The Shock Doctrine - The Rise of Disaste Part 12

-Harry Belafonte, American musician and civil rights activist, September 20052.

During the second week of September 2005,1 was in New Orleans with my husband, Avi, as well as Andrew, with whom I had traveled in Iraq, shooting documentary footage in the still partially flooded city. As the nightly six o'clock curfew descended, we found ourselves driving in circles, unable to find our way. The traffic lights were out, and half the street signs had been blown over or twisted sideways by the storm. Debris and water obstructed passage along many roads, and most of the people trying to navigate the obstacles were, like us, out-of-towners with no idea where they were going.

The accident was a bad one: a T-bone at full speed in the middle of a major intersection. Our car spun out into a traffic light, went through a wrought-iron fence and parked in a porch. The injuries to the people in both cars were thankfully minor, but before I knew it I was being strapped to a stretcher and driven away. Through the haze of concussion, I was aware that wherever the ambulance was going, it wouldn't be good. I had visions of the horrific scene at the makeshift health clinic at the New Orleans airport-there were so few doctors and nurses that elderly evacuees were being left unattended for hours, slumped in their wheelchairs. I thought about Charity Hospital, New Orleans' primary public emergency room, which we had passed earlier in the day. It flooded during the storm, and its staff had struggled without power to keep patients alive. I pleaded with the paramedics to let me out. I remember telling them that I was fine, really, then I must have passed out.

I came to as we arrived at the most modern and calm hospital I have ever been in. Unlike the clinics crowded with evacuees, at the Ochsner Medical Center-offering "healthcare with peace of mind"-doctors, nurses and orderlies far outnumbered the patients. In fact, there seemed to be only a handful of other patients in the immaculate ward. In minutes I was settled into a spacious private room, my cuts and bruises attended to by a small army of medical staff. Three nurses immediately took me in for a neck X-ray; a genteel Southern doctor removed some glass fragments and put in a couple of stitches.

To a veteran of the Canadian public health care system, these were wholly unfamiliar experiences; I usually wait for forty minutes to see my general practitioner. And this was downtown New Orleans -ground zero of the largest public health emergency in recent U.S. history. A polite administrator came into my room and explained that "in America we pay for health care. I am so sorry, dear-it's really terrible. We wish we had your system. Just fill out this form."

Within a couple of hours, I would have been free to go, were it not for the curfew that had locked down the city. "The biggest problem," a private security guard told me in the lobby where we were both biding time, "is all the junkies; they're jonesing and want to get into the pharmacy."

Since the pharmacy was locked tight, a medical intern was kind enough to slip me a few painkillers. I asked him what it had been like at the hospital at the peak of the storm. "I wasn't on duty, thank God," he said. "I live outside the city."

When I asked if he had gone to any of the shelters to help, he seemed taken aback by the question and a little embarrassed. "I hadn't thought of that," he said. I quickly changed the subject to what I hoped was safer ground: the fate of Charity Hospital. It was so underfunded that it was barely functioning before the storm, and people were already speculating that with the water damage it might never reopen. "They'd better reopen it," he said. "We can't treat those people here."

It occurred to me that this affable young doctor, and the spa-like medical care I had just received, were the embodiment of the culture that had made the horrors of Hurricane Katrina possible, the culture that had left New Orleans' poorest residents to drown. As a graduate of a private medical school and then an intern at a private hospital, he had been trained simply not to see New Orleans' uninsured, overwhelmingly African-American residents as potential patients. That was true before the storm, and it continued to be true even when all of New Orleans turned into a giant emergency room: he had sympathy for the evacuees, but that didn't change the fact that he still could not see them as potential patients of his.

When Katrina hit, the sharp divide between the worlds of Ochsner Hospital and Charity Hospital suddenly played out on the world stage. The economically secure drove out of town, checked into hotels and called their insurance companies. The 120,000 people in New Orleans without cars, who depended on the state to organize their evacuation, waited for help that did not arrive, making desperate SOS signs or rafts out of their refrigerator doors. Those images shocked the world because, even if most of us had resigned ourselves to the daily inequalities of who has access to health care and whose schools have decent equipment, there was still a widespread assumption that disasters were supposed to be different. It was taken for granted that the state -at least in a rich country-would come to the aid of the people during a cataclysmic event. The images from New Orleans showed that this general belief-that disasters are a kind of time-out for cutthroat capitalism, when we all pull together and the state switches into higher gear-had already been abandoned, and with no public debate.

There was a brief window of two or three weeks when it seemed that the drowning of New Orleans would provoke a crisis for the economic logic that had greatly exacerbated the human disaster with its relentless attacks on the public sphere. "The storm exposed the consequences of neoliberalism's lies and mystifications, in a single locale and all at once," wrote the political scientist and New Orleans native Adolph Reed Jr.3 The facts of this exposure are well known-from the levees that were never repaired, to the underfunded public transit system that failed, to the fact that the city's idea of disaster preparedness was passing out DVDs telling people that if a hurricane came, they should get out of town. The facts of this exposure are well known-from the levees that were never repaired, to the underfunded public transit system that failed, to the fact that the city's idea of disaster preparedness was passing out DVDs telling people that if a hurricane came, they should get out of town.

Then there was the Federal Emergency Management Agency (FEMA), a laboratory for the Bush administration's vision of government run by corporations. In the summer of 2004, more than a year before Katrina hit, the State of Louisiana put in a request to FEMA for funds to develop an in-depth contingency plan for a powerful hurricane. The request was refused. "Disaster mitigation"-advance government measures to make the effects of disasters less devastating-was one of the programs gutted under Bush. Yet that same summer FEMA awarded a $500,000 contract to a private firm called Innovative Emergency Management. Its task was to come up with a "catastrophic hurricane disaster plan for Southeast Louisiana and the City of New Orleans."4 The private company spared no expense. It brought together more than a hundred experts, and when money ran out, it went back to FEMA for more; eventually the bill for the exercise doubled to $1 million. The company came up with scenarios for a mass evacuation covering everything from delivering water to instructing neighboring communities to identify empty lots that could immediately be transformed into trailer parks for evacuees -all the sensible things that didn't happen when a hurricane like the one they were imagining actually hit. That's partly because, eight months after the contractor submitted its report, no action had been taken. "Money was not available to do the follow-up," explained Michael Brown, head of FEMA at the time.5The story is typical of the lopsided state that Bush built: a weak, underfunded, ineffective public sector on the one hand, and a parallel richly funded corporate infrastructure on the other. When it comes to paying contractors, the sky is the limit; when it comes to financing the basic functions of the state, the coffers are empty.

Just as the U.S. occupation authority in Iraq turned out to be an empty shell, when Katrina hit, so did the U.S. federal government at home. In fact, it was so thoroughly absent that FEMA could not seem to locate the New Orleans superdome, where twenty-three thousand people were stranded without food or water, despite the fact that the world media had been there for days.

For some free-market ideologues, this spectacle of what the New York Times New York Times columnist Paul Krugman termed "the can't do government" provoked a crisis of faith. "The collapsed levees of New Orleans will have consequences for neoconservatism just as long and deep as the collapse of the Wall in East Berlin had on Soviet Communism," wrote the repentant true believer Martin Kelly in a much-circulated essay. "Hopefully all of those who urged the ideology on, myself included, will have a long time to consider the error of our ways." Even neocon stalwarts like Jonah Goldberg were begging "big government" to ride to the rescue: "When a city is sinking into the sea and rioting runs rampant, government probably should saddle-up." columnist Paul Krugman termed "the can't do government" provoked a crisis of faith. "The collapsed levees of New Orleans will have consequences for neoconservatism just as long and deep as the collapse of the Wall in East Berlin had on Soviet Communism," wrote the repentant true believer Martin Kelly in a much-circulated essay. "Hopefully all of those who urged the ideology on, myself included, will have a long time to consider the error of our ways." Even neocon stalwarts like Jonah Goldberg were begging "big government" to ride to the rescue: "When a city is sinking into the sea and rioting runs rampant, government probably should saddle-up."6 No such soul-searching was in evidence at the Heritage Foundation, where the true disciples of Friedmanism can always be found. Katrina was a tragedy, but, as Milton Friedman wrote in his Wall Street Journal Wall Street Journal op-ed, it was "also an opportunity." On September 13, 2005-fourteen days after the levees were breached-the Heritage Foundation hosted a meeting of like-minded ideologues and Republican lawmakers. They came up with a list of "Pro-Free-Market Ideas for Responding to Hurricane Katrina and High Gas Prices"-thirty-two policies in all, each one straight out of the Chicago School playbook, and all of them packaged as "hurricane relief." The first three items were "automatically suspend Davis-Bacon prevailing wage laws in disaster areas," a reference to the law that required federal contractors to pay a living wage; "make the entire affected area a flat-tax free-enterprise zone"; and "make the entire region an economic competitiveness zone (comprehensive tax incentives and waiving of regulations)." Another demand called for giving parents vouchers to use at charter schools. op-ed, it was "also an opportunity." On September 13, 2005-fourteen days after the levees were breached-the Heritage Foundation hosted a meeting of like-minded ideologues and Republican lawmakers. They came up with a list of "Pro-Free-Market Ideas for Responding to Hurricane Katrina and High Gas Prices"-thirty-two policies in all, each one straight out of the Chicago School playbook, and all of them packaged as "hurricane relief." The first three items were "automatically suspend Davis-Bacon prevailing wage laws in disaster areas," a reference to the law that required federal contractors to pay a living wage; "make the entire affected area a flat-tax free-enterprise zone"; and "make the entire region an economic competitiveness zone (comprehensive tax incentives and waiving of regulations)." Another demand called for giving parents vouchers to use at charter schools.7All these measures were announced by President Bush within the week. He was eventually forced to reinstate the labor standards, though they were largely ignored by contractors.

The meeting produced more ideas that gained presidential support. Climate scientists have directly linked the increased intensity of hurricanes to warming ocean temperatures.8 This connection, however, didn't stop the working group at the Heritage Foundation from calling on Congress to repeal environmental regulations on the Gulf Coast, give permission for new oil refineries in the United States and green-light "drilling in the Arctic National Wildlife Refuge." This connection, however, didn't stop the working group at the Heritage Foundation from calling on Congress to repeal environmental regulations on the Gulf Coast, give permission for new oil refineries in the United States and green-light "drilling in the Arctic National Wildlife Refuge."9 All these measures would increase greenhouse gas emissions, the major human contributor to climate change, yet they were immediately championed by the president under the guise of responding to the Katrina disaster. All these measures would increase greenhouse gas emissions, the major human contributor to climate change, yet they were immediately championed by the president under the guise of responding to the Katrina disaster.

