Naomi Klein*
IN less than two
years, the lease on the largest and most important US military base
in Latin America will run out. The base is in Manta, Ecuador, and
Rafael Correa, the country's leftist president, has pronounced that
he will renew the lease "on one condition: that they let us put a
base in Miami – an Ecuadorean base. If there is no problem having
foreign soldiers on a country's soil, surely they'll let us have
an Ecuadorean base in the United States."
Since an
Ecuadorean military outpost in South Beach is a long shot, it is very
likely that the Manta base, which serves as a staging area for the
"war on drugs," will soon shut down. Correa's defiant stand is
not, as some have claimed, about anti-Americanism. Rather, it is part
of a broad range of measures being taken by Latin American
governments to make the continent less vulnerable to externally
provoked crises and shocks.
This is a crucial
development because for the past thirty-five years in Latin America,
such shocks from outside have served to create the political
conditions required to justify the imposition of "shock therapy"-
the constellation of corporate-friendly "emergency" economic
measures like large-scale privatizations and deep cuts to social
spending that debilitate the state in the name of free markets. In
one of his most influential essays, the late economist Milton
Friedman articulated contemporary capitalism's core tactical
nostrum, what I call the shock doctrine. He observed that "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."
Latin America has
always been the prime laboratory for this doctrine. Friedman first
learned how to exploit a large-scale crisis in the mid-1970s, when he
advised Chilean dictator Gen. Augusto Pinochet. Not only were
Chileans in a state of shock following Pinochet's violent overthrow
of Socialist President Salvador Allende; the country was also reeling
from severe hyperinflation. Friedman advised Pinochet to impose a
rapid-fire transformation of the economy-tax cuts, free trade,
privatized services, cuts to social spending and deregulation. It was
the most extreme capitalist makeover ever attempted, and it became
known as a Chicago School revolution, since so many of Pinochet's
top aides and ministers had studied under Friedman at the University
of Chicago. A similar process was under way in Uruguay and Brazil,
also with the help of University of Chicago graduates and professors,
and a few years later, in Argentina. These economic shock therapy
programs were facilitated by far less metaphorical shocks-performed
in the region's many torture cells, often by US-trained soldiers
and police, and directed against those activists who were deemed most
likely to stand in the way of the economic revolution.
In the 1980s and
'90s, as dictatorships gave way to fragile democracies, Latin
America did not escape the shock doctrine. Instead, new shocks
prepared the ground for another round of shock therapy-the "debt
shock" of the early '80s, followed by a wave of hyperinflation as
well as sudden drops in the prices of commodities on which economies
depended.
In Latin America
today, however, new crises are being repelled and old shocks are
wearing off-a combination of trends that is making the continent
not only more resilient in the face of change but also a model for a
future far more resistant to the shock doctrine.
When Milton
Friedman died last year, the global quest for unfettered capitalism
he helped launch in Chile three decades earlier found itself in
disarray. The obituaries heaped praise on him, but many were imbued
with a sense of fear that Friedman's death marked the end of an
era. In Canada's National Post, Terence Corcoran, one of Friedman's
most devoted disciples, wondered whether the global movement the
economist had inspired could carry on. "As the last great lion of
free market economics, Friedman leaves a void…. There is no one
alive today of equal stature. Will the principles Friedman fought for
and articulated survive over the long term without a new generation
of solid, charismatic and able intellectual leadership? Hard to say."
It certainly
seemed unlikely. Friedman's intellectual heirs in the United
States-the think-tank neocons who used the crisis of September 11
to launch a booming economy in privatized warfare and "homeland
security"-were at the lowest point in their history. The
movement's political pinnacle had been the Republicans' takeover
of the US Congress in 1994; just nine days before Friedman's death,
they lost it again to a Democratic majority. The three key issues
that contributed to the Republican defeat in the 2006 midterm
elections were political corruption, the mismanagement of the Iraq
War and the perception, best articulated by Jim Webb, a winning
Democratic candidate for the US Senate, that the country had drifted
"toward a class-based system, the likes of which we have not seen
since the nineteenth century."
