Essay: Disaster-capitalism complex (privatization and contracting out of disaster response)

A disaster is defined as a “humanitarian catastrophe associated with a natural hazard event” (Pelling and Dill 2009: 22). Governments, corporations, investors take advantage of the desperation and destruction in the aftermath of these natural hazard events to expedite sweeping neoliberal policies such as privatization, deregulation, marketization which reshape societies in the interest of a few elite (Venugopal 2015: 4; Gotham 2012: 633; Pelling and Dill 2009: 22-24).
In the recent past, disaster events have become commonplace. Their severity and impact has been tremendous (Sandoval and Gonzalez-Muzzio 2015: 1). The rise in their number and gravity has been paralleled by an almost simultaneous rise in neoliberal reforms (Sandoval and Gonzalez-Muzzio 2015: 1). Neoliberal reforms “are political reforms conducted by governments aimed to establish an institutional framework characterised by strong private property rights, free markets and free trade” (Harvey 2005: 2). Harvey (2005: 4) asserts that these reforms are rooted in neoliberalism as “a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills.” Neoliberalism rose to prominence in the 1970s and 80s as a policy reaction to economic downturns that plagued U.S. and European states (Prasad 2006). Saad-Filho and Johnston (2005: 2) term neoliberalism as “a hegemonic system of enhanced exploitation of the majority, a global system of minority power, plunder of nations and despoilment of the environment which tramples upon the poor, undermines rights and entitlements, and defeats resistance through a combination of domestic political, economic, legal, ideological and media pressures, backed up by international blackmail and military force if necessary.” Gotham (2008: 1042) describes it as a “political ideology that advocates market-based solutions to social problems and has influenced a range of policies to engineer economic growth, privatize public services and assets, and intensify inter-urban competition for capital investment.” Thorsen and Amund (2006) contend that neoliberalism is “a loosely demarcated set of political beliefs which include the conviction that the only legitimate purpose of the state is to safeguard individual, especially commercial, liberty, as well as strong private property rights” (Mises 1962; Nozick 1974; Hayek 1979). Neoliberalism generally also includes the belief that freely adopted market mechanisms is the optimal way of organising all exchanges of goods and services (Friedman 1962; 1980; Norberg 2001). Free markets and free trade will, it is believed, set free the creative potential and the entrepreneurial spirit which is built into the spontaneous order of any human society, and thereby lead to more individual liberty and well-being, and a more efficient allocation of resources (Hayek 1973; Rothbard 2004). Neoliberalism could also include a perspective on moral virtue: the good and virtuous person is one who is able to access the relevant markets and function as a competent actor in these markets (Thorsen and Amund 2006). He or she is willing to accept the risks associated with participating in free markets, and to adapt to rapid changes arising from such participation (Friedman 1980). Individuals are also seen as being solely responsible for the consequences of the choices and decisions they freely make: instances of inequality and glaring social injustice are morally acceptable, at least to the degree in which they could be seen as the result of freely made decisions (Nozick 1974; Hayek 1976). If a person demands that the state should regulate the market or make reparations to the unfortunate who has been caught at the losing end of a freely initiated market transaction, this is viewed as an indication that the person in question is morally depraved and underdeveloped, and scarcely different from a proponent of a totalitarian state (Mises 1962). Thus understood and defined, neoliberalism becomes a loose set of ideas of how the relationship between the state and its external environment ought to be organised, and not a complete political philosophy or ideology (Blomgren 1997; Malnes 1998).