Within weeks, the Gulf Coast became a domestic laboratory for the same kind of government-run-by-contractors that had been pioneered in Iraq. The companies that snatched up the biggest contracts were the familiar Baghdad gang: Halliburton's KBR unit had a $60 million gig to reconstruct military bases along the coast. Blackwater was hired to protect FEMA employees from looters. Parsons, infamous for its sloppy Iraq work, was brought in for a major bridge construction project in Mississippi. Fluor, Shaw, Bechtel, CH2M Hill -all top contractors in Iraq-were hired by the government 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.10 As many remarked at the time, within days of the storm it was as if Baghdad's Green Zone had lifted off from its perch on the Tigris and landed on the bayou. The parallels were undeniable. 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 similarities were so striking that some of the mercenary soldiers, fresh from Baghdad, were having trouble adjusting. When David En-ders, 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."11 Other things were pretty Green Zone too. On contracts valued at $8.75 billion, congressional investigators found "significant overcharges, wasteful spending, or mismanagement."12 (The fact that exactly the same errors as those made in Iraq were instantly repeated in New Orleans should put to rest the claim that Iraq's occupation was merely a string of mishaps and mistakes marked by incompetence and lack of oversight. When the same mistakes are repeated over and over again, it's time to consider the possibility that they are not mistakes at all.) (The fact that exactly the same errors as those made in Iraq were instantly repeated in New Orleans should put to rest the claim that Iraq's occupation was merely a string of mishaps and mistakes marked by incompetence and lack of oversight. When the same mistakes are repeated over and over again, it's time to consider the possibility that they are not mistakes at all.) In New Orleans, as in Iraq, no opportunity for profit was left untapped. Kenyon, a division of the mega funeral conglomerate Service Corporation International (a major Bush campaign donor), was hired to retrieve the dead from homes and streets. The work was extraordinarily slow, and bodies were left in the broiling sun for days. Emergency workers and local volunteer morticians were forbidden to step in to help because handling the bodies impinged on Kenyon's commercial territory. The company charged the state, on average, $12,500 a victim, and it has since been accused of failing to properly label many bodies. For almost a year after the flood, decayed corpses were still being discovered in attics.13 Another pretty Green Zone touch: relevant experience often appeared to have nothing to do with how contracts were allocated. AshBritt, the company paid half a billion dollars to remove debris, reportedly didn't own a single dump truck and farmed out the entire job to contractors.14 Even more striking was the company that FEMA paid $5.2 million to perform the crucial role of building a base camp for emergency workers in St. Bernard Parish, a suburb of New Orleans. The camp construction fell behind schedule and was never completed. When the contractor was investigated, it emerged that the company, Lighthouse Disaster Relief, was actually a religious group. "About the closest thing I have done to this is just organize a youth camp with my church," confessed Lighthouse's director, Pastor Gary Heldreth. Even more striking was the company that FEMA paid $5.2 million to perform the crucial role of building a base camp for emergency workers in St. Bernard Parish, a suburb of New Orleans. The camp construction fell behind schedule and was never completed. When the contractor was investigated, it emerged that the company, Lighthouse Disaster Relief, was actually a religious group. "About the closest thing I have done to this is just organize a youth camp with my church," confessed Lighthouse's director, Pastor Gary Heldreth.15 As in Iraq, government once again played the role of a cash machine equipped for both withdrawals and deposits. Corporations withdrew funds through massive contracts, then repaid the government not with reliable work but with campaign contributions and/or loyal foot soldiers for the next elections. (According to The New York Times The New York Times, "the top 20 service contractors have spent nearly $300 million since 2000 on lobbying and have donated $23 million to political campaigns." The Bush administration, in turn, increased the amount spent on contractors by roughly $200 billion between 2000 and 2006.)16 Something else was familiar: the contractors' aversion to hiring local people who might have seen the reconstruction of New Orleans not only as a job but as part of healing and reempowering their communities. Washington could easily have made it a condition of every Katrina contract that companies hire local people at decent wages to help them put their lives back together. Instead, the residents of the Gulf Coast, like the people of Iraq, were expected to watch as contractors created an economic boom based on easy taxpayer money and relaxed regulations.

The result, predictably, was that after all the layers of subcontractors had taken their cut, there was next to nothing left for the people doing the work. For instance, the author Mike Davis tracked the way FEMA paid Shaw $175 a square foot to install blue tarps on damaged roofs, even though the tarps themselves were provided by the government. Once all the subcontractors took their share, the workers who actually hammered in the tarps were paid as little as $2 a square foot. "Every level of the contracting food chain, in other words, is grotesquely overfed except the bottom rung," Davis wrote, "where the actual work is carried out."17 According to one study, "a quarter of the workers rebuilding the city were immigrants lacking papers, almost all of them Hispanic, making far less money than legal workers." In Mississippi, a class-action lawsuit forced several companies to pay hundreds of thousands of dollars in back wages to immigrant workers. Some were not paid at all. On one Halliburton/KBR job site, undocumented immigrant workers reported being wakened in the middle of the night by their employer (a subsubcontractor), who allegedly told them that immigration agents were on their way. Most workers fled to avoid arrest; after all, they could end up in one of the new immigration prisons that Halliburton/KBR had been contracted to build for the federal government.5618 The attacks on the disadvantaged, carried out in the name of reconstruction and relief, did not stop there. In order to offset the tens of billions going to private companies in contracts and tax breaks, in November 2005 the Republican-controlled Congress announced that it needed to cut $40 billion from the federal budget. Among the programs that were slashed were student loans, Medicaid and food stamps.19 In other words, the poorest citizens in the country subsidized the contractor bonanza twice-first when Ka-trina relief morphed into unregulated corporate handouts, providing neither decent jobs nor functional public services, and second when the few programs that directly assist the unemployed and working poor nationwide were gutted to pay those bloated bills. In other words, the poorest citizens in the country subsidized the contractor bonanza twice-first when Ka-trina relief morphed into unregulated corporate handouts, providing neither decent jobs nor functional public services, and second when the few programs that directly assist the unemployed and working poor nationwide were gutted to pay those bloated bills.

Not so long ago, disasters were periods of social leveling, rare moments when atomized communities put divisions aside and pulled together. Increasingly, however, disasters are the opposite: they provide windows into a cruel and ruthlessly divided future in which money and race buy survival.

Baghdad's Green Zone is the starkest expression of this world order. It has its own electrical grid, its own phone and sewage systems, its own oil supply and its own state-of-the-art hospital with pristine operating theaters-all protected by five-meter-thick walls. It feels, 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 can get on board, there are poolside drinks, bad Hollywood movies and Nautilus machines. If you are not among the chosen, you can get yourself shot just by standing too close to the wall.

Everywhere in Iraq, the wildly divergent value assigned to different categories of people is crudely evident. Westerners and their Iraqi colleagues have checkpoints at the entrance 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. Middle-class Iraqis, meanwhile, cling to the next rung down the ladder: they can afford to buy protection from local militias, and they are able to pay off kidnappers to have a family member released. But the vast majority of Iraqis have no protection at all. They walk the streets wide open to any possible violence, 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.

At first I thought the Green Zone phenomenon was unique to the war in Iraq. Now, after years spent in other disaster zones, I realize that the Green Zone emerges everywhere that the disaster capitalism complex descends, with the same stark partitions between the included and the excluded, the protected and the damned.

It happened in New Orleans. After the flood, an already divided city turned into a battleground between gated green zones and raging red zones-the result not of water damage but of the "free-market solutions" embraced by the president. The Bush administration refused to allow emergency funds to pay public sector salaries, and the City of New Orleans, which lost its tax base, had to fire three thousand workers in the months after Katrina. Among them were sixteen of the city's planning staff-with shades of "de-Baathification," laid off at the precise moment when New Orleans was in desperate need of planners. Instead, millions of public dollars went to outside consultants, many of whom were powerful real estate developers.20And of course thousands of teachers were also fired, paving the way for the conversion of dozens of public schools into charter schools, just as Friedman had called for.

Almost two years after the storm, Charity Hospital was still closed. The court system was barely functioning, and the privatized electricity company, Entergy, had failed to get the whole city back online. After threatening to raise rates dramatically, the company managed to extract a controversial $200 million bailout from the federal government. The public transit system was gutted and lost almost half its workers. The vast majority of publicly owned housing projects stood boarded up and empty, with five thousand units slotted for demolition by the federal housing authority.21 Much as the tourism lobby in Asia had longed to be rid of the beachfront fishing villages, New Orleans' powerful tourism lobby had been eyeing the housing projects, several of them on prime land close to the French Quarter, the city's tourism magnet. Much as the tourism lobby in Asia had longed to be rid of the beachfront fishing villages, New Orleans' powerful tourism lobby had been eyeing the housing projects, several of them on prime land close to the French Quarter, the city's tourism magnet.

Endesha Juakali helped set up a protest camp outside one of the boarded-up projects, St. Bernard Public Housing, explaining that "they've had an agenda for St. Bernard a long time, but as long as people lived here, they couldn't do it. So they used the disaster as a way of cleansing the neighborhood when the neighborhood is weakest. . . . This is a great location for bigger houses and condos. The only problem is you got all these poor black people sitting on it!"22 Amid the schools, the homes, the hospitals, the transit system and the lack of clean water in many parts of town, New Orleans' public sphere was not being rebuilt, it was being erased, with the storm used as the excuse. At an earlier stage of capitalist "creative destruction," large swaths of the United States lost their manufacturing bases and degenerated into rust belts of shuttered factories and neglected neighborhoods. Post-Katrina New Orleans may be providing the first Western-world image of a new kind of wasted urban landscape: the mold belt, destroyed by the deadly combination of weathered public infrastructure and extreme weather.

The American Society of Civil Engineers said in 2007 that the U.S. had fallen so far behind in maintaining its public infrastructure -roads, bridges, schools, dams-that it would take more than a trillion and half dollars over five years to bring it back up to standard. Instead, these types of expenditures are being cut back.25 At the same time, public infrastructure around the world is facing unprecedented stress, with hurricanes, cyclones, floods and forest fires all increasing in frequency and intensity. It's easy to imagine a future in which growing numbers of cities have their frail and long-neglected infrastructures knocked out by disasters and then are left to rot, their core services never repaired or rehabilitated. The well-off, meanwhile, will withdraw into gated communities, their needs met by privatized providers. At the same time, public infrastructure around the world is facing unprecedented stress, with hurricanes, cyclones, floods and forest fires all increasing in frequency and intensity. It's easy to imagine a future in which growing numbers of cities have their frail and long-neglected infrastructures knocked out by disasters and then are left to rot, their core services never repaired or rehabilitated. The well-off, meanwhile, will withdraw into gated communities, their needs met by privatized providers.

