archbishop Desmond Tutu, chair of South Africa’s Truth and Reconciliation commission, “ …What is the point of having made this transition, if the quality of life of these people is not enhanced and improved? If not, the vote is useless. 2001 (1).
Alister Sparks, South African journalist, “before transferring power, the Nationalist power wants to emasculate it. It is trying a …swap…will give up the right to run the country…in exchange for the right to stop the blacks from running it…” (2).
In January 1990, Nelson Mandela wrote from jail, “the nationalization of banks, mines and monopoly industries is the policy of the ANC, and any change…is inconceivable…state control of certain sectors of the economy is unavoidable” (3).
The ANC had started drafting a statement of core principles, the Freedom charter in 1955, based on the opinion obtained by 50,000 volunteers dispatched to villages and towns. Hand written on scraps of paper, “Land to be given to landless…”, “living wages and shorter hours of work, “free and compulsory education..”, “the right to reside and move…freely”. A final document was adopted on 06/20/ 1955, at the Congress of the People, held in Kliptown, a zone to sequestrate the blacks of Soweto from white Johannesburg. The charter enshrines the right to work, decent housing, freedom of thought, and to share in wealth of the country (the largest goldfield in the world-6).
Apartheid was not taken just as a political system, but as an economic system as well which used racism to allow a small white elite to accumulate enormous wealth. In the mines, whites were paid up to ten times as blacks, and industrialists worked closely with the military to disappear people (7).
On February 11, 0990, Mandela walked out of the prison. Mandela had been arrested in 1962. ( PM Patrice Lumumba of Belgian Congo had been killed in 1961). A lot had happened since. Africa had seen nationalism sweeping the continent, now it was torn by war. Che Guevara had been killed in Bolivia in 1967, Salvador Allende in 1973, Samora Machel, liberation hero and president of Mozambique had died in a mysterious plane crash in 1986. Berlin wall fell in 1991.
Mandela had an opportunity to lead a people to freedom peacefully, without an economic collapse, and democratizing the society and redistributing wealth.
In the 1980s, ant-apartheid struggle had become global and Mandela had earned global admiration and support. The most effective weapon was corporate boycott of South African products as well as that of international firms that did business with South Africa. That had given ANC a unique opportunity to reject the free market dogma. There was already widespread agreement that corporations shared responsibility for apartheid rimes, Mandela could have used the argument to say that the debt accumulated under apartheid was odious. As a living saint, he could have faced off IMF, WB and US treasury.
Between the time Mandela wrote the note from prison, and ANCs election sweep, something convinced the leadership that they could nor reclaim and red distribute the country’s robbed wealth. They adopted policies that have further accentuated inequality between the rich and the poor and crime has gone up steeply.
On the way out the Portuguese had destroyed as much in Mozambique, as they could, pouring concrete down elevator shafts and smashing tractors. The sabotage of the South African Nationalist party was subtler and worse, contained in the fine print in transfer of power agreements.
The talks between ANC and the nationalist party were on two fronts, political and economic. On the political front F.W. de Klerk tried breaking the country into a con-federation, getting veto power for the minority, reserving seats in government structure for each ethnic group (9). He did not get away with anything. He need not have.
Economic negotiations were conducted on the ANC side by Thabo Mbeki. Later to be South African president, and still later forced out of office. The de Klerk government portrayed key sectors of economic decision making such as trade policy and central bank as technical/administrative, and used international trade agreements, innovations in the constitution and SAS programs to hand over the supposedly impartial economists and officials from the IMF, WB, GATT, and the National Party, but not to any one in ANC.
What party loyalists did not know that the negotiating team had made concessions which would make implementation of the charter an impossibility. Vishnu Padayachee told Naomi Klein (page 253), “It was dead even before it was launched”. WE got a call from the negotiating team in late 1993, on pros and cons of making the central bank an independent entity, run with total autonomy from the elected government by the next morning. He knew that even among market economists in the US, central bank was regarded as a fringe idea, a dogma of the Chicago School, that the bank should be run as a foreign republic within states (10).
If the Central Bank was not accountable to the ANC government, to whom would it be accountable-the IMF, the Johannesburg stock exchange. The bank would keep its head under apartheid and the finance minister under the old regime would keep his job too (11-for all these concessions, Mandela got a statue in the London parliament square).
Patrick Bond, an economic adviser to Mandela during early years recalled the quip, “Hey, we’ve the state, where is the power”
At the last minute, the negotiators conceded a new clause in the constitution to protect private property, making land reforms impossible. Hundreds of factories were about to close because the ANC had signed on to GATT, which made it illegal to subsidize auto plants, and textile factories. Offering free AIDS drugs was a violation of intellectual property rights under WTO
Welfare measures like housing for the poor, and free electricity to towns could not be undertaken as the budget was being eaten up by servicing the massive debt of the apartheid era. Even free water could not be provided as that militated against privatization of all state services. Currency controls to curb speculation violated the terms of the deal for $ 850 million signed with IMF. Wages could not be raised for the same reason(12).
What ANC activists did not understand was that it was the nature of democracy that was being negotiated away.
Rasool Synman, long time ant-apartheid activist, “ They never freed us. They only took the chain from around our neck and put it on our ankles” (13).
In the first two years of office, ANC did build more than 100,000 homes, and millions got water connections, phone lines and electricity (14). But under IMF pressure to privatize services, the government started to raise rates, a decade into ANC rule millions had their water, phone and electricity cut off, because they could not pay bills (14). Banks, mines and monopoly industry remained in the same four white owned conglomerates, which also controlled 80% of the Johannesburg stock exchange.(16). In 2005, only 4% of the companies listed on the stock exchange were owned/controlled by blacks (17). In 2006, 70% of the country’s land was owned by whites who were 10% of the population (18-Mugabe of Zimbabwe believed in the word of the British government that it would compensate the country, if he left land in control of the 3% whites. (The British, of course, went back on their word, and when Mugabe nationalized farm lands, he was hit by the most obnoxious sanctions). The average life expectancy of for South African since Mandela left the prison in 1990, had dropped by 13 years (20).
The leadership did not have the nerve to launch another liberation movement, when it found that de Klerk’s team would not budge on economic issues. It was not an easy choice though. As soon as Mandela was released, the South African market collapsed, and the currency dropped by 10% (21), and soon afterwards, De Beers diamonds moved their HQ to Switzerland. A few words by him on nationalization would have cause an stampede of the “electronic herd” as NY Times Thomas Friedman calls it (22). Even comments on calling Rugby a white game by Trevor Manuel, an ANC minister hit the Rand (25).
Thabo Mbeki was the one person who seemed to understand how to make the shocks stop. Rather than calling for the nationalization of the mines, he began meeting on a regular basis, with Robert Oppenheimer, former chairman of Anglo-American and De Beers mines, going to the extent of submitting ANC economic program to Oppenheimer for approval (28). In his first interview as the president, Mandela distanced himself from nationalization, “In our economic policies…not single reference to…nationalization…not a single slogan will connect us…Marxist ideology: (29). His inside prison thoughts had become Marxist ideology. The Wall Street journal, “Mr. Mandela…sounded…more like Margaret Thatcher” (30).
In South Africa, few of Mbeki’s colleagues even knew that a new economic program was in the works (32).
In 1996, Mbeki unveiled the neo-liberal shock (34), and quipped, “just call me a Thatcherite” (35).
Yasmin Sooka, a member of the Truth and reconciliation commission made a recommendation, modest by any standards, for a one time 1%’solidarity’ corporate tax to raise money for the victims of apartheid, Mbeki then the president rejected it out of hand, any suggestion of corporate reparation/tax.
Chairman of the commission, Archbishop Tutu offering the report in 2003, observed, “can you explain how a black person wakes up in squalid ghetto to day, ten years after freedom…then he goes to work in a town…largely white…I don’t know why …don’t say to hell with peace, to hell with Tutu and the truth commission” (36).
Reparations in Reverse.
