[R-G] Disaster capitalism: State of extortion
fentona at shaw.ca
Mon Jul 7 09:21:48 MDT 2008
Disaster capitalism: State of extortion
>by Naomi Klein
July 7, 2008
Once oil passed $140 a barrel, even the most rabidly right-wing media
hosts had to prove their populist cred by devoting a portion of every
show to bashing Big Oil. Some have gone so far as to invite me on for
a friendly chat about an insidious new phenomenon: "disaster
capitalism." It usually goes well — until it doesn't.
For instance, "independent conservative" radio host Jerry Doyle and I
were having a perfectly amiable conversation about sleazy insurance
companies and inept politicians when this happened: "I think I have a
quick way to bring the prices down," Doyle announced. "We've invested
$650 billion to liberate a nation of 25 million people. Shouldn't we
just demand that they give us oil? There should be tankers after
tankers backed up like a traffic jam getting into the Lincoln Tunnel,
the Stinkin' Lincoln, at rush hour with thank-you notes from the Iraqi
government.... Why don't we just take the oil? We've invested it
liberating a country. I can have the problem solved of gas prices
coming down in ten days, not ten years."
There were a couple of problems with Doyle's plan, of course. The
first was that he was describing the biggest stickup in world history.
The second, that he was too late: "We" are already heisting Iraq's
oil, or at least are on the cusp of doing so.
It's been ten months since the publication of my book The Shock
Doctrine: The Rise of Disaster Capitalism, in which I argue that
today's preferred method of reshaping the world in the interest of
multinational corporations is to systematically exploit the state of
fear and disorientation that accompanies moments of great shock and
crisis. With the globe being rocked by multiple shocks, this seems
like a good time to see how and where the strategy is being applied.
And the disaster capitalists have been busy — from private
firefighters already on the scene in Northern California's wildfires,
to land grabs in cyclone-hit Burma, to the housing bill making its way
through Congress. The bill contains little in the way of affordable
housing, shifts the burden of mortgage default to taxpayers and makes
sure that the banks that made bad loans get some payouts. No wonder it
is known in the hallways of Congress as "The Credit Suisse Plan,"
after one of the banks that generously proposed it.
Iraq Disaster: We broke it, we (just) bought it
But these cases of disaster capitalism are amateurish compared with
what is unfolding at Iraq's oil ministry. It started with no-bid
service contracts announced for ExxonMobil, Chevron, Shell, BP and
Total (they have yet to be signed but are still on course). Paying
multinationals for their technical expertise is not unusual. What is
odd is that such contracts almost invariably go to oil service
companies — not to the oil majors, whose work is exploring, producing
and owning carbon wealth. As London-based oil expert Greg Muttitt
points out, the contracts make sense only in the context of reports
that the oil majors have insisted on the right of first refusal on
subsequent contracts handed out to manage and produce Iraq's oil
fields. In other words, other companies will be free to bid on those
future contracts, but these companies will win.
One week after the no-bid service deals were announced, the world
caught its first glimpse of the real prize. After years of back-room
arm-twisting, Iraq is officially flinging open six of its major oil
fields, accounting for around half of its known reserves, to foreign
investors. According to Iraq's oil minister, the long-term contracts
will be signed within a year. While ostensibly under control of the
Iraq National Oil Company, foreign firms will keep 75 per cent of the
value of the contracts, leaving just 25 per cent for their Iraqi
That kind of ratio is unheard of in oil-rich Arab and Persian states,
where achieving majority national control over oil was the defining
victory of anticolonial struggles. According to Muttitt, the
assumption until now was that foreign multinationals would be brought
in to develop brand-new fields in Iraq — not to take over ones that
are already in production and therefore require minimal technical
support. "The policy was always to allocate these fields to the Iraq
National Oil Company," he told me. This is a total reversal of that
policy, giving INOC a mere 25 per cent instead of the planned 100 per
So what makes such lousy deals possible in Iraq, which has already
suffered so much? Ironically, it is Iraq's suffering — its never-
ending crisis — that is the rationale for an arrangement that
threatens to drain its treasury of its main source of revenue. The
logic goes like this: Iraq's oil industry needs foreign expertise
because years of punishing sanctions starved it of new technology and
the invasion and continuing violence degraded it further. And Iraq
urgently needs to start producing more oil. Why? Again because of the
war. The country is shattered, and the billions handed out in no-bid
contracts to Western firms have failed to rebuild the country. And
that's where the new no-bid contracts come in: they will raise more
money, but Iraq has become such a treacherous place that the oil
majors must be induced to take the risk of investing. Thus the
invasion of Iraq neatly creates the argument for its subsequent pillage.
Several of the architects of the Iraq War no longer even bother to
deny that oil was a major motivator. On National Public Radio's To the
Point, Fadhil Chalabi, one of the primary Iraqi advisers to the Bush
Administration in the lead-up to the invasion, recently described the
war as "a strategic move on the part of the United States of America
and the U.K. to have a military presence in the Gulf in order to
secure [oil] supplies in the future." Chalabi, who served as Iraq's
oil under secretary and met with the oil majors before the invasion,
described this as "a primary objective."
