"Notes from The Shock Doctrine:
The Rise of Disaster Capitalism (2007)"
by Naomi Klein

The Shock Doctrine: the Rise of Disaster Capitalism (New York: Picador, 2007)

“... For Milton Friedman, however, the entire concept of a state-run school system reeked of socialism. In his view, the state's sole functions were 'to protect our freedom both from the enemies outside our gates and from our fellow-citizens: to preserve law and order, to enforce private contracts, to foster competitive markets.' In other words, to supply the police and the soldiers – anything else, including providing free education, was an unfair interference in the market.” p. 6

“In contrast to the glacial pace with which the levees were repaired and the electricity grid was brought back online, the auctioning off of New Orleans' school system took place with almost military speed and precision. Within nineteen months, with most of the city's poor residents still in exile, New Orleans' public school system had been almost completely replaced by privately run charter schools. … New Orleans teachers used to be represented by a strong union; now the union's contract had been shredded, and its forty-seven hundred members had all been fired. Some of the younger teachers were rehired by the charters, at reduced salaries; most were not.” p. 6

“I call these orchestrated raids on the public sphere in the wake of catastrophic events, combined with the treatment of disasters as exciting market opportunities, 'disaster capitalism.'” [emphasis added] p. 6

“For more than three decades, Friedman and his powerful followers had been perfecting

“The Bush administration immediately seized upon the fear generating by the attacks not only to launch the War on Terror but to ensure that it is an almost completely for-profit venture, a booming new industry that has breathed new life into the faltering U.S. economy. Best understood as a “disaster capitalism complex,” it has much farther-reaching tentacles than the military-industrial complex that Dwight Eisenhower warned against at the end of his presidency: this is a global war fought at every level by private companies whose involvement is paid for with public money; with the unending mandate of protecting the United States homeland in perpetuity while eliminating all “evil” abroad.

The ultimate goal for the corporations at the center of the complex is to bring the model of for-profit government, which advances so rapidly in extraordinary circumstances, into the ordinary and day-to-day functioning of the state – in effect, to privatize the government.”

To kick-start the disaster capitalism complex, the Bush administration outsourced, with no public debate, many of the most sensitive and core functions of government – from providing health care to soldiers, to interrogating prisoners, to gathering and 'data mining' information on all of us. The role of the government in this unending war is not that of an administrator managing a network of contractors but of a deep-pocketed venture capitalist, both providing its seed money for the complex's creation and becoming the biggest customer for its new services. ...”

And that's just the home front of the War on Terror; the real money is in fighting wars abroad. Beyond the weapons contractors, who have seen their profits soar thanks to the war in Iraq, maintaining the U.S. military is now one of the fastest-growing service economies in the world. … thanks to the model of for-profit warfare, the U.S. Army now goes to war with Burger King and Pizza Hut in tow, contracting them to run franchises for the soldiers on military bases from Iraq to the 'mini city' at Guantanamo Bay.” p. 15

“A more accurate term for a system that erases the boundaries between Big Government and Big Business is not liberal, conservative or capitalist but corporatist. Its main characteristics are huge transfers of public wealth to private hands, often accompanied by exploding debt, an ever-widening chasm between the dazzling right and the disposable poor and an aggressive nationalism that justifies bottomless spending on security.

Chapter Eight: Crisis Works: the Packaging of Shock Therapy

Chapter Fourteen: Shock Therapy in the U.S.A., The Homeland Security Bubble

“Three months after 9/11 attacks, Enron declared bankruptcy, leading thousands of employees to lose their retirement savings while executives acting on insider knowledge cashed out.” p. 374

“Bizarrely, the most effective ideological tool in this process was the claim that economic ideology was no longer a primary motivator of U.S. foreign or domestic policy. The mantra “Septempber 11 changed everything” neatly disguised the fact that for free-market ideologues and the corporations whose interests they serve, the only thing that changed was the ease with which they could pursue their ambitious agenda. … As The New York Times observed in February 2007, 'Without a public debate or formal policy decision, contractors have become a virtual fourth branch of government.'” p. 377-378

“Every aspect of the way the Bush administration has defined the parameters of the War on Terror has served to maximize its profitability and sustainability as a market – from the definition of the enemy to the rules of engagement to the ever-expanding scale of the battle.” p. 379

