1

Chapter 2
Milton Friedman introduced ultra laissez-faire, a system in which the market would create itself

and manage itself with no state intervention. He believed that if something went wrong within a

free-market economy like high inflation or soaring unemployment it was because the market was

not truly free. However, implementing such an idea into the U.S. economy would be hard

because after the Great Depression people were looking for help from state. The New Deal came

into place and thus state intervention into the economy soared. Milton Friedmans ideas of

laissez-faire were highly rejected in the United States. He needed a country that would enable

him to apply his ideology and test his model of a totally free market economy. By the 1950s, the

developmentalists, like the keynesians and social democrats in rich countries, were able to boast

a series of impressive success stories. The most advanced laboratory of developmentalism was

the shorter tip of Latin America, known as the southern cone: Chile, Argentina, Uruguay, and

parts of Brazil. Keynesianism was also helping the United States recover back its economy but

president Eisenhower was eager to take swift and radical action to defeat developmentalism

abroad. Thus, the CIA was created to help stop developmentalism abroad. The CIA overthrew

Mossadegh in Iran and replaced him with a brutal shah. In 1954, the CIA sponsored coup in

Guatemala. Later the University of Chicago was created in Santiago to ingrain laissez-faire

ideals into the people of Chile. Many Chilean universities had denied the school but one much

conservative Catholic University and so the Chilean Project was born. Soon, Chile was

changing its government and it began to open its borders for foreign trade. The United States

was benefiting making business in Chile. Allende then came to power and began to push laissez-

faire ideal out and Chile began to recover from the drop in economy that it had suffered due to

U.S. intervention in Chile. In Indonesia, the CIA also tried to control its economic system. The
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CIA put General Suharto into power and overthrew President Sukarno, the Hugo Chavez of his

day. President Sukarno, a nationalist, had enraged the rich countries by protecting Indonesias

economy, redistributing wealth and thought the international Monetary Fund and the World

Bank, which he had accused of being facades for the interest of Western multinationals. In Brazil

in 1964, Brazil was opened up to foreign investment in a gentlemens coup. No violence.

Brazilians still had limited press freedoms and freedoms of assembly. However, once people

started protesting tat the poverty, the military got violent and democracy was shut down.

Chapter 4

Letelier argued that the establishment of a free private economy and the control of inflation a la

Friedman could not be done peacefully. The economic plan had had to be enforced, and in the

Chilean context that could be done only by the killing of thousands, the establishment

concentration camps all over the country, the jailing of more than 100,000 persons in three years.

He stated that it only gave economic freedom to a small privileged groups and regression for the

majority. Letelier was later killed by a senior member of Pinochets secret police. The juntas

staged massive ideological cleanup operations , burning books by Freud, Marx and Neruda,

closing hundreds of newspapers and magazines, occupying universities, banning strikes and

political meetings. Students were killed for speaking against them. The juntas did not let anyone

who posed a threat to their ideology escape and thus were killed. Teachers, students, musicians,

etc. were killed. At the start of the dictatorship in Chile, Argentina and Uruguay, the only public

gatherings permitted where shows of military strength and football matches. The Chilean junta

urged citizens to report foreign extremists and fanaticized Chileans. These countries dictators
 3

arrested people not only because they were terrorists but also if they didn't follow their basic

ideology. In addition, foreign corporations did more than thank the juntas for their fine work;

some were active participants in the terror campaigns. In Brazil, several multinationals banded

together and financed their own privatized torture squad. In Argentina, Ford supplied the

military with cars which were used for kidnappings and disappearances. The dictators not only

want to destroy collectivism in their countries but also destroy it from the mind and spirit. Thus,

they used torture them in the prisons. Torturers tried to take away what was most precious to

them. The ultimate acts of rebellion in this context were small gestures of kindness between

prisoners, such as tending to each others wounds or sharing scarce food. When the torturers

discovered them they would be tortured. They were trying to make them as much individualistic

as possible. Babies born inside these torture centers were giving off to couples or sold. They

were raised with capitalistic values and Christianity. They were never told of their heritage.

Their plan was to create a new breed of model citizens.