As a vehicle of neoliberalism, Disaster Capitalism precipitated the lacklustre responses to the Hurricane Katrina tragedy in the United States. Naomi Klein brought to the fore and popularized the notion of Disaster Capitalism. In her book The Shock Doctrine (2007), she described Disaster Capitalism as the “political economic processes that take advantage of mass trauma to impose neoliberal capitalist economic policies, facilitating the redistribution of wealth and exacerbating socio-economic divisions.” Other authors have aptly elucidated the concept as well. Disaster Capitalism is defined as “national and transnational governmental institutions’ instrumental use of catastrophe (both so-called natural and human-mediated disasters, including post conflict situations) to promote and empower a range of private, neoliberal capitalist interests” (Maldonado and Schuller 2016: 62). Disaster Capitalism is as much about the pre-disaster exclusion of a certain group of people from participating equally in the economic system, as it is the capital-driven strategies for recovery and rebuilding (Edwards 2016: 1). Disaster Capitalism constitutes of two parts (Maldonado and Schuller 2016: 62). Non-profiteering, which is the first, is the process whereby public agencies direct resources to private entities. The second part consists of radical policy reforms. These reforms are referred to by Antonio Donini (2008) terms as world ordering (Maldonado and Schuller 2016: 62).
Naomi Klein identifies the Chicago School of neo-liberal economics and its iconic figure Milton Friedman as providing the framework for disaster capitalism (Edwards 2016:1). It was Freidman’s own belief that “[i]f a government activity is to be privatized or eliminated, by all means do so completely. Do not compromise by partial privatization or partial reduction.” Friedman contended that doing so will only enable those most negatively affected by the reforms to eventually succeed in forcing reversals (Freidman 1990: 11- 14).
Klein compares covert electroshock experiments carried out by C.I.A operatives in the 1950s to the “shock therapy” of economic reform being formulated at the Chicago School of Economics by Milton Friedman. The application of electrodes to stubborn patients to help facilitate “reprogramming” could also be applied to Keynesian economies in need of rapid market liberalization.
Klein locates the origin of this ‘disaster capitalism’ in Latin America in the 1970s. The concept of shock therapy incorporated into economic reasoning by Klein had its root in crude electric shock treatments for patients diagnosed with mental disorders. Rigorously employed in the former Soviet Republics, the logic of shock therapy was to use the disarray inherent to regime change to advance economic reorganization (Sachs 1995; Haynes and Husan 2002). As opposed to piecemeal reforms, shock therapy suggested rapid and radical transformations of economic policies (Friedman 1990; Popov 2000). Using the shock therapy analogy, disaster capitalism utilises disasters to predicate radical capitalist economic policies (Ott 2012). Naomi Klein (2007:49) furthers that “every time a new crisis hit – even when the crisis itself is the direct by-product of free-market ideology – the fear and disorientation that follow are harnessed for radical social and economic engineering.” Klein continues to explain that “each new shock is midwife to a new course of economic shock therapy” (49). For Klein, shocks, which come in the form of wars, financial crisis, coup d’état, terrorists attacks, and natural disasters, are taken advantage of by reform-minded technocrats, politicians and transnational capitalist forces to pursue neoliberal economic policies. Disaster capitalism thus relies upon a series of interrelating shocks: The initial shock is the disaster event. This leads to public shock, characterized by fear and disorientation. The third jolt is in the form of shock therapy and the pursuit of neoliberal policy reforms. Finally, as the public gathers its bearings, the state’s security apparatus maintains acquiescence to the new orthodoxy by utilizing actual shock techniques (McSherry 2002: 43; Klein 2007).
The first country subjected to Milton Friedman’s ‘economic shock treatment’ was Chile in 1973 (Ott 2012; Klein 2007). General Augusto Pinochet’s US. Government supported military coup which deposed Salvador Allende’s government was the initial shock. Economic policy under Pinochet was designed and implemented by the ‘Chicago Boys’ – Friedman and his disciples, who saw the opportunity to put into practice their (neoliberal) theories about market liberalisation, privatisation and state retrenchment (Ott 2012). The policies they recommended could only be implemented at the point of a gun (Klein 2010). This would be the pattern throughout Latin America in the 1970s: military rule (including systematic murder and torture) and neoliberal ‘shock therapy’ running side by side. General Augusto and the Chicago Boys disintegrated and his Chicago Boys did their best to dismantle Chile’s public sphere, auctioning off state enterprises and slashing financial and trade regulations (Klein 2010). Enormous wealth was created in this period but at a terrible cost: by the early 80s, Pinochet’s Friedman-prescribed policies had caused rapid de-industrialisation, a tenfold increase in unemployment and an explosion of distinctly unstable shantytowns. They also led to a crisis of corruption and debt so severe that, in 1982, Pinochet was forced to fire his key Chicago Boy advisers and nationalise several of the large deregulated financial institutions.