“Through all of its various name changes – the War on Terror, the war on radical Islam, the war against Islamofascism, the Third World War, the long war, the generational war – the basic shape of the conflict has remained unchanged. It is limited by neither time nor space nor target. From a military perspective, these sprawling and amorphous traits make the war on terror an unwinnable proposition. But from an economic perspective, they make it an unbeatable one: not a flash-in-the-pan war that could potentially be won but a new and permanent fixture in the global economic architecture.” p. 380

“...In 2003, the Bush Administration spent $327 billion on contracts to private companies – nearly 40 cents of every discretionary dollar.” p. 380

Chapter Sixteen: Erasing Iraq

“The best time to invest is when there is still blood on the ground.” p. 412

“... the parties with the most to gain never show up on the battlefield.” p. 413

“... extreme violence has a way of preventing us from seeing the interests it serves. p. 413

Chapter Eighteen: Full Circle

“Failure: The New Face of Success” p. 474

“It's hard to overstate the disgrace of this attempted resource grab. Iraq's oil profits are the country's only hope of financing its own reconstruction when some semblance of peace returns. To lay claim that future wealth in a moment of national disintegration was disaster capitalism at its most shameless.” p. 478

“There was another, little discussed, consequence of the chaos in Iraq: the longer it wore on, the more privatized the foreign presence became, ultimately forging a new paradigm for the way wars are fought and how human catastrophes are responded to.” p. 478

“This is where the ideology of radical privatization at the heart of the anti-Marshal Plan paid off handsomely. The Bush administration's steadfast refusal to staff the war in Iraq – whether with troops or with civilian administrators under its control – had some very clear benefits for its other war, the one to outsource the U.S. government. This crusade, while it ceased to be the subject of the administration's public rhetoric, has remained the driving obsession behind the scenes, and it has been far more successful than all the administration's more public battles combined.” p. 478

“For companies that are clever and far-sighted, like Haliburton and the Carlyle Group, the destroyers and rebuilders are different divisions of the same corporations.” p. 482

“... preemptive reconstruction – rebuilding places that have not yet been destroyed.” p. 483

“So in the end, the war in Iraq did create a model economy – it was just not the Tiger on the Tigris that the neocons had advertised. Instead, it was a model for privatized war and reconstruction – a model that quickly became export-ready. Until Iraq, the frontiers of the Chicago crusade had been bound by geography: Russia, Argentina, South Korea. Now a new frontier can open up wherever the next disaster strikes.” p. 484

Chapter Eleven: Bonfire of a Young Democracy – Russia chooses “The Pinochet Option”

“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.” – Grigory Gorin, Russian writer, 1993” p. 275

“So what happened at the G7 meeting in 1991 was totally unexpected. The nearly unanimous message that Gorbachev received from his fellow heads of state was that, if he didn't embrace radical economic shock therapy immediately, they would sever the rope and let him fall. 'Their suggestions as to the tempo and methods of transition were astonishing,' Gorbachev wrote of the event.” pp. 276-277

“Russia was different: the democratic revolution was already well underway – in order to push through the Chicago School economic program, that peaceful and hopeful process that Gorbachev began had to be violently interrupted, then radically reversed.” p. 277

Gorbachev soon found himself facing an adversary who was more than willing to play the role of a Russian Pinochet. Boris Yeltsin … “ p. 278

“The abolition of the Soviet Union, 'the only country most Russians had ever known,' was a powerful shock to the Russian psyche – and as the political scientist Stephen Cohen put it, it was the first of 'three traumatic shocks' that Russians would endure over the next three years.” p. 279

“The 'reformers' waited only one week after Gorbachev resigned to launch their economic shock therapy program – the second of three traumatic shocks. The shock therapy program also included free-trade policies and the first phase of the rapid-fire privatization of the country's approximately 225,000 state-owned companies. “The country was taken by surprise by the 'Chicago School' program,'” one of Yeltsin's original economic advisers recalled. That surprise was deliberate, part of Gaidar's strategy of unleashing change so suddenly and quickly that resistance would be impossible. The problem his team was up against was the usual one: the threat of democracy obstructing their plans. Russians did not want their economy organized by a Communist central committee, but most still believed firmly in wealth redistribution and in an activist role for government. … That meant that if Yeltsin's team had submitted their plans to democratic debate, rather than launching a stealth attack on an already deeply disoriented public, the Chicago School revolution would not have stood a chance.” p. 282

[Joseph Stiglitz said] “Only a blitzkrieg approach during the 'window of opportunity' provided by the 'fog of transition' would get the changes made before the population had a chance to organize to protect its previous vested interests.” In other words, the shock doctrine.” p. 283

