The Shock Doctrine: The Rise of Disaster Capitalism

by Naomi Klein

  For weeks after the attacks, the president went on a grand tour of the public sector—public schools, firehouses and memorials, the Centers for Disease Control and Prevention—embracing and thanking civil servants for their contributions and humble patriotism. “We have gained new heroes,” Bush said in a speech, praising not only emergency services personnel but teachers, postal employees and health care workers.38 At these events, he treated work done in the public interest with a level of respect and dignity that had not been seen in the United States in four decades. Cost-cutting was suddenly off the agenda, and in every speech the president gave, he announced some ambitious new public program.

  “The twin demands of a sagging economy and an urgent new war on terrorism have transformed the philosophical heart of President Bush’s agenda,” confidently declared John Harris and Dana Milbank in The Washington Post eleven days after the attacks. “A man who came to power offering himself as an ideological descendant of Ronald Reagan has emerged nine months later as something closer to an heir of Franklin D. Roosevelt.” They further observed that “Bush is working on a large economic stimulus package to stave off recession. He said a weak economy needs its pump primed by government with a big infusion of money—a basic precept of Keynesian economics that was at the heart of FDR’s New Deal.”39

  A Corporate New Deal

  Public pronouncements and photo ops aside, Bush and his inner circle had no intention of converting to Keynesianism. Far from shaking their determination to weaken the public sphere, the security failures of 9/11 reaffirmed their deepest ideological (and self-interested) beliefs—that only private firms possessed the intelligence and innovation to meet the new security challenge. Although it was true that the White House was on the verge of spending huge amounts of taxpayer money to stimulate the economy, it most certainly was not going to be on the model of FDR. Rather, Bush’s New Deal would be exclusively with corporate America, a straight-up transfer of hundreds of billions of public dollars a year into private hands. It would take the form of contracts, many offered secretively, with no competition and scarcely any oversight, to a sprawling network of industries: technology, media, communications, incarceration, engineering, education, health care.*

  What happened in the period of mass disorientation after the attacks was, in retrospect, a domestic form of economic shock therapy. The Bush team, Friedmanite to the core, quickly moved to exploit the shock that gripped the nation to push through its radical vision of a hollow government in which everything from war fighting to disaster response was a for-profit venture.

  It was a bold evolution of shock therapy. Rather than the nineties approach of selling off existing public companies, the Bush team created a whole new framework for its actions—the War on Terror—built to be private from the start. This feat required two stages. First, the White House used the omnipresent sense of peril in the aftermath of 9/11 to dramatically increase the policing, surveillance, detention and war-waging powers of the executive branch—a power grab that the military historian Andrew Bacevich has termed “a rolling coup.”40 Then those newly enhanced and richly funded functions of security, invasion, occupation and reconstruction were immediately outsourced, handed over to the private sector to perform at a profit.

  Although the stated goal was fighting terrorism, the effect was the creation of the disaster capitalism complex—a full-fledged new economy in homeland security, privatized war and disaster reconstruction tasked with nothing less than building and running a privatized security state, both at home and abroad. The economic stimulus of this sweeping initiative proved enough to pick up the slack where globalization and the dot-com booms had left off. Just as the Internet had launched the dot-com bubble, 9/11 launched the disaster capitalism bubble. “When the IT industry shut down, post-bubble, guess who had all the money? The government,” said Roger Novak of Novak Biddle Venture Partners, a venture capitalism firm that invests in homeland security companies. Now, he says, “every fund is seeing how big the trough is and asking, How do I get a piece of that action?”41

  It was the pinnacle of the counterrevolution launched by Friedman. For decades, the market had been feeding off the appendages of the state; now it would devour the core.

  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 “September 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. Now, rather than subjecting new policies to fractious public debate in Congress or bitter conflict with public sector unions, the Bush White House could use the patriotic alignment behind the president and the free pass handed out by the press to stop talking and start doing. 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.”42

  Rather than meet the security challenge posed by September 11 with a comprehensive plan to plug the holes in the public infrastructure, the Bush team devised a new role for government, one in which the job of the state was not to provide security but to purchase it at market prices. And so, in November 2001, just two months after the attacks, the Department of Defense brought together what it described as “a small group of venture capitalist consultants” with experience in the dot-com sector. The mission was to identify “emerging technology solutions that directly assist in the U.S. efforts in the Global War on Terrorism.” By early 2006, this informal exchange had become an official arm of the Pentagon: the Defense Venture Catalyst Initiative (DeVenCI), a “fully operational office” that continually feeds security information to politically connected venture capitalists, who, in turn, scour the private sector for start-ups that can produce new surveillance and related products. “We’re a search engine,” explains Bob Pohanka, director of DeVenCI.43 According to the Bush vision, the role of government is merely to raise the money necessary to launch the new war market, then buy the best products that emerge out of that creative cauldron, encouraging industry to even greater innovation. In other words, the politicians create the demand, and the private sector supplies all manner of solutions—a booming economy in homeland security and twenty-first-century warfare entirely underwritten by taxpayer dollars.

