72 pages • 2-hour read
The Shock Doctrine: The Rise of Disaster Capitalism
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Part 5Chapter Summaries & Analyses
Part 5, Chapter 14 Summary: “Shock Therapy in the U.S.A.: The Homeland Security Bubble”
Content Warning: This section of the guide includes discussion of terrorist attacks.
Chapter 14 is about the transformation of the American security and military apparatus in the lead up to, and during, the Iraq War and the War on Terror more generally. The chapter opens with a description of Donald Rumsfeld, a key actor in this transformation. Rumsfeld was defense secretary during the Ford administration. He then went on to a series of positions on corporate boards.
In 2001, Rumsfeld joined the George W. Bush administration as defense secretary. On September 10th, 2001, Rumsfeld announced he would be dismantling the Pentagon’s bureaucracy as part of a larger project of privatizing and corporatizing the US military.
Cheney and Rumsfeld: Proto-Disaster Capitalists
Prior to the Bush administration, the US government had already contracted out many services to private contractors. Only core functions of the state remained to be privatized. Rumsfeld, a close friend and ally of Milton Friedman, wanted to aggressively pursue privatizing remaining services.
Dick Cheney, Bush’s vice president, shared in this vision. Rumsfeld was a former chairman of Gilead Sciences, a company that produces Tamiflu, an antiviral. Cheney was a former “boss” at Halliburton, a military contractor, oil company, and consulting firm. His wife, Lynne Cheney, was on the board of Lockheed Martin, a weapons contractor that also provides software for security services. George W. Bush himself was a champion of privatization of public services during his tenure as governor of Texas.
September 11 and the Civil Service Comeback
After the 9/11 terrorist attacks, the Bush administration’s efforts to privatize public services was temporarily hampered, as concerns were raised about the use of private contractors providing airport security and other essential first aid response services.
A Corporate New Deal
The Bush administration quickly capitalized on the crisis to push through a major expansion of “policing, surveillance, detention and war-waging powers of the executive branch” (298). They then poured the money for this expansion into private contracting services. Klein describes this as “the creation of a disaster capitalism complex” tasked with “running a privatized security state” (299). This created a bubble of investment in military technologies and an expansion in militarized lobbying interests.
A Market for Terrorism
Klein compares the economics of the “disaster bubble” to other economic bubbles like the tech bubble. She notes that the “application of market ‘solutions’” (305) by the security state has led to human rights abuses, such as the use of software wrongfully identifying someone as an “enemy combatant” who is then shipped to Guantánamo or a CIA black site, where they can then be denied their right to a trial (habeas corpus).
Part 5, Chapter 15 Summary: “A Corporatist State: Removing the Revolving Door, Putting in an Archway”
In 2006, Bush signed the Defense Authorization Act that massively expanded the ability of the executive branch to declare martial law. It also gave the military a role in protecting pharmaceutical offices during disease outbreaks. Klein speculates this contributed to the increase in stock price of Gilead, as Tamiflu can be used to treat avian flu.
Klein cites Stephen Kinzer’s work Overthrow, about the history of US-backed regime changes, to draw conclusions on how business interests benefited from the expanded security state and the invasion of Iraq. Kinzer argues that the US initiates a regime change operation when a US company’s profits are threatened (such as when they overthrew the Guatemalan government to protect the United Fruit Company). They use propaganda to transform the private interests of the company into a public concern of the nation. Klein argues that this model was transformed during the War on Terror because the “war and other disasters” are the “ends in themselves” (311). The goal of the regime change in this new iteration is not only to protect a company’s profits, but rather to generate profits through regime change.
When private individuals join the public sector, they are supposed to divest from holdings to avoid self-dealing, insider trading, or stock manipulation. Rumsfeld, Cheney, and other members of the Bush administration refused to do so. For instance, Cheney held onto his shares of Halliburton even as the Bush administration awarded millions of dollars in contracts to Halliburton to operate in Iraq, enriching himself in the process. Klein argues that this “crony capitalism” is not an “aberration” but rather the entire point of Chicago School economics.
The Power of the Formers
The Bush administration used many former government officials as informal freelance “advisors.” This allowed people to sidestep laws and rules against self-dealing and conflict. For instance, former Secretary of State James Baker III was working for the Carlyle Group before being tasked with negotiating debt relief for Iraq. Klein’s reporting revealed that at the same time, the Carlyle Group was telling Kuwait they would get Iraq to repay their debt to Kuwait if Kuwait paid the Carlyle Group a billion dollars. These advisors claimed publicly they were not motivated by profit but rather by neoconservative ideology, but Klein argues this is a false distinction because the “right to limitless profit-seeking has always been at the center of neocon ideology” (322).
Part 5 Analysis
In Part 5, the chronology of The Shock Treatment comes to the point in time that is contemporaneous with Klein’s writing of the book, the early to mid-2000s. This necessitates a subtle but important shift in the sourcing, narration, and argumentation of the text. In Parts 1-4, Klein was able to rely on historical documentation, witness testimony, and reporting. She also had the benefit of hindsight on the events in question, meaning she could argue about connections between the events and their aftermath with a higher degree of certainty.
In Part 5 and moving forward, Klein uses more of her own and others’ reporting as the basis for her descriptions and analysis. For instance, in Chapter 15, she cites her own reporting about former Secretary of State James Baker III, and his attempts at self-dealing as a part of the Carlyle Group while taking a lead role in negotiating Iraq’s debt relief. She has become part of the narrative itself, as “the day after [her] story about Baker was published in The Nation, Carlyle backed out of the consortium, forfeiting its hope of landing the $1 billion” (318). She is no longer an observer reporting on past events, but actively shaping ongoing events through her reporting.
Her temporal proximity to the events being analyzed also means that, rather than stating definitively what the impacts of various policy choices were, she has to speculate about what the effects will be. For instance, she focuses on Donald Rumsfeld’s connection to Gilead Sciences, a company that sells Tamiflu, a drug used to treat avian flu, and speculates that “these companies are banking on an apocalyptic future of rampant disease” (291). In the 2020s, the United States was faced with both outbreaks of avian flu and Covid-19, suggesting that this speculation may have been correct in this instance. Elsewhere, however, her predictions have not borne out. For instance, in this 2007 work, Klein speculates that the “disaster bubble”—her term for debt-financed spending on privatized security and miliary contractors as part of the War on Terror—may burst in the near-term. While there was indeed a major financial downturn in 2008, it was caused by the collapse of the US housing market bubble, not the implosion of the disaster bubble.
In these chapters, Klein focuses on the Exploitation of Crises for Economic Gain, particularly the economic gain of individual actors like Donald Rumsfeld, Dick Cheney, and others. Notably, she characterizes this network in Chapter 15 as “a corporatist state.” While this term has many uses, historically it has been most closely associated with the fascist Italian government under Benito Mussolini, which explicitly used the term and conflated the needs of corporate entities with the role of the government. Klein’s use of “corporatism” in this context implies that she saw the Bush administration as having fascistic elements.
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