Confessions of an Economic Hitman
Uncover the secrets of American foreign policy, a Book by: John Perkins
How can you get rid of obnoxious dictators while keeping ostensibly autonomous countries and their riches under your control without sending troops?
This was a topic that American strategists grappled within the early years of the Cold War.
In the 1950s, a clandestine operation in Iran established a pattern for American foreign policy, but it needed to be tweaked.
Empires have relied on military might throughout history. If they wished to rule an area, they sent troops to capture it. Rivals might contest these claims, which could lead to war, although violence was rarely used as a deterrent. The conflict was just an inherent expense of doing business as an imperial power.
After World War II, this calculation shifted. As traditional European countries declined, two new empires arose: the Soviet Union and the United States. Both owned the atomic bomb, implying that a battle between them would almost certainly result in a nuclear war. That was a deterrent, and it prompted the United States to devise a new strategy for imperial management.
Iranians chose Mohammad Mosaddegh, a popular nationalist who vowed to return sovereignty of the country’s huge oil riches to the people, in 1951. In March 1953, he made good on his promise by nationalizing APOC, or the Anglo-Persian Oil Business, the British company that owned Iran’s oil.
Washington was shocked. Mosaddegh had set an example for other governments to follow by allowing a valued partner to lose control of a critical strategic resource. Mosaddegh, on the other hand, was difficult to get rid of. If the United States invaded Iran, the Soviet Union may respond. That remained just one option: a clandestine operation.
Kermit Roosevelt, a CIA operative, led it. Roosevelt, a practitioner of the dark arts of subversion, encouraged riots and anti-government rallies, thereby rendering Iran unruly. This turmoil provided the ideal excuse for a coup. Mosaddegh was deposed in August 1953 and replaced by a pro-Western administration that rapidly restored control of Iran’s oil to APOC.
The American strategists were overjoyed. They had deposed a tyrannical regime without firing a single shot. They had developed a blueprint for clandestine influence in the process, which would be utilized again and again in the coming years. However, there remained one loose end.
Roosevelt worked for the CIA. If he had been apprehended, the United States would have been implicated in the coup. That would have prompted Soviet reaction and increased the likelihood of a disastrous conflict. What strategists recognized at this point was that they required plausible deniability. They also understood, as we’ll see later, that the easiest way to do this was to outsource covert operations to the private sector.
Perkins’ attempt to avoid the draft led him down an unexpected road.
In the 1950s, Iran was hardly the only nation that kept American strategists up at night. The Soviet Union had backed an anti-colonial insurrection in Vietnam. Washington did not want to support France’s collapsing empire, but the danger of a Communist takeover compelled it to do so.
Money, weapons, and advisors began to pour into Vietnam. It was insufficient, and France was defeated. In 1965, the United States increased the ante by deploying its own combat forces. Suddenly, millions of young American men faced the prospect of being recruited. One of them was the author, John Perkins, a 20-year-old high school graduate from a conservative household in New Hampshire.
He was a natural rebel, wanting to escape being sent to Vietnam to fight an enemy whose cause he believed was fair. His attempts to avoid the conscription would, ironically, lead him to become a committed servant of American power.
In the 1960s, there were a few options for avoiding the draft. Radicals just walked out of town and went to Canada. You had another option if you wanted to stay on the right side of the law: college. However, this was just a brief reprieve. Students were not allowed to join, although graduates under the age of 26 were.
In 1965, Perkins enrolled in a three-year program at Boston University. He raced to find a job that would keep him out of Vietnam after being certified fit for deployment in 1967. Fortunately, he had connections. Frank, a family friend, worked for the National Security Agency. Frank pushed some strings and arranged for him to have an interview. He got the job, so he was safe. Government employees, like students, could not be drafted.
But, before he could begin working for the Agency, he had to complete his education. During his last year, he attended a Peace Corps lecture and discovered two fascinating facts.
One: participants in this government-run program were exempt from the draft. Second, the Corps need volunteers in the Amazon. It was a simple choice between a desk job and a jungle adventure. He immediately joined up.
He contacted Frank to inform him of the situation, anticipating him to be disappointed. No, he wasn’t. Vietnam, Frank said, will succumb to the Communists. The focus of American interest would shift to the Amazon and its undiscovered oil riches. Plenty of people, he continued cryptically, would be interested in employing someone who was familiar with the region.
After being headhunted by a consultancy, Perkins obtained a position as an economic forecaster.
In September 1968, Perkins landed in Ecuador. Ecuador’s mountain streams constitute the headwaters of the Amazon, straddling the Andes and some of the world’s most difficult rainforests. Perkins began his job as a Peace Corps volunteer on the banks of this powerful river.