Signs of that future were already in evidence by the time hurricane season rolled around in 2006. In just one year, the disaster-response industry had exploded, with a slew of new corporations entering the market, promising safety and security should the next Big One hit. One of the more ambitious ventures was launched by an airline in West Palm Beach, Florida. Help Jet bills itself as "the first hurricane escape plan that turns a hurricane evacuation into a jet-setter vacation." When a storm is coming, the airline books holidays for its members at five-star golf resorts, spas or Disneyland. With the reservations all 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."24 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. "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,'" said Dave Blandford, an exhibitor at the conference, showing off his "self-heating meals."25 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 come under frequent political fire for spending 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.26 Much of those funds have, quite legally, gone into huge investments in corporate infrastructure- Bechtel's battalions of earth-moving equipment, Halliburton's planes and fleets of trucks, and the surveillance architecture built by 1^3, CACI and Booz Allen. Much of those funds have, quite legally, gone into huge investments in corporate infrastructure- Bechtel's battalions of earth-moving equipment, Halliburton's planes and fleets of trucks, and the surveillance architecture built by 1^3, CACI and Booz Allen.

Most dramatic has been Blackwater's investment in its paramilitary infrastructure. Founded in 1996, the company has used the steady stream of contracts during the Bush years to build up a private army of twenty thousand mercenary soldiers on call and a massive military base in North Carolina worth between $40 million and $50 million. According to one account, Blackwater's capacity now includes the following: "A burgeoning logistics operation that can deliver 100- or 200-ton self-contained humanitarian relief response packages faster than the Red Cross. A Florida aviation division with 26 different platforms, from helicopter gunships to a massive Boeing 767. The company even has a Zeppelin. The country's largest tactical driving track. ... A 20-acre man-made lake with shipping containers that have been mocked up with ship rails and portholes, floating on pontoons, used to teach how to board a hostile ship. A K-9 training facility that currently has 80 dog teams deployed around the world. . . . A 1,200-yard-long firing range for sniper training."*27 A right-wing journal in the U.S. pronounced Blackwater "al Qaeda for the good guys."28 It's a striking analogy. Wherever the disaster capitalism complex has landed, it has produced a proliferation of armed groupings 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, Black-water, the Mahdi Army or the gang down the street in New Orleans. It's a striking analogy. Wherever the disaster capitalism complex has landed, it has produced a proliferation of armed groupings 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, Black-water, the Mahdi Army or the gang down the street in New Orleans.

The emergence of this parallel privatized infrastructure reaches far beyond policing. When the contractor infrastructure built up during the Bush years is looked at as a whole, what is seen 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 (90 percent of Blackwater's revenues come from state contracts), including the training of its staff (overwhelmingly former civil servants, politicians and soldiers).29Yet the vast infrastructure is all privately owned and controlled. The citizens who have 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 contracted out the job to one of its major contractors, MPRI -it no longer had the know-how in-house. The CIA is losing so many staffers to the parallel 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. 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, 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, * One of the most worrying aspects of this industry is how unabashedly partisan it is. Blackwater, for instance, is closely aligned with the antiabortion 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 87 percent of its campaign contributions to Republicans, CH2M Hill 70 percent. Is it beyond the realm of the imagination to conceive of 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?

"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."30 Under 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 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 privatized 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, Bech-tel and Chevron. The group, calling itself Partnership for Disaster Response, complained of "mission creep" by the nonprofit sector in the aftermath of disasters. Apparently charities and NGOs were infringing on their market by donating building supplies rather than having Home Depot supply them for a fee. The mercenary firms, meanwhile, have been loudly claiming that they are better equipped to engage in peacekeeping in Darfur than the UN. 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 privatized 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, Bech-tel and Chevron. The group, calling itself Partnership for Disaster Response, complained of "mission creep" by the nonprofit sector in the aftermath of disasters. Apparently charities and NGOs were infringing on their market by donating building supplies rather than having Home Depot supply them for a fee. The mercenary firms, meanwhile, have been loudly claiming that they are better equipped to engage in peacekeeping in Darfur than the UN.32 Much of this new aggressiveness flows from the fact that the corporate world knows that the golden era of bottomless federal contracts cannot last much longer. The U.S. government is barreling toward an economic crisis, in no small part thanks to the deficit spending that has bankrolled the construction of the privatized disaster economy. That means that sooner rather than later, the contracts are going 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.33 When the disaster bubble bursts, firms such as Bechtel, Fluor and Black-water will lose much of their primary revenue streams. They will still have all the high-tech gear and 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 can't-do 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.

Already wealth 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 its citizens for the cost of their own evacuations, though it was eventually forced to back down.34 If we continue in this direction, the images of people stranded on New Orleans rooftops will not only be a glimpse of America's unresolved past of racial inequality but will also foreshadow a collective future of disaster apartheid in which survival is determined by who can afford to pay for escape. If we continue in this direction, the images of people stranded on New Orleans rooftops will not only be a glimpse of America's unresolved past of racial inequality but will also foreshadow a collective future of disaster apartheid in which survival is determined by who can afford to pay for escape.

Looking ahead to coming disasters, ecological and political, we often assume that we are all going to face them together, that what's needed are leaders who recognize the destructive course we are on. But I'm not so sure. Perhaps part of the reason why 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 -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 is disaster-proofing other corporations. This was Paul Bremer's line of business before he went to Iraq: turning multinationals into security bubbles, able to function smoothly even if the states in which they are functioning are crumbling around them. The early results can be seen in the lobbies of many major 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, 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 Falluja, they can do for the police in downtown Reno," a spokesperson for Lockheed Martin said in November 2004.35 The 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 successful management consultant. In a widely circulated manifesto for Fast Company 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." 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."36 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 described 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, administered by private security companies who 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, such as 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 new charter schools. As usual, 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 sovereign 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 post-apocalyptic no-man's-land. A hit song by the rapper Juvenile in the summer after Katrina summed up the atmosphere: "We livin' like Haiti without no government"-failed state U.S.A.37 Bill Quigley, a local lawyer and activist, observed, "What is happening in New Orleans is just a more concentrated, more graphic version of what is going on all over our country. Every city in our country has some serious similarities to New Orleans. Every city has some abandoned neighborhoods. Every city in our country has abandoned some public education, public housing, public healthcare, and criminal justice. Those who do not support public education, healthcare, and housing will continue to turn all of our country into the Lower Ninth Ward unless we stop them."38 The process is already well under way. 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 its taxes on services for its 100,000 citizens and not have the revenues redistributed throughout the larger 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.39 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." He told another journalist that "no one in our industry has done a complete city of this size before."40 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, which would mean that none of their tax dollars would go to the poor neighborhoods nearby. 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 hyperserviced one on the other. What they were describing sounded a lot like New Orleans and a little like Baghdad. 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, which would mean that none of their tax dollars would go to the poor neighborhoods nearby. 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 hyperserviced one on the other. What they were describing sounded a lot like New Orleans and a little like Baghdad.41 In these wealthy Atlanta suburbs, the three-decade corporatist crusade to strip-mine the state was complete: it wasn't just every government service that had been outsourced but also the very function of government, which is to govern. It was 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 had not only built ports and bridges but was "responsible for the overall management of the infrastructure program."42 In post-Katrina New Orleans, it was awarded $500 million to build FEMA-villes and put on standby to be ready to do the same for the next disaster. A master of privatizing the state during extraordinary circumstances, it was now doing the same under ordinary ones. If Iraq was a laboratory of extreme privatization, the testing phase was clearly over. In post-Katrina New Orleans, it was awarded $500 million to build FEMA-villes and put on standby to be ready to do the same for the next disaster. A master of privatizing the state during extraordinary circumstances, it was now doing the same under ordinary ones. If Iraq was a laboratory of extreme privatization, the testing phase was clearly over.

CHAPTER 21.

LOSING THE PEACE INCENTIVE.

ISRAEL AS WARNING.

Big border fences belong not to the world of the gulag but to the world of noise barriers along highways, luxury boxes in sports stadiums, no-smoking areas, security zones in airports and "gated communities." ... They make explicit the privileges of the haves and the envy of the have-nots in a way that is embarrassing for both. That is not the same as saying they do not work. -Christopher Caldwell, senior editor, -Christopher Caldwell, senior editor, The Weekly Standard, The Weekly Standard, November 2006 November 20061 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 each other.

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 the Financial Times Financial Times columnist Martin Wolf described as "the contrast between the world's favourable economics and troublesome politics." As he 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. Soon after, former U.S. Treasury Secretary Lawrence Summers described the "near complete disconnect" between politics and markets as "something out of Dickens, you talk to international relations experts and it's the worst of all times. Then you talk to potential investors and it's one of the best of all times." columnist Martin Wolf described as "the contrast between the world's favourable economics and troublesome politics." As he 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. Soon after, former U.S. Treasury Secretary Lawrence Summers described the "near complete disconnect" between politics and markets as "something out of Dickens, you talk to international relations experts and it's the worst of all times. Then you talk to potential investors and it's one of the best of all times."2 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 consistently 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.

But that truism is no longer true. Since 2003, the year of the Iraq invasion, the index 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.3 The galloping economic growth in China and India played a part in the increased demand for luxury items, but so did 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 security sector, for heavy construction, for private health care companies treating wounded soldiers, for the oil and gas sectors-and of course for defense contractors. The galloping economic growth in China and India played a part in the increased demand for luxury items, but so did 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 security sector, for heavy construction, for private health care companies treating wounded soldiers, 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 loudly agitating for war in Iraq, received $25 billion of U.S. taxpayer dollars in 2005 alone. The 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 was 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 markets were saved from a prolonged crash following September 11. While conventional stock prices have under-performed, the Spade Defense Index, "a benchmark for defense, homeland security and aerospace stocks," went up every year from 2001 to 2006 by an average of 15 percent-seven and a half times the Standard Poor's 500 average increase in that same period.4 The Davos Dilemma is being further fueled by the intensely profitable model of privatized reconstruction that was forged in Iraq. Heavy-construction stocks, which include the big engineering firms that land juicy no-bid contracts after wars and natural disasters, went up 250 percent between 2001 and April 2007. Reconstruction is now such big business that every new destruction is greeted with the excitement of hot initial public stock offerings: $30 billion for Iraq reconstruction, $13 billion for tsunami reconstruction, $100 billion for New Orleans and the Gulf Coast, $7.6 billion for Lebanon.5 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 transport system, killing dozens and injuring hundreds, the U.S. stock market closed higher than it did the day before, with the Nasdaq up 7 points. The following August, on the day British law enforcement agencies arrested twenty-four suspects allegedly planning to blow up jetliners headed to the U.S., the Nasdaq closed 11.4 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.6 Like those corporations linked to defense, heavy construction and homeland security, the oil sector's fortunes 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), by pushing through Iraq's oil law 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 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. Like those corporations linked to defense, heavy construction and homeland security, the oil sector's fortunes 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), by pushing through Iraq's oil law 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 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.