In the first years after takeover, the government had to pay $ 5 billion annually in debt servicing, and only $85 million to 19,000 victims and families of apartheid killing and torture.(37).
Between 1997-2004, the government sold 18 state owned firms to raise $4 billion, half of which went to debt servicing.(38).
De Klerk demanded, and got, that all civil servants be guaranteed their jobs and be given hefty pensions(39). 40% of the government debt payments go to pension funds to former apartheid employees.(40). The victims of apartheid continue to send large paychecks to their victimizers.
Since the 1994 takeover by ANC:
-the number of people living on less than a $ a day has gone from1 million to 2 million
-unemployment rate for blacks has gone up from 23% to 48$ (46).
-Of 35 million blacks, only 5,000 make more than $60,000 a year, among the whites 100,000 of 3.5 million do so, and many make far more (47).
-The government built 1.8 million homes, while 2 million lost theirs(48).
-1 million have been evicted from farms (49).
-number of shack dwellers has grown by 50%, 1 in four of the total (50).

Chap 11 Yeltsin Sells Russia
Gregory Gorin, Russian writer, “For a long time we lived under the dictatorship of the communists, but now we have found out that life under the dictatorship of business people is no better. They couldn’t care less about what country they are in” (1).
Mickhail Gorbachev had won the Nobel peace prize in 1990 (3), and had won over the American public as well.
He had led the USSR through a remarkable process of democratization, 6through his policies of glasnost (openness) and perestroika (restructuring). His end goal was to build a social democracy on the lines of Scandinavian countries, “a socialist beacon for all mankind” (4).
At the G7 meeting in 1991, he was stunned to be told that if he did not embrace radical economic shock therapy, they will let him fall “Their suggestion as to the tempo of transition were astonishing, he wrote later (6).
Later that year when Russia asked for debt forgiveness, it was told that the debts had to be honored (7). Russia like China had to choose between Chicago and democracy. The peaceful process that Gorbachev had started had to be violently suppressed and then reversed. In 1990, The Economist had urged Gorbachev to adopt “strong man rule…to smash the resistance…” (8). In August 1991, The Washington Post ran a headline “Pinochet’s Chile a Pragmatic Model for Soviet Economy”.
On August 19, 1991, a group of communist old guard drove tanks to the White house, the parliament building. Yeltsin stood on one of the tanks and denounced… “a cynical right wing coup…”(10). The tanks retreated, and Yeltsin emerged as a heroic defender of democracy.(11).
In December 1991, Yeltsin formed an alliance with tow other Soviet republics, so in effect the Soviet Union was dissolved, forcing Gorbachev’s resignation. As the political scientist Stephen Cohen put it, “it was the first of the three traumatic shocks that Russians would have to bear in the next three years (12-the way Yeltsin was to behave later, makes one wonder if he was not a CIA ‘agent’ like Pinochet and other junta leaders. Sachs had been invited by Yeltsin as an adviser, and was in the room in Kremlin on the day Yeltsin announced that the soviet union was no more (13-14).
Yeltsin wanted Sachs to raise funds as he had done for Poland, “If Poland can do it, so can Russia” (14). Sachs told Yeltsin that if Moscow was willing to go with the ‘big bang’ approach, in establishing a capitalist economy, he could raise $15 billion (16).
Russia’s conversion to capitalism was akin to the corrupt approach that had led to Tiananmen.. Gavril Popov, Moscow’s mayor on how to break up the centrally controlled economy, “there is the democratic approach…the nomenklatura, apparatchik…(17). Yeltsin took the latter, and in late 1991, he went to the parliament that if they gave him one year f special powers, to issue laws by decree, rather than bring them to the parliament, he would solve the economic crisis. The answer was yes.
He immediately surrounded himself with Russian followers of the free market Chicago School. They had formed a sort of book club with Yegor Gaider as their figurehead, whom Yeltsin named as one of his two deputy PMs.
Russia newspaper Nezavisimaya observed that “ for the first time Russia will get…a team of liberals…followers of Freidrich Hayek…and Milton Friedman…”(19).
The US funded its own team of transition experts to assist Yeltsin’s Chicago boys to write privatization decrees, launch NY style stock exchange, design Russian mutual funds. In the fall USAID awarded $2.1 million to the Harvard Institute of International Development which sent teams to Russia. In May 1995, Harvard named Sachs director of the institute.
On October 28, 1991, Yeltsin announced the lifting of price controls, a week after Gorbachev resigned.(21). The decrees included free trade and the first phase of the privatization of the state’s 225,000 companies (22). It was a well planned surprise. 67% of Russians told pollsters that workers cooperatives were the most equitable way to privatize assets of the state, and 79% felt that maintaining full employment was a core function of the government (24).
Joseph Stiglitz, then the chief economist at the WB summarized the mentality, “Only the blitzkrieg approach during the ‘window of opportunity’…would get the changes…before the population had a chance to organize to protect its…interests” (26).
After only one year, millions of Russians had lost their life’s savings, millions of workers were not paid because of abrupt cuts in subsidies (29). . Russians consumed 40% less in 1992 than they did in 1991, and a 1/3 of the population fell below the poverty line (30). People were forced to sell personal belongings on the street (31).
The people eventually began to demand an end to the cruel economic adventure. In December 1992, the parliament voted to unseat Yegor Gaider, and in March 1993, they voted to repeal the special powers they had given to Yeltsin.
Yeltsin retaliated by announcing a state of emergency on TV. Russia’s independent constitutional court, a creation of Gorbachev, ruled 9-3 that Yeltsin’s power grab was a violation of the constitution, he had sworn to uphold.
The West threw its weight behind Yeltsin (32) The majority of the Western press did too(33).
In the spring of 1993, the parliament brought a budget which did not follow IMF guidelines for austerity. Yeltsin tried to eliminate the parliament through a referendum (Zia/other satrapies fashion). Not enough voters turned out to give the mandate to hold snap elections asked for, but he claimed victory (36).
Lawrence Summers, then US treasury under secretary warned that, “the momentum for…reforms must be reinvigorated…” (37). IMF leaked to the press that $1.5 billion loan was being rescinded…” (38).
Yeltsin, confident of the West’s support issued decree 1400 to dissolve the parliament and abolish the constitution. 2 days later, the parliament voted to impeach him by a vote of 636 to 2.(40). Clinton continued to back him, and the congress voted $2.5billion in aid. Yeltsin sent troops to surround the parliament, cut the power, heat and phones off. Supporters of democracy came in thousands to break the blockade. The only way out would have been to call elections for the parliament and the presidency. Yeltsin was reportedly leaning towards elections, when he heard that voters had turned out Solidarity from power. Election in Russia would be too risky. Too much wealth-huge oil fields, and 30% of world’s gas deposits, 20% of its nickel, weapons factories, media-were at stake.
Yeltsin attacked the parliament with thousands of interior ministry troops, barbed wires and water cannons (41). On 10/03 crowds of parliament supporters “marched to the TV center…there were children in the crowd…they were met with machine gun fire. One hundred demonstrators and one soldier were killed. Yeltsin dissolved all city and regional councils of the country.
On 10/04/0993, Yeltsin ordered the army to storm the parliament, and setting it on fire. At 4.15 pm, about 300 deputies, staff workers and guards marched single file out of the building with their hands up (44).
500 had been killed and 1000 wounded, more violence than since 1917(45).
The US secretary of state traveled to Moscow to show support to Yeltsin (48).
The Chicago boys went on a law-making binge (53). The communist state was simply replaced with a corporatist state. A clique of nouveaux billionaires, also known as oligarchs, teamed up with Chicago boys and stripped the county of nearly everything of value, moving the loot ashore at the rate of $2 billion a month. Before the shock therapy, Russia had no millionaires. By 2003, it had 17 billionaires, according to Forbes (57). In a rare departure from the Chicago School dogma, Yeltsin and co had not allowed foreign MNCs to buy the assets directly.
