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The Rise of Disaster Capitalism
This article, published in Apri in The Nation and on Naomi Klein's No Logo site, and syndicated elsewhere, seems highly relevant in the light of events in New Orleans.
By Naomi Klein

April 19, 2005
The Nation

Last summer, in the lull of the August media doze, the Bush Administration's
doctrine of preventive w ar took a major leap forward. On August 5, 2004,
the White House created the Office of the Coordinator for Reconstruction and
Stabilization, headed by former US Ambassador to Ukraine Carlos Pascual. Its
mandate is to draw up elaborate "post-conflict" plans for up to twenty-five
countries that are not, as of yet, in conflict. According to Pascual, it
will also be able to coordinate three full-scale reconstruction operations
in different countries "at the same time," each lasting "five to seven

Fittingly, a government devoted to perpetual pre-emptive deconstruction now
has a standing office of perpetual pre-emptive reconstruction.

Gone are the days of waiting for wars to break out and then drawing up ad
hoc plans to pick up the pieces. In close cooperation with the National
Intelligence Council, Pascual's office keeps "high risk" countries on a
"watch list" and assembles rapid-response teams ready to engage in prewar
planning and to "mobilize and deploy quickly" after a conflict has gone
down. The teams are made up of private companies, nongovernmental
organizations and members of think tanks--some, Pascual told an audience at
the Center for Strategic and International Studies in October, will have
"pre-completed" contracts to rebuild countries that are not yet broken.
Doing this paperwork in advance could "cut off three to six months in your
response time."

The plans Pascual's teams have been drawing up in his little-known office in
the State Department are about changing "the very social fabric of a
nation," he told CSIS. The office's mandate is not to rebuild any old
states, you see, but to create "democratic and market-oriented" ones. So,
for instance (and he was just pulling this example out of his hat, no
doubt), his fast-acting reconstructors might help sell off "state-owned
enterprises that created a nonviable economy." Sometimes rebuilding, he
explained, means "tearing apart the old."

Few ideologues can resist the allure of a blank slate--that was
colonialism's seductive promise: "discovering" wide-open new lands where
utopia seemed possible. But colonialism is dead, or so we are told; there
are no new places to discover, no terra nullius (there never was), no more
blank pages on which, as Mao once said, "the newest and most beautiful words
can be written." There is, however, plenty of destruction--countries smashed
to rubble, whether by so-called Acts of God or by Acts of Bush (on orders
from God). And where there is destruction there is reconstruction, a chance
to grab hold of "the terrible barrenness," as a UN official recently
described the devastation in Aceh, and fill it with the most perfect,
beautiful plans.

"We used to have vulgar colonialism," says Shalmali Guttal, a
Bangalore-based researcher with Focus on the Global South. "Now we have
sophisticated colonialism, and they call it 'reconstruction.'"

It certainly seems that ever-larger portions of the globe are under active
reconstruction: being rebuilt by a parallel government made up of a familiar
cast of for-profit consulting firms, engineering companies, mega-NGOs,
government and UN aid agencies and international financial institutions. And
from the people living in these reconstruction sites--Iraq to Aceh,
Afghanistan to Haiti--a similar chorus of complaints can be heard. The work
is far too slow, if it is happening at all. Foreign consultants live high on
cost-plus expense accounts and thousand- dollar-a-day salaries, while locals
are shut out of much-needed jobs, training and decision-making. Expert
"democracy builders" lecture governments on the importance of transparency
and "good governance," yet most contractors and NGOs refuse to open their
books to those same governments, let alone give them control over how their
aid money is spent.

Three months after the tsunami hit Aceh, the New York Times ran a
distressing story reporting that "almost nothing seems to have been done to
begin repairs and rebuilding." The dispatch could easily have come from
Iraq, where, as the Los Angeles Times just reported, all of Bechtel's
allegedly rebuilt water plants have started to break down, one more in an
endless litany of reconstruction screw-ups. It could also have come from
Afghanistan, where President Hamid Karzai recently blasted "corrupt,
wasteful and unaccountable" foreign contractors for "squandering the
precious resources that Afghanistan received in aid." Or from Sri Lanka,
where 600,000 people who lost their homes in the tsunami are still
languishing in temporary camps. One hundred days after the giant waves hit,
Herman Kumara, head of the National Fisheries Solidarity Movement in
Negombo, Sri Lanka, sent out a desperate e-mail to colleagues around the
world. "The funds received for the benefit of the victims are directed to
the benefit of the privileged few, not to the real victims," he wrote. "Our
voices are not heard and not allowed to be voiced."