Invading countries to seize their natural resources is illegal under
the Geneva Conventions. That means that the huge task of rebuilding
Iraq's infrastructure — including its oil infrastructure — is the
financial responsibility of Iraq's invaders. They should be forced to
pay reparations. (Recall that Saddam Hussein's regime paid $9 billion
to Kuwait in reparations for its 1990 invasion.) Instead, Iraq is
being forced to sell 75 per cent of its national patrimony to pay the
bills for its own illegal invasion and occupation.
Oil price shock: Give us the arctic or never drive again
Iraq isn't the only country in the midst of an oil-related stickup.
The Bush Administration is busily using a related crisis — the soaring
price of fuel — to revive its dream of drilling in the Arctic National
Wildlife Refuge (ANWR). And of drilling offshore. And in the rock-
solid shale of the Green River Basin. "Congress must face a hard
reality," said George W. Bush on June 18. "Unless members are willing
to accept gas prices at today's painful levels — or even higher — our
nation must produce more oil."
This is the President as Extortionist in Chief, with gas nozzle
pointed to the head of his hostage — which happens to be the entire
country. Give me ANWR, or everyone has to spend their summer vacations
in the backyard. A final stickup from the cowboy President.
Despite the Drill Here. Drill Now. Pay Less bumper stickers, drilling
in ANWR would have little discernible impact on actual global oil
supplies, as its advocates well know. The argument that it could
nonetheless bring down oil prices is based not on hard economics but
on market psychoanalysis: drilling would "send a message" to the oil
traders that more oil is on the way, which would cause them to start
betting down the price.
Two points follow from this approach. First, trying to psych out
hyperactive commodity traders is what passes for governing in the Bush
era, even in the midst of a national emergency. Second, it will never
work. If there is one thing we can predict from the oil market's
recent behavior, it is that the price is going to keep going up
regardless of what new supplies are announced.
Take the massive oil boom under way in Alberta's notorious tar sands.
The tar sands (sometimes called the oil sands) have the same things
going for them as Bush's proposed drill sites: they are nearby and
perfectly secure, since the North American Free Trade Agreement
contains a provision barring Canada from cutting off supply to the
United States. And with little fanfare, oil from this largely untapped
source has been pouring into the market, so much so that Canada is now
the largest supplier of oil to the United States, surpassing Saudi
Arabia. Between 2005 and 2007, Canada increased its exports to the
States by almost 100 million barrels. Yet despite this significant
increase in secure supplies, oil prices have been going up the entire
What is driving the ANWR push is not facts but pure shock doctrine
strategy — the oil crisis has created the conditions in which it is
possible to sell a previously unsellable (but highly profitable) policy.
Food price shock: Genetic modification or starvation
Intimately connected to the price of oil is the global food crisis.
Not only do high gas prices drive up food costs but the boom in
agrofuels has blurred the line between food and fuel, pushing food
growers off their land and encouraging rampant speculation. Several
Latin American countries have been pushing to re-examine the push for
agrofuels and to have food recognized as a human right, not a mere
commodity. United States Deputy Secretary of State John Negroponte has
other ideas. In the same speech touting the US commitment to emergency
food aid, he called on countries to lower their "export restrictions
and high tariffs" and eliminate "barriers to use of innovative plant
and animal production technologies, including biotechnology." This was
an admittedly more subtle stickup, but the message was clear:
impoverished countries had better crack open their agricultural
markets to American products and genetically modified seeds, or they
could risk having their aid cut off.
Genetically modified crops have emerged as the cureall for the food
crisis, at least according to the World Bank, the European Commission
president (time to "bite the bullet") and Prime Minister of Britain
Gordon Brown. And, of course, the agribusiness companies. "You cannot
today feed the world without genetically modified organisms," Peter
Brabeck, chairman of Nestlé, told the Financial Times recently. The
problem with this argument, at least for now, is that there is no
evidence that GMOs increase crop yields, and they often decrease them.
But even if there was a simple key to solving the global food crisis,
would we really want it in the hands of the Nestlés and Monsantos?
What would it cost us to use it? In recent months Monsanto, Syngenta
and BASF have been frenetically buying up patents on so-called
"climate ready" seeds — plants that can grow in earth parched from
drought and salinated from flooding.
In other words, plants built to survive a future of climate chaos. We
already know the lengths Monsanto will go to protect its intellectual
property, spying on and suing farmers who dare to save their seeds
from one year to the next. We have seen patented AIDS medications fail
to treat millions in sub-Saharan Africa. Why would patented "climate
ready" crops be any different?
Meanwhile, amid all the talk of exciting new genetic and drilling
technologies, the Bush Administration announced a moratorium of up to
two years on new solar energy projects on federal lands — due,
apparently, to environmental concerns. This is the final frontier for
disaster capitalism. Our leaders are failing to invest in technology
that will actually prevent a future of climate chaos, choosing instead
to work hand in hand with those plotting innovative schemes to profit
from the mayhem.
Privatizing Iraq's oil, ensuring global dominance for genetically
modified crops, lowering the last of the trade barriers and opening
the last of the wildlife refuges... Not so long ago, those goals were
pursued through polite trade agreements, under the benign pseudonym
"globalization." Now this discredited agenda is forced to ride on the
backs of serial crises, selling itself as lifesaving medicine for a
world in pain.
Naomi Klein is the author of The Shock Doctrine: The Rise of Disaster
Capitalism. This column has appeared in The Nation.
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