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The Real Blackwater Scandal: Build a Frontier, You Get Cowboys

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Two weeks ago, I talked with Naomi Klein about her new book, The Shock Doctrine: The Rise of Disaster Capitalism. If you missed the original video, you can watch it here, and the longer transcript is here. You can also learn more about the book and read excerpts here.

At that point, the Blackwater scandal over the massacre in Baghdad's Nisoor Square was just breaking. Since then, the story has blown wide open, with more mind-boggling details coming to light every day. It turns out the US occupation is so dependent on this one private mercenary company that it can't even function without Blackwater on the roads, providing the kind of protection that levels everything in its path... including the lives of Iraqi civilians.

Now we find out that the original report exonerating Blackwater, issued on U.S. diplomatic letterhead, was actually written by a Blackwater guy. As we are gripped by the unfolding scandal, it's easy -- and dangerous -- to see this as a story about a single rogue outfit, just another accountability scandal in the epic and tragic reality of this war.

What Naomi does so well is put the corruption scandals into a broader context, unveiling and meticulously documenting how the scandals of the Bush regime -- from the invasion of Iraq to the inability of FEMA to locate the Superdome for days after Katrina hit -- are actually part of a new emerging economy, what she calls the Disaster Capitalism Complex, which itself is the culmination of a 35 year ideological campaign of radical privatization and de-regulation. It is not a conspiracy in any sense, but a very open, fundamentalist ideological war against the New Deal in America and Keynesian economics around the globe. Francis Fukuyama called the supposed peak of this movement "the End of History." But what may actually be ending is the illusion that this campaign has done anything but great damage to people around the globe. Blackwater is a perfect case in point.

Here's more from our ongoing conversation:

Cusack: The Blackwater scandal broke just as you hit the US on your book tour. What do you make of the coverage?

Klein: It definitely feels like a watershed moment. There is this collective understanding that this wasn't an accident, it was inevitable: give a bunch of pumped-up guys guns, and send them to a place where they're above the law, and they'll act like cowboys. But what's missing from too much of the analysis is the obvious next point: this is true of the entire occupation.

Give a bunch of contractors billions of dollars with no accountability, while simultaneously eviscerating the Iraqi state (de-Baathification, laying off the army, flinging open the economy with no regulation) and they'll gorge. Give a bunch of Heritage Foundation interns control of an economy with no oversight and they'll try to privatize everything in sight. The entire disaster in Iraq was utterly predictable. But what I argue in the book is that not only was this predictable, it was the plan. The plan wasn't to destroy Iraq; it was to create a market frontier. And the reason you build a frontier is always the same: nothing is more profitable. Adam Smith wrote about it in The Wealth of Nations: on the colonial frontier, land can be grabbed, taxes are few, and capitalism can exist in its purest, most profitable form. That's why the Wall Street Journal has been comparing Iraq to a "gold rush" from the very first reconstruction conferences in 2003 -- any frontier is a gold rush.

So what frustrates me about the current Blackwater scandal is the attitude of surprise in the media and congress -- surprise that these companies are acting like "cowboys" in a "wild west." Of course they are -- the occupation was built to be the Wild West. For four years the White House systematically fought every attempt at oversight of the contractors, specifically granted them immunity under Iraqi law and made no serious attempt to monitor their activities. And it's not just Blackwater -- think of all the tens of billions of public dollars allocated to reconstructing Iraq. The money has all been given away to contractors while Iraq is in worse shape than ever -- those contractors are cowboys too. And that's not even including the roughly $9 billion of Iraq's own oil money that has gone missing.

And what's even worse than the feigned astonishment we are seeing is this insistence on framing everything as an individual "corruption" scandal. Companies are built to profit from opportunity -- to do everything they can get away with to make as much money as possible. It's their legal duty. So the scandal isn't Blackwater or Halliburton or Exxon; it's the vision of politics we have been living with since Reagan that holds that the central role of government is to be the executive chef for this corporate feeding frenzy. In the eighties and nineties, that meant chopping of major limbs of the state -- water, electricity, the airwaves -- and feeding them to corporations. Today the process has moved into the very core of the state: armies, interrogation, evacuations. But rampant corruption has always been part of these neo-colonial privatization frenzies -- think of the instant billionaires in Latin America's privatization wave, when Carlos Slim, now the third richest man in the world, made his fortune, or the lawless rise of the Russian oligarchs during "shock therapy."