Conceptually, disaster capitalism relies upon a series of actions that take place after a disaster event. This includes (1) the displacement and disorientation of affected populations, (2) the prompt centralization of decision-making power: often via a state of emergency, (3) a call for immediate international aid and an appeal for long-term assistance from international financial institutions (IFIs), and (4) the relaxation or repeal of particular socio-economic regulations and the legislation of others (Klein 2005 and 2007). According to Klein (2007), shocks are not solely attributable to natural occurrences, but rather, result from a series of deliberate policy decisions. Often, unequal developmental patterns resulting from the implementation of neoliberal policies help to create a set of vulnerabilities that are borne out during a disaster event (Barber 1979: 370-373).
The inherent ‘shock’ associated with disasters, as noted by Olson and Gawronski, puts the affected communities emphasis back onto “essential material needs” (2010: 4), thereby sheltering policymakers from the public scrutiny associated with sweeping economic reform policies like privatizations, capital liberalization, and cuts in long-term government spending. Disasters create a shock in the public realm, a kind of disorientation where policy space is made available and must be acted upon immediately before the public regains their collective clarity and sense of normalcy.
Hurricane Katrina proved to be a watershed moment in the conceptualisation of Klein’s “disaster capitalism complex.”
Katrina was a category 4 storm, surging over 6 metres in height that made its landfall on the U.S. Gulf Coast on August 29, 2005. It is estimated to have impacted approximately 90,000 square miles throughout southern Louisiana, Mississippi, and Alabama, displaced between 1-1.5 million people (with nearly half of those coming from New Orleans), killed more than 1,800 people, and exceeded $80 billion in costs (Button and Oliver-Smith 2008:123; Cutter et al. 2006:8; Elliot and Pais 2006:302). The handling of Hurricane Katrina relief efforts by the Bush government was dubbed an administrative failure over the years (Eikenberry, Arroyave, Cooper 2007: 160; Dreier 2006) However, his administration was cunning enough to use the catastrophe for financial gain, in one of the most blatant instances of disaster capitalism in recent years. In the aftermath of the disaster, the administration sought to remove tax breaks for small business, lodge suggestions that the Environmental Protection Agency (EPA) forgo environmental statutes such as the Clean Air Act, waive preconditions of affirmative action for contractors, and lift the cap on the number of work hours for truck drivers (Dreier 2006). Bush’s government, buoyed by Republican congressmen also pursued $50 billion in cuts of public expenditure on social services for the poor such as Medicaid, child care, food stamps and Supplemental Security Income (Dreier 2006). It rescinded rules capping the number of hours truckers can work. Firms and corporations with linkages to the government were added no-bid contracts for the rebuilding and reconstruction work. Firms and large corporations with political connections reaped big. Halliburton earned $ 124.9 million from contracts with the Department of Defence, FEMA, the US Navy and Army Corps of Engineers (Halliburton Watch 2005; Adams, Hattum and English 2009: 629). This was despite the fact that Halliburton botched its performance in Iraq and underwent 20 investigations for purported crimes such as bribery, vote rigging, overcharging (Adams, Hattum and English 2009: 629). However, the firm’s close relationship with the Bush administration played strongly to their advantage. The U.S construction industry furnished the Republican Party presidential and congressional candidates with over half of their $71 million pledges during the 2004 election cycle. Hurricane Katrina was their opportune moment to push their agendas through Bush’s Republican administration. According to the Los Angeles Times, lobbyists representing energy, transportation and other corporate sectors dominated the task forces created by Louisiana Senators David Vitter (a Republican) and Mary Landrieu (a Democrat) to advise them in drafting the Louisiana Katrina Reconstruction Act. The legislation included “billions of dollars’ worth of business for clients of those lobbyists.”