No Conspiracies Required

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 destroy the black part of town and keep the white part dry," as the Nation of Islam's leader, Louis Farrakhan, suggested.7 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. 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 and the dot-com collapse all demonstrate. Our common addiction to dirty, nonrenewable energy sources keeps other kinds of emergencies coming: natural disasters (up 430 percent since 1975) and wars waged for control over scarce resources (not just Iraq and Afghanistan but lower-intensity conflicts such as those that rage in Nigeria, Colombia and Sudan), which in turn create terrorist blowback (a 2007 study calculated that the number of terrorist attacks since the start of the Iraq war had increased sevenfold).8 Given the boiling temperatures, both climatic and political, future disasters need not be cooked up in dark conspiracies. All indications are that simply by staying 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.

While the disaster capitalism complex does not deliberately scheme to create the cataclysms on which it feeds (though Iraq may be a notable exception), 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 has spent an estimated $16 million on the crusade over the past decade. While this 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 with 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.9 The creeping expansion of the disaster capitalism complex into media may prove to be a new kind of corporate synergy, one building on the vertical integration 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 in the nineties, the nightmare of the menacing, fortressed Western continents, under siege from jihadists and illegal immigrants, plays the same role in the new millennium. The only prospect that threatens the booming disaster economy on which so much wealth depends-from weapons to oil to engineering to surveillance to patented drugs -is the possibility of achieving some measure of climatic stability and geopolitical peace.

Israel and the Standing Disaster Apartheid State

As analysts struggle to understand the Davos Dilemma, a new consensus is emerging. It is not that the market has become immune to instability, at least not exactly. It is that a steady flow of disasters is now so expected that the ever-adaptable market has changed to fit this new status quo-instability is the new stability. In discussions of this post-9/11 economic phenomenon, Israel is often held up as a sort of Exhibit A. For much of the past decade, Israel has been experiencing its own miniaturized Davos Dilemma: wars and terrorist attacks have been increasing, but the Tel Aviv Stock Exchange has been rising to record levels right alongside this violence. As one stock analyst noted on Fox News after the July 7 London bombings, "In Israel they deal with the threat of terror daily, and that market is up for the year."10 Like the global economy in general, Israels political situation is, most agree, disastrous, but its economy has never been stronger, with 2007 growth rates rivaling those of China and India. Like the global economy in general, Israels political situation is, most agree, disastrous, but its economy has never been stronger, with 2007 growth rates rivaling those of China and India.

What makes Israel interesting as a guns-and-caviar model is not only that its economy is resilient in the face of major political shocks such as the 2006 war with Lebanon or Hamas's 2007 takeover of Gaza, but also that Israel has crafted an economy that expands markedly in direct response to escalating violence. The reasons for Israeli industry's comfort level with disaster are not mysterious. Years before U.S. and European companies grasped the potential of the global security boom, Israeli technology firms were busily pioneering the homeland security industry, and they continue to dominate the sector today. The Israeli Export Institute estimates that Israel has 350 corporations dedicated to selling homeland security products, and 30 new ones entered the market in 2007. From a corporate perspective, this development has made Israel a model to be emulated in the post-9/11 market. From a social and political perspective, however, Israel should serve as something else -a stark warning. The fact that Israel continues to enjoy booming prosperity, even as it wages war against its neighbors and escalates the brutality in the occupied territories, demonstrates just how perilous it is to build an economy based on the premise of continual war and deepening disasters.

Israels current ability to combine guns and caviar is the culmination of a dramatic shift in the nature of its economy over the past fifteen years, one that has had a profound and little-examined impact on the parallel disintegration of prospects for peace. The last time there was a credible prospect of peace breaking out in the Middle East was the early nineties, a time when a powerful constituency of Israelis believed that continued conflict was no longer an option. Communism had collapsed, the information revolution was beginning, and there was a widespread conviction inside Israel's business community that the bloody occupation of Gaza and the West Bank, compounded by the boycott of Israel by Arab states, was putting Israel's economic future in peril. Seeing the explosion of "emerging markets" around the world, Israeli corporations were tired of being held back by war; they wanted to be part of the high-profit borderless world, not penned in by regional strife. If the Israeli government could negotiate some sort of peace agreement with the Palestinians, Israel's neighbors would have to lift their boycotts, and the country would be perfectly positioned to be the Middle East's free-trade hub.

In 1993, Dan Gillerman, then president of the Federation of Israeli Chambers of Commerce, was a vocal proponent of this position. "Israel could become just another state ... or, it could become the strategic, logistic and marketing center of the whole region like a Middle Eastern Singapore or Hong Kong where multinational companies base their head offices. . . . We are talking about an utterly different economy. . . . Israel must act and fast to adjust or this once in a lifetime economic opportunity will be missed only for us to say: 'we could have.' "n That same year, Shimon Peres, then foreign minister, explained to a group of Israeli journalists that peace was now inevitable. It was a very particular kind of peace, however. "We are not seeking a peace of flags," Peres said, "we are interested in a peace of markets."12 A few months later, the Israeli prime minister, Yitzhak Rabin, and the Palestinian Liberation Organization chairman, Yasser Arafat, shook hands on the White House lawn to mark the inauguration of the Oslo Accords. The world cheered, the three men shared the 1994 Nobel Peace Prize-and then it all went horribly wrong. A few months later, the Israeli prime minister, Yitzhak Rabin, and the Palestinian Liberation Organization chairman, Yasser Arafat, shook hands on the White House lawn to mark the inauguration of the Oslo Accords. The world cheered, the three men shared the 1994 Nobel Peace Prize-and then it all went horribly wrong.

Oslo may have been the most optimistic period in Israeli-Palestinian relations, but the famous handshake did not mark the sealing of a deal. It was merely an agreement to start a process, with all the most contentious questions left unresolved. Arafat was in a terrible bargaining position, having to negotiate his own return to the occupied territories, and he secured no agreement on the fate of Jerusalem, on Palestinian refugees, on Jewish settlers or even on the right to Palestinian self-determination. The Oslo strategy, the negotiators claimed, was to push ahead with the "peace of markets" based on the idea that the rest would fall into place: by flinging open borders and joining the globalization juggernaut, both Israelis and Palestinians were supposed to experience such concrete improvements in daily life that a more hospitable context would be created for a "peace of flags" in the negotiations to come. That, at least, was the Oslo promise.

Many factors contributed to the subsequent breakdown. Israelis tend to blame suicide bombings and Rabin's assassination. Palestinians point to Israel's frenetic expansion of illegal settlements during the Oslo period as proof that the peace process was founded, in the words of Shlomo Ben-Ami, Israel's foreign minister in the Labor government of Ehud Barak, "on a neo-colonialist basis," designed so that "when there will finally be peace between us and the Palestinians, there will be a situation of dependence, of a structured lack of equality between the two entities."13 The debates about who derailed the peace process, or whether peace was ever the real goal of the process, are well known and have been exhaustively explored. However, two factors that contributed to Israel's retreat into unilateralism are little understood and rarely discussed, both related to the unique ways that the Chicago School free-market crusade played out in Israel. One was the influx of Soviet Jews, which was a direct result of Russia's shock therapy experiment. The other was the flipping of Israel's export economy from one based on traditional goods and high technology to one disproportionately dependent on selling expertise and devices relating to counterterrorism. Both factors were greatly disruptive to the Oslo process: the arrival of Russians reduced Israel's reliance on Palestinian labor and allowed it to seal in the occupied territories, while the rapid expansion of the high-tech security economy created a powerful appetite inside Israel's wealthy and most powerful sectors for abandoning peace in favor of fighting a continual, and continuously expanding, War on Terror. The debates about who derailed the peace process, or whether peace was ever the real goal of the process, are well known and have been exhaustively explored. However, two factors that contributed to Israel's retreat into unilateralism are little understood and rarely discussed, both related to the unique ways that the Chicago School free-market crusade played out in Israel. One was the influx of Soviet Jews, which was a direct result of Russia's shock therapy experiment. The other was the flipping of Israel's export economy from one based on traditional goods and high technology to one disproportionately dependent on selling expertise and devices relating to counterterrorism. Both factors were greatly disruptive to the Oslo process: the arrival of Russians reduced Israel's reliance on Palestinian labor and allowed it to seal in the occupied territories, while the rapid expansion of the high-tech security economy created a powerful appetite inside Israel's wealthy and most powerful sectors for abandoning peace in favor of fighting a continual, and continuously expanding, War on Terror.

By unfortunate historical coincidence, the start of the Oslo period coincided precisely with the most painful phase of the Chicago School experiment in Russia. The handshake on the White House lawn was on September 13, 1993; exactly three weeks later, Yeltsin sent in the tanks to set fire to the parliament building, paving the way for his most brutal dose of economic shock.

Over the course of the 1990s, roughly 1 million Jews left the former Soviet Union and moved to Israel. Immigrants who came from the former Soviet Union in this period now make up more than 18 percent of Israel's total Jewish population.14It's hard to overstate the impact of such a large and rapid population transfer to a country as small as Israel. Proportionally, it would be the equivalent of every person in Angola, Cambodia and Peru packing their bags and moving to the United States all at once. In Europe, it would be equivalent to all of Greece moving to France.

When the first wave of Soviet Jews headed for Israel, many were choosing to live in a Jewish state after a lifetime of religious persecution. Following that initial wave, however, the number of Russian immigrants to Israel increased dramatically and in direct relation to the amount of pain being inflicted on the Russian people by their economic shock doctors. These later waves of Soviet immigrants were not idealistic Zionists (many had quite tenuous claims to being Jewish); they were desperate economic refugees. "It is not where we are going that is most important, but from where we are coming," an emigrant waiting outside the Israeli embassy in Moscow told The Washington Times The Washington Times in 1992. A spokesperson for the Soviet Jewry Zionist Forum confessed of the exodus that "they are not drawn to Israel, they feel expelled from the USSR by the political instability and economic deterioration there." By far the largest wave came in the wake of Yeltsin's coup in 1993 -just as the peace process was beginning in Israel. After that, an additional 600,000 people moved from former Soviet states to Israel. in 1992. A spokesperson for the Soviet Jewry Zionist Forum confessed of the exodus that "they are not drawn to Israel, they feel expelled from the USSR by the political instability and economic deterioration there." By far the largest wave came in the wake of Yeltsin's coup in 1993 -just as the peace process was beginning in Israel. After that, an additional 600,000 people moved from former Soviet states to Israel.15 This demographic transformation upended the agreement's already precarious dynamic. Before the arrival of the Soviet refugees, Israel could not have severed itself for any length of time from the Palestinian populations in Gaza and the West Bank; its economy could no more survive without Palestinian labor than California could run without Mexicans. Roughly 150,000 Palestinians left their homes in Gaza and the West Bank every day and traveled to Israel to clean streets and build roads, while Palestinian farmers and tradespeople filled trucks with goods and sold them in Israel and in other parts of the territories.16 Each side depended on the other economically, and Israel took aggressive measures to prevent the Palestinian territories from developing autonomous trade relationships with Arab states. Each side depended on the other economically, and Israel took aggressive measures to prevent the Palestinian territories from developing autonomous trade relationships with Arab states.

