Disaster Capitalism, by Naomi Klein
Source News for Social Justice Activists
Date 07/10/03/09:16

Harper's Magazine October 2007
The New Economy of Catastrophe
By Naomi Klein

Only a crisis -- actual or perceived -- produces real change. When that
crisis occurs, the actions that are taken depend on the ideas that are lying

-- Milton Friedman

THREE years ago, when I was in Baghdad on assignment for this magazine, I
paid an early-morning visit to Khadamiya, a mostly Shiite area. An Iraqi
colleague had heard that part of the neighborhood had flooded the night
before, as it did regularly. When we arrived, the streets were drenched in
slick green-blue liquid that was bubbling up from sewage pipes beneath
exhausted asphalt. A family invited us to see what the frequent floods had
done to their once lovely home. The walls were moldy and cracked, and every
item -- books, photos, sofas -- was caked in the algae-like scum. Out back,
a walled garden was a fetid swamp, with a child's swing dangling forlornly
from a dead palm tree. "It was a beautiful garden," Durdham Yassin, the
owner, told us. "I grew tomatoes."

For the frequent flooding, Yassin spread the blame around. There was Saddam,
who spent oil money on weapons instead of infrastructure during the
Iran-Iraq War. There was the first Gulf War, when U.S. missiles struck a
nearby electricity plant, knocking out power to the sewage-treatment
facility. Next came the years of U.N. sanctions, when city workers could not
replace crucial parts of the sewage system. Then there was the 2003
invasion, which further fried the power grid. And, more recently, there were
companies like Bechtel and General Electric, which were hired to fix this
mess, and which failed.

Around the corner, a truck was idling with a large hose down a manhole. "The
most powerful vacuum loader in the world," it advertised, in English, on its
side. Yassin explained that the neighbors had pooled their money to pay the
company to suck away the latest batch of sludge, a costly and temporary
solution. The mosque had helped, too. As we drove away, I noticed that there
were similar private vacuum trucks on every other block. Later that day I
stopped by Baghdad's world-famous Green Zone. There, the challenges of
living without functioning public infrastructure are also addressed by
private actors. The difference is that in the Green Zone, the solutions
actually work. The enclave has its own electrical grid, its own phone and
sanitation systems, its own oil supply, and its own state-of-the-art
hospital with pristine operating theaters-all protected by walls five meters
thick. It felt, oddly, like a giant fortified Carnival Cruise ship parked in
the middle of a sea of vi! olence and despair, the boiling Red Zone that is
Iraq. If you could get on board, there were poolside drinks, bad Hollywood
movies, and Nautilus machines. If you were not among the chosen, you could
get shot just for standing too close to the wall.

Everywhere in Iraq, the wildly divergent values assigned to different
categories of people are on crude display. Westerners and their Iraqi
colleagues have checkpoints at the entrances to their streets, blast walls
in front of their houses, body armor, and private security guards on call at
all hours. They travel the country in menacing armored convoys, with
mercenaries pointing guns out the windows as they follow their prime
directive to "protect the principal." With every move they broadcast the
same unapologetic message: We are the chosen, our lives are infinitely more
precious than yours. Middle-class Iraqis, meanwhile, cling to the next rung
down the ladder: they can afford to buy protection from local militias, they
are able to ransom a family member held by kidnappers, they may ultimately
escape to a life of poverty in Jordan. But the vast majority of Iraqis have
no protection at all. They walk the streets exposed to any possible
ravaging, with nothing between them an! d the next car bomb but a thin layer
of fabric. In Iraq, the lucky get Kevlar; the rest get prayer beads.

Like most people, I saw the divide between Baghdad's Green and Red zones as
a simple by-product of the war: This is what happens when the richest
country in the world sets up camp in one of the poorest. But now, after
years spent visiting other disaster zones, from post-tsunami Sri Lanka to
post-Katrina New Orleans, I've come to think of these Green Zone/Red Zone
worlds as something else: fast-forward versions of what "free market" forces
are doing to our societies even in the absence of war. In Iraq the phones,
pipes, and roads had been destroyed by weapons and trade embargoes. In many
other parts of the world, including the United States, they have been
demolished by ideology, the war on "big government," the religion of tax
cuts, the fetish for privatization. When that crumbling infrastructure is
blasted with increasingly intense weather, the effects can be as devastating
as war.