  The Department of Homeland Security, as a brand-new arm of the state created by the Bush regime, is the clearest expression of this wholly outsourced mode of government. As Jane Alexander, deputy director of the research wing of the Department of Homeland Security, explained, “We don’t make things. If it doesn’t come from industry, we are not going to be able to get it.”44

  Another is Counterintelligence Field Activity (CIFA), a new intelligence agency created under Rumsfeld that is independent of the CIA. This parallel spy agency outsources 70 percent of its budget to private contractors; like the Department of Homeland Security, it was built as a hollow shell. As Ken Minihan, former director of the National Security Agency, explained, “Homeland security is too important to be left to the government.” Minihan, like hundreds of other Bush administration staffers, has already left his government post to work in the bourgeoning homeland security industry, which, as a top spy, he helped create.45

  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. The document that launched the Department of Homeland Security declares, “Today’s terrorists can strike at any place, at any time, and with virtually any weapon”—which conveniently means that the security services required must protect against every imaginable risk in every conceivable place at every possible time. And it’s not necessary to prove that a threat is real for it to merit a full-scale response—not with Cheney’s famous
“1 percent doctrine,” which justified the invasion of Iraq on the grounds that if there is a 1 percent chance that something is a threat, it requires that the U.S. respond as if the threat is a 100 percent certainty. This logic has been a particular boon for the makers of various high-tech detection devices: for instance, because we can conceive of a smallpox attack, the Department of Homeland Security has handed out half a billion dollars to private companies to develop and install detection equipment to guard against this unproven threat.46

  Through all 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.

  That was the business prospectus that the Bush administration put before corporate America after September 11. The revenue stream was a seemingly bottomless supply of tax dollars to be funneled from the Pentagon ($270 billion a year to private contractors, a $137 billion increase since Bush took office); U.S. intelligence agencies ($42 billion a year to contractors for outsourced intelligence, more than double 1995 levels); and the newest arrival, the Department of Homeland Security. Between September 11, 2001, and 2006, the Department of Homeland Security handed out $130 billion to private contractors—money that was not in the economy before and that is more than the GDP of Chile or the Czech Republic. In 2003, the Bush administration spent $327 billion on contracts to private companies—nearly 40 cents of every discretionary dollar.47

  In a remarkably short time, the suburbs ringing Washington, D.C., became dotted with gray buildings housing security “start-ups” and “incubator” companies, hastily thrown together operations where, as in late-nineties Silicon Valley, the money came in faster than the furniture could be assembled. The Bush administration, meanwhile, played the part of the free-spending venture capitalist of that same heady era. Whereas in the nineties the goal was to develop the killer application, the “next new new thing,” and sell it to Microsoft or Oracle, now it was to come up with a new “search and nail” terrorist-catching technology and sell it to the Department of Homeland Security or the Pentagon. That is why, in addition to the start-ups and investment funds, the disaster industry also gave birth to an army of new lobby firms promising to hook up new companies with the right people on Capitol Hill—in 2001, there were two such security-oriented lobby firms, but by mid-2006 there were 543. “I’ve been in private equity since the early ’90s,” Michael Steed, managing director of the homeland security firm Paladin told Wired, “and I’ve never seen a sustained deal flow like this.”48

  A Market for Terrorism

  Like the dot-com bubble, the disaster bubble is inflating in an ad hoc and chaotic fashion. One of the first booms for the homeland security industry was surveillance cameras, 4.2 million of which have been installed in Britain, one for every fourteen people, and 30 million in the U.S., shooting about 4 billion hours of footage a year. That created a problem: Who’s going to watch 4 billion hours of footage? So a new market emerged for “analytic software” that scans the tapes and creates matches with images already on file (networking various security systems has been the source of some of the most lucrative contracts, such as $9 billion from the air force to a consortium of companies including Booz Allen Hamilton, one of the oldest strategy consulting firms, and some of the largest defense contractors).49

  This development created another problem, because facial recognition software can really make positive IDs only if people present themselves front and center to the cameras, which they rarely do while rushing to and from work. So another market was created for digital image enhancement. Salient Stills, a company that sells software to isolate and enhance video images, started by pitching its technology to media companies, but it turned out that there was more potential revenue from the FBI and other law-enforcement agencies.50 And with all the snooping going on—phone logs, wiretapping, financial records, mail, surveillance cameras, Web surfing—the government is drowning in data, which has opened up yet another massive market in information management and data mining, as well as software that claims to be able to “connect the dots” in this ocean of words and numbers and pinpoint suspicious activity.