Then, just as Oslo came into effect, that deeply interdependent relationship was abruptly severed. Unlike Palestinian workers, whose presence in Israel challenged the Zionist project by making demands on the Israeli state for restitution of stolen land and for equal citizenship rights, the hundreds of thousands of Russians who came to Israel at this juncture had the opposite effect. They bolstered Zionist goals by markedly increasing the ratio of Jews to Arabs, while simultaneously providing a new pool of cheap labor. Suddenly, Tel Aviv had the power to launch a new era in Palestinian relations. On March 30, 1993, Israel began its policy of "closure," sealing off the border between Israel and the occupied territories, often for days or weeks at a time, preventing Palestinians from getting to their jobs and selling their goods. Closure began as a temporary measure, ostensibly as an emergency response to the threat of terrorism. It quickly became the new status quo, with territories sealed off not just from Israel but from each other, policed through an ever more elaborate and demeaning system of checkpoints.

Nineteen ninety-three had been held up as the dawn of a new hopeful era; instead, it was the year that the occupied territories were transformed from run-down dormitories housing the underclass of the Israeli state into suffocating prisons. In this same period, between 1993 and 2000, the Israeli settlers living in the occupied territories doubled their numbers.17What had been in many places rough-hewn settler outposts were transformed into lush, fortified suburbs with their own restricted-access roads, clearly designed to be an addition to the Israeli state. During the Oslo years, Israel also continued to claim key water reserves in the West Bank, feeding the settlements and diverting scarce water back to Israel.

The new immigrants played a little-examined part here as well. Many residents of the former Soviet Union who arrived in Israel penniless after seeing their life savings disappear in the shock therapy devaluations were easily lured into the occupied territories, where houses and apartments were far cheaper, and special loans and bonuses were on offer. Some of the most ambitious settlements -such as Ariel in the West Bank, which boasts a university, a hotel and a Texas mini golf course-aggressively recruited in the former Soviet Union, sending scouts and launching Russian-language Web sites. Ariel managed to double its population thanks to this approach, and today it stands as a kind of mini-Moscow, with store signs advertising in both Hebrew and Russian. Half its residents are new immigrants from the former Soviet Union. The Israeli group Peace Now estimates that about twenty-five thousand Israeli citizens living in illegal settlements fall into this category, and it also notes that many Russians made the move "without a clear understanding of where they were going."18 In Israel, the years after the Oslo Accords delivered on their promise of trading conflict for prosperity in dramatic fashion. In the mid- and late nineties, Israeli companies took the global economy by storm, particularly high-tech firms specializing in telecommunications and Web technology, with Tel Aviv and Haifa becoming Middle Eastern outposts of Silicon Valley. At the peak of the dot-com bubble, 15 percent of Israel's gross domestic product came from high tech and about half its exports. That made Israel's economy "the most tech-dependent in the world," according to BusinessWeek-twice BusinessWeek-twice as dependent as the United States. as dependent as the United States.19 Once again, the new arrivals played a decisive role in the boom. Among the hundreds of thousands of Soviets who came to Israel in the nineties were more highly trained scientists than Israel's top tech institute had graduated in the eighty years of its existence. These were many of the scientists who had kept up the Soviet side of the Cold War-and as one Israeli economist put it, they became "the rocket fuel for [Israel's] tech industry." Shlomo Ben-Ami describes the years after the White House handshake as "one of the most breathtaking eras of economic growth and opening up of markets in [Israel's] history."20 That opening of markets had promised to benefit both sides in the conflict, but with the exception of a corrupt elite around Arafat, Palestinians were conspicuously absent from the post-Oslo boom. The biggest obstacle was closure, a policy that was never once lifted in the fourteen years since it was first imposed in 1993. According to the Harvard Middle East specialist Sara Roy, when the borders were abruptly sealed in 1993, the effects on Palestinian economic life were catastrophic. "Closure has been the single most damaging feature to the economy during the Oslo period and since, the one measure that has imposed the greatest damage on an already compromised economy," she said in an interview.

Workers couldn't work, traders couldn't sell their goods, farmers couldn't reach their fields. In 1993 per capita GNP in the occupied territories plummeted close to 30 percent; by the following year, poverty among Palestinians was up 33 percent. By 1996, says Roy, who has extensively documented the economic impact of closure, "66 per cent of the Palestinian labor force was either unemployed or severely under-employed."21 Far from a "peace of markets," what Oslo meant for Palestinians was disappearing markets, less work, less freedom-and, crucially, as the settlements expanded, less land. It was this utterly untenable situation that turned the occupied territories into the tinderbox that went up in flames when Ariel Sharon visited the site in Jerusalem called al-Haram al-Sharif by Muslims (by Jews, the Temple Mount) in September 2000, setting off the second intifada. Far from a "peace of markets," what Oslo meant for Palestinians was disappearing markets, less work, less freedom-and, crucially, as the settlements expanded, less land. It was this utterly untenable situation that turned the occupied territories into the tinderbox that went up in flames when Ariel Sharon visited the site in Jerusalem called al-Haram al-Sharif by Muslims (by Jews, the Temple Mount) in September 2000, setting off the second intifada.

In Israel and the international press, it is generally argued that the reason the peace process collapsed was that Ehud Barak's offer at Camp David in July 2000 was the best deal the Palestinians were ever going to get, and Arafat turned his back on Israel's generosity, thus proving that he was never genuine in the quest for peace. After that experience, and the eruption of the second intifada, Israelis lost faith in negotiation, elected Ariel Sharon and started building what they call the security barrier, and Palestinians call the Apartheid Wall-the network of concrete walls and steel fences that protrudes from the 1967 green-line border, reaching hungrily into Palestinian territory and pulling huge settlement blocks into the Israeli state, as well as 30 percent of the water sources in some areas.22 There is no doubt that Arafat wanted a better deal than the ones produced either at Camp David or Taba in January 2001, but these deals were also not the prizes they have been made out to be. Though consistently presented by Israelis as an offer unparalleled in its generosity, Camp David would have provided almost no redress to Palestinians who had been forced from their homes and land when the Israeli state was created in 1948, and it did not come close to satisfying the minimal rights of Palestinians to self-determination. In 2006, Shlomo Ben-Ami, a lead negotiator for the Israeli government at both Camp David and Taba, broke ranks with the party line and admitted that "Camp David was not the missed opportunity for the Palestinians, and if I were Palestinian I would have rejected Camp David, as well."23 There were other factors contributing to Tel Aviv's abandonment of serious negotiations at peace talks post-2001 - factors just as powerful as Arafat's alleged intransigence or Sharon's personal drive to create a "greater Israel." One related to the rise of Israel's tech economy. In the early nineties, Israel's economic elites wanted peace for prosperity, but the kind of prosperity they then built during the Oslo years ended up relying far less on peace than they had originally assumed. When Israel's niche in the global economy turned out to be information technologies, it meant that the key to growth was sending software and computer chips to Los Angeles and London, not shipping heavy cargo to Beirut and Damascus. Success in the tech sector did not require Israel to have friendly relationships with its Arab neighbors or to end its occupation of the territories. The rise of the tech economy was only the first phase of Israel's fateful economic transformation, however. The second came after the dot-com economy crashed in 2000, and Israel's leading companies needed to find a new niche in the global market.

With the most tech-dependent economy in the world, Israel was hit harder by the dot-com crash than anywhere else. The country went into immediate free fall, and by June 2001, analysts were predicting that roughly three hundred high-tech Israeli firms would go bankrupt, with tens of thousands of layoffs. The Tel Aviv business newspaper Globes Globes declared in a headline that 2002 was the "Worst Year for Israeli Economy Since 1953." declared in a headline that 2002 was the "Worst Year for Israeli Economy Since 1953."24 The only reason the recession was not even worse, the newspaper observed, was that the Israeli government quickly intervened with a powerful 10.7 percent increase in military spending, partially financed through cutbacks in social services. The government also encouraged the tech industry to branch out from information and communication technologies and into security and surveillance. In this period, the Israeli Defence Forces played a role similar to a business incubator. Young Israeli soldiers experimented with network systems and surveillance devices while they fulfilled their mandatory military service, then turned their findings into business plans when they returned to civilian life. A slew of new start-ups were launched, specializing in everything from "search and nail" data mining, to surveillance cameras, to terrorist profiling.25 When the market for these services and devices exploded in the years after September 11, the Israeli state openly embraced a new national economic vision: the growth provided by the dot-com bubble would be replaced with a homeland security boom. It was the perfect marriage of the Likud Party's hawkishness and its radical embrace of Chicago School economics, as embodied by Sharon's finance minister, Benjamin Netanyahu, and Israel's new central bank chief, Stanley Fischer, chief architect of the IMF's shock therapy adventures in Russia and Asia. When the market for these services and devices exploded in the years after September 11, the Israeli state openly embraced a new national economic vision: the growth provided by the dot-com bubble would be replaced with a homeland security boom. It was the perfect marriage of the Likud Party's hawkishness and its radical embrace of Chicago School economics, as embodied by Sharon's finance minister, Benjamin Netanyahu, and Israel's new central bank chief, Stanley Fischer, chief architect of the IMF's shock therapy adventures in Russia and Asia.

By 2003, Israel was already making a stunning recovery, and by 2004 the country had seemed to pull off a miracle: after its calamitous crash, it was performing better than almost any Western economy. Much of this growth was due to Israel's savvy positioning of itself as a kind of shopping mall for homeland security technologies. The timing was perfect. Governments around the world were suddenly desperate for terrorist hunting tools, as well as for human intelligence know-how in the Arab world. Under the leadership of the Likud Party, the Israeli state billed itself as a showroom for the cutting-edge homeland security state, drawing on its decades of experience and expertise fighting Arab and Muslim threats. Israel's pitch to North America and Europe was straightforward: the War on Terror you are just embarking on is one we have been fighting since our birth. Let our high-tech firms and privatized spy companies show you how it's done.