Last February, for instance, Jakarta suffered one of these predictable
disasters. The rains had come, as they always do, but this time the water
didn't drain out of Jakarta's famously putrid sewers, and half the city
filled up like a swimming pool. There were mass evacuations, and at least
fifty-seven people were killed. No bombs or trade sanctions were needed for
Jakarta's infrastructure to fail -- in fact, the steady erosion of the
country's public sphere had taken place under the banner of "free trade."
For decades, Washington-backed structural-adjustment programs had pampered
investors and starved public services, leading to such cliches of lopsided
development as glittering shopping malls with indoor skating rinks
surrounded by moats of open sewers. Now those sewers had failed completely.
In wealthier countries, where public infrastructure was far more robust
before the decline began, it has been possible to delay this kind of
reckoning. Politicians have been free to cu! t taxes and rail against big
government even as their constituents drove on, studied in, and drank from
the huge public- works projects of the 1930s and 1940s. But after a few
decades, that trick stops working. The American Society of Civil Engineers
has warned that the United States has fallen so far behind in maintaining
its public infrastructure -- roads, bridges, schools, dams -- that it would
take more than a trillion and a half dollars over five years to bring it
back up to standard. This past summer those statistics came to life:
collapsing bridges, flooding subways, exploding steam pipes, and the
still-unfolding tragedy that began when New Orleans's levees broke.

After each new disaster, it's tempting to imagine that the loss of life and
productivity will finally serve as a wake-up call, provoking the political
class to launch some kind of "new New Deal." In fact, the opposite is taking
place: disasters have become the preferred moments for advancing a vision of
a ruthlessly divided world, one in which the very idea of a public sphere
has no place at all. Call it disaster capitalism. Every time a new crisis
hits -- even when the crisis itself is the direct by-product of free-market
ideology -- the fear and disorientation that follow are harnessed for
radical social and economic re-engineering. Each new shock is midwife to a
new course of economic shock therapy. The end result is the same kind of
unapologetic partition between the included and the excluded, the protected
and the damned, that is on display in Baghdad. Consider the instant
reactions to last summer's various infrastructure disasters. Four days after
the Minneapolis bridg! e collapsed, a Wall Street Journal editorial had the
solution: "tapping private investors to build and operate public roads and
bridges," with the cost made up from ever-escalating tolls. After heavy rain
caused the shutdown of New York City's subway lines, the New York Sun ran an
editorial under the headline "Sell the Subways." It called for individual
train lines to compete against one another, luring customers with the
safest, driest service-and "charging higher fares when the competing lines,
stingier on their investments, were shut down with tracks under water." (1)
It's not hard to imagine what this free market in subways would look like:
high-speed lines ferrying commuters from the Upper West Side to Wall Street,
while the trains serving the South Bronx wouldn't just continue their long
decay -- they would simply drown.

The same week as the bridge collapse, hysteria erupted over canceled flights
and delays at London's Heathrow airport, prompting The Economist to demand
"radical reform" of the "grubby, cramped" facility. London's airports are
already privatized, but now, according to the magazine, they should be
deregulated, allowing terminals to compete against one another: "different
firms could provide different forms of security checks, some faster and
dearer than others." Meanwhile, in New Orleans, schools were getting ready
to reopen for fall. More than half the city's students would be attending
newly minted charter schools, where they would enjoy small classes,
well-trained teachers, and refurbished libraries, thanks to special state
and foundation funding pouring into what the New York Times has described as
"the nation's pre-eminent laboratory for the widespread use of charter
schools." But charters are only for the students who are admitted to the
system-an educational Green Zone.! The rest of New Orleans's public-school
students -- many of them with special emotional and physical needs, almost
all of them African-American -- are dumped into the pre-Katrina system: no
extra money, overcrowded classrooms, more guards than teachers. An
educational Red Zone. Other institutions that had attempted to bridge the
gap between New Orleans's super-rich and ultra-poor were also under attack:
thousands of units of subsidized housing were slotted for demolition, and
Charity Hospital, the city's largest public-health facility, remained
shuttered. The original disaster was created and deepened by public
infrastructure that was on its last legs; in the years since, the disaster
itself has been used as an excuse to finish the job. There will be more
Katrinas, The bones of our states - so frail and aging -- will keep getting
buffeted by storms both climatic and political. And as key pieces of the
infrastructure are knocked out, there is no guarantee that they will be !
repaired or rebuilt, at least not as they were before. More likely, th ey
will be left to rot, with the well-off withdrawing into gated communities,
their needs met by private suppliers.

Not so long ago, disasters were periods of social leveling, rare moments
when atomized communities put divisions aside and pulled together. Today
they are moments when we are hurled further apart, when we lurch into a
radically segregated future where some of us will fall off the map and
others ascend to a parallel privatized state, one equipped with well-paved
highways and skyways, safe bridges, boutique charter schools, fast-lane
airport terminals, and deluxe subways.