He had only met members of Latin America’s elite up to this point — rich families who sent their sons and daughters to study in the United States. He was now living among the Shuar, an indigenous group that, like their forefathers thousands of years before, foraged and hunted for sustenance.
It was a magical period, but it wouldn’t last. Before he could become lost in the bush, a representative from the contemporary world knocked. He had a proposal.
When Perkins first met Einar Greve in 1969, his newly pressed suit stood out like a sore thumb. He didn’t seem to spend much time in the forest, so why was he here? Greve informed him.
He was a vice president of Chas T. Main Inc., or MAIN for short, a consulting firm that dealt with international institutions such as the World Bank. Ecuador’s government, which was short for funds, sought to build hydroelectric dams. It needed to borrow money to do so. The World Bank wanted to see if this was a good investment before authorizing a billion-dollar loan.
Greve was seeking for a reliable source in Ecuador. He was inclined to trust Perkins since he had been promised a job at the NSA, but could he also supply important data? Greve requested him to give regular reports on Ecuador’s chances before departing. Perkins rose to the occasion, submitting 15 comprehensive assessments of the country’s economic position over the next year.
Greve was pleased by his effort. MAIN had recruited three economists to make projections for its main customer, the World Bank, but all had struggled with the rigors of obtaining data in remote locations with no government assistance. In a secluded Panamanian hamlet, one of them had even suffered a mental breakdown.
The author’s experience in rural Ecuador, as well as his data-packed letters, demonstrated that he was well-suited to this type of job. He began working as an economic forecaster for MAIN in early 1971. This was his formal title; in reality, he played a totally different function…
The actual nature of MAIN’s job was disclosed by a mystery consultant.
MAIN employed two sorts of people: engineers and ex-military personnel. The weird thing was that the firm has never built anything bigger than a storage shed. It also did not work with the Department of Defense or the Army. So, what exactly did MAIN do?
Perkins was troubled by this issue. He’d worked with the firm for a few months and had submitted a couple of meticulously prepared reports. It was good effort, but it didn’t quite reach the point. Colleagues started implying that going forward at MAIN was all about finding the proper type of data.
What exactly did that mean? He was about to discover the truth.
Perkins had spent weeks attempting to dig down obscure statistics on Kuwaiti oil output. He’d almost given up when a woman sat down next to him in MAIN’s lobby and gave him a folder. She smiled as she saw his face light up; it had everything he wanted.
He’d just met Claudine Martin, the MAIN consultant who’d oversee his training.
Martin began by saying that over the next few weeks, she would shape him into a “Economic Hit Man,” or EHM. He’d have to make a decision after she was through.
Martin said that EHMs serve two purposes. To begin, they develop economic predictions that justify large loans to fund construction projects in nations such as Ecuador. Forget about precision; statistics can always be altered. The goal is to generate possibilities for MAIN, which makes money by serving as a go-between for governments and construction businesses.
Second, EHMs bankrupt the countries that get them. Indebted governments are obligated to their creditors, which include institutions such as the World Bank, which are mainly sponsored by and closely linked with the United States. This is useful when Washington requires a favor, such as a vote in the UN or authorization to establish a new military post.
Perkins might anticipate two things from MAIN in exchange for this filthy job. The first was enough money to assure he never needed anything else again. The second was a life of luxury and intrigue on the high seas.
So, did he go in or out? It was a simple inquiry for a determined 26-year-old.
He was all in.
Perkins’ first objective was to produce shady statistics to justify massive loans to Indonesia.
The United States’ participation in Vietnam was motivated by a simple but persuasive idea: if one nation succumbs to Communism, its neighbors would follow just as definitely as one falling domino topples the next. In Asia, China had been followed by North Korea; if Vietnam collapsed, no one knew who would come next.
However, by 1971, strategists were persuaded that it was too late to save Vietnam. Their attention was drawn to the next domino, Indonesia, a 17,500-island archipelago rich in oil. Keeping Indonesia open for commerce and friendly with the US, on the other hand, was not a military concern. The EHMs would be in charge of this expedition.
The Indonesian domino had already swayed a couple of times. Following the country’s independence in 1945, a fierce anti-imperialist named Sukarno rose to power. He allied Indonesia with the Soviet bloc and defended the strong Indonesian Communist Party.
In 1965, the Army ended this partnership by rounding up and murdering hundreds of thousands of Communists. It ousted Sukarno and appointed a general from its own ranks as president in 1967. The United States exhaled a sigh of satisfaction; Indonesia had been delivered from Communism. It was now necessary to gain the loyalty of the new administration.
