How Power Profits From Disaster

By Naomi Klein, Guardian UK

07 July 17

After a crisis, private contractors move in and suck up funding for work done badly, if at all – then those billions get cut from government budgets. Like Grenfell Tower, Hurricane Katrina revealed a disdain for the poor.

here have been times in my reporting from disaster zones when I have had the unsettling feeling that I was seeing not just a crisis in the here and now, but getting a glimpse of the future – a preview of where the road we are all on is headed, unless we somehow grab the wheel and swerve. When I listen to Donald Trump speak, with his obvious relish in creating an atmosphere of chaos and destabilisation, I often think: I’ve seen this before, in those strange moments when portals seemed to open up into our collective future.

One of those moments arrived in New Orleans after Hurricane Katrina, as I watched hordes of private military contractors descend on the flooded city to find ways to profit from the disaster, even as thousands of the city’s residents, abandoned by their government, were treated like dangerous criminals just for trying to survive.

I started to notice the same tactics in disaster zones around the world. I used the term “shock doctrine” to describe the brutal tactic of using the public’s disorientation following a collective shock – wars, coups, terrorist attacks, market crashes or natural disasters – to push through radical pro-corporate measures, often called “shock therapy”. Though Trump breaks the mould in some ways, his shock tactics do follow a script, and one that is familiar from other countries that have had rapid changes imposed under the cover of crisis.

This strategy has been a silent partner to the imposition of neoliberalism for more than 40 years. Shock tactics follow a clear pattern: wait for a crisis (or even, in some instances, as in Chile or Russia, help foment one), declare a moment of what is sometimes called “extraordinary politics”, suspend some or all democratic norms – and then ram the corporate wishlist through as quickly as possible. The research showed that virtually any tumultuous situation, if framed with sufficient hysteria by political leaders, could serve this softening-up function. It could be an event as radical as a military coup, but the economic shock of a market or budget crisis would also do the trick. Amid hyperinflation or a banking collapse, for instance, the country’s governing elites were frequently able to sell a panicked population on the necessity for attacks on social protections, or enormous bailouts to prop up the financial private sector – because the alternative, they claimed, was outright economic apocalypse.

The Republicans under Donald Trump are already seizing the atmosphere of constant crisis that surrounds this presidency to push through as many unpopular, pro-corporate policies. And we know they would move much further and faster given an even bigger external shock. We know this because senior members of Trump’s team have been at the heart of some of the most egregious examples of the shock doctrine in recent memory.

Rex Tillerson, the US secretary of state, has built his career in large part around taking advantage of the profitability of war and instability. ExxonMobil profited more than any oil major from the increase in the price of oil that was the result of the 2003 invasion of Iraq. It also directly exploited the Iraq war to defy US state department advice and make an exploration deal in Iraqi Kurdistan, a move that, because it sidelined Iraq’s central government, could well have sparked a full-blown civil war, and certainly did contribute to internal conflict.

As CEO of ExxonMobil, Tillerson profited from disaster in other ways as well. As an executive at the fossil fuel giant, he spent his career working for a company that, despite its own scientists’ research into the reality of human-caused climate change, decided to fund and spread misinformation and junk climate science. All the while, according to an LA Times investigation, ExxonMobil (both before and after Exxon and Mobil merged) worked diligently to figure out how to further profit from and protect itself against the very crisis on which it was casting doubt. It did so by exploring drilling in the Arctic (which was melting, thanks to climate change), redesigning a natural gas pipeline in the North Sea to accommodate rising sea levels and supercharged storms, and doing the same for a new rig off the coast of Nova Scotia.

At a public event in 2012, Tillerson acknowledged that climate change was happening – but what he said next was revealing: “as a species”, humans have always adapted. “So we will adapt to this. Changes to weather patterns that move crop production areas around – we’ll adapt to that.”

He’s quite right: humans do adapt when their land ceases to produce food. The way humans adapt is by moving. They leave their homes and look for places to live where they can feed themselves and their families. But, as Tillerson well knows, we do not live at a time when countries gladly open their borders to hungry and desperate people. In fact, he now works for a president who has painted refugees from Syria – a country where drought was an accelerant of the tensions that led to civil war – as Trojan horses for terrorism. A president who introduced a travel ban that has gone a long way towards barring Syrian migrants from entering the United States.

