[DEBATE] : (Fwd) Naomi Klein on Latin Am. anti-imperialism

[Patrick Bond]

Latin America's Shock Resistance

By Naomi Klein
13 November 2007

In less than two years, the lease on the largest and most important US 
military base in Latin America will run out. The base is in Manta, 
Ecuador, and Rafael Correa, the country’s leftist president, has 
pronounced that he will renew the lease “on one condition: that they let 
us put a base in Miami–an Ecuadorean base. If there is no problem having 
foreign soldiers on a country’s soil, surely they’ll let us have an 
Ecuadorean base in the United States.”

Since an Ecuadorean military outpost in South Beach is a long shot, it 
is very likely that the Manta base, which serves as a staging area for 
the “war on drugs,” will soon shut down. Correa’s defiant stand is not, 
as some have claimed, about anti-Americanism. Rather, it is part of a 
broad range of measures being taken by Latin American governments to 
make the continent less vulnerable to externally provoked crises and shocks.

This is a crucial development because for the past thirty-five years in 
Latin America, such shocks from outside have served to create the 
political conditions required to justify the imposition of “shock 
therapy”–the constellation of corporate-friendly “emergency” economic 
measures like large-scale privatizations and deep cuts to social 
spending that debilitate the state in the name of free markets. In one 
of his most influential essays, the late economist Milton Friedman 
articulated contemporary capitalism’s core tactical nostrum, what I call 
the shock doctrine. He observed that “only a crisis–actual or 
perceived–produces real change. When that crisis occurs, the actions 
that are taken depend on the ideas that are lying around.”

Latin America has always been the prime laboratory for this doctrine. 
Friedman first learned how to exploit a large-scale crisis in the 
mid-1970s, when he advised Chilean dictator Gen. Augusto Pinochet. Not 
only were Chileans in a state of shock following Pinochet’s violent 
overthrow of Socialist President Salvador Allende; the country was also 
reeling from severe hyperinflation. Friedman advised Pinochet to impose 
a rapid-fire transformation of the economy–tax cuts, free trade, 
privatized services, cuts to social spending and deregulation. It was 
the most extreme capitalist makeover ever attempted, and it became known 
as a Chicago School revolution, since so many of Pinochet’s top aides 
and ministers had studied under Friedman at the University of Chicago. A 
similar process was under way in Uruguay and Brazil, also with the help 
of University of Chicago graduates and professors, and a few years 
later, in Argentina. These economic shock therapy programs were 
facilitated by far less metaphorical shocks–performed in the region’s 
many torture cells, often by US-trained soldiers and police, and 
directed against those activists who were deemed most likely to stand in 
the way of the economic revolution.

In the 1980s and ’90s, as dictatorships gave way to fragile democracies, 
Latin America did not escape the shock doctrine. Instead, new shocks 
prepared the ground for another round of shock therapy–the “debt shock” 
of the early ’80s, followed by a wave of hyperinflation as well as 
sudden drops in the prices of commodities on which economies depended.

In Latin America today, however, new crises are being repelled and old 
shocks are wearing off–a combination of trends that is making the 
continent not only more resilient in the face of change but also a model 
for a future far more resistant to the shock doctrine.

When Milton Friedman died last year, the global quest for unfettered 
capitalism he helped launch in Chile three decades earlier found itself 
in disarray. The obituaries heaped praise on him, but many were imbued 
with a sense of fear that Friedman’s death marked the end of an era. In 
Canada’s National Post, Terence Corcoran, one of Friedman’s most devoted 
disciples, wondered whether the global movement the economist had 
inspired could carry on. “As the last great lion of free market 
economics, Friedman leaves a void…. There is no one alive today of equal 
stature. Will the principles Friedman fought for and articulated survive 
over the long term without a new generation of solid, charismatic and 
able intellectual leadership? Hard to say.”

It certainly seemed unlikely. Friedman’s intellectual heirs in the 
United States–the think-tank neocons who used the crisis of September 11 
to launch a booming economy in privatized warfare and “homeland 
security”–were at the lowest point in their history. The movement’s 
political pinnacle had been the Republicans’ takeover of the US Congress 
in 1994; just nine days before Friedman’s death, they lost it again to a 
Democratic majority. The three key issues that contributed to the 
Republican defeat in the 2006 midterm elections were political 
corruption, the mismanagement of the Iraq War and the perception, best 
articulated by Jim Webb, a winning Democratic candidate for the US 
Senate, that the country had drifted “toward a class-based system, the 
likes of which we have not seen since the nineteenth century.”