With this goal in mind, the World Bank and the United States Agency for International Development, or USAID, agreed to provide billions of dollars to Indonesia for infrastructure projects. These loans would not only leave Indonesia indebted to the United States; they would also make American businesses extremely wealthy.
How? The loans, on the other hand, would be conditional. The Indonesian government was required to make two pledges. First and foremost, it would agree to recruit American contractors and pay them whatever they demanded. Second, it would prioritize projects that would allow for the exploitation and shipment of the country’s mainly undeveloped oil reserves.
However, before proceeding with this strategy, Indonesia’s potential creditors need credible evidence demonstrating that these loans made economic sense. MAIN dispatched the author to Indonesia in the summer of 1971. He was part of an eleven-person team entrusted with assessing a plan to build an energy infrastructure to enable oil extraction on Java, Indonesia’s biggest island.
His job was precisely what Claudine Martin had promised him it would be: manipulating statistical data till it revealed what his bosses desired. It was his first challenge.
Despite his reservations, Perkins lied about the numbers required to authorize loans to Indonesia.
The World Bank and USAID would only make loans to Indonesia if it could be demonstrated that the electrification of Java contributed to the country’s economic growth. The projects would be halted if a positive prediction was not provided. That was an unsatisfactory conclusion for MAIN.
It expected Perkins to provide growth predictions — the greater, the better. This was the job he’d been prepared for, but the more he stayed in Indonesia, the more doubts he had about his purpose.
Few MAIN workers considered themselves to be conspirators. There was a simple explanation for this: they believed in an ideology that justified their labor, no matter how dirty it appeared to be.
The notion was that all economic progress benefits humanity, and that more growth produces even more advantages. There was just one problem with this idea, according to the author: it wasn’t true.
Consider Jakarta, Indonesia’s capital. It was frequently a very lovely city, filled with lush gardens, tropical flowers, colourful sarongs, and the fragrance of cloves. But it also had a dark and terrible aspect to it. In the streets, lepers with bleeding stumps for hands begged. Young females sold their bodies for pennies on the dollar. The magnificent canals created by the Dutch, Indonesia’s ancient colonial overlords, were filled with rubbish and bordered with cardboard hovels, the dwellings of the impoverished in Jakarta.
Electrification would bring prosperity, but that growth would not benefit these people; rather, it would swell the coffers of the elites who controlled the increasingly efficient oil sector.
Despite this depressing conclusion, Perkins chose to give his employers what they wanted. His research stated that electrifying Java would enhance economic development by 17 percent per year, a vastly inflated number.
He rationalized this to himself by claiming that his projection would be rejected anyhow. Another forecaster on his team was Parker, a gruff 70-year-old who refused to tow the business line. He was aware that Parker’s more realistic estimate was just 7% and thought that MAIN would be obliged to accept this figure — Parker was, after all, the more senior economist.
It was a smart justification, but it didn’t work out. MAIN let go of Parker, elevated Perkins to chief economist, and then relied on his projection.
The loans have been authorized.
Following the 1973 oil embargo, the United States welcomed Saudi Arabia.Following the 1973 oil embargo, the United States welcomed Saudi Arabia.
When Perkins was appointed head economist at MAIN in 1972, the global economic outlook was favorable. His role, it seems, would be to steer the firm through a period of steady but unspectacular development.
Everything changed on October 6, 1973. The October War began when Egyptian and Syrian armies launched an assault on Israel. The United States went to Israel’s aid. Egypt’s president, Anwar Sadat, was outraged and urged Arab and Muslim countries sympathetic to his country’s cause to utilize the “oil weapon.”
On October 16, six countries, including Saudi Arabia, announced a 70% rise in oil prices. Three days later, when President Nixon requested Congress for $2.2 billion in aid for Israel, they went even farther, placing a total oil embargo on the US.
It was a momentous move that forever altered America’s strategic thinking.
The embargo was in effect until March 8, 1974. It had a huge impact. Saudi oil cost $1.39 per barrel on January 1, 1970. Four years later, it was trading at $8.32 per barrel. In the United States, the unexpected price increase threatened to render a critical industrial input all but expensive. The economy came to a standstill, and the country was on the verge of a second Great Depression.
The embargo was removed in time to avert this, but it was a traumatic experience for American leaders. Washington and Wall Street were resolved to do everything possible to keep this from occurring again. As we’ve seen, ensuring America’s access to oil has long been a strategic priority. It became more than that after the embargo — it became an obsession.
Saudi Arabia was on the other side of the equation. Prior to 1973, it was a minor participant in international affairs, but it suddenly became a crucial piece on the global chessboard. From now on, the United States would be obliged to acknowledge the conservative kingdom’s significance to its economy and way of life.
