[Sosfbay-discuss] Disaster Capitalism: The new economy of

[Drew Johnson]

From: Scott McLarty <scottmclarty at yahoo.com>
Subject: [usgp-dx] (A must-read) Disaster Capitalism: radical economic
        engineering, from Katrina to Iraq (Naomi Klein, Harper's)

Disaster Capitalism: The new economy of
catastrophe.

By Naomi Klein
Harper's Magazine, October 2007 (on the
newsstands now)
http://www.harpers.org/archive/2007/09/00000000010


"Only a crisis -- actual or perceived -- produces real
change. When that crisis occurs, the actions that
are taken depend on the ideas that are lying
around."  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 violence 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 and 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 clich's 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
cut 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 bridge 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
preeminent 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, they 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.

* * *

As 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 reconstruct 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 project 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 Cross
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
contractor.?

?
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
humanitarian 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 Orleans.

* * *

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
unusual 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.

* * *

The 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 than the U.N. to engage in
peacekeeping in Darfur.

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 of Tamiflu
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 pay.

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 the 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 CH2M Hill, described Sandy Springs as
?a clean sheet of paper with no governmental
processes in place.? The Atlanta
Journal-Constitution reported 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 outside 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 hyper-serviced 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. If
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, homeland 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
ExxonMobil 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 States 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 complex.

* * *

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 economies.

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,
nonrenewable 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 blowback (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;
ExxonMobil 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
increasingly integrated with media corporations,
a development that has Orwellian implications. In
2004 the digital-communications giant LexisNexis
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
InVision, the major producer of controversial
high-tech bomb-detection devices used in airports
and other public spaces.

InVision 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 IDs 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 interrupted 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 CIA?


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