Nowhere, however,
was the economic project in deeper crisis than where it had started:
Latin America. Washington has always regarded democratic socialism as
a greater challenge than totalitarian Communism, which was easy to
vilify and made for a handy enemy. In the 1960s and '70s, the
favored tactic for dealing with the inconvenient popularity of
economic nationalism and democratic socialism was to try to equate
them with Stalinism, deliberately blurring the clear differences
between the worldviews. A stark example of this strategy comes from
the early days of the Chicago crusade, deep inside the declassified
Chile documents. Despite the CIA-funded propaganda campaign painting
Allende as a Soviet-style dictator, Washington's real concerns
about the Allende victory were relayed by Henry Kissinger in a 1970
memo to Nixon: "The example of a successful elected Marxist
government in Chile would surely have an impact on-and even
precedent value for-other parts of the world, especially in Italy;
the imitative spread of similar phenomena elsewhere would in turn
significantly affect the world balance and our own position in it."
In other words, Allende needed to be taken out before his democratic
third way spread.
But the dream
Allende represented was never defeated. It was temporarily silenced,
pushed under the surface by fear. Which is why, as Latin America now
emerges from its decades of shock, the old ideas are bubbling back
up-along with the "imitative spread" Kissinger so feared.
By 2001 the shift
had become impossible to ignore. In the mid-'70s, Argentina's
legendary investigative journalist Rodolfo Walsh had regarded the
ascendancy of Chicago School economics under junta rule as a setback,
not a lasting defeat, for the left. The terror tactics used by the
military had put his country into a state of shock, but Walsh knew
that shock, by its very nature, is a temporary state. Before he was
gunned down by Argentine security agents on the streets of Buenos
Aires in 1977, Walsh estimated that it would take twenty to thirty
years until the effects of the terror receded and Argentines regained
their footing, courage and confidence, ready once again to fight for
economic and social equality. It was in 2001, twenty-four years
later, that Argentina erupted in protest against IMF-prescribed
austerity measures and then proceeded to force out five presidents in
only three weeks.
"The
dictatorship just ended!" people declared at the time. They meant
that it had taken seventeen years of democracy for the legacy of
terror to fade-just as Walsh had predicted.
In the years
since, that renewed courage has spread to other former shock labs in
the region. And as people shed the collective fear that was first
instilled with tanks and cattle prods, with sudden flights of capital
and brutal cutbacks, many are demanding more democracy and more
control over markets. These demands represent the greatest threat to
Friedman's legacy because they challenge his central claim: that
capitalism and freedom are part of the same indivisible project.
The staunchest
opponents of neoliberal economics in Latin America have been winning
election after election. Venezuelan president Hugo Chávez,
running on a platform of "Twenty-First-Century Socialism," was
re-elected in 2006 for a third term with 63 percent of the vote.
Despite attempts by the Bush Administration to paint Venezuela as a
pseudo-democracy, a poll that year found 57 percent of Venezuelans
happy with the state of their democracy, an approval rating on the
continent second only to Uruguay's, where the left-wing coalition
party Frente Amplio had been elected to government and where a series
of referendums had blocked major privatizations. In other words, in
the two Latin American states where voting had resulted in real
challenges to the Washington Consensus, citizens had renewed their
faith in the power of democracy to improve their lives.
Ever since the
Argentine collapse in 2001, opposition to privatization has become
the defining issue of the continent, able to make governments and
break them; by late 2006, it was practically creating a domino
effect. Luiz Inácio Lula da Silva was re-elected as president
of Brazil largely because he turned the vote into a referendum on
privatization. His opponent, from the party responsible for Brazil's
major sell-offs in the '90s, resorted to dressing up like a
socialist NASCAR driver, wearing a jacket and baseball hat covered in
logos from the public companies that had not yet been sold. Voters
weren't persuaded, and Lula got 61 percent of the vote. Shortly
afterward in Nicaragua, Daniel Ortega, former head of the
Sandinistas, made the country's frequent blackouts the center of
his winning campaign; the sale of the national electricity company to
the Spanish firm Unión Fenosa after Hurricane Mitch, he
asserted, was the source of the problem. "Who brought Unión
Fenosa to this country?" he bellowed. "The government of the rich
did, those who are in the service of barbarian capitalism."