A president who has said about Syrian children seeking asylum, “I can look in their faces and say: ‘You can’t come.’” A president who has not budged from that position even after he ordered missile strikes on Syria, supposedly moved by the horrifying impacts of a chemical weapon attack on Syrian children and “beautiful babies”. (But not moved enough to welcome them and their parents.) A president who has announced plans to turn the tracking, surveillance, incarceration and deportation of immigrants into a defining feature of his administration.

Waiting in the wings, biding their time, are plenty of other members of the Trump team who have deep skills in profiting from all of that.

Between election day and the end of Trump’s first month in office, the stocks of the two largest private prison companies in the US, CoreCivic (formerly the Corrections Corporation of America) and the Geo Group, doubled, soaring by 140% and 98%, respectively. And why not? Just as Exxon learned to profit from climate change, these companies are part of the sprawling industry of private prisons, private security and private surveillance that sees wars and migration – both very often linked to climate stresses – as exciting and expanding market opportunities. In the US, the Immigration and Customs Enforcement agency (Ice) incarcerates up to 34,000 immigrants thought to be in the country illegally on any given day, and 73% of them are held in private prisons. Little wonder, then, that these companies’ stocks soared on Trump’s election. And soon they had even more reasons to celebrate: one of the first things Trump’s new attorney general, Jeff Sessions, did was rescind the Obama administration’s decision to move away from for-profit jails for the general prison population.

Trump appointed as deputy defence secretary Patrick Shanahan, a top executive at Boeing who, at one point, was responsible for selling costly hardware to the US military, including Apache and Chinook helicopters. He also oversaw Boeing’s ballistic missile defence programme – a part of the operation that stands to profit enormously if international tensions continue to escalate under Trump.

And this is part of a much larger trend. As Lee Fang reported in the Intercept in March 2017, “President Donald Trump has weaponised the revolving door by appointing defence contractors and lobbyists to key government positions as he seeks to rapidly expand the military budget and homeland security programmes … At least 15 officials with financial ties to defence contractors have been either nominated or appointed so far.”

The revolving door is nothing new, of course. Retired military brass reliably take up jobs and contracts with weapons companies. What’s new is the number of generals with lucrative ties to military contractors whom Trump has appointed to cabinet posts with the power to allocate funds – including those stemming from his plan to increase spending on the military, the Pentagon and the Department of Homeland Security by more than $80bn in just one year.

The other thing that has changed is the size of the Homeland Security and surveillance industry. This sector grew exponentially after the September 11 attacks, when the Bush administration announced it was embarking on a never-ending “war on terror”, and that everything that could be outsourced would be. New firms with tinted windows sprouted up like malevolent mushrooms around suburban Virginia, outside Washington DC, and existing ones, such as Booz Allen Hamilton, expanded into brand new territories. Writing in Slate in 2005, Daniel Gross captured the mood of what many called the security bubble: “Homeland security may have just reached the stage that internet investing hit in 1997. Back then, all you needed to do was put an ‘e’ in front of your company name and your IPO would rocket. Now you can do the same with ‘fortress’.”

That means many of Trump’s appointees come from firms that specialise in functions that, not so long ago, it would have been unthinkable to outsource. His National Security Council chief of staff, for instance, is retired Lt Gen Keith Kellogg. Among the many jobs Kellogg has had with security contractors since going private was one with Cubic Defense.

According to the company, he led “our ground combat training business and focus[ed] on expanding the company’s worldwide customer base”. If you think “combat training” is something armies used to do all on their own, you’d be right.

One noticeable thing about Trump’s contractor appointees is how many of them come from firms that did not even exist before 9/11: L-1 Identity Solutions (specialising in biometrics), the Chertoff Group (founded by George W Bush’s homeland security director Michael Chertoff), Palantir Technologies (a surveillance/big data firm cofounded by PayPal billionaire and Trump backer Peter Thiel), and many more. Security firms draw heavily on the military and intelligence wings of government for their staffing.

Under Trump, lobbyists and staffers from these firms are now migrating back to government, where they will very likely push for even more opportunities to monetise the hunt for people Trump likes to call “bad hombres”.