Iraq and New Orleans both reveal, the markets opened up by crises aren't
only the roads, schools, and oil wells; the disasters themselves are major
new markets. The military-industrial complex that Dwight D. Eisenhower
warned against in 1961 has expanded and morphed into what is best understood
as a disaster-capitalism complex, in which all conflict -- and
disaster-related functions (waging war, securing borders, spying on
citizens, rebuilding cities, treating traumatized soldiers) can be performed
by corporations at a profit. And this complex is not satisfied merely to
feed off the state, the way traditional military contractors do; it aims,
ultimately, to replace core functions of government with its own profitable
enterprises, as it did in Baghdad's Green Zone.

It happened in New Orleans. Within weeks of Hurricane Katrina, the Gulf
Coast became a domestic laboratory for the same kind of government run by
contractors that was pioneered in Iraq. The companies that snatched up the
biggest contracts were the familiar Baghdad gang: Halliburton's KBR unit
received a $60 million contract to re- construct military bases along the
coast. Blackwater was hired to protect FEMA operations, with the company
billing an average of $950 a day per guard. Parsons, infamous for its sloppy
work in Iraq, was brought in for a major bridge-construction project in
Mississippi. Fluor, Shaw, Bechtel, CH2M Hill-all top contractors in
Iraq-were handed contracts on the Gulf Coast to provide mobile homes to
evacuees just ten days after the levees broke. Their contracts ended up
totaling $3.4 billion, no open bidding required. To spearhead its Katrina
operation, Shaw hired the former head of the U.S. Army's Iraq reconstruction
office. Fluor sent its senior projec! t manager from Iraq to the flood zone.
"Our rebuilding work in Iraq is slowing down, and this has made some people
available to respond to our work in Louisiana," a company representative
explained. Joe Allbaugh, whose company, New Bridge Strategies, had promised
to bring Wal-Mart and 7-Eleven to Iraq, was the lobbyist in the middle of
many of the deals. The feeling that the Iraq war had somehow just been
franchised was so striking that some of the mercenary soldiers, fresh from
Baghdad, were having trouble adjusting. When David Enders, a reporter, asked
an armed guard outside a New Orleans hotel if there had been much action, he
replied, "Nope. It's pretty Green Zone here."

Since then, privatized disaster response has become one of the hottest
industries in the South. Just one year after Hurricane Katrina, a slew of
new corporations had entered the market, promising safety and security
should the next Big One hit. One of the more ambitious ventures was launched
by a charter air service in West Palm Beach, Florida. Help Jet bills itself
as "the world's first hurricane escape plan that turns a hurricane
evacuation into a jet-setter vacation." When a storm is coming, the charter
company books holidays for its members at five-star golf resorts, spas, or
Disneyland. With the reservations made, the evacuees are then whisked out of
the hurricane zone on a luxury jet. "No standing in lines, no hassle with
crowds, just a first class experience that turns a problem into a vacation
.... Enjoy the feeling of avoiding the usual hurricane evacuation
nightmare." For the people left behind, there is a different kind of
privatized solution. In 2006, the Red Cro! ss signed a new disaster-response
partnership with Wal-Mart. "It's all going to be private enterprise before
it's over," said Billy Wagner, chief of emergency management for the Florida
Keys. "They've got the expertise. They've got the resources." He was
speaking at the National Hurricane Conference in Orlando, Florida, a
fast-growing annual trade show for the companies selling everything that
might come in handy during the next disaster. Dave Blandford, an exhibitor
showing off his "self-heating meals" at the conference, observed: "Some
folks here said, 'Man, this is huge business-this is my new business. I'm
not in the landscaping business anymore; I'm going to be a hurricane-debris

Much of the parallel disaster economy has been built with taxpayers' money,
thanks to the boom in privatized war-zone reconstruction. The giant
contractors that have served as "the primes" in Iraq and Afghanistan have
spent large portions of their income from government contracts on their own
corporate overhead-between 20 and 55 percent, according to a 2006 audit of
Iraq contractors. Much of those funds has, quite legally, gone into huge
investments in corporate equipment, such as Bechtel's battalions of earth
movers, Halliburton's fleets of planes and trucks, and the surveillance
architecture built by L-3, CACI, and Booz Allen. Most dramatic has been
Blackwater's investment in its paramilitary infrastructure. Founded in 1996,
the company has used its steady stream of contracts to build up a private
army of 20,000 on-call mercenary soldiers and a military base in North
Carolina worth between $40 million and $50 million. It reportedly has the
ability to field massive humanita! rian operations faster than the Red
Cross, and boasts a fleet of aircraft ranging from helicopter gunships to a
Boeing 767. (2)

Blackwater has been called "al Qaeda for the good guys" by its right-wing
admirers. It's a striking analogy. Wherever the disaster-capitalism complex
has landed, it has produced a proliferation of armed groups that operate
outside the state. That is hardly a surprise: when countries are rebuilt by
people who don't believe in governments, the states they build are
invariably weak, creating a market for alternative security forces, whether
Hezbollah, Blackwater, the Mahdi Army, or the gang down the street in New

The reach of the disaster industry extends far beyond policing. When the
contractor infrastructure built up during the Bush years is looked at as a
whole, what we see is a fully articulated state-within-a-state that is as
muscular and capable as the actual state is frail and feeble. This corporate
shadow-state has been built almost exclusively with public resources,
including the training of its staff: 90 percent of Blackwater's revenues
come from state contracts, and the majority of its employees are former
politicians, soldiers, and civil servants. Yet the vast infrastructure is
all privately owned and controlled. The citizens who funded it have
absolutely no claim to this parallel economy or its resources.

The actual state, meanwhile, has lost the ability to perform its core
functions without the help of contractors. Its own equipment is out of date,
and the best experts have fled to the private sector. When Katrina hit, FEMA
had to hire a contractor to award contracts to contractors. Similarly, when
it came time to update the Army manual on the rules for dealing with
contractors, the Army outsourced the job to one of its major contractors,
MPRI, because it no longer had the in-house expertise. The CIA has lost so
many staffers to the privatized spy sector that it has had to bar
contractors from recruiting in the agency dining room. "One recently retired
case officer said he had been approached twice while in line for coffee,"
reported the Los Angeles Times. And when the Department of Homeland Security
decided it needed to build "virtual fences" on the U.S. borders with Mexico
and Canada, Michael P. Jackson, deputy secretary of the department, told
contractors, "This is an unu! sual invitation .... We're asking you to come
back and tell us how to do our business." The department's inspector general
explained that Homeland Security "does not have the capacity needed to
effectively plan, oversee, and execute the [Secure Border Initiative]
program." Under George W. Bush, the state still has all the trappings of a
government -- the impressive buildings, presidential press briefings, policy
Battles -- but it no more does the actual work of governing than the
employees at Nike's Beaverton, Oregon, campus stitch running shoes.

he implications of the decision by the current crop of politicians to
systematically outsource their elected responsibilities will reach far
beyond a single administration. Once a market has been created, it needs to
be protected. The companies at the heart of the disaster-capitalism complex
increasingly regard both the state and nonprofits as competitors; from the
corporate perspective, whenever governments or charities fulfill their
traditional roles, they are denying contractors work that could be performed
at a profit.

"Neglected Defense: Mobilizing the Private Sector to Support Homeland
Security," a 2006 report whose advisory committee included some of the
largest corporations in the sector, warned that "the compassionate federal
impulse to provide emergency assistance to the victims of disasters affects
the market's approach to managing its exposure to risk." Published by the
Council on Foreign Relations, the report argued that if people know the
government will come to the rescue, they have no incentive to pay for
protection. In a similar vein, a year after Katrina, CEOs from thirty of the
largest corporations in the United States joined together under the umbrella
of the Business Roundtable, which includes in its membership Fluor, Bechtel,
and Chevron. The group, calling itself Partnership for Disaster Response,
complained of "mission creep" by the nonprofit sector in the aftermath of
disasters. The mercenary firms, meanwhile, have been loudly claiming that
they are better equipped tha! n the U.N. to engage in peacekeeping in

Much of this new aggressiveness flows from suspicion that the golden era of
bottomless federal contracts might not last much longer. The U.S. government
is barreling toward an economic crisis, thanks in no small part to the
deficit spending that has bankrolled the privatized disaster economy. Sooner
rather than later, the contracts are likely to dip significantly. In late
2006 defense analysts began predicting that the Pentagon's acquisitions
budget could shrink by as much as 25 percent in the coming decade.

When the disaster bubble bursts, firms such as Bechtel, Fluor, and
Blackwater will lose much of their primary revenue streams. They will still
have all the high-tech equipment bought at taxpayer expense, but they will
need to find a new business model, a new way to cover their high costs. The
next phase of the disaster-capitalism complex is all too clear: with
emergencies on the rise, government no longer able to foot the bill, and
citizens stranded by their hollow state, the parallel corporate state will
rent back its disaster infrastructure to whoever can afford it, at whatever
price the market will bear. For sale will be everything from helicopter
rides off rooftops to drinking water to beds in shelters.