The only problem for the oligarchs and foreign investors was the extreme unpopularity of Yeltsin.
In December 1994, Yeltsin started a war in Chechnya. Starting a war is the favorite desperate measure of failing dictators. The defense minister predicted it would be “…in a matter of hours, a cakewalk (59). It did work in the short term. But in 1996, when he faced reelection, he was still very unpopular. He toyed with idea of canceling the election-the Pinochet option, favored by his privatization minister, Sachs protégé Anatoly Chubais (60-61).
Yeltsin won, funded by $100 million financing by the oligarchs-33 times the legal limits, and 800 times more coverage than for his rivals on oligarch controlled TV stations (63).
In return, he sold 40% of an oil co, the size of Franc’s Total( Total sales in 2006 $193 billion) for $88 million, Norlisk Nickel which produced 1/5th of world’s nickel (annual profits $1.5 billion), for $170 million, Yukos with more oil than Kuwait (annual income more than $3 billion) for $309 million, 51% of oil Sidanko (valued at $2.8 billion) for $130 million. (64). The banks which ran the auctions, bid in them too.
And all these were purchased, not with corporate, but with public money (65). Communists had made an exchange of power with property (66).
It was an oversight that IMF and WB did not force MNCs in the initial loot. They would not forget the lesson in Bolivia, Argentina and Iraq.
Gates were now open for foreign investors. In 1997, royal Dutch/shell entered into partnership with two oil co-Gazprom and Sidnako (67).
Several of Yeltsin’s ministers would later be found guilty of corruption. Two from Harvard’s Russia project economics professor Andrei Shleifer and his wife, and his deputy Jonathan Hay were discovered to have been directly profiting from the market(70).US department of justice sued Harvard. Harvard paid a $26.5 million settlement (72).
There are honest neo-liberals, but the Chicago boys do seem to be particularly inclined to corruption.
George Soros, the world’s most powerful currency trader (implicated in the rumors which led to the Asian T iger’s downfall, he had withdrawn $ in billions) profited from his philanthropic work in Eastern Europe, when the countries implemented convertible currencies and lifted capital controls.
In 1999 Russia was hit with a series of terrorist attacks (76). The country was had been hit by the Asian crisis the year before. Vladmir Putin, Russia’s PM was made in charge of dealing with terrorists (77). In 09/1999, he launched air attacks on Chechnya.
With the conflict overshadowing all other discussion, on 12/31/1999, the oligarchs quietly arranged a hand over of power to Putin from Yeltsin who was by now drunk almost all the time Was shown so on US TV), and returned the compliment by conferring legal immunity on his predecessor.
Wars in Chechnya have killed 100,000(78). In contrast to Pinochet’s, Yeltsin’s massacres occurred in slow motion, and not so widely noticed.
By 1998, more than 80% of the Russians had gone bankrupt, 70,000 factories closed causing huge unemployment. Before 1989, 2 million Russians Federation residents were living in poverty. By mid-nineties, 74 million were doing so. By 1996, 25% were living in ‘desperate’ poverty (79).
Under the communists, Russians were alt least housed . In 2006, the government admitted to 715,000 homeless, while UNICEF put the number at 3.5 million children alone (80).
Under communism, Russians needed large quantities of vodka to get through the day. Under capitalism, they drink twice as much. Russia’s drug czar, Aleksadr Mikhailov says that the number of drug user has gone up 900% from 1994 to 2004, to 4 million, many of them on heroin, and as an aftereffect, the number of AIDS victims has gone up from 5,3000 to double that in 2 years, and in ten years according to UNAID, nearly 1 million were HIV positive (81).
Russia’s already high suicide rate reached about double of what it had been 8 years before. Violent crime had risen 4 times by 1994 (82). Russia’s population is falling by 700,000 per year, losing 6.6 million between the shock therapy peak year of 1992 to 2006 (83).
While the elite flaunt their wealth like the Emirs of oil Sheikhdoms, a 17 year old provincial girl read by candlelight (84).
Corruption Blame Game:
Clinton, EU, IMF, WB wanted to erase the pre-existing state for the capitalist feeding frenzy-Iraq without cruise missiles. Harvard’s Richard Pipes “for Russia to keep on disintegrating…till nothing remains…institutional structures” (86).
Cover for Russia’s failure was provided by its “culture of corruption” (88).
The entire drama will be repeated to explain billions in Iraq, with Saddam and Radical Islam, filling in for communism and czarism.
Rather than journeying through Adam Smith’s “savage and barbarous nations”, Milton Friedman’s troops systematically dismantled existing laws to recreate that earlier lawlessness. Smith’s colonists seized ‘wastelands’ by force or ‘for a trifle’, Friedman’s hordes, the MNCs see government assets and programs as ‘wasteland’ to be conquered.
Culture of corruption is endemic in the world. Friedman’s acolytes offered what was beyond the wildest dreams of third world minions (and first world partners).
Colonial times are often called the first pillage-land was seized from natives. In the second pillage, the state was stripped.

Chap 13 : (do 12 later) The Trashing of Asian Tigers.
Asian Tigers, Thailand, the Philippines Indonesia, Malaysia and South Korea, had been held up as examples of economic vitality. Stockbrokers were telling their clients that there was no surer way to increase wealth.
Then it all seemed to go wrong. They started to cash out in droves, traders attacked the currencies.
Indonesia was the worst hit. Its currency dropped between the morning and night and kept on doing it. The market crash was dubbed ‘the Asian flu’, later renamed ‘the Asian contagion, when it spread to Latin America and Russia.
Nothing tangible had changed. The same set ran the economies, deficits were not that much, no physical disaster had hit the region, they were still producing shoes to cars, with sales as strong as ever. In 1996, investors had put in $1000 billon in SK, but had taken out $120 billion in 1997.
Some one started a rumor that Thailand did not have enough $ to back up its currency. The electronic hers was triggered into a stampede. Real estate market which had been booming crashed. Construction halted, banks called in their loans.
Mutual funds had marketed all the countries as a package, so all went down.
The government tried to stem the outward flow with their reserves. That led to more panic. $600 billion disappeared from Asian Markets in one year (5).
In Indonesia people stormed stores (6). In south Korea, TV stations ran a campaign for citizens to donate gold jewelry. 200 tons were offered, but the currency continued to plummet (7).
It led to a wave of suicides. In SK, it went up by 50%(8).
No loans were forthcoming as in the case of the Tequila crisis of 1994, as the US treasury won’t let Mexico crash (9).
Milton Friedman, in his mid eighties made an appearance on CNN to talk to the anchor man, Lou Dobbs that he opposed any kind of bail out. He was echoed by Walter Wriston, former head of Citibank, George Shultz of Hoover Institute and Charles Schwab (10), and the Wall Street (11).
While addressing Asia Pacific Economic Cooperation Council held in November 1997 in Vancouver, Bill Clinton taken the cue called the crisis “ a few little glitches on the road” (12).
IMF took a do-nothing approach, then came up with a list demands.
Whether the crisis was inadvertently started by a rumor, or the rumor was started deliberately (George Soros had withdrawn billions, reported to have $5 billion over 2 weeks and more in the east European crisis-check this-read somewhere). But the IMF grabbed as an opportunity to strip the countries of assets and transfer them to MNCs, under the Chicago School dogma.
The Tigers had not grown on free trade. Malaysia, Thailand and South Korea were highly protectionist, and had maintained a significant role for the state, keeping control of energy and transportation. They had also blocked certain imports from Japan, Europe and North America to build up domestic markets.
The situation was an anathema to Japan, the West and MNCs. They saw the consumer market explode, and longed for unrestricted access. They also wanted to grab the best of the tiger’s corporations, and had cast greedy eyes on SK’s Daewoo, Hyundai, Samsung and LG.
In the mid-nineties, IMF and WB had coerced the countries to lift barriers to financial sector. That was to be their undoing.