Overnight, Israel became, in the words of Forbes Forbes magazine, "the go-to country for antiterrorism technologies." magazine, "the go-to country for antiterrorism technologies."26 Every year since 2002, Israel has played host to at least half a dozen major homeland security conferences for lawmakers, police chiefs, sheriffs and CEOs from around the world, with their size and scope growing annually. As traditional tourism suffered in the face of security fears, this kind of official counterterror tourism emerged to partially fill the gap. Every year since 2002, Israel has played host to at least half a dozen major homeland security conferences for lawmakers, police chiefs, sheriffs and CEOs from around the world, with their size and scope growing annually. As traditional tourism suffered in the face of security fears, this kind of official counterterror tourism emerged to partially fill the gap.

During one such gathering in February 2006, billed as a "behind-the-scenes tour of [Israel's] struggle against terrorism," delegates from the FBI, Microsoft and Singapore's Mass Transit System (among others) traveled to some of Israel's most popular tourism destinations: the Knesset, the Temple Mount, the Wailing Wall. At each location, the visitors examined and admired the fortress-style security systems to see what they could apply at home. In May 2007, Israel hosted the directors of several large U.S. airports, who attended workshops on the types of aggressive passenger profiling and screening used at Ben Gurion International Airport near Tel Aviv. Steven Grossman, head of aviation at the international airport in Oakland, California, explained that he was there because "the Israelis are legendary for their security." Some of the events are macabre and theatrical. At the International Homeland Security Conference 2006, for instance, the Israeli military staged an elaborate "simulation of a mass casualty disaster that started in the City of Ness Ziona and concluded in Asaf Harofeh Hospital," according to the organizers.27 These are not policy conferences, but highly lucrative trade shows designed to demonstrate the prowess of Israeli security firms. As a result, Israel's exports in counter terrorism-related products and services increased by 15 percent in 2006 and were projected to grow by 20 percent in 2007, totalling $1.2 billion annually. The country's defense exports in 2006 reached a record $3.4 billion (compared to $1.6 billion in 1992), making Israel the fourth largest arms dealer in the world, larger than the U.K. Israel has more technology stocks listed on the Nasdaq exchange -many of them security related- than any other foreign country, and it has more tech patents registered in the U.S. than China and India combined. Its technology sector, much of it linked to security, now makes up 60 percent of all exports.28 Len Rosen, a prominent Israeli investment banker, told Fortune Fortune magazine, "It's security that matters more than peace." During Oslo, "people were looking for peace to provide growth. Now they're looking for security so violence doesn't curtail growth." magazine, "It's security that matters more than peace." During Oslo, "people were looking for peace to provide growth. Now they're looking for security so violence doesn't curtail growth."29 He could have gone much further: the business of providing "security"-in Israel and around the world-is directly responsible for much of Israel's meteoric economic growth in recent years. It is not an exaggeration to say that the War on Terror industry saved Israel's faltering economy, much as the disaster capitalism complex helped rescue the global stock markets. He could have gone much further: the business of providing "security"-in Israel and around the world-is directly responsible for much of Israel's meteoric economic growth in recent years. It is not an exaggeration to say that the War on Terror industry saved Israel's faltering economy, much as the disaster capitalism complex helped rescue the global stock markets.

Here is a small sample of the industry's reach: *A call made to the New York Police Department will be recorded and analyzed on technology created by Nice Systems, an Israeli firm. Nice also monitors communication for the L.A. Police and Time Warner, as well as providing video surveillance cameras to Ronald Reagan National Airport, among dozens of other top clients.30 *Images captured in the London tube system are recorded on Verint video surveillance cameras, owned by the Israeli technology giant Comverse. Verint surveillance gear is also used at the U.S. Department of Defense, Washington's Dulles International Airport, on Capitol Hill and the Montreal Metro. The company has surveillance clients in more than fifty countries and also helps corporate giants like Home Depot and Target keep an eye on their workers.31 *Employees of the cities of Los Angeles and Columbus, Ohio, carry electronic "smartcard" IDs made by the Israeli company SuperCom, which boasts the former CIA director James Woolsey as the chair of its advisory board. An unnamed European country has gone with SuperCom for a national ID program; another has commissioned a pilot program for "biometric passports," both highly controversial initiatives.32 *The firewalls in the computer networks of some of the largest electricity companies in the U.S. were built by the Israeli tech giant Check Point, though the corporations have chosen to keep their names secret. According to the company, "89% of Fortune 500 companies use Check Point security solutions."33 *In the run-up to the 2007 Super Bowl, all the workers at the Miami International Airport received training to identify "bad people, not just bad things" using a psychological system called Behavior Pattern Recognition, developed by the Israeli firm New Age Security Solutions. The company's CEO is the former head of security at Israel's Ben Gurion Airport. Other airports that have contracted with New Age in recent years to train workers in passenger profiling include Boston, San Francisco, Glasgow, Athens and London Heathrow, as well as many others. Port workers in the conflict-ridden Niger Delta have received New Age training, as have employees at the Netherlands Ministry of Justice, guards for the Statue of Liberty and agents with the New York Police Department's Counter Terrorism Bureau.34 *When the wealthy New Orleans neighborhood of Audubon Place decided it needed its own police force after Hurricane Katrina, it hired the Israel private security firm Instinctive Shooting International.35 *Agents with the Royal Canadian Mounted Police, Canada's federal police agency, have received training from International Security Instructors, a Virginia-based company that specializes in training law enforcement and soldiers. Advertising its "hard won Israeli experience," its instructors are "veterans of Israeli special task forces from .. . Israel Defense Force, Israel National Police Counter Terrorism units [and] General Security Services (GSS or 'Shin Beit')." The company's elite list of clients includes the FBI, the U.S. Army, the U.S. Marine Corps, the U.S. Navy SEALs, and London's Metropolitan Police Service.36 *In April 2007, special immigration agents with the U.S. Department of Homeland Security, working along the Mexican border, went through an intensive eight-day training course put on by the Golan Group. The Golan Group was founded by ex-Israeli Special Forces officers and boasts more than 3,500 employees in seven countries. "Essentially we put an Israeli security spin on our procedures," Thomas Pearson, the company's head of operations, explained of the training course, which covered everything from hand-to-hand combat to target practice to "getting really proactive with their SUV." The Golan Group, now based in Florida but still marketing its Israeli advantage, also produces X-ray machines, metal detectors and rifles. In addition to many governments and celebrities, its clients include ExxonMobil, Shell, Texaco, Levi's, Sony, Citigroup and Pizza Hut.37 *When Buckingham Palace needed a new security system, it selected a design by Magal, one of two Israeli companies that have been most involved in building the Israeli "security barrier."38 *When Boeing begins building the planned $2.5 billion "virtual fences" on the U.S. borders with Mexico and Canada-complete with electronic sensors, unmanned aircraft, surveillance cameras and eighteen hundred towers-one of its main partners will be Elbit. El-bit is the other Israeli firm most involved in building Israel's hugely controversial wall, which is "the largest construction project in Israel's history" and has also cost $2.5 billion.39 With more and more countries turning themselves into fortresses (walls and high-tech fences are going up on the border between India and Kashmir, Saudi Arabia and Iraq, Afghanistan and Pakistan), "security barriers" may prove to be the biggest disaster market of all. That's why Elbit and Magal don't mind the relentless negative publicity that Israel's wall attracts around the world-in fact, they consider it free advertising. "People believe we are the only ones who have experience testing this equipment in real life," explained Magal CEO Jacob Even-Ezra.40 Elbit and Magal have seen their stock prices more than double since September 11, a standard performance for Israeli homeland security stocks. Verint-dubbed "the granddaddy of the video surveillance space"- wasn't profitable at all before September 11, but between 2002 and 2006 its stock price has more than tripled, thanks to the surveillance boom. Elbit and Magal have seen their stock prices more than double since September 11, a standard performance for Israeli homeland security stocks. Verint-dubbed "the granddaddy of the video surveillance space"- wasn't profitable at all before September 11, but between 2002 and 2006 its stock price has more than tripled, thanks to the surveillance boom.41 The extraordinary performance of Israel's homeland security companies is well known to stock watchers, but it is rarely discussed as a factor in the politics of the region. It should be. It is not a coincidence that the Israeli state's decision to put "counterterrorism" at the center of its export economy has coincided precisely with its abandonment of peace negotiations, as well as a clear strategy to reframe its conflict with the Palestinians not as a battle against a nationalist movement with specific goals for land and rights but rather as part of the global War on Terror-one against illogical, fanatical forces bent only on destruction.

Economics is by no means the primary motivator for the escalation in the region since 2001. There is, of course, no shortage of fuel for violence on all sides. Yet within this context that is so weighted against peace, economics has, at certain points, been a countervailing force, pushing reluctant political leaders into negotiations, as was the case in the early nineties. What the homeland security boom has done is change the direction of that pressure, creating yet another powerful sector invested in continued violence.

As has been the case on previous Chicago School frontiers, Israel's post-9/11 growth spurt has been marked by the rapid stratification of society between rich and poor inside the state. The security buildup has been accompanied by a wave of privatizations and funding cuts to social programs that has virtually annihilated the economic legacy of Labor Zionism and created an epidemic of inequality the likes of which Israelis have never known. In 2007, 24.4 percent of Israelis were living below the poverty line, with 35.2 percent of all children in poverty-compared with 8 percent of children twenty years earlier42 Yet even though the benefits of the boom have not been widely shared, they have been so lucrative for a small sector of Israelis, particularly the powerful segment that is seamlessly integrated into both the military and government (with all the familiar corporatist corruption scandals), that a crucial incentive for peace has been obliterated. Yet even though the benefits of the boom have not been widely shared, they have been so lucrative for a small sector of Israelis, particularly the powerful segment that is seamlessly integrated into both the military and government (with all the familiar corporatist corruption scandals), that a crucial incentive for peace has been obliterated.