Wealth already provides an escape hatch from most disasters-it buys
early-warning systems for tsunami-prone regions and stockpiles ofTamiflu for
the next outbreak. It buys bottled water, generators, satellite phones, and
rent- a-cops. During the Israeli attack on Lebanon in 2006, the U.S.
government initially tried to charge American citizens for the cost of their
own evacuation, though it was eventually forced to back down. If we continue
in this direction, the images of people stranded on New Orleans rooftops
will not only have been a glimpse of America's unresolved past of racial
inequality but will also have foreshadowed a collective future of disaster
apartheid, in which survival is determined primarily by one's ability to

Perhaps part of the reason so many of our elites, both political and
corporate, are so sanguine about climate change is that they are confident
they will be able to buy their way out of the worst of it. This may also
partially explain why so many Bush supporters are Christian end-timers. It's
not just that they need to believe there is an escape hatch from the world
they are creating. It's that the Rapture is a parable for what they are
building down here on Earth-a system that invites destruction and disaster,
then swoops in with private helicopters and airlifts them and their friends
to divine safety.

As contractors rush to develop alternative stable sources of revenue, one
avenue of business is in disaster-proofing other corporations. This was Paul
Bremer's line of work before he became Bush's proconsul in Iraq: turning
multinationals into security bubbles able to function smoothly even if the
states in which they are doing business crumble around them. The early
results can be seen in the lobbies of many office buildings in New York or
London --airport-style check-ins complete with photo-ID requirements and
x-ray machines -- but the industry has far greater ambitions, including
privatized global communications networks, emergency health and electricity
services, and the ability to locate and provide transportation for a global
workforce in the midst of a major disaster. Another potential growth area
identified by the disaster-capitalism complex is municipal government: the
contracting out of police and fire departments to private security
companies. "What they do for th! e military in downtown Fallujah, they can
do for the police in downtown Reno," a spokesperson for Lockheed Martin said
in November 2004.

The contracting industry predicts that these new markets will expand
dramatically over the next decade. A frank vision of where these trends are
leading is provided by John Robb, a former covert-action mission commander
with Delta Force turned management consultant. In a widely circulated
manifesto for Fast Company magazine, he describes the "end result" of the
war on terror as "a new, more resilient approach to national security, one
built not around the state but around private citizens and companies ....
Security will become a function of where you live and whom you work for,
much as health care is allocated already."

Robb writes, "Wealthy individuals and multinational corporations will be the
first to bail out of our collective system, opting instead to hire private
military companies, such as Blackwater and Triple Canopy, to protect their
homes and facilities and establish a protective perimeter around daily life.
Parallel transportation networks--evolving out of the time-share aircraft
companies such as Warren Buffett's NetJets-will cater to this group,
leapfrogging its members from one secure, well-appointed lily pad to the
next." That elite world is already largely in place, but Robb predicts that
the middle class will soon follow suit, "forming suburban collectives to
share the costs of security." These "'armored suburbs' will deploy and
maintain backup generators and communications links" and be patrolled by
private militias "that have received corporate training and boast their own
state-of-the-art emergency response systems."

In other words, a world of suburban Green Zones. As for those outside the
secured perimeter, "they will have to make do with the remains of the
national system. They will gravitate to America's cities, where they will be
subject to ubiquitous surveillance and marginal or nonexistent services. For
the poor, there will be no other refuge." The future Robb describes sounds
very much like the present in New Orleans, where two very different kinds of
gated communities emerged from the rubble. On the one hand were the
so-called FEMA-villes: desolate, out-of-the-way trailer camps for low-income
evacuees, built by Bechtel or Fluor subcontractors and administered by
private security companies that patrolled the gravel lots, restricted
visitors, kept journalists out, and treated survivors like criminals. On the
other hand were the gated communities built in the wealthy areas of the city
like Audubon and the Garden District, bubbles of functionality that seemed
to have seceded from the! state altogether. Within weeks of the storm,
residents there had water and powerful emergency generators. Their sick were
treated in private hospitals, and their children went to private or charter
schools. And they had no need for public transit. In St. Bernard Parish, a
New Orleans suburb, DynCorp had taken over much of the policing; other
neighborhoods hired security companies directly. Between the two kinds of
privatized city-states was the New Orleans version of the Red Zone, where
the murder rate soared and neighborhoods like the storied Lower Ninth Ward
descended into a postapocalyptic no-man's-land.