The issue, in America’s opinion, was that Saudi Arabia was not another Indonesia. Oil price increases have filled the country’s royal coffers. It could afford everything it wanted, therefore the EHM approach of leveraging debt to control a country’s leaders would fail.
To crack the Saudi nut, a fresh strategy would be required.
Before it could guarantee its oil supply, Washington needed to know out what the Saudis wanted.
In 1974, a Saudi ambassador sent the author a photograph of Riyadh, the capital of Saudi Arabia. It depicted a government building with a heap of rubbish in front of it. There was a herd of goats among the rubbish. The ambassador said that the animals were employed as a waste disposal device. He went on to say that it was left to them since no “self-respecting Saudi” would ever gather rubbish.
It was a “eureka” moment for the author, who recognized this shot was a critical piece of a jigsaw that the US was now attempting to solve.
Negotiations between the United States and Saudi Arabia began immediately after the embargo was lifted. What may the United States have to offer? The Saudis, on the other hand, were not interested in loans — they had enough of cash to burn. Other types of aid, ranging from military hardware to technological support and training, remained. This would be a direct monetary injection in whatever form it took.
During these discussions, MAIN was engaged to come up with innovative arguments for investing billions of dollars into the Saudi economy. Perkins was working on this project when he saw the ambassador’s photo of Riyadh.
Because of the oil boom, an increasing number of rich Saudis were traveling, drinking, and living in the West. These jet-setters were cosmopolitan and urbane, and they despised everything the goats represented. They want for their country to be as contemporary as they were, and this was something the US could provide.
Over the next year, Perkins drew out an ambitious strategy for Saudi Arabia’s future. Petrochemical factories and industrial parks would sprout up in the desert. Thousands of kilometers of roadways, pipelines, and telephone connections would be built. New airports would be developed, and current seaports would be upgraded. Cities would see the construction of skyscrapers and shopping complexes. In summary, Saudi Arabia would be updated, and gleaming new trash compactors would replace its garbage-munching quadrupeds.
In exchange for that, as well as America’s unqualified military backing, the Saudis would guarantee oil supply and keep prices at levels acceptable to the US. The two parties came to an agreement.
America’s oil supply was secure. Even if other nations like Iran, Iraq, or Indonesia tried to impose an embargo, it would fail because Saudi Arabia’s oil reserves were so vast that it could always step in to fill the void.
Perkins felt he couldn’t continue to serve the American empire after the Iranian Revolution in 1979.
Perkins was reassigned once the Saudi agreement was completed. Between 1975 and 1978, he spent the most of his time managing infrastructure projects in Iran, another oil-rich Muslim country.
The country looked to be doing well. Sure, Iran’s leader — the Shah, which translates as “king” in Persian — was an unelected strongman, but he appeared to be popular. And, as a result of the government’s ambitious modernization program, Iran was experiencing an unparalleled economic boom.
However, looks can be deceiving. When Iranians talked English with Westerners like Perkins, they lauded the Shah, but these talks rarely represented their actual feelings. Many people loathed the Shah and the US-backed dictatorship he established on Iran following the 1953 coup.
Perkins met an Iranian officer who once stepped in front of the Shah to defend him from an assassin’s bullet in late 1978. He anticipated this elderly loyalist to extol the Shah, but he was surprised.
The Shah, according to the general, was a dead man walking, and it was only a matter of time until the Iranians overthrew him.
Why was this the case? The Shah, on the other hand, was corrupt and greedy. Worse, he was ruthless. His secret police, SAVAK, tortured and murdered dissidents with impunity. The Shah’s only rationale for remaining in power was his relationship with the United States. This deal had two purposes: it kept Iranian oil flowing while also protecting America’s most important Middle Eastern ally, Israel. The people, on the other hand, were opposed to these policies, which is why the US supported a ruthless dictator like the Shah — if given the option or a vote, Iranians would prefer a government that shared their beliefs.
However, the general decided that you can only suppress people’s actual opinions for so long. They will rebel sooner or later. He was correct.
The initial demonstrations took place in late 1978. Iran was soon in the grip of a popular Islamic revolution. In January 1979, the Shah fled for fear of his life. It was a watershed moment for Perkins. To preserve its own interests, the US imposed a cruel and unpopular dictatorship on a country. It was now suffering the repercussions — an outpouring of anti-American fury.
Perkins, like the Vietnamese in 1965, couldn’t help but believe that the Iranians were correct. Why shouldn’t they have a say in who rules them and for what purpose? It was the beginning of the end. In 1980, unable to reconcile his principles with his employment as an EHM, he chose to leave MAIN.