  In the nineties, tech companies endlessly trumpeted the wonders of the borderless world and the power of information technology to topple authoritarian regimes and bring down walls. Today, inside the disaster capitalism complex, the tools of the information revolution have been flipped to serve the opposite purpose. In the process, cell phones and Web surfing have been turned into powerful tools of mass state surveillance by increasingly authoritarian regimes, with the full cooperation of privatized phone companies and search engines, whether it’s Yahoo collaborating with the Chinese government to pinpoint the location of dissidents or AT&T helping the U.S. National Security Agency to wiretap its customers without a warrant (a practice the Bush administration claims it has discontinued). The dismantling of borders, the great symbol and promise of globalization, has been replaced with the exploding industry of border surveillance, from optical scanning and biometric IDs to the planned high-tech fence on the border between Mexico and the U.S., worth up to $2.5 billion for Boeing and a consortium of other companies.51

  As high-tech firms have jumped from one bubble to another, the result has been a bizarre merger of security and shopping cultures. Many technologies in use today as part of the War on Terror—biometric identification, video surveillance, Web tracking, data mining, sold by companies like Verint Systems and Seisint, Accenture and ChoicePoint—had been developed by the private sector before September 11 as a way to build detailed customer profiles, opening up new vistas for micromarketing. They also promised to reduce the number of retail workers at supermarkets and shopping malls, because biometric IDs, combined with cash cards, would eliminate the need for tellers. When widespread discomfort about big-brother technologies stalled many of these initiatives, it caused dismay to both marketers and retailers. September 11 loosened this logjam in the market: suddenly the fear of terror was greater than the fear of living in a surveillance society. So now, the same information collected from cash cards or “loyalty” cards can be sold not only to a travel agency or the Gap as marketing data but also to the FBI as security data, flagging a “suspicious” interest in pay-as-you-go cell phones and Middle Eastern travel.52

  As an exuberant article in the business magazine Red Herring explained, one such program “tracks terrorists by figuring out if a name spelled a hundred different ways matches a name in a homeland security database. Take the name Mohammad. The software contains hundreds of possible spellings for the name, and it can search terabytes of data in a second.”53 Impressive, unless they nail the wrong Mohammad, which they have a bad habit of doing, from Iraq to Afghanistan to the suburbs of Toronto.

  This potential for error is where the incompetence and greed that have been the hallmark of the Bush years, from Iraq to New Orleans, becomes harrowing. One false ID coming out of any of these electronic fishing expeditions is enough for an apolitical family man, who sort of looks like someone whose name sort of sounds like his (at least to someone with no knowledge of Arabic or Muslim culture), to be flagged as a potential terrorist. And the process of putting names and organizations on watch lists is also now handled by private companies, as are the programs to cross-check the names of travelers with the names in the data bank. As of June 2007, there were half a million names on a list of suspected terrorists kept by the National Counterterrorism Center. Another program, the Automated Targeting System (ATS), made public in November 2006, has already assigned a “risk assessment” rating to tens of millions of travelers passing through the
U.S. The rating, never disclosed to passengers, is based on suspicious patterns revealed through commercial data mining—for instance, information provided by airlines about “the passenger’s history of one-way ticket purchase, seat preferences, frequent flyer records, number of bags, how they pay for tickets and even what meals they order.”54 Incidents of supposedly suspicious behaviour are tallied up to generate each passenger’s risk rating.

  Anyone can be blocked from flying, denied an entry visa to the U.S. or even arrested and named as an “enemy combatant” based on evidence from these dubious technologies—a blurry image identified through facial recognition software, a misspelled name, a misunderstood snippet of a conversation. If “enemy combatants” are not U.S. citizens, they will probably never even know what it was that convicted them, because the Bush administration has stripped them of habeas corpus, the right to see the evidence in court, as well as the right to a fair trial and a vigorous defense.

  If the suspect is taken, as a result, to Guantánamo, he may well end up in the new two-hundred-person maximum-security prison constructed by Halliburton. If he is a victim of the CIA’s “extraordinary rendition” program, kidnapped off the streets of Milan or while changing planes at a U.S. airport, then whisked to a so-called black site somewhere in the CIA’s archipelago of secret prisons, the hooded prisoner will likely fly in a Boeing 737, designed as a deluxe executive jet, retrofitted for this purpose. According to The New Yorker, Boeing has been acting as the “CIA’s travel agent”—blocking out flight plans for as many as 1,245 rendition voyages, arranging ground crews and even booking hotels. A Spanish police report explains that the work was done by Jeppesen International Trip Planning, a Boeing subsidiary in San Jose. In May 2007, the American Civil Liberties Union launched a lawsuit against the Boeing subsidiary; the company has refused to confirm or deny the allegations.55