Another glimpse of a disaster-apartheid future can be found in a wealthy
Republican suburb outside Atlanta. Its residents decided that they were
tired of watching their property taxes subsidize schools and police in the
county's low-income African-American neighborhoods. They voted to
incorporate as their own city, Sandy Springs, which could spend most of its
taxes on services for its 100,000 citizens and minimize the revenue that
would be redistributed throughout Fulton County. The only difficulty was
that Sandy Springs had no government structures and needed to build them
from scratch-everything from tax collection to zoning to parks and
recreation. In September 2005, the same month that New Orleans flooded, the
residents of Sandy Springs were approached by the construction and
consulting giant CH2M Hill with a unique pitch: Let us do it for you. For
the starting price of $27 million a year, the contractor pledged to build a
complete city from the ground up.

A few months later, Sandy Springs became the first "contract city." Only
four people worked directly for the new municipality --everyone else was a
contractor. Rick Hirsekorn, heading up the project for CHZM Hill, described
Sandy Springs as "a clean sheet of paper with no governmental processes in
place." The Atlanta Journal-Constitution re- ported that "when Sandy Springs
hired corporate workers to run the new city, it was considered a bold
experiment." Within a year, however, contract-city mania was tearing through
Atlanta's wealthy suburbs, and it had become "standard procedure in north
Fulton [County]." Neighboring communities took their cue from Sandy Springs
and also voted to become stand-alone cities and contract out their
government. One new city, Milton, immediately hired CH2M Hill for the
job-after all, it had the experience. Soon, a campaign began for the new
corporate cities to join together to form their own county. The plan has
encountered fierce opposition out! side the proposed enclave, where
politicians say that without those tax dollars, they will no longer be able
to afford their large public hospital and public transit system; that
partitioning the county would create a failed state on the one hand and a
hyperserviced one on the other. What they were describing sounded a lot like
New Orleans and a little like Baghdad.

In these wealthy Atlanta suburbs, the long crusade to strip-mine the state
is nearing completion, and it is particularly fitting that the new ground
was broken by CH2M Hill. The corporation was a multimillion-dollar
contractor in Iraq, paid to perform the core government function of
overseeing other contractors. In Sri Lanka after the tsunami, it not only
had built ports and bridges but was, according to the U.S. State Department,
"responsible for the overall management of the infrastructure program." In
post- Katrina New Orleans, CH2M Hill was awarded $500 million to build
FEMA-villes and was put on standby for the next disaster. A master of
privatizing the core functions of the state during extraordinary
circumstances, the company was now doing the same under ordinary ones. lf
disasters had served as laboratories of extreme privatization, the testing
phase was clearly over.

For decades, the conventional wisdom was that generalized mayhem was a drain
on the global economy. Individual shocks and crises could be harnessed as
leverage to force open new markets, of course, but after the initial shock
had done its work, relative peace and stability were required for sustained
economic growth. That was the accepted explanation for why the Nineties had
been such prosperous years: with the Cold War over, economies were liberated
to concentrate on trade and investment, and as countries became more
enmeshed and interdependent, they were far less likely to bomb one another.

At the 2007 World Economic Forum in Davos, Switzerland, however, political
and corporate leaders were scratching their heads over a state of affairs
that seemed to flout this conventional wisdom. It was being called the
"Davos Dilemma," which Financial Times columnist Martin Wolf described as
"the contrast between the world's favourable economics and troublesome
politics." As Wolf put it, the economy had faced "a series of shocks: the
stock market crash after 2000; the terrorist outrages of September 11, 2001;
wars in Afghanistan and Iraq; friction over US policies; a jump in real oil
prices to levels not seen since the 1970s; the cessation of negotiations in
the Doha round [of WTO talks]; and the confrontation over Iran's nuclear
ambitions" -- and yet it found itself in "a golden period of broadly shared
growth." Put bluntly, the world was going to hell, there was no stability in
sight, and the global economy was roaring its approval.

This puzzling trend has also been observed through an economic indicator
called "the guns-to-caviar index." The index tracks the sales of fighter
jets (guns) and executive jets (caviar). For seventeen years, it generally
found that when fighter jets were selling briskly, sales of luxury executive
jets went down, and vice versa: when executive-jet sales were on the rise,
fighter-jet sales dipped. Of course, a handful of war profiteers always
managed to get rich from selling guns, but they were economically
insignificant. It was a truism of the contemporary market that you couldn't
have booming economic growth in the midst of violence and instability.

