Klein gives the example of President Kissinger talking to the foreign minister under Argentina's dictatorship, eagerly suggesting America's willingness to lend and support military rule that continues to open up the economy. When the government was overthrown by Peron's nationalist movement, the USA called for a budget structured around immediate debt repayments. There's an unfair pattern witnessed here, repeated in numerous other countries.
First off, foreign bodies like the US administration operating in the Southern Cone actively lend to governments (elected or not, popular or not, brutal and tryannical or not) that privatise their main industries and open their economies to foreign profiteering.
When these governments change or are overthrown, the international lenders immediately hold the new government responsible for the debt. Worse, the conditions and interest placed on loans is at the lender's discretion.
The specific rise Klein discusses is the 1981, 'Volcker Shock,' which raised interest on all US loans to a debilitating 21%. Developmentalist countries that had had their feet swept out from under them in the 70's (their main industries privatised, protections removed through free trade and foreign pressure) were now in even less of a position to defect from international pressure.
In this pattern, repayment schedules and debt restructuring are allowed only in conjunction with further free market policy enactment, the dreaded conditionality of IMF loans. Klein gives a list of staggering debt figures for Latin American countries (suddenly magnified by the Volcker Shock). She then gives typical examples from Argentina and Bolivia where nationalist leaders with wide popular support, once in power, proceed with free market reform. In Argentina, though elected on a popular nationalist platform, by 1994 the government under Menem had privatised nearly 90% of state-owned firms. The new leaders simply have no choice under the massive debt and pressure from international powerhouses like the IMF.
In Bolivia, the reform process involved declaration of a military state with zone passport checks, and a huge crackdown on Union leaders. These responses, in keeping with lessons learned, were swift, strong and unhesitating in order to quell or distract from protest against the economic moves. Klein directly attributes the huge increase in poverty, as well as cocaine production, trade and associated crime in Bolivia, to the sale of key national industries during free market privatisation.
Lesson learned: Manipulation of loans and debt structure can strongarm free market policy changes in reluctant countries; such methods can operate as a preliminary step and essential part of free market shock therapy.
In the case of Bolivia's reforms of this era, Klein introduces Jeffrey Sachs for the first time, an economist of not-quite-Chicago school bent, who advised privatisation and large loans from international donors.