In this case, crisis was exploited on behalf of what Klein would call the “disaster-capitalism complex” or the privatization and contracting out of disaster response. While the scope of the disaster necessitated the use of private contracting, some of the largest no-bid contracts went to firm that were used by the government in Iraq: Halliburton’s KBR (military base construction), Blackwater (provided security for FEMA, the frenzy of firms pouring into Louisiana and Mississippi to secure largely no bid contracts was encouraged by the relaxation of longstanding labour protections. Shortly after the failure of Louisiana’s levy system, the federal government overturned The Davis-Bacon Act and Executive Order 11246. The 1931 Davis-Bacon Act called for federal contractors “to pay their labourers and mechanics not less than the prevailing wage rates and fringe benefits for corresponding classes of labourers and mechanics employed on similar projects in the area.” The 1965 Executive Order 11246 is an affirmative action provision that “prohibits federal contractors and federally assisted construction contractors and subcontractors…from discriminating in employment decisions on the basis of race, colour, religion, sex, or national origin.” The temporary annulment of these two laws – described as necessary to speed up the recovery process – allowed for contractors to reap enormous profits within this vacuum of deregulation. The ability to focus strictly on profit maximization led to numerous cases of prejudicial contracting, discriminatory employment practices, and the abuse of health and safety standards. It was not until affected groups were able to mobilize, coupled with the public censuring by civil rights alliances, that these regulations were reinstated (Bennett 2006; Olam and Stamper 2006; Button and Oliver-Smith 2008; Schuller 2008).
Whereas disaster capitalism theory provides an authentic outlook of the manipulation of Hurricane Katrina by self-interested individuals, government officials and big corporations to make money, it is not without criticism and theoretical limitations.
There is a dearth of literature on Hurricane Katrina about the significance and impact of politics in disaster response and recovery efforts. Disaster Capitalism cannot be theorized without capturing the essence of the prevalent politics inherent pre and post disaster. Disaster politics and disaster capitalism go hand-in-hand (Pelling and Dill 2010: 22). The exclusion of disaster politics discussions is a major limitation of the theoretical framing of disaster capitalism. Olson and Gawronski (2010: 267) argue that “disasters are unequivocally political because they invariably increase the number of demands on a political system as well as the novelty and complexity of those demands while at the same time wreaking havoc on system response capabilities.” They adduce that the shock created by natural disasters can precipitate political disturbances that aid the downfall or popularity of a government. If handled well, the disaster shock can also raise the political profile of the sitting government. (Bello 2008: 890)
To add on, Disaster Capitalism is reluctant to lump humanitarian assistance as one of the agents for the push of neoliberal policies in disaster response and recovery. Hans Morgenthau (1962) stipulated that the use of humanitarian aid as a tool for advancement of private interests is under-theorized in the literature. To that end, Hans Morgenthau (1962) provided one of the more lucid typologies of the foreign aid enterprise. For Morgenthau, humanitarian foreign assistance, along with subsistence, military, bribery, prestige, and foreign aid for economic development are all occasions for donors to exercise policy. Drury, Olson, and Van Belle (2005) support Morgenthau’s proposition and note that in the event of emergencies, relief agencies are fervent perpetrators of Disaster Capitalism. Disaster capitalism is enabled by bilateral humanitarian aid allocation. This is so because the strategic use of aid requests is an occasion for national and transnational commercial interests to advance policy preferences (Harmer and Cotterell 2009). The U.S has been a world leader in providing emergency and humanitarian relief during crises and disasters across the globe. However, Hurricane Katrina brought an unprecedented opportunity for INGOs to act outside of their organisational mandates, in addition to the U.S also receiving offers of help from developing nations (Richard 2006). A