Chapter 6

Friedrich Hayek wanted Margaret Thatcher, prime minister of the U.K., to copy Chiles

adaptation of free markets model for transforming Britains Keynesian economy. However, she

responded that such a model was not possible in a democracy like the United Kingdom. The

Southern Cones experiment had generated such spectacular profits, except for a small number of

players, that there was tremendous appetite from increasingly global multinationals for new

frontiers- and not just in developing countries but in rich ones in the West too, where states

controlled even more lucrative assets that could be run as for-profit interests. Nixon, who

approved of Friedmans model, put him and his colleagues into his office. With true disciples
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making policy and a strong personal rapport with the president, Friedman had every reason to

believe that his ideas were about to be put into practice in the most powerful economy in the

world. In 1971, U.S. economy was down and Nixon to avoid impeachment put a cap on prices

of rent and oil which Friedman was outraged. To Friedman, price controls were the absolute

worst. Richard Nixon turns toward Keynsian and Friedman hated him. Friedmans followers in

office also became Keynsian. However, dictatorships where freedom was absent were the only

governments who were ready to put pure free market doctrine into practice. Almost everywhere

that right-wing military dictatorships were in power, the University of Chicagos presence could

be felt. Stephen Haggard, a neoliberal, said that reforms almost happened after military coups

and that democracy and full tilt free market dont always go together. In the developing world,

there are are far more poor people than rich ones. Iran, Nicaragua, Ecuador, Peru, Bolivia were

starting to overthrow their authoritarian regimes. The Islamic regime, which had not yet

transitioned to full blown authoritarianism, nationalized the banking sector and then brought in a

land redistribution program and imposed controls on imports and exports. Six weeks after

Thatcher told Friedrich that the U.K. could not follow Chiles example, on April 2, 1982,

Argentina invaded the Falkland Islands, a relic of British colonial rule. With this war, Thatcher

used it as an excuse to bring laissez-faire ideals into the U.K. since people were willing to do

anything to win the war. Thatcher proved that a Chicago School economic program did not need

military dictatorships and torture chambers in order to advance and that with a large enough

political crisis to rally around, a limited version of shock therapy could be imposed in a

democracy. Crises are in a way democracy-free-zones gaps in politics as usual when the

need for consent and consensus do not seem to apply. When the market crashed, Keynes and his
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disciples, previously voices in the wilderness, had been ready and waiting with their ideas, their

New Deal solutions.

Chapter 8

Bolivias hyperinflation meltdown was the excuse that was needed to push through a program

that would have been politically impossible under normal circumstances. By the mid-eighties,

several economists had observed that a true hyperinflation crisis simulates the effects of a

military war such as spreading fear and confusion, creating refugees and causing large loss of

life. The hyperinflation was due to passing on illegitimate debts accumulated under dictatorships

to new democracies and Friedman-inspired decision at the Federal Reserve to allow interest rates

to soar. The Federal Reserve increased interest rates in the United States as high as 21 percent

also known as Volcker Shock. Soaring interest rates meant higher interest payments on foreign

debts and often the higher payments could only be met by taking on more loans. When a country

looked as though it was falling into crisis, the IMF would leap in with stabilizing grants and

loans, thereby preventing crises before they occurred. For example, after the Volcker Shock,

Brazils debt doubled from $50 billion to $100 billion in six years. The more the global economy

followed his prescriptions the more crisis-prone the system became, producing more and more of

precisely the type of meltdowns he had identified as the only circumstances under which

governments would take more of his radical advice. John Maynard Keynes, who headed the

U.K. delegation, was convinced that the world had finally recognized the political perils of

leaving the market to regulate itself. The colonization of the World Bank and the IMF by the

Chicago School became official in 1989 when John Williamson unveiled what he called the
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Washington Consensus. It was a list of economic policies that were the bare minimum for

economic health. (All state enterprises should be privatized, barriers impeding the entry of

foreign firms should be abolished). When crisis-struck countries came to the IMF seeking debt

relief and emergency loans, the fund responded with sweeping shock therapy programs. In

Argentina in order to supply foreign investors, Argentina had sold off the riches of the country so

rapidly and so completely that the project far surpassed what had taken place in Chile a decade

earlier. This plan destroyed Chile and its economy. It was very expensive to produce goods

inside the country and so many jobs were lost.

Chapter 16
Naomi visits Baghdad to discuss about economic but finds that no one really cares about such

discussions but rather than finding how to stay alive and take care of their own. Iraq was a

country plagued with war. The Arab world identified the true cause of the war as the regions

deficit in free-market democracy. In order to spread privatization in the Arab world, the U.S.

needed a single country as a catalyst to conquer all the other Arab countries since the Arab world

was too big and diverse. Compared with Iran or Syria, Iraq seemed the site for the most

winnable war. The U.S.s plan to win the war was to psychologically manipulate the people such

as in the shock therapies. The United States used their attack strategy fear up to demoralize the

Iraqis. They demonstrated the MOAB as their weapon towards Iraq. Although they never used

it, it was very useful to scare the Iraqis and make them unwilling to fight back. When the war

began, U.S. troops attacked Baghdad with bombs thus cutting off millions of phones across the

city. People were unable to communicate with each other even though they were a few blocks

away. They were unable to tell if their loved ones were dead or alive. Then they took away their
 7

lights. Civilians were left in the dark just wandering what would happen to them. It was all

psychological torture. The airlines and museums and many import places were trashed and

looted by U.S. soldiers. Iraq was very advanced compared to other countries in the Arab world.