In November 2006,
Ecuador's presidential elections turned into a similar ideological
battleground. Rafael Correa, a 43-year-old left-wing economist, won
the vote against Álvaro Noboa, a banana tycoon and one of the
richest men in the country. With Twisted Sister's "We're Not
Gonna Take It" as his official campaign song, Correa called for the
country "to overcome all the fallacies of neoliberalism." When he
won, the new president of Ecuador declared himself "no fan of
Milton Friedman." By then, Bolivian President Evo Morales was
already approaching the end of his first year in office. After
sending in the army to take back the gas fields from "plunder" by
multinationals, he moved on to nationalize parts of the mining
sector. That year in Chile, under the leadership of President
Michelle Bachelet-who had been a prisoner under Pinochet-high
school students staged a wave of militant protests against the
two-tiered educational system introduced by the Chicago Boys. The
country's copper miners soon followed with strikes of their own.
In December 2006,
a month after Friedman's death, Latin America's leaders gathered
for a historic summit in Bolivia, held in the city of Cochabamba,
where a popular uprising against water privatization had forced
Bechtel out of the country several years earlier. Morales began the
proceedings with a vow to close "the open veins of Latin America."
It was a reference to Eduardo Galeano's book Open Veins of Latin
America: Five Centuries of the Pillage of a Continent, a lyrical
accounting of the violent plunder that had turned a rich continent
into a poor one. The book was published in 1971, two years before
Allende was overthrown for daring to try to close those open veins by
nationalizing his country's copper mines. That event ushered in a
new era of furious pillage, during which the structures built by the
continent's developmentalist movements were sacked, stripped and
sold off.
Today Latin
Americans are picking up the project that was so brutally interrupted
all those years ago. Many of the policies cropping up are familiar:
nationalization of key sectors of the economy, land reform, major
investments in education, literacy and healthcare. These are not
revolutionary ideas, but in their unapologetic vision of a government
that helps reach for equality, they are certainly a rebuke to
Friedman's 1975 assertion in a letter to Pinochet that "the major
error, in my opinion, was…to believe that it is possible to do good
with other people's money."
Though clearly
drawing on a long rebellious history, Latin America's contemporary
movements are not direct replicas of their predecessors. Of all the
differences, the most striking is an acute awareness of the need for
protection from the shocks that worked in the past-the coups, the
foreign shock therapists, the US-trained torturers, as well as the
debt shocks and currency collapses. Latin America's mass movements,
which have powered the wave of election victories for left-wing
candidates, are learning how to build shock absorbers into their
organizing models. They are, for example, less centralized than in
the '60s, making it harder to demobilize whole movements by
eliminating a few leaders. Despite the overwhelming cult of
personality surrounding Chávez, and his controversial moves to
centralize power at the state level, the progressive networks in
Venezuela are at the same time highly decentralized, with power
dispersed at the grassroots and community levels, through thousands
of neighborhood councils and co-ops. In Bolivia, the indigenous
people's movements that put Morales in office function similarly
and have made it clear that Morales does not have their unconditional
support: the barrios will back him as long as he stays true to his
democratic mandate, and not a moment longer. This kind of network
approach is what allowed Chávez to survive the 2002 coup
attempt: when their revolution was threatened, his supporters poured
down from the shantytowns surrounding Caracas to demand his
reinstatement, a kind of popular mobilization that did not happen
during the coups of the '70s.
Latin America's
new leaders are also taking bold measures to block any future
US-backed coups that could attempt to undermine their democratic
victories. Chávez has let it be known that if an extremist
right-wing element in Bolivia's Santa Cruz province makes good on
its threats against Morales's government, Venezuelan troops will
help defend Bolivia's democracy. Meanwhile, the governments of
Venezuela, Costa Rica, Argentina, Uruguay and Bolivia have all
announced that they will no longer send students to the School of the
Americas (now called the Western Hemisphere Institute for Security
Cooperation)-the infamous police and military training center in
Fort Benning, Georgia, where so many of the continent's notorious
killers learned the latest in "counterterrorism" techniques, then
promptly directed them against farmers in El Salvador and auto
workers in Argentina. Ecuador, in addition to closing the US military
base, also looks set to cut its ties with the school. It's hard to
overstate the importance of these developments. If the US military
loses its bases and training programs, its power to inflict shocks on
the continent will be greatly eroded.