“... the market Bolsheviks believed in a kind of magic: if the optimal conditions for profit making were created, the country would rebuild itself, no planning required.” p. 283

“This logic of so-called creative destruction resulted in scarce creation and spiraling destruction. After only one year, shock therapy had taken a devastating toll: millions of middle class Russians had lost their life savings when money lost its value, and abrupt cuts to subsidies meant millions of workers had not been paid in months. The average Russian consumed 40 percent less in 1992 than in 1991, and a third of the population fell below the poverty line. The middle class was forced to sell personal belongings from card tables in the streets – desperate acts that the Chicago School economists praised as 'entrepreneurial,' proof that a capitalist renaissance was indeed under way, one family heirloom and second-hand blazer at a time.” p. 283

“Lawrence Summers, then U.S. Treasury Undersecretary, warned that ‘the momentum for Russian reform must be reinvigorated and intensified to ensure sustained multilateral support.’ The IMF got the message and an unnamed official leaked to the press that a promised $1.5 billion loan was being rescinded because the IMF was ‘unhappy with Russia’s backtracking on reforms.’” p. 285

“In theory, all this wheeling and dealing was supposed to create the economic boom that would lift Russia out of desperation; in practice the Communist state was simply replaced with a corporatist one: the beneficiaries of the boom were confined to a small club of Russians, many of them former Communist party apparatchiks, and a handful of Western mutual fund managers who made dizzying returns investing in newly privatized Russian companies. A clique of nouveaux billionaires, many of whom were to become part of the group universally known as “the oligarchs” for their imperial levels of wealth and power, teamed up with Yeltsin’s Chicago Boys and stripped the country of nearly everything of value, moving the enormous profits offshore at a rate of $2 billion a month. Before shock therapy, Russia had no millionaires; by 2003, the number of Russian billionaires had risen to seventeen; according to the Forbes list.” p. 291

“For the country’s oligarchs and foreign investors, only one cloud loomed on the horizon: Yeltsin’s plummeting popularity. The effects of the economic program were so brutal for the average Russian, and the process was so self-evidently corrupt that his approval ratings fell into the single digits. If Yeltsin was pushed from office, whoever replaced him would likely put a halt to Russia’s adventure in extreme capitalism. Even more worrying for the oligarchs and the “reformers,” there would be a strong case for re-nationalizing many of the assets that had been handed out under such unconstitutional political circumstances.” p. 292

“The real problem with the blame-Russia narrative is that it preempts any serious examination of what the whole episode has to teach about the true face of the crusade for unfettered free markets, the most powerful political trend of the past three decades. The corruption of many of the oligarchs is still spoken of as an alien force that infected otherwise worthy free-market plans. But corruption wasn't an intruder to Russia's free-market reforms: quick and dirty deals were actively encouraged by Western powers at every stage as the fastest way to kick-start the economy. National salvation through the harnessing of greed was the closest thing Russia's Chicago Boys and their advisers had to a plan for what they were going to do after they finished destroying Russia's institutions.” p. 304

“The point of shock therapy is to open up a window for enormous profits to be made very quickly – not despite the lawlessness but precisely because of it.” p. 304

“...this movement set out to systematically dismantle existing laws and regulations to re-create that earlier lawlessness. … today's multinationals see government programs, public assets and everything that is not for sale as terrain to be conquered and seized – the post office, national parks, schools, social security, disaster relief and anything else that is publicly administered.” p. 305

“… all built with public wealth, then sold for a trifle. … relentlessly searching for new profit frontiers in the public domain.” p. 305

Since the most significant privatization deals are always signed amid the tumult of an economic or political crisis, clear laws and effective regulations are never in place – the atmosphere is chaotic, the prices are flexible and so are the politicians. What we have been living for three decades is frontier capitalism, with the frontier constantly shifting location from crisis to crisis, moving on as soon as the law catches up.” pp. 305-306

“And so, far from acting as a cautionary tale, the rise of Russia's billionaire oligarchs proved precisely how profitable the strip mining of an industrialized state could be – and Wall Street wanted more. Immediately following the Soviet collapse, the U.S. Treasury and the IMF became much tougher in their demands for instant privatization from other crisis-racked countries. … Clearly the only lesson learned from Russia is that the faster and more lawless the transfer of wealth, the more profitable it will be.” p. 306

“But calling for law and order after the profits have all been moved offshore is really just a way of legalizing the theft ex post facto. … Lawlessness on the frontier, as Adam Smith understood, is not the problem but the point, as much a part of the game as the contrite hand-wringing and the pledges to do better next time.” p. 308-309

Chapter Twelve: The Capitalist Id – Russia and the New Era of the Boor Market.