In 1997, the hot money reversed current. Jay Pelosky of Morgan Stanley was forthright, “if the crisis was left to worsen, all foreign currency would be drained…Asian owned companies would either…close or…sell to western firms…(13).
Jose Pinera, Pinochet’s financial hatchet man, rewarded with a job in Washington DC’s Cato Institute, said the fall of tigers represented , “the fall of a second Berlin Wall” , the collapse of the notion that there is a third way between market…capitalism and socialist…” (14). The view was shared by Alan Greenspan, chairman of the Fed (15).
Michel Camdessus, head of IMF spoke of the crisis as an opportunity (16).
The only country to be able to resist was Malaysia, which had a relatively small debt, and had immediately put them back up. currency controls. PM Mahathir Muhammad did not think should have to, “destroy the economy in order that it should become better” (17)Rest of the Tigers came to the table with their hands out for loans. Stanley Fischer, negotiator for the IMF, “…when it is out of money, it hasn’t got many places to turn (18-old time usurers in India, used to wait for calamities, sometimes enticed peasants with loans, and at the end of the day, the loan would double every month or week, and they would take away cows, goats, household belongings and even women against the loan. Conditionalities are equivalent to the pound of flesh immortalized by Shylock of Shakespeare)..
Several countries suggested that since capital flight had caused the crisis, perhaps it was time to put back ‘capital controls. China had kept them on, and Malaysia was quick on its feet, and had escaped the crisis.
IMF team rejected the idea out of hand. They were focused on how to use the crisis as a leverage to beggar the countries. The first step was to denude the countries of all trade and investment barriers and state intervention that had created the ‘Asian miracle’, so the countries would never get out of bondage (20).. they also demanded deep budget cuts, massive lay offs in public sector. Fischer confessed later than in SK and Indonesia, the crisis was unrelated to government overspending, but that did not deter him from the sadistic measures(21).
Thailand would allow foreigners to buy large stakes in banks, Indonesia would cut food subsidies, and SK would lift regulations against massive layoffs. (22).MNCs wanted to downsize the firms they were about to buy.
Thailand’s reform package was pushed through with 4 emergency decrees, and not through the parliament (24). In south Korea, IMF demanded that money would not be released till all the candidates in the forthcoming presidential elections, commit to the rules in writing. Two of the anti-IMF candidates capitulated (25), though the day they signed was dubbed ‘humiliation day (26).
Suharto who had ruled for 30 years was more used to taking care of himself, kith and kin, resisted for a while (Camdessus of IMF reportedly chewed him out in public-find the source), but a senior IMF official, on condition of anonymity, told the Washington Post that, “the markets are asking… how committed…Indonesian leadership is…” As soon as the news was published, the currency lost 25%…in a day(28).
Suharto gave in.(29). He brought back the Berkeley mafia. The IMF got 140 adjustments (31)
IMF thought all was going well. When it revealed the extreme makeover package (32), the market panicked, yanked out more money and currency. SK was losing $ 1billion a day. IMF had turned a crisis into a catastrophe. Sachs, now an open dissident, “instead of dousing the fire, IMF…screamed fire in the theatre” (33).
ILO estimated that 24 million lost their jobs, Indonesia unemployment went up from 4 to 12%. Thailand was losing 60,000 jobs a day. SK was firing 300,000 workers every month. In 1996, 63.7% identified as middle class; by 1999 it was down to 38.4%. WB , 20 million Asian were thrown into poverty(34), all thanks to IMF extortionists.
Women and children suffered the most. Philippines and SK sold their daughters to traffickers. Child prostitution in Thailand increased by 20%.(35). US secretary of state, Madleine Albright, herself the daughter of refugees, on a visit to Thailand in March 1999, insensitively scolded the public for turning to prostitution and drugs. She could not see any connection between the austerity policies and the sex trade (36).
The fund’s Independent Evaluation office concluded that SAS demands were “ill advise” and “ broader than seemed necessary, as well as “not critical to resolving the crisis”, and that “crisis should not be used as an opportunity…” but that was akin to an assassin’s regrets at the funeral(37-the report was not released till 2003, 5 years after the crisis).
While IMF failed the Asians, it did not fail the Wall Street.
Pretty much everything in Asia was for sale. The Wall Street journal ran an article “Wall Street Scavenging in Asia-Pacific” and reported that Morgan Stanley, among other such houses, had dispatched armies of bankers…to scout for brokerage…asset management…even banks…that they can snap up at bargain prices…” (39).
Several major sales went through: Merrill Lynch bought Japan’s Yamaichi securities, as well as Thailand’s largest securities firms. AIG bought Bangkok Investments. JP Morgan bought a big stake in Kia Motors, Travelers and Solomon Smith Barney bought one of Korea’s largest textile and several other companies. (The chairman of Solomon…International Advisory Board was Don Rumsfeld. Dick Cheney was also on the board. Carlyle (Former Secretary if state James Baker, former UK PM john Major, Bush Sr) snapped up Daewoo’s telecom division (40), all for fire sale price.
The Korean Samsung was broken up and sold-Heavy Industry Division to Volvo, Pharmaceutical to SC Johnson, lighting division to General Electric. Car division worth $ 6 billion for $400 million to GM (43). The list is long (page 348-44).
The NY Times called it, “the world’s biggest going out of business sale” and a business buying Bazaar by the Business Week.
Governments had also to sell public service . US Trade reprehensive Charlene Barshefsky while asking the US congress to authorize billions to IMF, offered assurances that the agreements would “create new business opportunities for US firms…”(46).
The crisis set off a storm of privatizations-Bechtel got water and sewage system in eastern Manila…(47).
There were 186 mergers and acquisitions with in 20 months.
Asia’s crisis is still not over. 24 million lost their jobs. Their desperation id reflected in the rise of religious extremism and trafficking in flesh, and unabated wave of suicides and violent death (50).
In Indonesia Chinese were the unwitting victims of IMF depredations. Being a business community, they were blamed for the rise of the price of basic necessities imposed on Suharto by the UMF. Riots targeted the ethnic minority. 1200 hundred were killed and scores of Chinese women were gang raped (52).
Financial Times wrote an unusually balanced editorial, Asia was a “warning signal that public unease with capitalism and the forces of globalization is reaching a worrying level…the crisis showed that even the most successful countries…brought to their knees by a sudden outflow of capital…outraged…how whims of …hedge funds could cause mass poverty…”54).
The defiant mood made its global debut in 1999 WTO talks in Seattle, LDCs formed a voting block and turned down demands for further concessions, while EU and the USA continued to subsidize…their domestic industries and agriculture, while students and activists outside hogged the media coverage. The US government’s dream of a unified free trade zones in Asia-Pacific, and a free trade area of the America were smashed by third world resistance.
The anti-globalization movement exposed the Chicago School dogma to international debate. Capitalism’s monopoly period lasted only from 1991-collapse pf the USSR to the collapse of the Seattle talks in 1999.

Chap 14: the Homeland Security Enterprise.
Rumsfeld joined the cabinet of GWB in 2000, it was with a personal mission to reinvent warfare, more spectacle than struggle, far more profitable than it had ever been before. He wanted ‘transformation’. Senior military officials derided it. Beneath the slogan of modernization, it was simply an attempt to bring outsourcing of the corporate world into the military. In the 1990s, many traditional manufactories, which had maintained stable work forces at home took to the ‘Nike model; no factories, produce through a web of contractors, our resources in design and marketing. The other model was ‘Microsoft: maintain tight control over employees who perform ‘core competency’ work, and outsource all else, including code writing.
Fortune said, “Mr. CEO was about to restructure as he done to corporations” (8). Rumsfeld wanted the army to shed large numbers of full-time troops with a small core of officers, supported by cheaper temporary soldiers from the Reserves and National Guard. Contractors like Blackwater and Halliburton would do such work as high risk chauffeuring, prisoner interrogation, and health care. He would spend the savings into the latest satellite and nano-technology in the private sector(9).
The generals became very hostile to the concept of a hollow military.
