Shock Doctrine Series

 

Economic Hit Man Series

 

Shock Doctrine by Naomi Klein, 2007, Excerpts

 

Philosophically, Milton Friedman did not believe in the IMF or the World Bank: they were classic examples of big government interfering with the delicate signals of the free market. So it was ironic that there was a virtual conveyor belt delivering Chicago Boys to the two institutions.

 

When countries were sent spiraling into crisis in the eighties, they had nowhere else to turn by the World Bank and the IMF. When they did, they hit a wall of orthodox Chicago Boys, trained to see their economic catastrophes not as problems to solve but as precious opportunities to leverage in order to secure a new free-market frontier. Crisis opportunism was the guiding logic of the world’s most powerful institutions.

 

Officials with the World Bank and IMF had always made policy recommendations when they handed out loans, but in the early eighties, emboldened by the desperation of developing countries, those recommendations morphed into radical free-market demands. When crisis-struck countries came to the IMF seeking debt relief and emergency loans, the fund responded with sweeping shock therapy programs.

 

In November 1989, the Berlin Wall way joyously dismantled; the Soviet Union was on the verge of breaking apart, apartheid in South Africa seemed on its last legs, authoritarian regimes continued to crumble in Latin America, Eastern Europe and Asia, Everywhere. Old regimes were collapsing. In 1989, history was taking an exhilarating turn, entering a period of genuine openness and possibility.

 

Nor was it coincidence that the World Bank and the IMF chose that same volatile year to unveil the Washington Consensus – a clear effort to halt all discussion and debate about any economic ideas outside the free-market lockbox.

 

In country after country, the international debt crisis was being methodically leveraged to advance the ChicagoSchool agenda. The principle was simple – countries in crisis desperately need emergency aid to stabilize their currencies. When privatization and free-trade polices are packaged together with a financial bailout, countries have little choice but to accept the whole package.

 

By 1999, the ChicagoSchool international alumni included more than twenty-five government ministers and more than a dozen central bank presidents from Israel to Costa Rica, an extraordinary level of influence for one university department. In Argentina, the Chicago Boys formed a kind of ideological pincer around the elected government, one group squeezing from within another exerting its pressure Washington.

 

By moving deftly from crisis to crisis, they expertly exploited the desperation of economic emergencies to push through policies that would tie the hands of fragile new democracies. Once the tactic was perfected, opportunities just seemed to multiply. The Volcker Shock would be followed by the Mexican Tequila Crisis in 1994, the Asian Contagion in 1997, and the Russian Collapse in 1998, which was followed shortly afterward by one in Brazil. When these shocks and crises started to lose their power, even more cataclysmic ones would appear: tsunamis, hurricanes, wars and terrorist attacks. Disaster capitalism was taking shape.

 

Wikipedia 1994 economic crisis in Mexico

Wikipedia  Asian Contagion

 

Once countries opened themselves up to the global markets’ temperamental moods, any departure from ChicagoSchool orthodoxy is instantly punished by traders in New York and London who bet against the offending country’s currency, causing a deeper crisis and the need for more loans, with more conditions attached.

 

 

Confessions of an Economic Hit Man by John Perkins, 2004, Excerpts

 

During the 1973 OPEC oil embargo, petroleum prices skyrocketed and Venezuela’s nations budget quadrupled. The international banks flooded the country with loans that paid for vast infrastructure and industrial projects and for the highest skyscrapers o the continent.

 

Then oil prices crashed, and Venezuela could not repay its debts. In 1989, the IMF imposed harsh austerity measures and pressured Caracas to support the corporatocracy in many other ways. Venezuelans reacted violently; riots killed over two hundred people. The illusion of oil as a bottomless source was shattered. Between 1978 and 2003, Venezuela’s per capita income plummeted by over 40 percent.

 

As poverty increased, resentment intensified. Polarization resulted, with the middle class pitted against the poor. As so often occurs in countries whose economies depend on oil production, demographics shifted. The sinking economy took its toll on the middle class, and many fell into the ranks of the poor.

 

In 1998, the poor and disenfranchised of Venezuela elected Hugo Chavez by a landslide as their president. He immediately instituted drastic measures, taking control of the courts and other institutions and dissolving the Venezuelan Congress. He denounced the United States for its “shameless imperialism” and spoke forcefully against globalizations.

 

Chavez defied the traditional independence of the state-owned oil company by replacing its top executives with people loyal to him. Venezuelan oil is crucial to economies around the world. In 2002 the nation was the world’s fourth largest oil exporter and the number three supplier to the United States. Petroleos de Venezuela, with forty thousand employees and $50 billions a year in sales, provides 80 percent of the country’s export revenue. It is by far the most important factor in Venezuela’s economy. By taking over the industry, Chavez had thrust himself onto the world stage as a major player.

 

Wikipedia International Monetary Fund 

IMF describes itself as "an organization of 185 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty".