Why aren’t the candidates talking about our hollow government?

[Cross-posted from the Accountable Strategies blog]

The book details how Halliburton has used $20 billion in public reconstruction funds to build “city-states” for the thousands of contractors that have overrun Iraq, yet little or no money has gone to the country's factories.  The money has been turned over almost exclusively to American and other foreign contractors and accountants, most of them handed no-bid contracts, while Iraqis themselves have largely been excluded from all the fun.

Meanwhile, the administration never set up a workable system of public oversight of these contractors, who seem to be immune as well from both Iraqi and American laws in their dealings.  The result has been widespread fraud and mismangement.  As Klein puts it:

…the occupation of Iraq was, from the start, a radical experiment in hollow governance.

Klein contends that this situation, coupled with American decisions early on to stifle democratic elections in Iraq led to the horrific violence there, which was then met with American-imposed repression, ultimately symbolized by the spectacle of Abu Ghraib.

Klein makes a convincing case that all too many key current and former members of the U.S. government, such as Dick Cheney, Donald Rumsfeld, Henry Kissinger, Richard Perle, James Baker, George Shultz and others have personally profited either from the war in Iraq or from the Bush administration's “War on Terror” in the wake of 9/11.  She notes:

In the Bush administration, the war profiteers aren't just clamoring to get access to government, they are the government: there is no distinction between the two.

The book, subtitled “The Rise of Disaster Capitalism,” also describes a pattern of  corporate corruption in country after country in which the U.S. has intervened economically and sometimes militarily in the past four decades.  This pattern began in Chile and Argentina in the 1970s, and continued in Poland and Russia, just after the fall of Communism, in South Africa after Apartheid, in Thailand and other countries in Asia, and finally in Iraq.  It's a pattern that appears to involve the imposition of Milton Friedman's “Chicago School” economic doctrines in every case.

In none of these cases have these doctrines of mass privatization, deregulation of markets, and massive cuts in social services worked.  In every case, a small cadre of corporate elites has gotten rich, while the middle class has been pushed into poverty and despair.  Iraq has been the ultimate example of this.  Moreover, because these economic principles are so unpalatable to the local populations, Klein contends, the principles have had to be imposed in conjunction with violent shocks involving repression, violence, natural disasters, and, in many cases, torture.   

Klein opens with the example of Hurricane Katrina, a major shock, which was seen by many local politicians and corporate lobbyists as an opportunity to level public housing projects in New Orleans, lower taxes, deregulate the economy, and downsize the government.  She  details the situations in Chile, Argentina and other South American countries, beginning in the 1970s, in which Augusto Pinochet and other dictators imposed the shocks on their own, instituting enormous repression, killings, torture, and disappearances on their populations, with the sole aim, it turns out, of installing free-market economies in their countries.  Lurking behind the scenes in case after case has been the University of Chicago Economics Department and Friedman, its free-market guru, who advised and encouraged these dictators to transform their countries according to their free-market theories.  

Klein also drags Israel into this morass, but I think she goes off the track here.   She contends that Israel's security wall has turned that country into a “fortified gated community” equivalent to the Green Zone in Iraq.  She makes no mention of the fact that the wall appears to have stopped the suicide bombings inside Israel.  She also contends that a lot of Israeli companies have profited from selling security-related technology around the world, but she makes no case that those companies are running the Israeli government the way Halliburton etc. appear to be running the U.S. government.  She makes no case, moreover, that Israel's leaders are seeking to impose free-market principles on the Palestinians or anyone else for that matter, so this chapter really doesn't seem to fit within this book.

On the whole, however, this is a book that should be read and discussed in both programs and courses on corporate social responsibility and public sector governance.  It should also be part of the curriculum in economics departments and should be a key focus of discussion in the presidential campaign as well.

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