The Rise of Disaster Capitalism
By Naomi Klein, The Nation. Posted April 18, 2005.

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

Last summer, in the lull of the August media doze, the Bush Administration's doctrine of preventive war 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 years."

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 charge.

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").

End Part I