Nowhere, however, was the economic project in deeper crisis than where 
it had started: Latin America. Washington has always regarded democratic 
socialism as a greater challenge than totalitarian Communism, which was 
easy to vilify and made for a handy enemy. In the 1960s and ’70s, the 
favored tactic for dealing with the inconvenient popularity of economic 
nationalism and democratic socialism was to try to equate them with 
Stalinism, deliberately blurring the clear differences between the 
worldviews. A stark example of this strategy comes from the early days 
of the Chicago crusade, deep inside the declassified Chile documents. 
Despite the CIA-funded propaganda campaign painting Allende as a 
Soviet-style dictator, Washington’s real concerns about the Allende 
victory were relayed by Henry Kissinger in a 1970 memo to Nixon: “The 
example of a successful elected Marxist government in Chile would surely 
have an impact on–and even precedent value for–other parts of the world, 
especially in Italy; the imitative spread of similar phenomena elsewhere 
would in turn significantly affect the world balance and our own 
position in it.” In other words, Allende needed to be taken out before 
his democratic third way spread.

But the dream Allende represented was never defeated. It was temporarily 
silenced, pushed under the surface by fear. Which is why, as Latin 
America now emerges from its decades of shock, the old ideas are 
bubbling back up–along with the “imitative spread” Kissinger so feared.

By 2001 the shift had become impossible to ignore. In the mid-’70s, 
Argentina’s legendary investigative journalist Rodolfo Walsh had 
regarded the ascendancy of Chicago School economics under junta rule as 
a setback, not a lasting defeat, for the left. The terror tactics used 
by the military had put his country into a state of shock, but Walsh 
knew that shock, by its very nature, is a temporary state. Before he was 
gunned down by Argentine security agents on the streets of Buenos Aires 
in 1977, Walsh estimated that it would take twenty to thirty years until 
the effects of the terror receded and Argentines regained their footing, 
courage and confidence, ready once again to fight for economic and 
social equality. It was in 2001, twenty-four years later, that Argentina 
erupted in protest against IMF-prescribed austerity measures and then 
proceeded to force out five presidents in only three weeks.

“The dictatorship just ended!” people declared at the time. They meant 
that it had taken seventeen years of democracy for the legacy of terror 
to fade–just as Walsh had predicted.

In the years since, that renewed courage has spread to other former 
shock labs in the region. And as people shed the collective fear that 
was first instilled with tanks and cattle prods, with sudden flights of 
capital and brutal cutbacks, many are demanding more democracy and more 
control over markets. These demands represent the greatest threat to 
Friedman’s legacy because they challenge his central claim: that 
capitalism and freedom are part of the same indivisible project.

The staunchest opponents of neoliberal economics in Latin America have 
been winning election after election. Venezuelan president Hugo Chávez, 
running on a platform of “Twenty-First-Century Socialism,” was 
re-elected in 2006 for a third term with 63 percent of the vote. Despite 
attempts by the Bush Administration to paint Venezuela as a 
pseudo-democracy, a poll that year found 57 percent of Venezuelans happy 
with the state of their democracy, an approval rating on the continent 
second only to Uruguay’s, where the left-wing coalition party Frente 
Amplio had been elected to government and where a series of referendums 
had blocked major privatizations. In other words, in the two Latin 
American states where voting had resulted in real challenges to the 
Washington Consensus, citizens had renewed their faith in the power of 
democracy to improve their lives.

Ever since the Argentine collapse in 2001, opposition to privatization 
has become the defining issue of the continent, able to make governments 
and break them; by late 2006, it was practically creating a domino 
effect. Luiz Inácio Lula da Silva was re-elected as president of Brazil 
largely because he turned the vote into a referendum on privatization. 
His opponent, from the party responsible for Brazil’s major sell-offs in 
the ’90s, resorted to dressing up like a socialist NASCAR driver, 
wearing a jacket and baseball hat covered in logos from the public 
companies that had not yet been sold. Voters weren’t persuaded, and Lula 
got 61 percent of the vote. Shortly afterward in Nicaragua, Daniel 
Ortega, former head of the Sandinistas, made the country’s frequent 
blackouts the center of his winning campaign; the sale of the national 
electricity company to the Spanish firm Unión Fenosa after Hurricane 
Mitch, he asserted, was the source of the problem. “Who brought Unión 
Fenosa to this country?” he bellowed. “The government of the rich did, 
those who are in the service of barbarian capitalism.”