It had a 89 percent of literacy. Overnight, Iraq went from being one of the most isolated

countries in the world, sealed off from the most basic trade by strict UN sanctions, to becoming

the widest-open market anywhere.

Chapter 17

In Iraq, United States firms were going to be the first in line for the easy billions. In Iraq,

Washington cut out the middlemen: the IMF and the World Bank were relegated to supporting

roles, and the U.S. was front and center. Paul Bremer became the government in Baghdad and

began passing laws just as they came to him. Bremers goal was not to get along with the Iraqi

people but to turn the country into Iraq Inc. The month after Bremer got into power, he

privatized and the 200 state-owned companies except the oil. He dropped the corporate taxes

from 45 percent to 15 percent and private owners could take out all of their profits out of Iraq.

None of the money went to Iraqi factories so they could reopen and form the foundation of a

sustainable economy, create local jobs and fund a social safety net. They were given boxes with

things for them but were assemble by U.S. workers of private companies. If a task could be

performed by a private entity, it must be. Iraqis were cast aside to do nothing. American

companies preferred to import their own cement at ten times the price. Each miscalculation

provoked escalating levels of resistance, answered with counter repression by foreign troops,

ultimately sending the country spiraling into an inferno of violence. Bremer fired about 500,000

state workers, most of them soldiers, but also doctors, nurses, teachers and engineers. The
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ideological blindness had three concrete effects: it damaged the possibility of reconstruction by

removing skilled people from their posts, it weakened the voice of secular Iraqis, and it fed the

resistance with angry people. People were not going to let their companies become privatized

since if they sold their companies, private investors were going to fire off the employees. Iraqis

threatened to burn the businesses or blow themselves up with them. If within six months of the

invasion, Iraqis had found themselves drinking clean water from Bechtel pipes, their homes

illuminated with GE lights, their infirm treated in sanitary Parsons-built hospitals, their streets

patrolled by competent DynCorp-trained police, many citizens would probably have overcome

their anger at being excluded from the reconstruction process but they didnt. When they sued a

company, it was later found that they could not sue because there were no laws or no government

at all. Iraq had lost billions and was severely damaged.

Chapter 18

After the Iraq invasion, there was a lot of pent up hunger for political participation. There was

anger at Bremers layoffs and frustration with the blackouts and the foreign contractors but for

months it was expressed through outbursts of free speech. They started electing leaders in cities,

towns and provinces across the country. The Bush administration, due to the rejection of

Bremers economic program, had to elect someone to represent them. However, since economic

nationalism was so ingrained into the populace, Washington abandoned its democratic promises

and ordered increases in the shock levels. The U.S. had planned to created a large constituent

assembly, representing all sectors of Iraqi society but Bremer scrapped the idea. Instead he

chose the members. He cancelled all the elections because he could allow the wrong person to

win the election. He made the Marines to chose Iraqis that were safe and pick them as mayors.
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The Shia began rebelling through peaceful protests but with no avail. Later many Shia became

convinced that if majority rule democracy was ever to become a reality, they would have to fight

for it. In the first three and a half years of occupation, an estimated 61,500 Iraqis were captures

and imprisoned by U.S. forces, usually with methods designed to maximize capture shock or

torture. Although Bremers forces were capable of bringing down Saddam, they had no hope of

handling what Bremers edicts created in Iraq and so he scooped people off the streets and put

them into jail. They were later aggressively interrogated for information about the rebellion.

The Bush team had failed to shock Iraqis into obedience either with Shock and Awe or with

economic shock therapy. Now the shock tactics became more personal. They were tortured and

deprived. People were tortured to death and some disappeared. Iraqis were beginning to leave

their countries to escape persecution. Bremer was sent to Iraq to build a corporate utopia;

instead, Iraq became a ghoulish dystopia where going to a simple business meeting could get you

lynched, burned alive or beheaded. In few cases were contracts were awarded to Iraqi firms it

was more efficient and cheaper and it has energized the economy because it puts Iraqis to work.

Contractors in Iraq were operating with little supervision. There were so many contractors such

that a certain point there was a contractor for every 1.4 soldiers. The longer the war dragged on,

the more it became a privatized war. The Iraq model economy turned to a model for

privatization war and reconstruction.