Except that the truism is no longer true. Since 2003, the year of the Iraq
invasion, the index has found that spending has been going up on both
fighter jets and executive jets rapidly and simultaneously, which means that
the world is becoming less peaceful while accumulating significantly more
profit. The galloping economic growth in China and India has played a part
in the increased demand for luxury items, but so has the expansion of the
narrow military-industrial complex into the sprawling disaster-capitalism
complex. Today, global instability does not just benefit a small group of
arms dealers; it generates huge profits for the high-tech-homeland-security
sector, for heavy construction, for private health-care companies, for the
oil and gas sectors-and, of course, for defense contractors.

The scale of the revenues at stake is certainly enough to fuel an economic
boom. Lockheed Martin, whose former vice president chaired the Committee for
the Liberation of Iraq, which loudly agitated for the invasion, received $25
billion in U.S. government contracts in 2005 alone. Democratic Congressman
Henry Waxman noted that the sum "exceeded the gross domestic product of 103
countries, including Iceland, Jordan, and Costa Rica ... [and] was also
larger than the combined budgets of the Department of Commerce, the
Department of the Interior, the Small Business Administration, and the
entire legislative branch of government." Lockheed itself deserved to be
characterized as an emerging market. Companies like Lockheed (whose stock
price tripled between 2000 and 2005) are a large part of the reason why the
U.S. stock market was saved from a prolonged crash following September 11.
While conventional stocks have underperformed, the Spade Defense Index, "a
benchmark for defense, ho! meland security and aerospace stocks," went up 76
percent between 2001 and 2006-while Standard & Poor's 500 average dropped 5
percent in that same period.

The Davos Dilemma is being fueled further by the intensely profitable model
of privatized reconstruction that was forged in Iraq. Share prices of heavy-
construction companies, which include the big engineering firms that land
juicy no-bid contracts after wars and natural disasters, went up 300 percent
between 2001 and July 2007. Reconstruction is now such big business that
investors greet each new disaster with the excitement of hot initial public
stock offerings: $30 billion for Iraq reconstruction, $ 13 billion for
tsunami reconstruction, $110 billion for New Orleans and the Gulf Coast,
$7.6 billion for Lebanon.

Terrorist attacks, which used to send the stock market spiraling downward,
now receive a similarly upbeat market reception. After September 11, 2001,
the Dow Jones plummeted 685 points as soon as markets reopened. In sharp
contrast, on July 7, 2005, the day four bombs ripped through London's public
transportation system, killing dozens and injuring hundreds, the U.S. stock
market closed higher than it had the day before, with the Nasdaq up 7
points. A year later, on the day British law-enforcement agencies arrested
twenty-four suspects who had allegedly planned to blow up jetliners headed
to the United States, the Nasdaq closed 11.5 points higher, largely thanks
to soaring homeland-security stocks.

Then there are the outrageous fortunes of the oil sector -- a $40 billion
profit in 2006 for Exxon-Mobil alone, the largest profit ever recorded, and
its colleagues at rival companies like Chevron were not far behind. Like the
fortunes of corporations linked to defense, heavy construction, and homeland
security, those of the oil sector improve with every war, terrorist attack,
and Category 5 hurricane. In addition to reaping the short-term benefits of
high prices linked to uncertainty in key oil-producing regions, the oil
industry has consistently managed to turn disasters to its long-term
advantage, whether by ensuring that a large portion of the reconstruction
funds in Afghanistan went into the expensive road infrastructure for a new
pipeline (while most other major reconstruction projects stalled), or by
pushing for a new investor-friendly oil law in Iraq while the country
burned, or by piggybacking on Hurricane Katrina to plan the first new
refineries in the United State! s since the Seventies. The oil and gas
industry is so intimately entwined with the economy of disaster-both as a
root cause behind many disasters and as a beneficiary from them-that it
deserves to be treated as an honorary adjunct of the disaster-capitalism