What I argue in The Shock Doctrine is that privatization is the post-modern frontier. Essentially, what shock therapy means is selling off as much as possible before the law catches up, just as an earlier era of conquistadors grabbed land and minerals and signed treaties after the fact. The same goes for today: after each one of these feeding frenzies, the same policy makers who opened up the neo-frontier turn around and act surprised and scandalized that the corporations who they themselves have liberated are caught scamming wildly. It's only then that we hear the pious lectures about the need for oversight and rules and regulations. My question is this: how does the capacity for corporate greed keep coming as a surprise? The politicians who designed this war are all supposed to be adherents to a philosophy that holds that there is nothing more powerful in the world than greed -- that it should be the governing force in as many human interactions as possible. Isn't that what Milton Friedman wanted? Iraq's occupation was organized by the Bush Administration to unleash that instinct with absolutely no restraint.

Either greed belongs in a war zone, or it doesn't. You can't unleash it in the name of sparking an economic boom and then be shocked when Halliburton overcharges for everything from towels to gas, when Parsons' sub, sub, sub-contractor builds a police academy where the pipes drip raw sewage on the heads of army cadets and where Blackwater investigates itself and finds it acted honorably. That's just corporations doing what they do and Iraq is a privatized war zone so that's what you get. Build a frontier, you get cowboys and robber barons.

Cusack: This notion of the frontier seems important to understanding the occupation. It reminds me of what Garry Wills said in his great book by the same name: it's John Wayne's America. And it seems that exploiting the frontier mythology has been key to selling what you call the Shock Doctrine to the public -- drawing on its whole aesthetic, so central to the American identity. Ideas of rugged individualism, tribal but not collective loyalties, the freedom archetype -- the cowboy as symbolized by Wayne, who is still seen as the greatest of American icons some 30 years after his death. He's a killer, a tamer of lands -- principled and ruthless, but ultimately benevolent and kind. First and foremost, of course, he is a law unto himself. Which is exactly how the occupation has been sold -- as you say, an attempt to build a model state in someone else's land. And rugged cowboy idealism was the packaging for the whole murderous and lawless project.

So let's talk about Paul Bremer, who single-handedly imposed many of the laws that are still on the books in Iraq, including the one giving Blackwater and other private contractors immunity from prosecution -- in effect putting them above the law. He set the tone, as well as the legal structure for what's happening now, yes?

Klein: He did -- but with the full support of Rumsfeld, from whom he was getting his orders directly, and from Bush. Blaming Bremer is kind of an easy out, which is probably why some of the war's architects have taken to scapegoating him for everything that has gone wrong. Richard Perle said in late 2006 that "the seminal mistake" was "bringing Bremer in." David Frum now says that they should have had "any kind of an Iraqi face" on the remaking of Iraq right away.

Of course none of these guys complained about it publicly during that whole first year of the occupation, when there was just Paul Bremer, holed up in Saddam's turquoise-domed Republican Palace, receiving trade and investment laws by email from the Department of Defense -- usually drafted by private companies like KPMG's Bearing Point, which had the contract to rewrite much of Iraq's economic architecture. According to his own memoirs, Bremer would print out the laws, sign them and impose them by fiat on the Iraqi people -- less the king of Iraq than the CEO of Iraq Inc. And he was completely in-your-face about it, criss-crossing the country in a Blackhawk helicopter, flanked by his ubiquitous Blackwater guards and always in his perfectly pressed Brooks Brothers suits and army boots -- the uniform of the disaster capitalism complex.

Cusack: It's a good look. Why did Bremer go with Blackwater in the first place, why not be protected by U.S. Marines?

Klein: Apparently he thought he would be safer with a private company, and he may well have been right. Because unlike soldiers, Blackwater has never had to worry about a broader mission of securing Iraq. The company's job with Bremer was just to bodyguard the CEO -- which has a brutal simplicity to it.

And Bremer and Blackwater made the perfect match. Blackwater's mission was to protect Paul Bremer at all costs -- "protect the principal." Bremer was protecting a principal too, his principal was the disastrous and ultimately failed project of forcibly transforming Iraq into a "model free-market," which was code for a wild-west utopia for western multinationals.

Cusack: But Bremer wasn't just a rogue, or an errand boy. That would be too convenient, as you say. He played a more significant historical role than that, trying to implement the broader vision of privatized government, pioneered by Milton Friedman and taken to its apotheosis by his acolyte Donald Rumsfeld... with the full approval and blessings of the entire Bush administration and the other intellectual architects of this disastrous war. Even within that context, however, Rumsfeld was quite the visionary.