The new leaders in
Latin America are also becoming better prepared for the kinds of
shocks produced by volatile markets. One of the most destabilizing
forces of recent decades has been the speed with which capital can
pick up and move, or how a sudden drop in commodity prices can
devastate an entire agricultural sector. But in much of Latin America
these shocks have already happened, leaving behind ghostly industrial
suburbs and huge stretches of fallow farmland. The task of the
region's new left, therefore, has become a matter of taking the
detritus of globalization and putting it back to work. In Brazil, the
phenomenon is best seen in the million and a half farmers of the
Landless Peoples Movement (MST), who have formed hundreds of
cooperatives to reclaim unused land. In Argentina, it is clearest in
the movement of "recovered companies," 200 bankrupt businesses
that have been resuscitated by their workers, who have turned them
into democratically run cooperatives. For the cooperatives, there is
no fear of facing an economic shock of investors leaving, because the
investors have already left.
Chávez has
made the cooperatives in Venezuela a top political priority, giving
them first refusal on government contracts and offering them economic
incentives to trade with one another. By 2006 there were roughly
100,000 cooperatives in the country, employing more than 700,000
workers. Many are pieces of state infrastructure-toll booths,
highway maintenance, health clinics-handed over to the communities
to run. It's a reverse of the logic of government outsourcing:
rather than auctioning off pieces of the state to large corporations
and losing democratic control, the people who use the resources are
given the power to manage them, creating, at least in theory, both
jobs and more responsive public services. Chávez's many
critics have derided these initiatives as handouts and unfair
subsidies, of course. Yet in an era when Halliburton treats the US
government as its personal ATM for six years, withdraws upward of $20
billion in Iraq contracts alone, refuses to hire local workers either
on the Gulf Coast or in Iraq, then expresses its gratitude to US
taxpayers by moving its corporate headquarters to Dubai (with all the
attendant tax and legal benefits), Chávez's direct subsidies
to regular people look significantly less radical.
Latin America's
most significant protection from future shocks (and therefore from
the shock doctrine) flows from the continent's emerging
independence from Washington's financial institutions, the result
of greater integration among regional governments. The Bolivian
Alternative for the Americas (ALBA) is the continent's retort to
the Free Trade Area of the Americas, the now-buried corporatist dream
of a free-trade zone stretching from Alaska to Tierra del Fuego.
Though ALBA is still in its early stages, Emir Sader, a Brazil-based
sociologist, describes its promise as "a perfect example of
genuinely fair trade: each country provides what it is best placed to
produce, in return for what it most needs, independent of global
market prices." So Bolivia provides gas at stable discounted
prices; Venezuela offers heavily subsidized oil to poorer countries
and shares expertise in developing reserves; and Cuba sends thousands
of doctors to deliver free healthcare all over the continent, while
training students from other countries at its medical schools.
This is a very
different model from the kind of academic exchange that began at the
University of Chicago in the mid-'50s, when hundreds of Latin
American students learned a single rigid ideology and were sent home
to impose it with uniformity across the continent. The major benefit
is that ALBA is essentially a barter system in which countries decide
for themselves what any given commodity or service is worth rather
than letting traders in New York, Chicago or London set the prices
for them. That makes trade less vulnerable to the kind of sudden
price fluctuations that have hurt Latin American economies before.
Surrounded by turbulent financial waters, Latin America is creating a
zone of relative economic calm and predictability, a feat presumed
impossible in the globalization era.