Rumsfeld called a ‘town hall’ meeting of hundreds of senior Pentagon staff, “…adversary that poses a threat…is one of the last bastions of central planning…is closer to home. It’s Pentagon bureaucracy (10).
He wanted less spent on the staff…far more…directly to…private companies. “Every department…to slash its staff by 15%…” (11).
Proto-disaster Capitalism:
The job of the government was not to govern, but to subcontract to…more efficient…private sector.
By the time Bush took over, The privatization mania, fully embraced by Clinton, had sold off or outsourced public co in several sectors like water, electricity, highway management and garbage collection. What was left were such services as the military, police, fire department, prisons, border control, intelligence, disease control, public schools and government bureaucracies, privatizing which would be tantamount to compromising the nation-state.
By late 1990s, the unthinkable was deemed practical. Like Russia’s oil fields, Latin America’s telecom, and Asia’s industry, the US government would be privatized for private profit, especially urgent due to the backlash in Asia drying up the profit lake. The crisis exploiting methods learned over the last 3 decades in Latin America, Asia and Russia would be put to use in US heartland.
As its CEO, Rumsfeld had used his contacts to get the highly lucrative FDA approval for Searle Pharmaceutical’s aspartame (NutraSweet). When he sold Searle to Monsanto, he earned $12 million (15). That sale earned him seats on the boards of blue chip Sears and Kellogg’s and Gulf stream aircraft manufacturers. He was paid $190,000 a year for swerving on the board of ASEA Brown Boveri, the Swiss engineering firm which gained notoriety when it was revealed that it had sold nuclear technology, including the technique to produce plutonium, to North Korea (16).
In 1997, he was named the chairman of the board of biotech firm Gilead Sciences, which had registered Tamiflu, meant to treat ,many types of influenza, and the preferred drug for avian flu. If there ever was an outbreak, or the threat of one, the governments will be forced to buy billions worth from Gilead. Jonas Salk developed the first polio vaccine in 1952, he refused to apply for a patent, telling the broadcaster Edward R Murrow “Could you patent the sun?-this might put ideas in Rumsfeld’s head (17). Gilead also owns the patents on 4 AIDS drugs, and spends a lot of time, money and energy to block distribution of cheaper generic versions. Its key medicines have been developed on public grants (18).
While Rumsfeld saw riches in future epidemics, his protégé in ford administration Dick Cheney saw it in wars, and as secretary defense under bush Sr scaled down the number of troops on active duty and increased hiring of private contractors. He hired Brown & Root, a division of Halliburton to identify tasks performed by troops, which could be taken over by private firms, and make profit. It did and Cheney created Logistics Civil Augmentation Program to serve the military as manager for its operations (20). No dollar value was attached to contracts, the cost would be covered, plus Pentagon will guarantee a profit-cost plus contract. Halliburton, “beat out 36 other bidders to win a 5 year contract, not surprising…given that…it was the co…drew up the plan.” Los Angles Time’s T.Christian Miller.
In 1995, with Clinton in the White House, Halliburton hired Cheney as its new boss. Thanks to the loosely worded contract that the company and Cheney had drawn up, when Cheney was defense secretary, that it was able to stretch…the meaning of ‘logistical support till Halliburton was able to take over the entire infrastructure of US military operations overseas.
In the Balkans, a Halliburton spokesman said, “The first person to greet our soldiers as they arrive…, and the last one to wave goodbye is one of our employees”, making it sound like a holiday cruise (21).Clinton had deployed 19,000 soldiers in the Balkans. Halliburton created neat, gated suburbs, run entirely by the company, as US bases, with fast food shops, supermarkets, movie theaters, and gyms (22).The saying made famous in the Green zone in Baghdad was “don’t worry, it is cost plus, but deluxe war was invented by Clinton Cheney, in just under 5 years, nearly doubled the amount of money Halliburton collected from the US Treasury, from $1.2 billion to $2.3 billion, and federal loans and loan guarantees went up 15 times (23). He made millions for himself (24).
Cheney’s wife Lynne, was making money hand over fist as a member of the board of Lockheed Martin (25). With the cold war ended, and defense spending dropping, they developed a new strategy-running the government for a fee. In mid-1990s, Lockheed began taking over IT divisions of the US government. In 2004, the NY Times reported, “Lockheed Martin does not run the US, but it does help…sorts your mail…totals …taxes…cuts social security checks…counts the US census, runs space flights, monitors air traffic, and to make all that happen…writes more computer code than Microsoft (26).
As governor of TX, GWB did not run the state as much as he parceled out state functions to private firms such as security, private prisons. The American Prospect Magazine called TX, “the world capital of private prison industry” (28).
Bush, Cheney and Rumsfeld made up an evil triad, which would hollow out the government.
9/11 and revival of civil service:
When Bush and co took over in 01/2001, the IT bubble had burst, Dow Jones was down in the basement. Bush’s solution was akin to the one neo-liberals had advocated for the rest of the world-give away public wealth to corporations, with tax cuts, lucrative contracts, and plans to privatize everything (31-32).
But 9/11 intervened, and the idea of the government’s self-immolation no longer seemed so good. The security failures of 9/11 exposed the fault lines created by 20 years of nibbling away at the public sector and outsourcing to corporations for their profit. Radio communication for NY police and fire fighters had broken down in the middle of the rescue operation, air traffic controllers did not notice the off course planes and the hijackers passed through security check points manned by people who made less than the employees of the food courts at the airports did.
Ronald Reagan had emasculated the air traffic controllers union, and deregulated the airlines-a clear victory for Friedman counterrevolution. The entire air traffic control system had been over the next 20 years privatized, deregulated and the security work performed by underpaid, poorly trained, non-union contractors. After the attack, the inspector general of the department of transportation testified that the airlines responsible for security had skimped a great deal to keep costs down. It was OK on 09/10/2001, but it hiring $6.00 an hour airport security guard did seem like criminal negligence on 9/11.
In October 2001, envelopes containing a white powder were sent to congressmen. Bioport, a private lab had the exclusive contract to produce the Anthrax vaccine had failed a series of safety inspections, and the FDA had denied it permission to distribute the vaccine (35). It was still in business.
The backlash against whole sale privatizations became acute with corporate scandals like Enron going bankrupt three months after 9/11. Employees lost their retirement, while executives cashed out. Then it came out that Enron had manipulated energy prices, which had led to massive blackouts in CA (36).
Trust in government had gone up (37). The blue-collar workers of NY had performed the best (403 lost lives).Bush had to praise not only security services, but also teachers. Postal employees and health care workers.
A Corporate New Deal
Bush was planning to spend large amounts of public money to stimulate the economy, but it was all earmarked for corporations
( as Obama is doing now), with no competition, which was a hallmark of Bush/Cheney regime, and virtually no oversight.
9/11 served the agenda of a huge domestic shock therapy, which bush moved quickly to exploit to hand over war to disaster management to for profit firms. The regime invented a new framework foot its scheme of privatization-the War on Terror. In order to enhance the already existing feeling of paranoia, they first increased to a previously unheard of ands unimaginable level, the policing, surveillance, detentions and launched a power grab, called “a rolling coup” by the military historian Andrew Bacevich (40). The net effect was a full fledged new economy in private hands in homeland security, war, reconstruction, at home and abroad.
The most effective camouflage for the privatization agenda was that economic ideology was no longer a primary motivator of foreign and domestic policy. War on terror was. The NY times February 2007, “ Without a public debate or formal policy decisions, contractors have become a virtual fourth branch of the government” (42).
In November 2001, the department of defense brought together , “a small group of dot.com venture capitalist consultants” to identify “emergency technology solutions…assist…in Global war on terrorism”, so the government, in stead of providing security was proposing to buy it. By early 2006, it has been incorporated in the Pentagon as the Defense Venture Catalyst Initiative (43). (One must compliment the US for coming up with the weirdest terminology).