Klein: Yeah, in the sixties, Rumsfeld used to attend seminars at the University of Chicago, and he described Milton Friedman and his colleagues as "a cluster of geniuses," while he and other "young pups" would "come in and learn at their feet." I think Rumsfeld's pedigree as a corporatist ideologue has really been lost in the focus on his military failures. Especially because even if he was a flop as a military strategist, from a business perspective, he was remarkably successful -- he oversaw the creation of a booming new economy in disaster.

We forget that he was very open about this goal when he took office, Fortune magazine ran an article at the time titled "Mr. CEO Goes to Washington" all about how he was going to bring a corporate-style downsizing and outsourcing revolution to the Pentagon. And of course Rumsfeld himself is a quintessential disaster capitalist -- he was chair of the board of Gilead Sciences, a drug company that owns the patent on Tamiflu, which is the treatment for Avian Flu. With every pandemic scare, Gilead's stock rises. So Rumsfeld, who held on to his Gilead stocks throughout his term in office -- watching their value soar as he recused himself from every meeting about drug supplies for flu pandemics -- knows all about this booming market.

More importantly, Rumsfeld was coming out of the private sector at a time when it was very trendy for corporations to unburden themselves of factories and full-time workers and focus exclusively on marketing and design -- the so-called Nike model. And that's pretty much what he did when he took over at the Pentagon: he downsized the full-time troops to the bare minimum and outsourced and contracted-out everything in sight. That freed his hand to focus on the military equivalent of marketing -- the shock and awe projection of U.S. power to the world.

And the outsourcing orgy he sparked keeps blowing up in the face of the administration: in Iraq and Afghanistan, companies like Blackwater and Halliburton perform ever more central functions of war fighting, while at home, Rumsfeld and Cheney oversaw the creation of the privatized homeland security state. The first stage was to give themselves special powers to detain, spy and authorize torture; the second stage was to outsource the performing of these functions to private companies. We only catch glimpses of this through scandal -- like the private contractors exposed during the Abu Ghraib controversy. Or remember the debacle about the conditions at Walter Reed? That was because the hospital's management was in the midst of being outsourced.

The stats on this new disaster economy are incredible: Counterintelligence Field Activity, a new intelligence agency created under Rumsfeld that is independent of the CIA, outsources 70 percent of its budget to private contractors. In 2003, the U.S. government handed out 3,512 contracts to companies to perform security functions; in the twenty-two-month period ending in August 2006, the Department of Homeland Security had issued more than 115,000 such contracts. The global "homeland security industry" -- economically insignificant before 2001 -- is now a $200 billion sector, bigger than Hollywood or the music industry. And the private companies performing these functions are a kind of shadow state, with extraordinary power and very little oversight, since the details of most of these contracts are completely obscured under the blanket of "classified" intelligence. In other words, extraordinarily sensitive state functions are being privatized -- but we can't know about it because they are too sensitive.

Cusack: That's always the Catch-22. On Blackwater, I would make the case that these privatized modern-day Hessians are illegal, and in every way an affront to the very idea of this country -- operating completely outside the checks and balances of the constitutional structure of the Republic. I mean, if privatizing homeland security and letting mercenaries go totally unregulated in Iraq is ok -- with no possible chance of the hired guns being prosecuted by state, federal or international law aren't we sanctioning roving corporate armies? Where does it end? This is really deeply down the rabbit hole. And the sickest part, in a weird way, is that this privatization revolution is not even a free market, it's entirely corporate welfare -- corporations taking our tax dollars to fund their private illegal armies.

Klein: Most people, when they learn about it, completely agree that what is going on is insane and surreal. Where this fits in with the thesis of my book is that the Disaster Capitalism Complex was launched without public debate -- the startup phase was after the extraordinary shock and disorientation of 9/11, and it was taken to market under the cover of crisis management in Iraq. It's why I am obsessed with disasters. They enable these leaps forward for corporate rule, precisely because debate is supposedly impossible during a state of emergency. So Rumsfeld's radical corporate downsizing and outsourcing of the military was never openly discussed while it was happening. Instead, we heard a lot about troop levels for the war and occupation -- it was basically reported as a numbers game, and as a power struggle between Rumsfeld and the generals or Rumsfeld and Powell, when something much more profound was going on: the birth of a new economy.