The Israeli business sector's shift in political direction has been dramatic. The vision that captivates the Tel Aviv Stock Exchange today is no longer that of Israel as a regional trade hub but rather as a futuristic fortress, able to survive even in a sea of determined enemies. The revised attitude was most pronounced in the summer of 2006, when the Israeli government turned what should have been a prisoner exchange negotiation with Hezbollah into a full-scale war. Israel's largest corporations didn't just support the war, they sponsored it. Bank Leumi, Israel's newly privatized megabank, distributed bumper stickers with the slogans "We Will Be Victorious" and "We Are Strong," while, as the Israeli journalist and novelist Yitzhak Laor wrote at the time, "the current war is the first to become a branding opportunity for one of our largest mobile phone companies, which is using it to run a huge promotional campaign."43 Clearly, Israeli industry no longer has reason to fear war. In contrast to 1993, when conflict was seen as a barrier to growth, the Tel Aviv Stock Exchange went up in August 2006, the month of the devastating war with Lebanon. In the final quarter of the year, which had also included the bloody escalation in the West Bank and Gaza following the election of Hamas, Israel's overall economy grew by a staggering 8 percent-more than triple the growth rate of the U.S. economy in the same period. The Palestinian economy, meanwhile, contracted by between 10 and 15 percent in 2006, with poverty rates reaching close to 70 percent.44 One month after the UN declared a cease-fire between Israel and Hezbollah, the New York Stock Exchange hosted a special conference on investing in Israel. More than two hundred Israeli firms attended, many of them in the homeland security sector. At that moment in Lebanon, economic activity was at a virtual standstill and roughly 140 factories-manufacturers of everything from prefab homes to medical products to milk-were clearing away the rubble after being hit by Israeli bombs and missiles. Impervious to the impact of the war, the message of the New York gatherings was upbeat: "Israel is open for business-has always been open for business," announced Israel's ambassador to the United Nations, Dan Gillerman, welcoming delegates to the event.45 Only a decade earlier, this kind of wartime exuberance would have been unimaginable. It was Gillerman who, as head of the Israeli Federation of Chambers of Commerce, had called for Israel to seize the historic opportunity and become "a Middle Eastern Singapore." Now he was one of the most inflammatory of Israel's pro-war hawks, pushing for an even wider escalation. On CNN, Gillerman said that "while it may be politically incorrect and maybe even untrue to say that all Muslims are terrorists, it happens to be very true that nearly all terrorists are Muslim. So this is not just Israel's war. This is the world's war."46 This recipe for endless worldwide war is the same one that the Bush administration offered as a business prospectus to the nascent disaster capitalism complex after September 11. It is not a war that can be won by any country, but winning is not the point. The point is to create "security" inside fortress states bolstered by endless low-level conflict outside their walls. In a way, it is the same goal that the private security companies have in Iraq: secure the perimeter, protect the principal. Baghdad, New Orleans and Sandy Springs provide glimpses of a kind of gated future built and run by the disaster capitalism complex. It is in Israel, however, that this process is most advanced: an entire country has turned itself into a fortified gated community, surrounded by locked-out people living in permanently excluded red zones. This is what a society looks like when it has lost its economic incentive for peace and is heavily invested in fighting and profiting from an endless and unwinnable War on Terror. One part looks like Israel; the other part looks like Gaza.

Israel's case is extreme, but the kind of society it is creating may not be unique. The disaster capitalism complex thrives in conditions of low-intensity grinding conflict. That seems to be the end point in all the disaster zones, from New Orleans to Iraq. In April 2007, U.S. soldiers began implementing a plan to turn several volatile Baghdad neighborhoods into "gated communities," surrounded by checkpoints and concrete walls, where residents would be tracked using biometric technology. "We'll be like the Palestinians," predicted one resident of Adhamiya, watching his neighborhood being sealed in by the barrier.47 After it becomes clear that Baghdad is never going to be Dubai, and New Orleans won't be Disneyland, Plan B is to settle into another Colombia or Nigeria -never-ending war, fought in large measure by private soldiers and paramilitaries, damped down just enough to get the natural resources out of the ground, helped along by mercenaries guarding the pipelines, platforms and water reserves. After it becomes clear that Baghdad is never going to be Dubai, and New Orleans won't be Disneyland, Plan B is to settle into another Colombia or Nigeria -never-ending war, fought in large measure by private soldiers and paramilitaries, damped down just enough to get the natural resources out of the ground, helped along by mercenaries guarding the pipelines, platforms and water reserves.

It has become commonplace to compare the militarized ghettos of Gaza and the West Bank, with their concrete walls, electrified fences and checkpoints, to the Bantustan system in South Africa, which kept blacks in ghettos and demanded passes when they left. "Israel's laws and practices in the OPT [occupied Palestinian territories] certainly resemble aspects of apartheid," said John Dugard, the South African lawyer who is the UN's special rapporteur on human rights in the Palestinian territories, in February 2007.48The similarities are stark, but there are differences too. South Africa's Bantustans were essentially work camps, a way to keep African laborers under tight surveillance and control so they would work cheaply in the mines. What Israel has constructed is a system designed to do the opposite: to keep workers from working, a network of open holding pens for millions of people who have been categorized as surplus humanity.

Palestinians are not the only people in the world who have been so categorized: millions of Russians also became surplus in their own country, which is why so many fled their homes in the hope of finding a job and a decent life in Israel. Although the original Bantustans have been dismantled in South Africa, the one in four people who live in shacks in fast-expanding slums are also surplus in the new, neoliberal South Africa.49 This discarding of 25 to 60 percent of the population has been the hallmark of the Chicago School crusade since the "misery villages" began mushrooming throughout the Southern Cone in the seventies. In South Africa, Russia and New Orleans the rich build walls around themselves. Israel has taken this disposal process a step further: it has built walls around the dangerous poor. This discarding of 25 to 60 percent of the population has been the hallmark of the Chicago School crusade since the "misery villages" began mushrooming throughout the Southern Cone in the seventies. In South Africa, Russia and New Orleans the rich build walls around themselves. Israel has taken this disposal process a step further: it has built walls around the dangerous poor.

CONCLUSION.

SHOCK WEARS OFF.

THE RISE OF PEOPLE'S RECONSTRUCTION.

I want to say to you, my Indian brothers concentrated here in Bolivia, that the five-hundred-year campaign of resistance has not been in vain. This democratic, cultural fight is part of the fight of our ancestors, it is the continuity of the fight of [the indigenous anticolonial leader] Tupac Katari, it is a continuity of the fight of Che Guevara.

-Evo Morales, after being sworn in as president of Bolivia, January 22, 2006 22, 20061 People know best. They know every corner and every detail of their community best. They also know their weak points.

-Pichit Ratakul, executive director of the Asian Disaster Preparedness Center, October 30, 20062 The people from the barrio built the city twice: during the day we built the houses of the well-off. At night and at weekends, with solidarity, we built our own homes, our barrio.

-Andres Antillano, resident of Caracas, April 15, 20043 When Milton Friedman died in November 2006, many of the obituaries were imbued with a sense of fear that his death marked the end of an era. In Canada's National Post National Post, Terence Corcoran, one of Friedman's most devoted disciples, wondered whether the global movement the economist had launched 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."4 Corcoran's grim assessment did not begin to encompass the state of disarray in which the quest for unfettered capitalism found itself that November. Friedman's intellectual heirs in the United States, the neocons who launched the disaster capitalism complex, were at the lowest point in their history. The movement's pinnacle had been the winning of the U.S. Congress by the Republicans 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 a winning Democratic candidate for the U.S. Senate, Jim Webb, that the country had drifted "toward a class-based system, the likes of which we have not seen since the 19th century."5 In each case, the core tenets of Chicago School economics-privatization, deregulation and cuts to government services-had laid the foundation for the breakdowns. In each case, the core tenets of Chicago School economics-privatization, deregulation and cuts to government services-had laid the foundation for the breakdowns.

In 1976, Orlando Letelier, one of the counterrevolution's first victims, had insisted that the massive wealth inequalities that the Chicago Boys opened up in Chile were "not an economic liability but a temporary political success." For Letelier, it was obvious that the dictatorship's "free market" rules were doing exactly what they were designed to do: they were not creating a perfectly harmonious economy but turning the already wealthy into the superrich and the organized working class into the disposable poor. These patterns of stratification have been repeated everywhere that the Chicago School ideology has triumphed. In China, despite its stunning economic growth, the gap between the incomes of city dwellers and the 800 million rural poor has doubled over the past twenty years. In Argentina, where in 1970 the richest 10 percent of the population earned 12 times as much as the poorest, the rich were by 2002 earning 43 times as much. Chile's "political success" has truly been globalized. In December 2006, a month after Friedman died, a UN study found that "the richest 2 per cent of adults in the world own more than half of global household wealth." The shift has been starkest in the U.S., where CEOs made 43 times what the average worker earned in 1980, when Reagan kicked off the Friedmanite crusade. By 2005, CEOs earned 411 times as much. For those executives, the counterrevolution that began in the basement of the Social Sciences building in the 1950s has indeed been a success, but the cost of that victory has been the widespread loss of faith in the core free-market promise-that increased wealth will be shared. As Webb said during the midterm campaign, "Trickle-down economics didn't happen."6 The hoarding of so much wealth by a tiny minority of the world's population was not a peaceful process, as we have seen, nor, often, was it a legal one. Corcoran was right to question the caliber of the movement's leadership, but the problem was not simply that there were no figureheads of Friedman's stature. It was that many of the men who had been on the front lines of the international drive to liberate the markets from all restrictions were at that moment caught up in an astonishing array of scandals and criminal proceedings, dating from the earliest laboratories in Latin America to the most recent one in Iraq. Throughout its thirty-five-year history, the Chicago School agenda has advanced through the intimate cooperation of powerful business figures, crusading ideologues and strong-arm political leaders. By 2006, key players from each camp were either in jail or up on charges.