The Department of Homeland Security is the clearest expression of wholly outsourced kind of government. (44).Another is Counter Intelligence Field Activity, created by Rumsfeld, independent of CIA. This agency outsources 70% of its budget to private contractors. Ken Minihan, a former director of NSA tells it, “Homeland security is too important to be left to the government”. Minihan and hundreds of Bush staffers, left the government to work in private security industry, which Minihan helped create (45).
The “1% doctrine of Cheney”, that even if there is a 1% chance, the US has to respond as though it was a 100% certainty, has been a boon for high tech detection services. Because a small pox attack can be conceived, homeland Security handed over$ ½ billion to private companies to develop and install detection equipment…against an unproven threat (46).
From a military perspective, these myriad of names, the wars-on terror, the war on radical Islam, on Islamo-fascism, the long war-make the war unwinnable, and untenable from an economic perspective.
After 9/11, Bush funneled $270.00 billion from the Pentagon, $42 billion from CIA, (nearly twice that Clinton did in both instances), and $130 billion from homeland Security. In 2003, Bush spent $327 billion on private contracts, nearly 40% of every discretionary dollar (47).
DC suburbs became dotted with security start ups, and “incubator companies. The industry also gave birth to new lobby firms to hook up companies to the ‘right people’ on the Hill. In 2001, there were 2 such companies, in mid-2006, they were 543 (48).
Terrorism Market:
One of the first booms was in surveillance cameras, 4.2 million in Britain, and 30 million in the US. That created 4 billion hours of footage, so a new market for ‘analytic software’ emerged (49). Another was digital enhancement, because facial recognition software can make a positive ID only if people offer front and center to the cameras (50).
Cell phone and Web surfing companies have been turned into tools of the state, akin to Yahoo collaborating with the Chinese government and AT&T, with the US.
Many technologies in use on the war on terror had been developed to build detailed customer profiles. So now the information collected from credit cards, can be sold, not only to travel agencies or shopping chains, but to FBI as well flagging an interest, for instance, in calls or travel to mid-East.
The p[potential for error, and being branded a terrorist, is enormous. As of June, 2007, there were ½ a million names on ATS (automated targeting system) list, and tens of millions were assigned a ‘risk assessment’ rating (54).
Any one could be declared ‘enemy combatant’, and if non-US citizen, they will never know what they were detained for as Bush had abolished “habeas corpus”.
Halliburton runs maximum security prisons in Guantnamo, Boeing, the CIA’s travel agent, designed special 737s for the 1245 extraordinary rendition flights (55).
“Over half of the qualified interrogators work for contractors (56).
They paid $3,000 to $25,000 for Al-Qaida/Taliban fighters handed over to them (57).
Pentagon: 86% of the prisoners at Gitmo were handed over by Afghan/Pak agents after the bounties were announced, and the majority of them were found to have no link or connection with either group (58).
There is an unprecedented convergence of unchecked police powers and greater corporate power. The industry not only creates an incentive to spy and torture, but also perpetuates the fear, which created it in the first place.
What passes for debate, is restricted individual cases of corruption or was profiteering, and the failure of government to properly oversee contractors, but not the consequences of a fully privatized war.
“Since the ‘war on terror’ CEOs of the top 34 defense contractor’s salary is double of what they got before 9/11 (60).
Unlike the dot.com one, the disaster industry does have CIA level of discretion (61).
Peter Swire, a Clinton regime privacy counselor, describes the convergence as, “ you have a government on a holy mission to ramp up information gathering, and you have an IT industry desperate for new markets” (62).

Chap 15: Removing the Revolving Door
During the midterm 2006 elections, bush signed the Defense Authorization Act in a private ceremony in the Oval office (three weeks before Rumsfeld resigned) , with a rider hidden in its 1400 pages, which gave him the power to declare martial law overriding state governors, in the event of a public emergency to restore public order. Before this, the president had the right only in the face of an insurrection (4).
Senator Patrick Leahy was the sole voice of dissent.
One clear winner was the Pharmaceutical industry. In case of an epidemic, the army and national guard could be called to protect their labs and assets, their and impose quarantine, the long standing desire of Rumsfeld’s former employer, Gilead Sciences, which owns the patent on Tamiflu. The law and Avian Flu scares (and now swine flu) sent its stock soaring by 24%, in five months after Rumsfeld left office(6).
It is pertinent to ask the question, what roles do MNCs play in shaping law, or for that matter Halliburton and Bechtel, and oil companies did in promoting invasion of Iraq. People involved are known for conflating corporate interest with national interest.
In his 2006 book Overthrow, former NY Times correspondent Stephen Kinzer, tried to get to the bottom of what motivated US rulers to order and orchestrate coups in foreign countries over the last hundred years. From Hawaii in 1893 to Iraq in 2003, he notes that there is often a three stage process, first a US MNC faces a financial setback due to the action of a foreign government, ranging “ pay taxes, follow labor/environmental laws, sell some of its assets, or it is nationalized. Second the politicians interpret it as an attack on the US (which it actually is-MNCs own the US, much more than they do other Western countries). Third the process of selling an invasion starts as a struggle between the good and the bad, and “ a chance to free the oppressed nation…from…brutality of the regime…” (7). It is an exercise in mass projection of the interest of a tiny elite to those of all humanity’s good.
This tendency is more pronounced among politicians who move directly from a corporate to public office. John foster Dulles was a high powered international corporate lawyer, representing some of the biggest corporation in their conflicts with foreign countries, before he was picked up by Eisenhower as his secretary of state. He was incapable of distinguishing between corporate and national interest. Kinzer writes “Dulles had two…obsessions: fighting communism and protecting… MNCs (8). The actions off Guatemalan government against the United Fruit Company was a defacto attack on America and required an invasion.
Bush with a cabinet packed with former CEOs pursues its twin goals of fighting ‘terror’ and protecting MNCs in similar way. But the critical difference between Dulles and Bush is that the former only wanted a stable and profitable environment, the latter takes the invasions as the primary goal. Cheney are a different breed. What is good for Lockheed, Halliburton, Carlyle and Gilead –wars, epidemics, disasters-is good for the US, and the whole world. They have ushered in an era of privatized war and disaster response, profiting from the disasters they unleashed.
Rumsfeld retired in 2006. Press reported that he was returning to the private sector. He never left it. He was required to divest himself of all holdings- security or defense related. He claimed that it was impossible to disentangle himself in time. He was still looking for suitable buyer for a lot of his holdings even after six months into his term as defense secretary (9).
As far Gilead, the Tamiflu firm, though epidemics are national security issues and with in purview of defense, he did not sell Gliead stocks for his entire term (10).
Rumsfeld’s refusal to divest himself of his holding affected his job performance. According to AP report He had to recuse himself from a great number of critical policy decisions “He avoided meetings in which AIDS was discussed. When high profile mergers like General Electric, Honeywell, Northrop Grumman, were discussed, he had to recuse himself.(12).
His colleagues took care of his interests. In July, 2005, the Pentagon bought $58 worth of Tamiflu and department of Health&H declared its intention to buy up to a $ billion’s worth later (14).
It paid off. If he had sold his Gilead shares in January , 2001 for $7.45 a share, he would not have received $67045 per share he received when he left office , a 807% increase. (15).
Cheney was equally reluctant to leave Halliburton. Before stepping down as CEO to be Bush’s running mate, he negotiated with Halliburton for a lot of stocks and options. After press questions, he sold some shares, making $18.50 million in profit. But according to Wall Street Journal, he hung on to 189,000 shares and 500,000 unvested options.
He maintained such a huge number of shares during his term as VP, that he made millions every year, and was paid deferred $ $211,000 every year as well. The company’s stock price rose from $10.00 before Iraq war to $41.00 three years later (17).
Saddam did not pose a threat to US security, but did to US oil companies as he had signed contracts with Russian oil companies and was negotiating with ‘Total’ of France (18).
Rumsfeld and Cheney, asked to choose private profit and public life, chose profit, forcing government ethics committees to cave in.
In the Bush administration, the war profiteers were not clamoring to get access to government, they were the government.
Among other ‘scandals’ of Bush administration, Jack Abramoff bribes to congress, and Randy ‘Duke’ Cunningham serving 8 years for offering his Yacht on official congressional letterhead…courtesy prostitutes (21).
Whirling revolving door (between corporations and the government) has always been there, but in other administrations, political figures waited till their administration was out of office before moving on to corporations. Eric Lipton, tracking the exodus from Homeland security for NY Times “ veteran Washington Lobbyist…the exodus of such a sizable share of an agency’s senior management before the end of administration has few modern parallels” (22).
John Ashcroft, an architect of the war on ‘Terror’ after resigning from Attorney General’s office became the head of the Ashcroft group, many years before Bush left office, specializes in homeland security firm procure federal contracts. Tom Ridge, the first head of homeland Security is at Ridge Global, Rudy Gulliani, hero of 9/11 response as the mayor of NY, started his firm, Gulliani Partners FOUR MONTHS AFTER 9/11 TO SELL HIS SERVICES AS CRISIS CONSULTANT.
Michael Brown head of FEMA during Katrina, started his firm specializing in disaster preparedness (23), wrote an e-mail to a fellow FEMA staffer in the middle of the disaster “Can I quit now”: the philosophy being stay in government long enough to get an impressive title.
The innovation of bush was that many felt entitled to occupy both spaces-corporation and government simultaneously.
James Baker and Richard Perle make policy, while embedded in privatized war, fulfilling the corporatist dream-a total merger of political and corporate elites, with state functioning as a business guild. It is where the Chicago School crusade, with its privatization, deregulation, open borders and union busting has been leading.
Former Officials:
Bush has exceeded all other presidents in using former official-James Baker, Paul Bremer, Henry Kissinger, George Schultz, Richard Perle-as advisers and envoys for key functions, while the congress played the role of a rubber stamp.
James Baker, like Cheney made a fortune after leaving office, particularly on his contacts in Saudi Arabia and Kuwait, he made during Gulf1. his Houston law firm represents the Saudi Royal family as well as Halliburton, Gazprom oil of Russia, he is an equity partner in the Carlyle group. The war in Iraq translated into a record breaking $6.6 billion payments to Carlyle’s investors (27). When bush made Baker his special envoy on Iraq’s debts, the NY times in an editorial wrote “Mr. baker is far too entangled…in lucrative private business…leave him looking like a potentially interested party in any debt restructuring…to perform honorably…must give up private ones” (28). Baker simply refused…did exactly opposite of what Baker was supposed to be doing as envoy…collect $27 billion from Iraq in unpaid debt to Kuwait-in stead of convincing governments to cancel Saddam era debts (29). But there was a price-Kuwait would have to invest $ 1 billion into the Carlyle group.
George Schultz became the head of the Committee for the Liberation of Iraq, at he request of Bush to build the case for the invasion in public opinion. He did not disclose that he was a member of the board of Bechtel, which would collect $ 2.3 billion to ‘reconstruct’ Iraq (31).
According to Danielle Brain of the Project on Government Oversight “it’s impossible to tell where the government ends and Lockheed begins” It is harder to tell where Lockheed ends and the Committee for Liberation of Iraq begins-Bruce Jackson, till very lately vice president for strategy and planning at Lockheed had convened the committee.
Kissinger had kicked off the counterrevolution by orchestrating the Pinochet coup in Chile. Bush named him to the chair of 9/11 commission, but when the families of victims asked him to produce a list of his corporate clients, pointing to a potential conflict of interest, he refused and elected to step down from the chair (35).
Rumsfeld named Richard Perle to chair Defense Policy Board, argued forcefully for the attack on Iraq, was one of the first Disaster post 9/11 Capitalists, launching his venture capital firm Trireme Partners, just two months after 9/11. Boeing had kicked in $20 million to start the partnership. Perle wrote an op-ed supporting Boeing’s $17 billion tanker contract with the Pentagon (37-the tanker deal landed a senior defense official and a Boeing executive in jail).
Wolf Blitzer of CNN confronted Perle with Samuel Hirsh’s observation “he has set up a company that may gain in a war”. Perle blew up, calling Hersh “the closest thing American journalism has to a terrorist…”(39).
The right limitless profit seeking has always been the center of neocon ideology (40).



Chap 20: Disaster Apartheid-Katrina
“Katrina was not unforeseeable. It was the result of a political structure that subcontracts its responsibility to private contractors and abdicates its responsibility altogether” Harry Bellefonte.
Our car spun out of into a traffic light…I was aware that wherever the ambulance was going, it wouldn’t be good. I had visions of the horrific scene at the makeshift health clinic at the New Orleans airport…so few doctors and nurses that elderly evacuees were being left unattended for hours, slumped in their wheel chairs.
In Canada, I usually wait for forty minutes to see my general practitioner. And this was downtown New Orleans…largest public health emergency in recent US history. A polite administrator came into my room “in America we pay for health care. I am sorry…we wish we had your system. Just fill out this form.”
Within a couple of hours, I would have been free to go, were it not for the curfew. A private security guard told me “The biggest problem is all the junkies; they are jonesing and want to get into the pharmacy”.
A medical intern was kind enough to slip me a few painkillers. When I asked him if he had gone to any of the shelters to help, he seemed…taken aback…embarrassed” I had not thought of that”. I…changed the subject…to the fate of Charity hospital…it was barely functioning before the storm… it might never reopen “They’d better reopen it,” he said “we can’t treat those people here”
It occurred to me that this affable doctor and the spa like medical care I had just received were the embodiment of the culture that had made the horrors of Katrina possible. As a graduate of a private medical school and an intern at a private hospital, he had been trained simply not to see New Orleans’ uninsured, overwhelmingly Afro-American residents as potential patients.
When Katrina hit, the sharp divide between…Ochsner Hospital and Charity hospital played out…”the economically secure drove out of town, checked out of hotels and called their insurance companies. The 120,000…without cars…waited for help that did not arrive…even if most of us had resigned ourselves to daily inequalities…access to health care…decent schools, disasters were supposed to be different…New Orleans showed that the general belief that disasters are…time out for cut throat capitalism…all pull together…state switches into higher gear…had already been abandoned, with no public debate.
“The storm exposed the consequences of neo-liberalism’s lies…in a single locale and all at once” the political scientist and New Orleans native (3). The levees were never repaired, the under funded public transit system…failed…the city’ idea of disaster preparedness was passing out videos…if hurricane came…get out of town.
The Federal Emergency Management Agency (FEMA)…Bush… vision of government run by corporations. In the summer of 2004, more than a year before Katrina, …Louisiana put in a request for funding to…develop emergency plan…a powerful hurricane. The request was refused. Disaster mitigation…advance measures to make…disasters less devastating, was…gutted under Bush. The same year FEMA awarded $ 500,000…to a private firm…Innovative emergency Management to come up with…” …hurricane disaster plan for South east Louisiana and the city of New Orleans” (4).
The company went back to FEMA for more money, eventually it came to $ 1 billion…came up with everything from delivering water…to identify empty lots…be transformed into trailer parks for evacuees... eight months after the contractor submitted the report, no action was taken. Michael Brown, head of FEMA “Money was not available to do the follow up.” (5).
FEMA could not…locate the New Orleans superdome, where 23,000…stranded without food or water…the media had been there for days.
Even neocon stalwarts like Jonah Goldberg …were begging,
“When a city is sinking…rioting runs rampant, government PROABABLY should saddle up.” (6).
Milton Friedman wrote in his Wall Street Journal op-ed “it was also an opportunity”. On September 13, 2005, two weeks after Katrina, the Heritage Foundation hosted a meeting of right wing ideologues and Republican Lawmakers. They came up with a list of “Pro-Free Market Ideas for responding to Katrina and high Gas Prices-32 in number…the first three…”automatically suspend Davis-Bacon prevailing wage laws in disaster areas…federal contractors required to pay a living wage, “make the entire…area a flat-tax free-enterprise zone” “make the entire region an economic competitive zone…waive regulations…give parents vouchers to use at charter schools (7). Bush announced all the measures, though he was forced to reinstate labor laws.