But if the reconstruction industry is stunningly inept at rebuilding, that
may be because rebuilding is not its primary purpose. According to Guttal,
"It's not reconstruction at all--it's about reshaping everything." If
anything, the stories of corruption and incompetence serve to mask this
deeper scandal: the rise of a predatory form of disaster capitalism that
uses the desperation and fear created by catastrophe to engage in radical
social and economic engineering. And on this front, the reconstruction
industry works so quickly and efficiently that the privatizations and land
grabs are usually locked in before the local population knows what hit them.

Kumara, in another e-mail, warns that Sri Lanka is now facing "a second
tsunami of corporate globalization and militarization," potentially even
more devastating than the first. "We see this as a plan of action amidst the
tsunami crisis to hand over the sea and the coast to foreign corporations
and tourism, with military assistance from the US Marines."

As Deputy Defense Secretary, Paul Wolfowitz designed and oversaw a
strikingly similar project in Iraq: The fires were still burning in Baghdad
when US occupation officials rewrote the investment laws and announced that
the country's state-owned companies would be privatized. Some have pointed
to this track record to argue that Wolfowitz is unfit to lead the World
Bank; in fact, nothing could have prepared him better for his new job. In
Iraq, Wolfowitz was just doing what the World Bank is already doing in
virtually every war-torn and disaster-struck country in the world--albeit
with fewer bureaucratic niceties and more ideological bravado.

"Post-conflict" countries now receive 20-25 percent of the World Bank's
total lending, up from 16 percent in 1998--itself an 800 percent increase
since 1980, according to a Congressional Research Service study. Rapid
response to wars and natural disasters has traditionally been the domain of
United Nations agencies, which worked with NGOs to provide emergency aid,
build temporary housing and the like. But now reconstruction work has been
revealed as a tremendously lucrative industry, too important to be left to
the do-gooders at the UN. So today it is the World Bank, already devoted to
the principle of poverty-alleviation through profit-making, that leads the

And there is no doubt that there are profits to be made in the
reconstruction business. There are massive engineering and supplies
contracts ($10 billion to Halliburton in Iraq and Afghanistan alone);
"democracy building" has exploded into a $2 billion industry; and times have
never been better for public-sector consultants--the private firms that
advise governments on selling off their assets, often running government
services themselves as subcontractors. (Bearing Point, the favored of these
firms in the United States, reported that the revenues for its "public
services" division "had quadrupled in just five years," and the profits are
huge: $342 million in 2002--a profit margin of 35 percent.)

But shattered countries are attractive to the World Bank for another reason:
They take orders well. After a cataclysmic event, governments will usually
do whatever it takes to get aid dollars--even if it means racking up huge
debts and agreeing to sweeping policy reforms. And with the local population
struggling to find shelter and food, political organizing against
privatization can seem like an unimaginable luxury.

Even better from the bank's perspective, many war-ravaged countries are in
states of "limited sovereignty": They are considered too unstable and
unskilled to manage the aid money pouring in, so it is often put in a trust
fund managed by the World Bank. This is the case in East Timor, where the
bank doles out money to the government as long as it shows it is spending
responsibly. Apparently, this means slashing public-sector jobs (Timor's
government is half the size it was under Indonesian occupation) but
lavishing aid money on foreign consultants the bank insists the government
hire (researcher Ben Moxham writes, "In one government department, a single
international consultant earns in one month the same as his twenty Timorese
colleagues earn together in an entire year").

In Afghanistan, where the World Bank also administers the country's aid
through a trust fund, it has already managed to privatize healthcare by
refusing to give funds to the Ministry of Health to build hospitals. Instead
it funnels money directly to NGOs, which are running their own private
health clinics on three-year contracts. It has also mandated "an increased
role for the private sector" in the water system, telecommunications, oil,
gas and mining and directed the government to "withdraw" from the
electricity sector and leave it to "foreign private investors." These
profound transformations of Afghan society were never debated or reported
on, because few outside the bank know they took place: The changes were
buried deep in a "technical annex" attached to a grant providing "emergency"
aid to Afghanistan's war-torn infrastructure--two years before the country
had an elected government.