In November 2006, Ecuador’s presidential elections turned into a similar 
ideological battleground. Rafael Correa, a 43-year-old left-wing 
economist, won the vote against Álvaro Noboa, a banana tycoon and one of 
the richest men in the country. With Twisted Sister’s “We’re Not Gonna 
Take It” as his official campaign song, Correa called for the country 
“to overcome all the fallacies of neoliberalism.” When he won, the new 
president of Ecuador declared himself “no fan of Milton Friedman.” By 
then, Bolivian President Evo Morales was already approaching the end of 
his first year in office. After sending in the army to take back the gas 
fields from “plunder” by multinationals, he moved on to nationalize 
parts of the mining sector. That year in Chile, under the leadership of 
President Michelle Bachelet–who had been a prisoner under Pinochet–high 
school students staged a wave of militant protests against the 
two-tiered educational system introduced by the Chicago Boys. The 
country’s copper miners soon followed with strikes of their own.

In December 2006, a month after Friedman’s death, Latin America’s 
leaders gathered for a historic summit in Bolivia, held in the city of 
Cochabamba, where a popular uprising against water privatization had 
forced Bechtel out of the country several years earlier. Morales began 
the proceedings with a vow to close “the open veins of Latin America.” 
It was a reference to Eduardo Galeano’s book Open Veins of Latin 
America: Five Centuries of the Pillage of a Continent, a lyrical 
accounting of the violent plunder that had turned a rich continent into 
a poor one. The book was published in 1971, two years before Allende was 
overthrown for daring to try to close those open veins by nationalizing 
his country’s copper mines. That event ushered in a new era of furious 
pillage, during which the structures built by the continent’s 
developmentalist movements were sacked, stripped and sold off.

Today Latin Americans are picking up the project that was so brutally 
interrupted all those years ago. Many of the policies cropping up are 
familiar: nationalization of key sectors of the economy, land reform, 
major investments in education, literacy and healthcare. These are not 
revolutionary ideas, but in their unapologetic vision of a government 
that helps reach for equality, they are certainly a rebuke to Friedman’s 
1975 assertion in a letter to Pinochet that “the major error, in my 
opinion, was…to believe that it is possible to do good with other 
people’s money.”

Though clearly drawing on a long rebellious history, Latin America’s 
contemporary movements are not direct replicas of their predecessors. Of 
all the differences, the most striking is an acute awareness of the need 
for protection from the shocks that worked in the past–the coups, the 
foreign shock therapists, the US-trained torturers, as well as the debt 
shocks and currency collapses. Latin America’s mass movements, which 
have powered the wave of election victories for left-wing candidates, 
are learning how to build shock absorbers into their organizing models. 
They are, for example, less centralized than in the ’60s, making it 
harder to demobilize whole movements by eliminating a few leaders. 
Despite the overwhelming cult of personality surrounding Chávez, and his 
controversial moves to centralize power at the state level, the 
progressive networks in Venezuela are at the same time highly 
decentralized, with power dispersed at the grassroots and community 
levels, through thousands of neighborhood councils and co-ops. In 
Bolivia, the indigenous people’s movements that put Morales in office 
function similarly and have made it clear that Morales does not have 
their unconditional support: the barrios will back him as long as he 
stays true to his democratic mandate, and not a moment longer. This kind 
of network approach is what allowed Chávez to survive the 2002 coup 
attempt: when their revolution was threatened, his supporters poured 
down from the shantytowns surrounding Caracas to demand his 
reinstatement, a kind of popular mobilization that did not happen during 
the coups of the ’70s.

Latin America’s new leaders are also taking bold measures to block any 
future US-backed coups that could attempt to undermine their democratic 
victories. Chávez has let it be known that if an extremist right-wing 
element in Bolivia’s Santa Cruz province makes good on its threats 
against Morales’s government, Venezuelan troops will help defend 
Bolivia’s democracy. Meanwhile, the governments of Venezuela, Costa 
Rica, Argentina, Uruguay and Bolivia have all announced that they will 
no longer send students to the School of the Americas (now called the 
Western Hemisphere Institute for Security Cooperation)–the infamous 
police and military training center in Fort Benning, Georgia, where so 
many of the continent’s notorious killers learned the latest in 
“counterterrorism” techniques, then promptly directed them against 
farmers in El Salvador and auto workers in Argentina. Ecuador, in 
addition to closing the US military base, also looks set to cut its ties 
with the school. It’s hard to overstate the importance of these 
developments. If the US military loses its bases and training programs, 
its power to inflict shocks on the continent will be greatly eroded.