The group at the Heritage Foundation called upon the congress to repeal environmental regulation on the gulf coast…for new oil refineries and “drilling in the Arctic national wildlife Refuge, in spite of the fact that climate scientists have linked the increased intensity of hurricanes to increasing ocean temperatures (8&9).
With in weeks the Gulf coast became the domestic laboratory for the same kind of government run by contractors…pioneered in Iraq. The Baghdad gang-Halliburton’s KBR unit got 60 million to reconstruct military bases. Blackwater hired to protect FEMA employees from looters. Parsons, notorious for doing sloppy work in Iraq, was brought in for bridge construction in Mississippi. Flour, Shaw, Bechtel, CH2M, all Iraq contractors, were given contracts to build mobile homes, just 10 days after levees broke. The contracts were worth $3.4 billion and there no open bidding (10).
The parallels with Baghdad’s Green zone were uncanny. Shaw hired the former head of the army’s Iraq reconstruction office. Flour sent its senior project manager from Iraq to New Orleans. Joe Allbaugh, who had promised to bring Wal-Mart and 7-Eleven to Iraq was the lobbyist for many of the deals. David Enders, a reporter asked, asked an armed guard outside a New Orleans hotel if he seen much action, he replied “…it is pretty much Green Zone here”(11).
Like the Green Zone, congressional investigators found “ significant over charges, wasteful spending or mismanagement” in contracts worth $3.75 billion (12).
Kenyon, a division of the massive funeral conglomerate, Service Corporation International and a major Bush campaign donor, was given the work of collecting dead bodies from homes and streets. They worked slowly, local emergency workers and volunteer morticians were not allowed, bodies often under blazing sun for days. Kenyon charged the state, on the average $12,500 per body, and for almost a year after Katrina, decayed bodies were still being found in attics. (13).
Experience did not have any effect on award of contracts. AshBitt was given half a billion to remove debris, did not own a single dump truck and outsourced the work (14).A company/religious group, Lighthouse Disaster relief was given 5.2 million to build a camp for emergency workers in suburb of the city. The work was never finished. The director Pastor Gary Heldreth confessed “ …the closest thing I have done…organize a youth camp…”(15).
According to The New York times ‘the top 20 contractors …spent nearly 300 million since 2000 on lobbying and 23 million to political campaigns”.
As in Iraq, they were averse to hiring locals.
After the contractors and sub-contractors had taken their cut, little was left for the people. The author, Mike Davis discovered that FEMA paid Shaw $ 175 per square foot to install blue tarp on damaged roofs, with the government supplying the tarps. Workers who hammered the tarp were paid $ 2.00 per square foot (17).
In November, 2005, to offset the billion going to the contractors, Republican dominated congress wanted to cut $40.00 billion from the budget, from student loans, Medicaid and food stamps (19).
From being social levelers that they were long ago, they now provide an inkling into the cruelly divided future. Baghdad’s Green Zone provides the best example-it has its own electric, phone and sewage systems and a state of the art hospital, all protected by 5 ft thick walls, poolside drinks, Hollywood movies and Nautilus exercise machines.
Green Zones are not exclusive to Baghdad. They emerged in New Orleans, Green Zones amidst Red Zones of , consequence of “free market economy, Bush refused to allow payment of public sector salaries from emergency funds. The city which could not collect taxes had to fire 3,000 workers. Millions went to outside consultants, many of whom were real estate developers (20).thousands of teachers were fired paving the way to privatize education.
Nearly two years later, Charity hospital was still closed, court system was barely functional and private energy company, Entetrgy had failed to supply electricity to the whole city. It threatened to raise rates and was gifted $200.00 million from the federal government. The public transport system lost half its workers, and the vast majority of publicly owned houses stood boarded and empty. (21) and the tourist lobby was eying the prime land close to the French Quarter.
New Orleans public sphere was being erased. Like Detroit and other manufacturing cities lost outsourcing of globalization, New Orleans provides the first example of post disaster wastage of cities.
In 2007, The American Society of Civil Engineers reported that the USA was falling behind in maintaining its public infrastructure, and it would take $ a trillion and a half to bring them back to safe standards. The expenditure was actually being cut back (23).
In 2006, the Red Cross signed a new disaster response partnership with Wal-Mart. “It is going to be private enterprise” said Billy Wagner, the chief of emergency management for Florida Keys (25).
Much of the parallel disaster economy has been built with tax-payer money spent in privatized war zone work. The overhead (euphemism for diverting funds for corporate/personal use) of contractors in Iraq and Afghanistan ranges from 20% to 55%.
Blackwater, (now named…after the exposure of the murders and other atrocities perpetrated on Iraqi civilians and bystanders by its criminal gangs) founded in 1996, built up an a mercenary army of 20,000 and a huge military base in North Carolina, worth $50 million. Its Florida wing boasts of helicopter gun ships, a Boeing 767, a Zeppelin, a 20 acre man made lake to train boarding a hostile ship, a 1200 yard firing range for sniper training, all courtesy Bush with public funds (27). A journal described it “al Qaeda for the good guys” (28).
The state has lost its ability to perform its functions. FEMA had to hire a contractor to award contracts to sub-contractors during Katrina. To update the army manual on the rules dealing with contractors, it had to hand over the job to one of its major contractors-MPRI. The CIA had to bar recruiter from luring its staff away from its own premises. Michael Jackson, deputy secretary of Homeland Security explained “the department does not have the capacity …to plan…oversee the ‘border initiative program (to build virtual fences on US borders with Mexico and Canada(30).
Once a market is created, it does not fold up with the termination of the term of one president.
A year after Katrina, CEOs of 30 largest US corporation joined hands under a ‘Business roundtable and complained of “Mission Creep” by NGOs in disaster relief as it infringed on their franchise. They claim to be better equipped than the UN to deal with Darfur (they will indiscriminately massacre both sides, and bring the peace of the grave yard).
Perhaps the main reason the elite are so sanguine about climate change is that they think they will be able to buy their way out of it. Christian end-timers (and Muslims too) actually favor disasters as paving the way to bring Rapture ( day of Qayamat for Muslims) sooner.
Paul Brenner, before he went to Iraq used to disaster proof corporations-turning Multinationals into security bubbles, to continue to function even the state around them crumbled. Early work can be glimpsed in the lobbies of major corporations in London and NY, equipped with airport style check in and scanners. They would like to proceed to privatized global communications, emergency health and energy supply and transportation for corporate personnel and their favorite minions among the politicians. What they can do for the military in Felluja, they can do for the police in Reno (35).
John Robb, a former force Delta commander, turned consultant says “Wealthy individuals and MNCs will be the first to bail out of our collective (security and transport) systems (36). The future Robb described looks very much like what went on in post Katrina New Orleans, with gate communities private hospitals, charter schools, water supply and emergency generators for the rich and out of the way trailer parks for the poor where they were treated like virtual criminals (37).
In a wealthy republican suburb of Atlanta, they were tired of their tax subsidizing schools and police in the poor sections of the county. They voted to incorporate their own city, called Sandy springs. In September 2005 (the month Katrina struck), consulting mammoth, offered to run the government for them at $ 27 million a yearCH2M, making it the first ‘contract’ city. Only four people worked for the new municipality, all others for the contractor (400. Neighboring communities took their cue from Sandy springs, one new city Milton hired, what else-CH2M Hill. Soon a campaign gathered for the corporate cities to band together. Politicians from the poor areas opposed the move fiercely (41).
CH2M Hill is one of the ‘primes’ of Iraq. It was granted contract to build ports and bridges and oversee all infrastructure programs in post tsunami Sri Lanka, and was awarded $ 500 million contract to build FEMA villas in post Katrina New Orleans.