This creates a disastrous cocktail. Take a group of people who directly profit from ongoing war and then put those same people at the heart of government. Who’s going to make the case for peace? Indeed, the idea that a war could ever definitively end seems a quaint relic of what during the Bush years was dismissed as “pre–September 11 thinking”.

And then there’s vice-president Mike Pence, seen by many as the grownup in Trump’s messy room. Yet it is Pence, the former governor of Indiana, who actually has the most disturbing track record when it comes to bloody-minded exploitation of human suffering.

When Mike Pence was announced as Donald Trump’s running mate, I thought to myself: I know that name, I’ve seen it somewhere. And then I remembered. He was at the heart of one of the most shocking stories I’ve ever covered: the disaster capitalism free-for-all that followed Katrina and the drowning of New Orleans. Mike Pence’s doings as a profiteer from human suffering are so appalling that they are worth exploring in a little more depth, since they tell us a great deal about what we can expect from this administration during times of heightened crisis.

Before we delve into Pence’s role, what’s important to remember about Hurricane Katrina is that, though it is usually described as a “natural disaster”, there was nothing natural about the way it affected the city of New Orleans. When Katrina hit the coast of Mississippi in August 2005, it had been downgraded from a category 5 to a still-devastating category 3 hurricane. But by the time it made its way to New Orleans, it had lost most of its strength and been downgraded again, to a “tropical storm”.

That’s relevant, because a tropical storm should never have broken through New Orleans’s flood defence. Katrina did break through, however, because the levees that protect the city did not hold. Why? We now know that despite repeated warnings about the risk, the army corps of engineers had allowed the levees to fall into a state of disrepair. That failure was the result of two main factors.

One was a specific disregard for the lives of poor black people, whose homes in the Lower Ninth Ward were left most vulnerable by the failure to fix the levees. This was part of a wider neglect of public infrastructure, which is the direct result of decades of neoliberal policy. Because when you systematically wage war on the very idea of the public sphere and the public good, of course the publicly owned bones of society – roads, bridges, levees, water systems – are going to slip into a state of such disrepair that it takes little to push them beyond the breaking point. When you massively cut taxes so that you don’t have money to spend on much of anything besides the police and the military, this is what happens.

It wasn’t just the physical infrastructure that failed the city, and particularly its poorest residents, who are, as in so many US cities, overwhelmingly African American. The human systems of disaster response also failed – the second great fracturing. The arm of the federal government that is tasked with responding to moments of national crisis such as this is the Federal Emergency Management Agency (Fema), with state and municipal governments also playing key roles in evacuation planning and response. All levels of government failed.

It took Fema five days to get water and food to people in New Orleans who had sought emergency shelter in the Superdome. The most harrowing images from that time were of people stranded on rooftops – of homes and hospitals – holding up signs that said “HELP”, watching the helicopters pass them by. People helped each other as best they could. They rescued each other in canoes and rowboats. They fed each other. They displayed that beautiful human capacity for solidarity that moments of crisis so often intensify. But at the official level, it was the complete opposite. I’ll always remember the words of Curtis Muhammad, a longtime New Orleans civil rights organiser, who said this experience “convinced us that we had no caretakers”.

The way this abandonment played out was deeply unequal, and the divisions cleaved along lines of race and class. Many people were able to leave the city on their own – they got into their cars, drove to a dry hotel, called their insurance brokers. Some people stayed because they believed the storm defences would hold. But a great many others stayed because they had no choice – they didn’t have a car, or were too infirm to drive, or simply didn’t know what to do. Those are the people who needed a functioning system of evacuation and relief – and they were out of luck.

Abandoned in the city without food or water, those in need did what anyone would do in those circumstances: they took provisions from local stores. Fox News and other media outlets seized on this to paint New Orleans’s black residents as dangerous “looters” who would soon be coming to invade the dry, white parts of the city and surrounding suburbs and towns. Buildings were spray-painted with messages: “Looters will be shot.”