It has been much the same story in Haiti, following the ouster of President
Jean-Bertrand Aristide. In exchange for a $61 million loan, the bank is
requiring "public-private partnership and governance in the education and
health sectors," according to bank documents--i.e., private companies
running schools and hospitals. Roger Noriega, US Assistant Secretary of
State for Western Hemisphere Affairs, has made it clear that the Bush
Administration shares these goals. "We will also encourage the government of
Haiti to move forward, at the appropriate time, with restructuring and
privatization of some public sector enterprises," he told the American
Enterprise Institute on April 14, 2004.

These are extraordinarily controversial plans in a country with a powerful
socialist base, and the bank admits that this is precisely why it is pushing
them now, with Haiti under what approaches military rule. "The Transitional
Government provide[s] a window of opportunity for implementing economic
governance reforms...that may be hard for a future government to undo," the
bank notes in its Economic Governance Reform Operation Project agreement.
For Haitians, this is a particularly bitter irony: Many blame multilateral
institutions, including the World Bank, for deepening the political crisis
that led to Aristide's ouster by withholding hundreds of millions in
promised loans. At the time, the Inter-American Development Bank, under
pressure from the State Department, claimed Haiti was insufficiently
democratic to receive the money, pointing to minor irregularities in a
legislative election. But now that Aristide is out, the World Bank is openly
celebrating the perks of operating in a democracy-free zone.

The World Bank and the International Monetary Fund have been imposing shock
therapy on countries in various states of shock for at least three decades,
most notably after Latin America's military coups and the collapse of the
Soviet Union. Yet many observers say that today's disaster capitalism really
hit its stride with Hurricane Mitch. For a week in October 1998, Mitch
parked itself over Central America, swallowing villages whole and killing
more than 9,000. Already impoverished countries were desperate for
reconstruction aid--and it came, but with strings attached. In the two
months after Mitch struck, with the country still knee-deep in rubble,
corpses and mud, the Honduran congress initiated what the Financial Times
called "speed sell-offs after the storm." It passed laws allowing the
privatization of airports, seaports and highways and fast-tracked plans to
privatize the state telephone company, the national electric company and
parts of the water sector. It overturned land-reform laws and made it easier
for foreigners to buy and sell property. It was much the same in neighboring
countries: In the same two months, Guatemala announced plans to sell off its
phone system, and Nicaragua did likewise, along with its electric company
and its petroleum sector.

All of the privatization plans were pushed aggressively by the usual
suspects. According to the Wall Street Journal, "the World Bank and
International Monetary Fund had thrown their weight behind the [telecom]
sale, making it a condition for release of roughly $47 million in aid
annually over three years and linking it to about $4.4 billion in
foreign-debt relief for Nicaragua."

Now the bank is using the December 26 tsunami to push through its
cookie-cutter policies. The most devastated countries have seen almost no
debt relief, and most of the World Bank's emergency aid has come in the form
of loans, not grants. Rather than emphasizing the need to help the small
fishing communities--more than 80 percent of the wave's victims--the bank is
pushing for expansion of the tourism sector and industrial fish farms. As
for the damaged public infrastructure, like roads and schools, bank
documents recognize that rebuilding them "may strain public finances" and
suggest that governments consider privatization (yes, they have only one
idea). "For certain investments," notes the bank's tsunami-response plan,
"it may be appropriate to utilize private financing."

As in other reconstruction sites, from Haiti to Iraq, tsunami relief has
little to do with recovering what was lost. Although hotels and industry
have already started reconstructing on the coast, in Sri Lanka, Thailand,
Indonesia and India, governments have passed laws preventing families from
rebuilding their oceanfront homes. Hundreds of thousands of people are being
forcibly relocated inland, to military style barracks in Aceh and prefab
concrete boxes in Thailand. The coast is not being rebuilt as it was--dotted
with fishing villages and beaches strewn with handmade nets. Instead,
governments, corporations and foreign donors are teaming up to rebuild it as
they would like it to be: the beaches as playgrounds for tourists, the
oceans as watery mines for corporate fishing fleets, both serviced by
privatized airports and highways built on borrowed money.

In January Condoleezza Rice sparked a small controversy by describing the
tsunami as "a wonderful opportunity" that "has paid great dividends for us."
Many were horrified at the idea of treating a massive human tragedy as a
chance to seek advantage. But, if anything, Rice was understating the case.
A group calling itself Thailand Tsunami Survivors and Supporters says that
for "businessmen-politicians, the tsunami was the answer to their prayers,
since it literally wiped these coastal areas clean of the communities which
had previously stood in the way of their plans for resorts, hotels, casinos
and shrimp farms. To them, all these coastal areas are now open land!"

Disaster, it seems, is the new terra nullius.