The new leaders in Latin America are also becoming better prepared for 
the kinds of shocks produced by volatile markets. One of the most 
destabilizing forces of recent decades has been the speed with which 
capital can pick up and move, or how a sudden drop in commodity prices 
can devastate an entire agricultural sector. But in much of Latin 
America these shocks have already happened, leaving behind ghostly 
industrial suburbs and huge stretches of fallow farmland. The task of 
the region’s new left, therefore, has become a matter of taking the 
detritus of globalization and putting it back to work. In Brazil, the 
phenomenon is best seen in the million and a half farmers of the 
Landless Peoples Movement (MST), who have formed hundreds of 
cooperatives to reclaim unused land. In Argentina, it is clearest in the 
movement of “recovered companies,” 200 bankrupt businesses that have 
been resuscitated by their workers, who have turned them into 
democratically run cooperatives. For the cooperatives, there is no fear 
of facing an economic shock of investors leaving, because the investors 
have already left.

Chávez has made the cooperatives in Venezuela a top political priority, 
giving them first refusal on government contracts and offering them 
economic incentives to trade with one another. By 2006 there were 
roughly 100,000 cooperatives in the country, employing more than 700,000 
workers. Many are pieces of state infrastructure–toll booths, highway 
maintenance, health clinics–handed over to the communities to run. It’s 
a reverse of the logic of government outsourcing: rather than auctioning 
off pieces of the state to large corporations and losing democratic 
control, the people who use the resources are given the power to manage 
them, creating, at least in theory, both jobs and more responsive public 
services. Chávez’s many critics have derided these initiatives as 
handouts and unfair subsidies, of course. Yet in an era when Halliburton 
treats the US government as its personal ATM for six years, withdraws 
upward of $20 billion in Iraq contracts alone, refuses to hire local 
workers either on the Gulf Coast or in Iraq, then expresses its 
gratitude to US taxpayers by moving its corporate headquarters to Dubai 
(with all the attendant tax and legal benefits), Chávez’s direct 
subsidies to regular people look significantly less radical.

Latin America’s most significant protection from future shocks (and 
therefore from the shock doctrine) flows from the continent’s emerging 
independence from Washington’s financial institutions, the result of 
greater integration among regional governments. The Bolivian Alternative 
for the Americas (ALBA) is the continent’s retort to the Free Trade Area 
of the Americas, the now-buried corporatist dream of a free-trade zone 
stretching from Alaska to Tierra del Fuego. Though ALBA is still in its 
early stages, Emir Sader, a Brazil-based sociologist, describes its 
promise as “a perfect example of genuinely fair trade: each country 
provides what it is best placed to produce, in return for what it most 
needs, independent of global market prices.” So Bolivia provides gas at 
stable discounted prices; Venezuela offers heavily subsidized oil to 
poorer countries and shares expertise in developing reserves; and Cuba 
sends thousands of doctors to deliver free healthcare all over the 
continent, while training students from other countries at its medical 
schools.

This is a very different model from the kind of academic exchange that 
began at the University of Chicago in the mid-’50s, when hundreds of 
Latin American students learned a single rigid ideology and were sent 
home to impose it with uniformity across the continent. The major 
benefit is that ALBA is essentially a barter system in which countries 
decide for themselves what any given commodity or service is worth 
rather than letting traders in New York, Chicago or London set the 
prices for them. That makes trade less vulnerable to the kind of sudden 
price fluctuations that have hurt Latin American economies before. 
Surrounded by turbulent financial waters, Latin America is creating a 
zone of relative economic calm and predictability, a feat presumed 
impossible in the globalization era.