Checkpoints were set up to trap people in the flooded parts of town. On Danziger Bridge, police officers shot black residents on sight (five of the officers involved ultimately pleaded guilty, and the city came to a $13.3m settlement with the families in that case and two other similar post-Katrina cases). Meanwhile, gangs of armed white vigilantes prowled the streets looking, as one resident later put it in an exposé by investigative journalist AC Thompson, for “the opportunity to hunt black people”.

I was in New Orleans during the flooding and I saw for myself how amped up the police and military were – not to mention private security guards from companies such as Blackwater who were showing up fresh from Iraq. It felt very much like a war zone, with poor and black people in the crosshairs – people whose only crime was trying to survive. By the time the National Guard arrived to organise a full evacuation of the city, it was done with a level of aggression and ruthlessness that was hard to fathom. Soldiers pointed machine guns at residents as they boarded buses, providing no information about where they were being taken. Children were often separated from their parents.

What I saw during the flooding shocked me. But what I saw in the aftermath of Katrina shocked me even more. With the city reeling, and with its residents dispersed across the country and unable to protect their own interests, a plan emerged to ram through a pro-corporate wishlist with maximum velocity. The famed free-market economist Milton Friedman, then 93 years old, wrote an article for the Wall Street Journal stating, “Most New Orleans schools are in ruins, as are the homes of the children who have attended them. The children are now scattered all over the country. This is a tragedy. It is also an opportunity to radically reform the educational system.”

In a similar vein, Richard Baker, at that time a Republican congressman from Louisiana, declared, “We finally cleaned up public housing in New Orleans. We couldn’t do it, but God did.” I was in an evacuation shelter near Baton Rouge when Baker made that statement. The people I spoke with were just floored by it. Imagine being forced to leave your home, having to sleep in a camping bed in some cavernous convention centre, and then finding out that the people who are supposed to represent you are claiming this was some sort of divine intervention – God apparently really likes condo developments.

Baker got his “cleanup” of public housing. In the months after the storm, with New Orleans’s residents – and all their inconvenient opinions, rich culture and deep attachments – out of the way, thousands of public housing units, many of which had sustained minimal storm damage because they were on high ground, were demolished. They were replaced with condos and town houses priced far out of reach for most who had lived there.

And this is where Mike Pence enters the story. At the time Katrina hit New Orleans, Pence was chairman of the powerful and highly ideological Republican Study Committee (RSC), a caucus of conservative lawmakers. On 13 September 2005 – just 15 days after the levees were breached, and with parts of New Orleans still under water – the RSC convened a fateful meeting at the offices of the Heritage Foundation in Washington DC. Under Pence’s leadership, the group came up with a list of “Pro-Free-Market Ideas for Responding to Hurricane Katrina and High Gas Prices” – 32 pseudo-relief policies in all, each one straight out of the disaster capitalism playbook.

What stands out is the commitment to wage all-out war on labour standards and the public sphere – which is bitterly ironic, because the failure of public infrastructure is what turned Katrina into a human catastrophe in the first place. Also notable is the determination to use any opportunity to strengthen the hand of the oil and gas industry. The list includes recommendations to suspend the obligation for federal contractors to pay a living wage; make the entire affected area a free-enterprise zone; and “repeal or waive restrictive environmental regulations … that hamper rebuilding”. In other words, a war on the kind of red tape designed to keep communities safe from harm.

President Bush adopted many of the recommendations within the week, although, under pressure, he was eventually forced to reinstate the labour standards. Another recommendation called for giving parents vouchers to use at private and charter schools (for-profit schools subsidised with tax dollars), a move perfectly in line with the vision held by Trump’s pick for education secretary, Betsy DeVos. Within the year, the New Orleans school system became the most privatised in the US.

And there was more. Though climate scientists have directly linked the increased intensity of hurricanes to warming ocean temperatures, that didn’t stop Pence and his committee from calling on Congress to repeal environmental regulations on the Gulf coast, give permission for new oil refineries in the US, and green-light “drilling in the Arctic National Wildlife Refuge”.

It’s a kind of madness. After all, these very measures are a surefire way to drive up greenhouse gas emissions, the major human contributor to climate change, which leads to fiercer storms. Yet they were immediately championed by Pence, and later adopted by Bush, under the guise of responding to a devastating hurricane.

It’s worth pausing to tease out the implications of all of this. Hurricane Katrina turned into a catastrophe in New Orleans because of a combination of extremely heavy weather – possibly linked to climate change – and weak and neglected public infrastructure. The so-called solutions proposed by the group Pence headed at the time were the very things that would inevitably exacerbate climate change and weaken public infrastructure even further. He and his fellow “free-market” travellers were determined, it seems, to do the very things that are guaranteed to lead to more Katrinas in the future.

And now Mike Pence is in a position to bring this vision to the entire United States.

The oil industry wasn’t the only one to profit from Hurricane Katrina. Immediately after the storm, the whole gang of contractors who had descended on Baghdad when war broke out – Bechtel, Fluor, Halliburton, Blackwater, CH2M Hill and Parsons, infamous for its sloppy Iraq work – now arrived in New Orleans. They had a singular vision: to prove that the kinds of privatised services they had been providing in Iraq and Afghanistan also had an ongoing domestic market – and to collect no-bid contracts totalling $3.4bn.

The controversies were legion. Relevant experience often appeared to have nothing to do with how contracts were allocated. Take, for example, the company that Fema paid $5.2m to perform the crucial role of building a base camp for emergency workers in St Bernard Parish, a suburb of New Orleans. The camp construction fell behind schedule and was never completed. Under investigation, it emerged that the contractor, Lighthouse Disaster Relief, was in fact a religious group. “About the closest thing I have done to this is just organise a youth camp with my church,” confessed Lighthouse’s director, Pastor Gary Heldreth.

After all the layers of subcontractors had taken their cut, there was next to nothing left for the people doing the work. Author Mike Davis tracked the way Fema paid Shaw $175 per sq ft to install blue tarps on damaged roofs, even though the tarps themselves were provided by the government. Once all the subcontractors took their share, the workers who actually hammered in the tarps were paid as little as $2 per sq ft.

“Every level of the contracting food chain, in other words, is grotesquely overfed except the bottom rung,” Davis wrote, “where the actual work is carried out.” These supposed “contractors” were really – like the Trump Organization – hollow brands, sucking out profit and then slapping their name on cheap or non-existent services.

In order to offset the tens of billions going to private companies in contracts and tax breaks, in November 2005 the Republican-controlled Congress announced that it needed to cut $40bn from the federal budget. Among the programmes that were slashed: student loans, Medicaid and food stamps.

So, the poorest people in the US subsidised the contractor bonanza twice: first, when Katrina relief morphed into unregulated corporate handouts, providing neither decent jobs nor functional public services; and second, when the few programmes that assist the unemployed and working poor nationwide were gutted to pay those bloated bills.

New Orleans is the disaster capitalism blueprint – designed by the current vice-president and by the Heritage Foundation, the hard-right think tank to which Trump has outsourced much of his administration’s budgeting. Ultimately, the response to Katrina sparked an approval ratings freefall for George W Bush, a plunge that eventually lost the Republicans the presidency in 2008. Nine years later, with Republicans now in control of Congress and the White House, it’s not hard to imagine this test case for privatised disaster response being adopted on a national scale.

The presence of highly militarised police and armed private soldiers in New Orleans came as a surprise to many. Since then, the phenomenon has expanded exponentially, with local police forces across the country outfitted to the gills with military-grade gear, including tanks and drones, and private security companies frequently providing training and support. Given the array of private military and security contractors occupying key positions in the Trump administration, we can expect all of this to expand further with each new shock.

The Katrina experience also stands as a stark warning to those who are holding out hope for Trump’s promised $1tn in infrastructure spending. That spending will fix some roads and bridges, and it will create jobs. Crucially, Trump has indicated that he plans to do as much as possible not through the public sector but through public-private partnerships – which have a terrible track record for corruption, and may result in far lower wages than true public-works projects would. Given Trump’s business record, and Pence’s role in the administration, there is every reason to fear that his big-ticket infrastructure spending could become a Katrina-like kleptocracy, a government of thieves, with the Mar-a-Lago set helping themselves to vast sums of taxpayer money.

New Orleans provides a harrowing picture of what we can expect when the next shock hits. But sadly, it is far from complete: there is much more that this administration might try to push through under cover of crisis. To become shock-resistant, we need to prepare for that, too.