Augusto Pinochet, the first leader to put Friedman's shock treatment into effect, was under house arrest (though he died before trials could go ahead on either the corruption or murder charges). The day after Friedman died, Uruguayan police came to arrest to Juan Maria Bordaberry on charges related to the killing of four prominent leftists in 1976. Bordaberry had led Uruguay during its brutal embrace of Chicago School economics, with Friedman's colleagues and students serving as prominent advisers. In Argentina, the courts have stripped the country's former junta leaders of immunity, sending ex-president Jorge Videla and Admiral Emilio Massera to jail for life. Domingo Cavallo, who had headed the central bank during the dictatorship and had gone on to impose the sweeping shock therapy program under democracy, was also indicted on charges of "fraud in public administration." A debt deal that Cavallo engineered with foreign banks in 2001 cost the country tens of billions of dollars, and the judge, who froze $10 million of Cavallo's personal assets, asserted that the administration had acted with "absolute consciousness" of the detrimental outcome.7 In Bolivia, former president Gonzalo Sanchez de Lozada, in whose living room the economic "atomic bomb" had been built, was wanted on several charges relating to the gunning down of protesters and his signing of contracts with foreign gas companies that allegedly violated Bolivian laws.8 In Russia, not only had the Harvard Men been found guilty of fraud but many of the Russian oligarchs, the well-connected businessmen who made billions from the overnight privatizations that the Harvard team had helped engineer, were either in jail or living in exile. Mikhail Khodorkovsky, former head of the oil giant Yukos, was serving an eight-year sentence in a Siberian prison. His colleague and principal shareholder, Leonid Nevzlin, was in exile in Israel, as was fellow oligarch Vladimir Gusinsky, while the infamous Boris Berezovsky had settled in London, unable to return to Moscow for fear of arrest on fraud charges; yet all these men deny wrongdoing. In Russia, not only had the Harvard Men been found guilty of fraud but many of the Russian oligarchs, the well-connected businessmen who made billions from the overnight privatizations that the Harvard team had helped engineer, were either in jail or living in exile. Mikhail Khodorkovsky, former head of the oil giant Yukos, was serving an eight-year sentence in a Siberian prison. His colleague and principal shareholder, Leonid Nevzlin, was in exile in Israel, as was fellow oligarch Vladimir Gusinsky, while the infamous Boris Berezovsky had settled in London, unable to return to Moscow for fear of arrest on fraud charges; yet all these men deny wrongdoing.9 Conrad Black, who, with his newspaper chain, was the most powerful ideological amplifier of Friedmanism in Canada, was facing charges in the U.S. that he had defrauded the shareholders of Hollinger International, treating the company, according to prosecutors, like "the bank of Conrad Black." Also in the United States, Enron's Ken Lay-the poster boy for the ill effects of energy deregulation -died in July 2006, having been convicted of conspiracy and fraud. And Grover Norquist, the Friedmanite think-tanker who had made progressives' hair stand on end by declaring, "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub," was neck-deep in the influence-peddling scandal surrounding the Washington lobbyist Jack Abramoff, though no charges had been laid. Conrad Black, who, with his newspaper chain, was the most powerful ideological amplifier of Friedmanism in Canada, was facing charges in the U.S. that he had defrauded the shareholders of Hollinger International, treating the company, according to prosecutors, like "the bank of Conrad Black." Also in the United States, Enron's Ken Lay-the poster boy for the ill effects of energy deregulation -died in July 2006, having been convicted of conspiracy and fraud. And Grover Norquist, the Friedmanite think-tanker who had made progressives' hair stand on end by declaring, "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub," was neck-deep in the influence-peddling scandal surrounding the Washington lobbyist Jack Abramoff, though no charges had been laid.10 Despite the attempts of everyone from Pinochet to Cavallo to Berezovsky to Black to portray himself as a victim of baseless political persecution, this list, by no means complete, represents a radical departure from the neolib-eral creation myth. The economic crusade managed to cling to a veneer of respectability and lawfulness as it progressed. Now that veneer was being very publicly stripped away to reveal a system of gross wealth inequalities, often opened up with the aid of grotesque criminality.

Besides legal trouble, there was another cloud on the horizon. The effects of the shocks that had been so integral to creating the illusion of ideological consensus were beginning to wear off. Rodolfo Walsh, another early casualty, had regarded the Chicago School ascendancy in Argentina as a setback, not a lasting defeat. The terror tactics used by the junta 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 on the streets of Buenos Aires, 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.

I was living in Buenos Aires in that period, and people kept exclaiming, "The dictatorship just ended!" At the time I didn't understand the meaning behind the jubilation, since the dictatorship had been over for seventeen years. Now I think I do: the state of shock had finally worn off, just as Walsh predicted.

In the years since, that wide-awake shock resistance has spread to many other former shock labs-Chile, Bolivia, China, Lebanon. 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 of all to Friedman's legacy because they challenge his most central claim: that capitalism and freedom are part of the same indivisible project.

The Bush administration remains so committed to perpetuating this false union that, in 2002, it embedded it in the National Security Strategy of the United States of America. "The great struggles of the twentieth century between liberty and totalitarianism ended with a decisive victory for the forces of freedom-a single sustainable model for national success: freedom, democracy and free enterprise."11 This assertion, made with the full force of the U.S. military arsenal behind it, was not enough to hold back the tide of citizens using their various freedoms to reject free-market orthodoxy-even in the United States. As a headline in This assertion, made with the full force of the U.S. military arsenal behind it, was not enough to hold back the tide of citizens using their various freedoms to reject free-market orthodoxy-even in the United States. As a headline in The Miami Herald The Miami Herald after the 2006 midterm elections put it, "Democrats won big by opposing free-trade agreements." A after the 2006 midterm elections put it, "Democrats won big by opposing free-trade agreements." A New York Times! New York Times!CBS poll a few months later found that 64 percent of U.S. citizens believed the government should guarantee health care coverage to all and "showed a striking willingness... to make tradeoffs" to achieve that goal, including paying up to $500 a year more in taxes.12 On the international stage, the staunchest opponents of neoliberal economics were winning election after election. The Venezuelan president Hugo Chavez, running on a platform of "21st Century Socialism," was reelected in 2006 for a third term with 63 percent of the vote. Despite attempts by the Bush administration to paint Venezuela as a pseudodemocracy, a poll that same year recorded that 57 percent of Venezuelans were 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.13 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. In stark contrast to this enthusiasm, in countries where economic policies remain largely unchanged regardless of the promises made during campaigns, polls consistently track an eroding faith in democracy, reflected in dwindling turnout for elections, deep cynicism toward politicians and a rise in religious fundamentalism. 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. In stark contrast to this enthusiasm, in countries where economic policies remain largely unchanged regardless of the promises made during campaigns, polls consistently track an eroding faith in democracy, reflected in dwindling turnout for elections, deep cynicism toward politicians and a rise in religious fundamentalism.

More clashes between free markets and free people took place in Europe in 2005, when the European Constitution was rejected in two national referendums. In France, the document came to be seen as the codification of the corporatist order. It was the first time citizens had ever been asked for their direct input into whether free-market rules should reign in Europe, and they seized the opportunity to say no. As the Paris-based author and activist Susan George put it, "People really didn't know Europe was all encapsulated, all written down in a single document. . . . Once you start to quote it, and people find out what's actually in this and find out what's going to be constitutionalized and not revisable and not amendable, they get scared to death."14 The powerful rejection of what the French call "savage capitalism" takes many different forms, including reactionary and racist ones. In the U.S., rage at the shrinking of the middle class has been easily redirected to calls for border fences, with CNN's Lou Dobbs leading a nightly campaign against the "invasion of illegal aliens" waging "war on the American middle class" - stealing jobs, spreading crime, as well as bringing in "highly contagious diseases."15 (This kind of scapegoating provoked the largest immigrants' rights protests in U.S. history, with more than a million people participating in a series of marches in 2006-another sign of a new fearlessness among casualties of economic shocks.) (This kind of scapegoating provoked the largest immigrants' rights protests in U.S. history, with more than a million people participating in a series of marches in 2006-another sign of a new fearlessness among casualties of economic shocks.) In the Netherlands, the 2005 referendum on the European Constitution was similarly hijacked by anti-immigration parties, turning it into a vote less against a corporate order than against the specter of Polish tradespeople flooding into Western Europe to push down wages. What drove many voters in both the French and Dutch referendums was "fear of the Polish plumber"-or "plumber phobia," in the words of the former European Union commissioner Pascal Lamy.16 In Poland, meanwhile, the backlash against the policies that impoverished so many in the nineties has unleashed its own set of disturbing phobias.

When Solidarity betrayed the workers who had built the movement, many Poles turned to new organizations, eventually putting the ultraconservative Law and Justice Party into power. Poland is now ruled by President Lech Kaczyriski, a disaffected Solidarity activist who, when he was mayor of Warsaw, made a name for himself by banning a gay-pride-day march and participating in a "normal people pride" event.57 Kaczyriski and his twin brother, Jaroslaw (now prime minister), won the 2005 elections with a campaign largely based on rhetoric attacking Chicago School policies. Their main opponents were promising to do away with the public pension system and to introduce a 15 percent flat tax-both straight out of the Friedman playbook. The twins pointed out that these policies would steal from the poor and enrich a nexus of big-business and on-the-take politicians. When the Law and Justice Party came to power, however, it switched its aim to easier targets: gays, Jews, feminists, foreigners, Communists. As one Polish newspaper editor put it, "Their project is definitely an indictment of the past 17 years." Kaczyriski and his twin brother, Jaroslaw (now prime minister), won the 2005 elections with a campaign largely based on rhetoric attacking Chicago School policies. Their main opponents were promising to do away with the public pension system and to introduce a 15 percent flat tax-both straight out of the Friedman playbook. The twins pointed out that these policies would steal from the poor and enrich a nexus of big-business and on-the-take politicians. When the Law and Justice Party came to power, however, it switched its aim to easier targets: gays, Jews, feminists, foreigners, Communists. As one Polish newspaper editor put it, "Their project is definitely an indictment of the past 17 years."17 In Russia, the Putin era is seen by many as a similar backlash against the shock therapy era. With tens of millions of impoverished citizens still excluded from the fast-growing economy, politicians have no difficulty riling up public sentiment about the events of the early nineties, which are frequently portrayed as a foreign conspiracy to bring the Soviet empire to its knees and put Russia "under external management."18 Despite the fact that Putin s legal moves against several oligarchs have mostly been symbolic-with a new breed of "state oligarch" rising around the Kremlin-the memory of the chaos of the nineties has made many Russians grateful for the order Putin has restored, even as growing numbers of journalists and other critics die mysteriously, and the secret police enjoy seemingly total impunity. Despite the fact that Putin s legal moves against several oligarchs have mostly been symbolic-with a new breed of "state oligarch" rising around the Kremlin-the memory of the chaos of the nineties has made many Russians grateful for the order Putin has restored, even as growing numbers of journalists and other critics die mysteriously, and the secret police enjoy seemingly total impunity.

With socialism still closely associated with the decades of brutality carried out in its name, public anger has few outlets for expression except nationalism and protofascism. Incidents of ethnic-based violence are up roughly 30 percent a year and in 2006 were reported almost daily. The slogan "Russia for Russians" is supported by close to 60 percent of the population.19 "The authorities are fully aware that their social and economic policy is very flawed with respect to providing acceptable living conditions to the majority of the population," said Yuri Vdovin, an antifascist activist. Yet "all the failures are allegedly due to the presence of other people with the wrong religion, the wrong skin colour or other ethnic background." "The authorities are fully aware that their social and economic policy is very flawed with respect to providing acceptable living conditions to the majority of the population," said Yuri Vdovin, an antifascist activist. Yet "all the failures are allegedly due to the presence of other people with the wrong religion, the wrong skin colour or other ethnic background."20 It is a bitter irony that when shock therapy was prescribed in Russia and Eastern Europe, its painful effects were often justified as the only way to prevent a repeat of the conditions in Weimar Germany that led to the rise of Nazism. The casual exclusion of tens of millions of people by free-market ideologues has reproduced frighteningly similar explosive conditions: proud populations that perceive themselves as humiliated by foreign forces, looking to regain their national pride by targeting the most vulnerable in their midst.