When one country does face a financial shortfall, this increased 
integration means that it does not necessarily need to turn to the IMF 
or the US Treasury for a bailout. That’s fortunate because the 2006 US 
National Security Strategy makes it clear that for Washington, the shock 
doctrine is still very much alive: “If crises occur, the IMF’s response 
must reinforce each country’s responsibility for its own economic 
choices,” the document states. “A refocused IMF will strengthen market 
institutions and market discipline over financial decisions.” This kind 
of “market discipline” can only be enforced if governments actually go 
to Washington for help. As former IMF deputy managing director Stanley 
Fischer explained during the Asian financial crisis, the lender can help 
only if it is asked, “but when [a country is] out of money, it hasn’t 
got many places to turn.” That is no longer the case. Thanks to high oil 
prices, Venezuela has emerged as a major lender to other developing 
countries, allowing them to do an end run around Washington. Even more 
significant, this December will mark the launch of a regional 
alternative to the Washington financial institutions, a “Bank of the 
South” that will make loans to member countries and promote economic 
integration among them.

Now that they can turn elsewhere for help, governments throughout the 
region are shunning the IMF, with dramatic consequences. Brazil, so long 
shackled to Washington by its enormous debt, is refusing to enter into a 
new agreement with the fund. Venezuela is considering withdrawing from 
the IMF and the World Bank, and even Argentina, Washington’s former 
“model pupil,” has been part of the trend. In his 2007 State of the 
Union address, President Néstor Kirchner (since succeeded by his wife, 
Christina) said that the country’s foreign creditors had told him, “‘You 
must have an agreement with the International Fund to be able to pay the 
debt.’ We say to them, ‘Sirs, we are sovereign. We want to pay the debt, 
but no way in hell are we going to make an agreement again with the 
IMF.’” As a result, the IMF, supremely powerful in the 1980s and ’90s, 
is no longer a force on the continent. In 2005 Latin America made up 80 
percent of the IMF’s total lending portfolio; the continent now 
represents just 1 percent–a sea change in only two years.

The transformation reaches beyond Latin America. In just three years, 
the IMF’s worldwide lending portfolio had shrunk from $81 billion to 
$11.8 billion, with almost all of that going to Turkey. The IMF, a 
pariah in countries where it has treated crises as profit-making 
opportunities, is withering away.

The World Bank faces an equally precarious future. In April Correa 
revealed that he had suspended all loans from the Bank and declared the 
institution’s representative in Ecuador persona non grata–an 
extraordinary step. Two years earlier, Correa explained, the World Bank 
had used a $100 million loan to defeat economic legislation that would 
have redistributed oil revenues to the country’s poor. “Ecuador is a 
sovereign country, and we will not stand for extortion from this 
international bureaucracy,” he said. Meanwhile, Evo Morales announced 
that Bolivia would quit the World Bank’s arbitration court, the body 
that allows multinational corporations to sue national governments for 
measures that cost them profits. “The governments of Latin America, and 
I think the world, never win the cases. The multinationals always win,” 
Morales said.

When Paul Wolfowitz was forced to resign as president of the World Bank 
in May, it was clear that the institution needed to take desperate 
measures to rescue itself from its profound crisis of credibility. In 
the midst of the Wolfowitz affair, the Financial Times reported that 
when World Bank managers dispensed advice in the developing world, “they 
were now laughed at.” Add the collapse of the World Trade Organization 
talks in 2006 (prompting declarations that “globalization is dead”), and 
it appears that the three main institutions responsible for imposing the 
Chicago School ideology under the guise of economic inevitability are at 
risk of extinction.

It stands to reason that the revolt against neoliberalism would be in 
its most advanced stage in Latin America. As inhabitants of the first 
shock lab, Latin Americans have had the most time to recover their 
bearings, to understand how shock politics work. This understanding is 
crucial for a new politics adapted to our shocking times. Any strategy 
based on exploiting the window of opportunity opened by a traumatic 
shock– the central tenet of the shock doctrine–relies heavily on the 
element of surprise. A state of shock is, by definition, a moment when 
there is a gap between fast-moving events and the information that 
exists to explain them. Yet as soon as we have a new narrative that 
offers a perspective on the shocking events, we become reoriented and 
the world begins to make sense again.

Once the mechanics of the shock doctrine are deeply and collectively 
understood, whole communities become harder to take by surprise, more 
difficult to confuse–shock-resistant.
www.venezuelanalysis.com

Naomi Klein is the author of many books, including her most recent, The 
Shock Doctrine: The Rise of Disaster Capitalism. Visit Naomi’s website 
at nologo.org.