The Shock Doctrine: The Rise of Disaster Capitalism

Klein describes the biography and legacy of economist Milton Friedman. Friedman and his colleagues and acolytes from the Chicago School believed that unfettered free market economics were a utopian, “sacred,” and “scientific” system that should be pursued with a fundamentalist fervor. In the late 1940s, laissez-faire economics was not popular; instead Keynesian and developmentalist economists advocated for a mix of market systems and state supports, like the nationalization of key resources such as minerals and water, and public health care. Friedman argued that “all this shared wealth should be transferred into private hands, on principle” (57).

The War Against Developmentalism

In the 1950s, the US government under Eisenhower sought to fight developmentalism abroad as part of their Cold War effort. Brothers John Foster Dulles (Secretary of State) and Allen Dulles (CIA Director) worked with large private industries, such as the United Fruit Company and Ford Motors, and right-wing figures in foreign countries to instigate a series of coups against democratically-elected leaders in order to install leaders who would promote Chicago School free market economic systems and other US-friendly interests. In Latin America, they particularly focused on the “Southern Cone” or Chile, Brazil, and Argentina.

To foment support for free market ideologies in Chile, in 1956, the US State Department, with support from the Ford Foundation, established scholarships to bring Chilean students to study at the Chicago School. These Chicago-trained economists then went on to teach their own students market fundamentalism at the Catholic University of Santiago. These economists came to be known as “los Chicago Boys.” However, their views had little support among the wider Chilean population. 

In 1970, left-wing leader Salvador Allende won the election in Chile and planned to nationalize key industries like telecoms. In response, the US government under Nixon “declared war on [Allende’s] administration” (64). Multinational companies like the International Telephone and Telegraph Company (ITT), Purina, Pfizer, and mining firms collaborated with the US government and right-wing Chilean military officials to stymy the Allende government.

Lessons in Regime Change: Brazil and Indonesia

In the 1960s, the US instigated regime change in Brazil and Indonesia, both of which were models for the Chilean regime change. In 1964, in Brazil, the US backed General Humberto Castello Branco’s military junta against liberal João Goulart and his “pro-poor programs.” By 1968, there were protests and the Castello regime violently cracked down on civil liberties and tortured and murdered dissenters. 

In 1965, Marxist leader Sukarno in Indonesia was overthrown by US-backed General Suharto. Suharto’s troops and the CIA systematically executed hundreds of thousands of leftist leaders and organizers throughout the country. Meanwhile, Indonesian economists trained at Berkeley, known as the Berkeley Mafia, established free market economic systems in the country. From these examples, those planning regime change in Chile realized it was important to strike brutally against leftists from the beginning to prevent protests, and to prepare economic advisors to ensure free market policies were swiftly adopted.

By 1971, Chilean aristocrats, economists, and military leaders were planning to kill Allende and his supporters while also creating a detailed free-market fundamentalist policy framework, called “The Brick,” that would be implemented immediately after the coup. Their plan involved “three distinct forms of shock” (71): The shock of the military coup; the shock of Friedman’s economic policies; and the electroshock torture methods developed by Cameron and the CIA.