The recent spate of disasters has translated into such spectacular profits
that many people around the world have come to the same conclusion: the rich
and powerful must be deliberately causing the catastrophes so that they can
exploit them. In July 2006, a national poll of U.S. residents found that
more than a third of respondents believed that the government had a hand in
the 9/11 attacks or took no action to stop them "because they wanted the
United States to go to war in the Middle East." Similar suspicions dog most
of the catastrophes of recent years. In Louisiana in the aftermath of
Katrina, the shelters were alive with rumors that the levees hadn't broken
but had been covertly blown up in order to keep the rich areas dry while
cleansing the city of poor people. In Sri Lanka, I often heard that the
tsunami had been caused by underwater explosions detonated by the United
States so that it could send troops into Southeast Asia and take full
control over the region's econ! omies. The truth is at once less sinister
and more dangerous. An economic system that requires constant growth while
bucking almost all serious attempts at environmental regulation generates a
steady stream of disasters all on its own, whether military, ecological, or
financial. The appetite for easy, short- term profits offered by purely
speculative investment has turned the stock, currency, and real estate
markets into crisis-creation machines, as the Asian financial crisis, the
Mexican peso crisis, the dot-com collapse, and the subprime-mortgage crisis
demonstrate. Our common addiction to dirty, non- renewable energy sources
keeps other kinds of emergencies coming: natural disasters (up 560 percent
since 1975) and wars waged for control over scarce resources (not just Iraq
and Afghanistan but lower-intensity conflicts such as those in Colombia,
Nigeria, and Sudan), which in turn spawn terrorist blow- back (a 2007 study
calculated that the number of terrorist attacks has ! increased sevenfold
since the start of the Iraq war).

Given the boiling temperatures, both climatic and political, future
disasters need not be cooked up in dark conspiracies. All indications are
that if we simply stay the current course, they will keep coming with ever
more ferocious intensity. Disaster generation can therefore be left to the
market's invisible hand. This is one area in which it actually delivers.

The disaster-capitalism complex does not deliberately scheme to create the
cataclysms on which it feeds (though Iraq may be a notable exception), but
there is plenty of evidence that its component industries work very hard
indeed to make sure that current disastrous trends continue unchallenged.
Large oil companies have bankrolled the climate-change-denial movement for
years; Exxon-Mobil alone has spent an estimated $19 million on the crusade
over the past decade. Although the phenomenon is well known, the interplay
between disaster contractors and elite opinion makers is far less
understood. Several influential Washington think tanks-including the
National Institute for Public Policy and the Center for Security Policy-are
heavily funded by weapons and homeland-security contractors, which profit
directly from these institutes' ceaseless portrayal of the world as a dark
and menacing place, its troubles responsive only to force. The
homeland-security sector is also becoming in! creasingly integrated with
media corporations, a development that has Orwellian implications. In 2004
the digital-communications giant Lexis-Nexis paid $775 million for Seisint,
a data-mining company that works closely on surveillance with federal and
state agencies. That same year, General Electric, which owns NBC, purchased
In Vision, the major producer of controversial high- tech bomb-detection
devices used in airports and other public spaces. In Vision received a
staggering $15 billion in homeland-security contracts between 2001 and 2006,
more of such contracts than any other company.

The creeping expansion of the disaster-capitalism complex into the media may
prove to be a new kind of corporate synergy, one building on the vertical
integration that became so popular in the Nineties. It certainly makes sound
business sense. The more panicked our societies become, convinced that there
are terrorists lurking in every mosque, the higher the news ratings soar,
the more biometric lOs and liquid-explosive-detection devices the complex
sells, and the more high-tech fences it builds. If the dream of the open,
borderless "small planet" was the ticket to profits during the Clinton
years, the nightmare of the menacing, fortressed Western continents, under
siege from jihadists and illegal immigrants, plays the same role in the new
millennium. There is only one cloud that looms over the thriving disaster
economy -- from weapons to oil to engineering to surveillance to patented
drugs. It is the threatening if unlikely scenario that this latest boom
could somehow be int! errupted by an outbreak of climatic stability and
geopolitical peace.

(1) If these solutions seemed to present themselves with uncanny speed, it
is largely because Washington's think tanks have been on such an aggressive
campaign to privatize the essential functions of the state. As a May 2007
cover story in Business Week explained, "In the past year, banks and private
investment firms have fallen in love with public infrastructure. They're
smitten by the rich cash flows that roads, bridges, airports, parking
garages and shipping ports generate-and the monopolistic advantages that
keep those cash flows as steady as a beating heart .... Investors can't get
in fast enough."

(2) One of the most alarming aspects of this industry is how unabashedly
partisan it is. Blackwater, for instance, is closely aligned with the
anti-abortion movement and other right-wing causes. It donates almost
exclusively to the Republican Party, rather than hedging its bets like most
big corporations. Halliburton sends 93 percent of its campaign contributions
to Republicans; Fluor, 78 percent. Is it far-fetched to imagine a day when
political parties will hire these companies to spy on their rivals during an
election campaign--or to engage in covert operations too shady even for the

Naomi Klein's most recent article for Harper's Magazine, "Baghdad Year
appeared in the September 2004 issue. Her new book, The Shock Doctrine, from
which this essay was adapted, was just published by Metropolitan Books.

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