When one country
does face a financial shortfall, this increased integration means
that it does not necessarily need to turn to the IMF or the US
Treasury for a bailout. That's fortunate because the 2006 US
National Security Strategy makes it clear that for Washington, the
shock doctrine is still very much alive: "If crises occur, the
IMF's response must reinforce each country's responsibility for
its own economic choices," the document states. "A refocused IMF
will strengthen market institutions and market discipline over
financial decisions." This kind of "market discipline" can only
be enforced if governments actually go to Washington for help. As
former IMF deputy managing director Stanley Fischer explained during
the Asian financial crisis, the lender can help only if it is asked,
"but when [a country is] out of money, it hasn't got many places
to turn." That is no longer the case. Thanks to high oil prices,
Venezuela has emerged as a major lender to other developing
countries, allowing them to do an end run around Washington. Even
more significant, this December will mark the launch of a regional
alternative to the Washington financial institutions, a "Bank of
the South" that will make loans to member countries and promote
economic integration among them.
Now that they can
turn elsewhere for help, governments throughout the region are
shunning the IMF, with dramatic consequences. Brazil, so long
shackled to Washington by its enormous debt, is refusing to enter
into a new agreement with the fund. Venezuela is considering
withdrawing from the IMF and the World Bank, and even Argentina,
Washington's former "model pupil," has been part of the trend.
In his 2007 State of the Union address, President Néstor
Kirchner (since succeeded by his wife, Christina) said that the
country's foreign creditors had told him, "‘You must have an
agreement with the International Fund to be able to pay the debt.'
We say to them, ‘Sirs, we are sovereign. We want to pay the debt,
but no way in hell are we going to make an agreement again with the
IMF.'" As a result, the IMF, supremely powerful in the 1980s and
'90s, is no longer a force on the continent. In 2005 Latin America
made up 80 percent of the IMF's total lending portfolio; the
continent now represents just 1 percent-a sea change in only two
years.
The transformation
reaches beyond Latin America. In just three years, the IMF's
worldwide lending portfolio had shrunk from $81 billion to $11.8
billion, with almost all of that going to Turkey. The IMF, a pariah
in countries where it has treated crises as profit-making
opportunities, is withering away.
The World Bank
faces an equally precarious future. In April Correa revealed that he
had suspended all loans from the Bank and declared the institution's
representative in Ecuador persona non grata-an extraordinary step.
Two years earlier, Correa explained, the World Bank had used a $100
million loan to defeat economic legislation that would have
redistributed oil revenues to the country's poor. "Ecuador is a
sovereign country, and we will not stand for extortion from this
international bureaucracy," he said. Meanwhile, Evo Morales
announced that Bolivia would quit the World Bank's arbitration
court, the body that allows multinational corporations to sue
national governments for measures that cost them profits. "The
governments of Latin America, and I think the world, never win the
cases. The multinationals always win," Morales said.
When Paul
Wolfowitz was forced to resign as president of the World Bank in May,
it was clear that the institution needed to take desperate measures
to rescue itself from its profound crisis of credibility. In the
midst of the Wolfowitz affair, the Financial Times reported that when
World Bank managers dispensed advice in the developing world, "they
were now laughed at." Add the collapse of the World Trade
Organization talks in 2006 (prompting declarations that
"globalization is dead"), and it appears that the three main
institutions responsible for imposing the Chicago School ideology
under the guise of economic inevitability are at risk of extinction.
It stands to
reason that the revolt against neoliberalism would be in its most
advanced stage in Latin America. As inhabitants of the first shock
lab, Latin Americans have had the most time to recover their
bearings, to understand how shock politics work. This understanding
is crucial for a new politics adapted to our shocking times. Any
strategy based on exploiting the window of opportunity opened by a
traumatic shock- the central tenet of the shock doctrine-relies
heavily on the element of surprise. A state of shock is, by
definition, a moment when there is a gap between fast-moving events
and the information that exists to explain them. Yet as soon as we
have a new narrative that offers a perspective on the shocking
events, we become reoriented and the world begins to make sense
again.
Once the mechanics
of the shock doctrine are deeply and collectively understood, whole
communities become harder to take by surprise, more difficult to
confuse – shock-resistant.
* Naomi Klein is
the author of many books. This essay is adapted from her most recent
book, "The Shock Doctrine: The Rise of Disaster Capitalism"
(New York: Metropolitan Books, 2007) and originally appeared in the
The Nation. Visit Naomi Klein's website at nologo.org.