“President Roosevelt brought in the New Deal not only to address the desperation of the Great Depression but to undercut a powerful movement to U.S. citizens who, having been dealt a savage blow by the unregulated free market, were demanding a different economic model.” p. 316

“... the achievements of the mid-century capitalism … worker's protections, pensions, public health care and state support for the poorest citizens in North America – all grew out of the same pragmatic need to make major concessions in the fact of a powerful left.” pp. 316-317

“This liberation from all constraints is, in essence, Chicago School economics (othewise known as neoliberalism or, in the U.S., neoconservatism): not some new invention but capitalism stripped of its Keynsian appendages, capitalism in its monopoly phase, a system that has let itself go.” p. 319

Chapter Fourteen: Shock Therapy in the U.S.A.

“Every aspect of the way the Bush administration has defined the parameters of the War on Terror has served to maximize its profitability and sustainability as a market – from the definition of the enemy to the rules of engagement to the ever-expanding scale of the battle.” p. 379

“From a military perspective, these sprawling and amorphous traits make the War on Terror an unwinnable proposition. But from an economic perspective, they make it an unbeatable one: not a flash-in-the-pan war that could potentially be won but a new and permanent fixture in the global economic architecture.” p. 380

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

“Much of U.S. foreign policy, in other words, is an exercise in mass projection, in which a tiny self-interested elite conflates its needs and desires with those of the entire world.” pp. 391-392

“In the Bush Administration, the war profiteers aren’t just clamoring to get access to government, they are the government; there is no distinction between the two.” p. 396

[The revolving door and] “… the disaster capitalism complex ...” “Because they are classified as contractors, not staff, most [of these former government officials] are not subject to the same conflict-of-interest rules as elected or appointed politicians – if they are subject to any restrictions at all. The effect has been to eliminate the so-called revolving door between government and industry and put in an “archway” … It has allowed the disaster industries to set up shop inside the government, using the reputations of such illustrious ex-politicians as cover.” p. 399-400

“… The war in Iraq, already clearly a disaster, translated into a record-breaking $6.6 billion payout to Carlyle’s select investors.” p. 400

“With the War on Terror, the neocons didn’t abandon their corporatist economic goals; they found a new, even more effective way to achieve them. Of course these Washington hawks are committed to an imperial role for the United States in the world and for Israel in the Middle East. It is impossible, however, to separate that military project – endless war abroad and a security state at home – from the interests of the disaster capitalism complex, which has built a multibillion-dollar industry based on these very assumptions. Nowhere has the merger of these political and profit-making goals been clearer than on the battlefields of Iraq.” p. 407

Chapter 16: Erasing Iraq: In Search of a ‘Model’ for the Middle East

“The best time to invest is when there is still blood on the ground,” I was told earnestly by a delegate at the “Rebuilding Iraq 2” conference in Washington, D.C.” p. 412

“The fact that it was hard to find people in Baghdad who were interested in talking about economics was not surprising. The architects of this invasion were firm believers in the shock doctrine – they knew that while Iraqis were consumed with daily emergencies, the country could be auctioned off discretely and the results announced as a done deal. As for journalists and activists, we seemed to be exhausting our attention on the spectacular physical attacks, forgetting that the parties with the most to gain never show up on the battlefield.” p. 412-413

“… extreme violence has a way of preventing us from seeing the interests it serves.” In a way it had happened already to the antiwar movement. Our explanations for why the war was waged rarely went beyond one word answers: oil, Israel, Halliburton. Most of us chose to oppose the war as an act of folly by a president who mistook himself for a king, and his British sidekick who wanted to be on the winning side of history. There was little interest in the idea that war was a rational policy choice, that the architects of the invasion had unleashed a ferocious violence because they could not crack open the closed economies of the Middle East by peaceful means, that the level of terror was proportional to what was at stake.” pp 413- 414



“… for these war advocates, who conflated attacks on Israel with attacks on the U.S., as if there were no differences between the two, that was enough to qualify the entire region as a potential terrorist breeding ground. So what was it about this part of the world, they asked, that produced terrorism. Ideologically blinded from seeing either U.S. or Israeli policies as contributing factors, let alone provocations, they identified the true cause as something else – the region’s deficit in free-market democracy.” p. 414

“But it was always that other kind of freedom, the one offered to Chile in the seventies and to Russia in the nineties – the freedom of Western multinationals to feed off freshly privatized states – that was at the center of the model theory.” p. 416

“The Iraq invasion marked the ferocious return to the early techniques of the free-market crusade – the use of ultimate shock to forcibly wipe out and erase all obstacles to the construction of model corporatist states free from all interference.” pp. 418-419

“Often, in the analysis of the war in Iraq, the conclusion is that the invasion was a ‘success’ but the occupation was a failure. What this assessment overlooks is that the invasion and occupation were two parts of a unified strategy – the initial bombardment was designed to erase the canvas on which the model nation could be built.” 419.