call for donations to Katrina efforts raised $3.3 billion in private donations; $2.1 billion went to the American Red Cross, $10 million to Mercy Corps and $11 million to World Vision (Kerkman 2006). The bigger INGOs introduced unfair competition for scarce recovery resources over smaller, local non-profits working in the affected areas. Many of the smaller NGOs closed shop as a result (Eikenberry, Arroyave and Cooper 2007: 166). Even though significant literature on Hurricane Katrina has ignored their participation and contribution, over twelve international nongovernmental organisations (INGOs) provided humanitarian assistance for the first time ever in the United States in the aftermath of the catastrophe. They included organisations such as Oxfam, Save the Children, Amnesty International, American Refugee Committee, International Rescue Committee, UNICEF, International Relief and Development among others. They concentrated on meeting immediate and basic needs such as water and health treatment to displaced persons. Their response was largely as a reaction to the perceived failure by the state and federal administrators to coordinate international and local nongovernmental relief efforts (Pipa 2006; Strom 2006; Wilheim 2005). INGOs focused their efforts on small groups of the population. They relinquished responsibility of defining and responding to the needs of the vulnerable displaced people to the wealthy businesses and individuals controlling the resources in the rescue efforts. The Red Cross which received the bulk of donations floundered in the recovery efforts. Employees and volunteers were found to have engaged in fraud, diversion of relief assistance, and accusations that their aid was politically motivated severed trust between the organisation and local communities.
Disaster capitalism is silent on issues of race and racism. The framing of disaster capitalism in the case of Hurricane Katrina pays no heed to the systemic racism entrenched in the affected areas. The literature focuses on the recent past and fails to address the long-term impacts of plantation slavery that have permeated the U.S societal fabric over centuries of discrimination (Beckles 2013; Mintz 1977, 1984; Trouillot 2003; Williams 1961). In 1916, New Orleans passed laws to bolster the creation of black and white territories (Pinder 2009). Residential segregation in New Orleans was a marker of the bigger racial segregation. Black neighbourhoods were characterised by overcrowding, disease outbreaks, poverty and crime (Pinder 2009: 245). The 2000 US Census Bureau reported that 28% of New Orleans was extremely poor and 84% of that statistic was African-Americans (Woldoff & Gerber 2007: 176). Majority of black people in New Orleans could not afford public transportation. 100,000 African-Americans did not own cars thus were unable to escape to safety when Hurricane Katrina hit (Strolovitch et al 2006; Woldoff & Gerber 2007: 178) The absence of this discussion thus creates a gap in understanding the way communities and actors responded to relief efforts. Michael Ignatieff rightly stated; “the safety of blacks mattered so little to the institutions charged with their protection” (Ignatieff 2005: 15). African Americans displaced by the disaster were neglected by the state and left to evacuate on their own. 8000 prisoners, majority of who were black, were left to die in New Orleans prison when the hurricane hit. Several drowned as flood waters filled their cells. The ones who made it to safety were captured by prison guards and taken to an interstate overpass where they were held for two days without water (Pinder 2009). African American citizens looking for safety were touted in a barrage of media reports as refugees, violent gang members, criminals (Dyson 2006: 171). The media coverage had a damaging effect on racial tensions. Racial hostility for blacks intensified as they sought refuge in fairly rebuilt white neighbourhoods such as Gretna in New Orleans (Pinder 2009:249; Dyson 2006: 145). Private prison contractors and the National Guard responded to the disturbances. White police officers terrorized black neighbourhoods and intensified their racial profiling of displaced black people. Displaced African Americans were incarcerated and fed back to the for-profit industrial complex Pinder 2009:249; Dyson 2006: 145. Katrina shone the spotlight on tensions and pre-existing racism. It also cast a shadow on the resolve of the government to end racial segregation and imprisonment of blacks.