In retrospect we can see that Rumsfeld's "mistakes" were extremely profitable for a small group of crony capitalists, and continue to be. It began when Rumsfeld rejected all solutions that required increasing the size of the army in Iraq. That meant the military had to find other ways to get more soldiers into combat roles. So private security companies flooded into Iraq to perform functions that had previously been done by soldiers -- security for diplomats and other officials, guarding bases, escorting other contractors. Once they were there, their roles expanded further in response to the chaos. As Jeremy Scahill argues in his excellent book, Blackwater: The Rise of the World's Most Powerful Mercenary Army, the company's original contract in Iraq was to provide private security for Bremer, but a year into the occupation, it was engaging in all-out street combat. During the April 2004 uprising of Moqtada al-Sadr's movement in Najaf, Blackwater actually assumed command over active-duty U.S. marines in a daylong battle with the Mahdi Army, during which dozens of Iraqis were killed.

In the book, I call this "corporate mission creep" and the numbers tell the story. At the start of the occupation of Iraq, there was one contractor for every ten soldiers -- already far more than during the first Gulf War. Today, private contractors outnumber U.S. soldiers, making this the most privatized war in modern history. Once again, a sea change that was never debated -- it just happened. The worse things get in Iraq, the more the market in private warfare expands into new territory.

These days, everyone is beating up on Blackwater. But at the time this new economy was being built, the press treated the corporate mission creep as absolutely normal, unworthy of serious examination except in extreme cases when a contractor was caught stealing. The financial press, of course, was raving about the so-called "Baghdad boom" in private security, urging investors to get a piece of the action.

Before the current scandal, Blackwater had been working incredibly hard to present itself as a kind of friendly, McMercenary company, with nothing to be ashamed of, just patriotic soldiers out to fight terrorism. They have hired aggressive Washington lobbyists to erase the word "mercenary" from the public vocabulary, launched a line of Blackwater fashions, and Erik Prince likes to compare what he is doing to the military to what FedEx did to the post office.

Cusack: See now that's not a joke -- the man actually said that. The man actually compared running a for-profit occupation to delivering the mail. And there is no function of the state that they don't want to turn into a business, is there?

Klein: I think the short answer is no. Not once you've already opened up prisoner interrogation, wiretapping, and border patrol -- what's left? As you know, in the book I talk about how evacuation from disasters is a burgeoning industry. A company in Florida called HelpJet is urging people to turn "a hurricane evacuation into a jet-setter vacation." Even military recruiting, which has always been seen as the job of soldiers, has become a for-profit business. A new generation of soldiers is being recruited by private headhunting firms like Serco, or the weapons giant L-3 Communications. The private recruiters are paid bonuses every time they sign up a soldier, so one company spokesperson bragged, "If you want to eat steak, you have to put people in the army." It's like Amway with sidearms.

All of this is ripe for corruption, for the most obvious of reasons. If recruitment is on commission, quantity will outweigh quality. If "intelligence" is a service provided to the government by a private contractor, then the customer is always right. And that's pretty scary when the customer is Dick Cheney. Want to prove Iraq has WMDs? Right away, sir. Anything else I can do for you, sir?

The other thing that happens when the working philosophy of the country's leaders is that private is always better is that the public sector is left to erode and atrophy -- in-house equipment falls out of date, the best people leave, the skills are no longer there. The CIA has lost so many staffers to the privatized spy sector that it has barred contractors from recruiting in the agency dining room.

The end result is that you have Blackwater being asked to investigate its own alleged massacre in Baghdad, or CH2M Hill given a contract in Iraq to oversee other contractors. And remember that when Katrina hit, FEMA had to hire a contractor to award contracts to contractors. My favorite example is that when it came time to update the Army manual on the rules for dealing with contractors, the Army outsourced the job to one of its major contractors, because it no longer had the in-house expertise. The Department of Homeland Security is paying Boeing $2.5 billion not just to build a "virtual fence" on U.S. borders but also to design the entire border initiative because, according to the department's inspector general, the DHS "does not have the capacity needed to effectively plan, oversee, and execute the program."

Governing is reduced to running an ATM machine -- awarding contracts to private players. And increasingly, we are hearing about the contracts themselves being written by the companies that eventually win the contracts, while another company is contracted to see that the contract is fulfilled. Under George W. Bush, the state still has all the trappings of a government -- the impressive buildings, presidential press briefings, policy battles -- but it no more does the actual work of governing than the employees at Nike's Oregon headquarters actually stitch running shoes.


Read the second part of this conversation here.

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