“… Shock and Awe is a military doctrine that prides itself on not merely targeting the enemy’s [i.e., “victims”] military forces but, as its author’s stress, the ‘society writ large’ – mass fear is a key part of the strategy Another element that distinguishes Shock and Awe is its acute consciousness of war as a cable news spectacle, one playing to several audiences at once: the enemy [i.e., intended victims], Americans at home and anyone else thinking of making trouble. … Less than a war strategy, it was a ‘global experiment in behaviorism.’” p. 420

Chapter 17: Ideological Blowback. A Very Capitalist Disaster.

“The war in Iraq had been in damage control mode for so long that it’s easy to forget the original vision for the way it was supposed to work out.” pp. 431-432 “Iraq under Bremer was the logical conclusion of Chicago School theory: a public sector reduced to a minimal number of employees, mostly contract workers, living in a Haliburton city state, tasked with signing corporate-friendly laws drafted by KPMG and handing out duffle bags of cash to Western contractors protected by mercenary soldiers, themselves shielded by full legal immunity. All around them were furious people, increasingly turning to religious fundamentalism because it’s the only source of power in a hollowed-out state. Like Russia’s gangsterism and Bush’s cronyism, contemporary Iraq is a creation of a fifty-year crusade to privatize the world. Rather than being disowned by its creators, it deserves to be seen as the purest incarnation yet of the ideology that gave it birth.” pp. 454-455

Chapter 18: Full Circle. From Blank Slate to Scorched Earth.

“In other words, it was the disaster that made the radical proposed law possible.” p. 476

“This unelected body, advised by unspecified foreigners, would have ultimate decision-making power on all oil matters, with the full authority to decide which contracts Iraq did and did not sign. In effect, the law called for Iraq’s publicly owned oil reserves, the country’s main source of revenues, to be exempted from democratic control and run instead by a powerful, wealthy oil dictatorship, which would exist alongside Iraq’s broken and ineffective government.” p. 477

“It’s hard to overstate the disgrace of this attempted resource grab. Iraq’s oil profits are the country’s only hope of financing its own reconstruction when some semblance of peace returns. To lay claim to that future wealth in a moment of national disintegration was disaster capitalism at its most shameless.”

“There was another, little discussed consequence of the chaos in Iraq: the longer it wore on, the more privatized the foreign presence became, ultimately forging a new paradigm for the way wars are fought and how human catastrophes are responded to.”

“This is where the ideology of radical privatization at the heart of the anti-Marshall Plan paid off handsomely. The Bush administration’s steadfast refusal to staff the war in Iraq – whether with troops or with civilian administrators under its control – had some very clear benefits for its other war, the one to outsource the U.S. government. This crusade, while it ceased to be the subject of the administration’s public rhetoric, has remained the driving obsession behind the scenes, and it has been far more successful than all the administration’s more public battles combined.”

“Because Rumsfeld designed the war as a just-in-time invasion, with soldiers there to provide only core combat functions, and because he eliminated fifty-five thousand jobs in the Department of Defense and the Department of Veterans Affairs in the first year of the Iraq deployment, the private sector was left to fill the gaps at every level. In practice, what this configuration meant was that, as Iraq spiraled into trumoil, an ever more elaborate privatized war industry took shape to prop up the bare-bones army – whether on the ground in Iraq or back home treating soldiers at the Walter Reed Medical Center.” [emphasis added] p. 478

Chapter Nineteen: Blanking the Beach

“Everywhere the Chicago School crusade has triumphed, it has created a permanent underclass of between 25 and 60 percent of the population. It is always a form of war. But when that warlike economic model of mass evictions and discarded cultures is imposed in a country that is already ravaged by disaster and scarred by ethnic conflict, the dangers are far greater. There are, as Keynes argued all those years ago, political consequences to this kind of punitive peace – including the outbreak of even bloodier wars.” p. 512