War is Big Business
Corporate America benefits from the warfare state. Everyone else pays.
The famed military-industrial complex was in trouble in mid-1990. The Berlin Wall had fallen. The Warsaw Pact had lost its purpose. The Soviet Union was tottering. Colin Powell would soon muse that he was running out of enemies.
It looked like America could finally pare down the massive war machine developed to contain the Evil Empire, as President Ronald Reagan famously termed the U.S.S.R.
But in August Saddam Hussein’s Iraq invaded Kuwait. The emcee at a convention of military contractors publicly thanked Hussein. War again was on the national agenda and the Pentagon could count on increased appropriations, much of which would be funneled to what Dwight Eisenhower famously termed the military-industrial complex.
A decade later, private firms similarly featured in the Global War on Terror. Business included arms, support services, logistics, weapons maintenance, military training, and security, the latter made (in)famous by Blackwater in Iraq. Afghanistan alone ended up costing the American people well over $2 trillion, much of which went to the famed merchants of death, ultimately outfitting the Taliban’s army after the Kabul government fell.
Writing for the Watson Institute’s Costs of War Project, William Hartung of the Center for International Policy recently offered a comprehensive assessment of who made how much over the last two decades. It is a depressing tale of corporate America doing well while the rest of America did badly, bleeding and paying. That a few profited so much should come as no surprise, since the American political system increasingly has been shaped to reward the well-connected and well-heeled.
The amount of money involved is enormous. Explained Hartung:
Corporations large and small have been, by far, the largest beneficiaries of the post-9/11 surge in military spending. Since the start of the war in Afghanistan, Pentagon spending has totaled over $14 trillion, one-third to one-half of which went to defense contractors. Some of these corporations earned profits that are widely considered legitimate. Other profits were the consequence of questionable or corrupt business practices that amount to waste, fraud, abuse, price-gouging or profiteering.
So much spending in any form is bound to have negative consequences. “Waste, fraud, and abuse” has almost become a cliché, a catchphrase for problems afflicting virtually every federal program, from housing to social welfare to economic development. Yet the military is unique, a government institution with no civilian counterpart and special emphasis on secrecy. Taking these functions private creates additional challenges.
For instance, Hartung warned:
privatizing key functions can reduce the U.S. military’s control of activities that occur in war zones while increasing risks of waste, fraud and abuse. Additionally, that the waging of war is a source of profits can contradict the goal of having the U.S. lead with diplomacy in seeking to resolve conflicts. More broadly, the outsized influence of defense contractors has resulted in a growing militarization of American society. This is manifested in everything from the Pentagon’s receipt of the lion’s share of the federal discretionary budget—more than half—to the supply of excess military equipment to state and local law enforcement agencies.
Unfortunately, such concerns mattered little after the terrorist attacks on 9/11 transformed the political climate. Candidate George W. Bush advocated a “humble” foreign policy. President George W. Bush implemented a radical and aggressive international approach—perhaps the most extreme in U.S. history. His campaign included multiple efforts at regime change, nation-building, and humanitarian intervention. Unfortunately, the more America spent, the worse America did.
Thousands of American and allied military personnel and contractors died. Tens of thousands were wounded. Hundreds of thousands of foreign civilians died. Millions were displaced. The U.S. has yet to fully confront so much blood lost and hardship imposed.
Moreover, trillions of dollars were expended. For what? To see the Taliban back in control of Afghanistan. Iraq uneasily survives, ravaged by sectarian war, suffering under a democracy both shambolic and violent, and heavily influenced by Iran. Libya is desperately seeking to escape a decade of civil war. Yemen has been reduced to bloody chaos by a murderous U.S. ally, Saudi Arabia, wielding American weapons.
Hartung has detailed the money spent. The base budget funds existing force structure. Overseas Contingency Operations pays for ongoing wars. Together they make up military outlays. After 9/11, the total exploded. Wrote Hartung:
The Pentagon budget—the base budget plus the OCO account—increased by over 10 percent in the first year after the 9/11 attacks and the commencement of the war in Afghanistan. The Pentagon budget ultimately increased year after year for 10 years running, an unprecedented occurrence in U.S. history. Pentagon spending peaked in 2010 at the highest level since World War II—over $800 billion in 2021 dollars. This figure was substantially more than the U.S. spent on its military at the height of the Korean or Vietnam Wars or the Reagan buildup of the 1980s.
Imagine. It cost America more to fight a ragged band of insurgents and terrorists than the Red Army, Red Guards, Viet Cong, Khmer Rouge, Korean People’s Army, and the rest of communism’s many axes of evil. And real military outlays today remain well above even Reagan’s enhanced levels.
Corporate America quickly seized its opportunity for gain. Hartung quoted Boeing Vice President Harry Stonecipher warning politicians not to get between the companies and the cash: “the purse is now open . . . any member of Congress who doesn’t vote for the funds we need to defend this country will be looking for a new job after next November.” Boeing’s PAC was experienced at winning votes for the Export-Import Bank, a fount of corporate welfare nicknamed Boeing’s Bank for munificently underwriting the company’s airline sales. Boeing also added to the horde of lobbyists, an estimated 700-plus for the infamous merchants of death alone. Many of these agents of influence served in either the Pentagon or Congress, putting their career contacts to profitable use.
During the global war on terror, hauling in contracts became the corporate equivalent of shooting fish in a barrel. Wrote Hartung:
Total Pentagon expenditures for all purposes since Fiscal Year 2001 have topped $14.1 trillion (measured in 2021 dollars). Of this sum, $4.4 trillion went for weapons procurement and research and development (R&D), categories that primarily benefit corporate contractors. The remaining funds went to pay and benefits for military and civilian personnel and supporting expenditures needed to operate and maintain the U.S. military. The $4.4 trillion figure is a conservative estimate of the pool of funding Pentagon contractors have drawn from in the two decades since 9/11. The Pentagon’s massive budget for operations and maintenance (O&M) also subsidizes contractors, but it is harder to determine what share of this category goes to private firms.
Boeing and four other contractors—General Dynamics, Lockheed Martin, Northrop Grumman, and Raytheon—collected up to a third of the total, depending on the year. The numbers are incredible. Detailed Hartung:
These five companies received over $286 billion in contracts in Fiscal Year 2019 and Fiscal Year 2020 alone. From FY 2001 to FY 2020 these five firms alone split over $2.1 trillion in Pentagon contracts (in 2021 dollars). To put these figures in perspective, the $75 billion in Pentagon contracts received by Lockheed Martin in FY 2020 is well over one and one-half times the entire budget for the State Department and Agency for International Development for that year, which totaled $44 billion.
It’s a great gig if you can get it.
The biggest funding areas are weapons, security, and logistics/reconstruction. It would be difficult to spend that much money well under the best of circumstances. However, the last two decades were anything but. Noted Hartung: “The chaos of war, the lack of adequate government oversight, and the sheer volume of funds poured into the reconstruction effort in a short time frame all contributed to an environment that enabled massive waste, fraud and abuse in the reconstruction efforts in Iraq and Afghanistan.” The many reports of the inspectors general for Iraq and Afghanistan make for depressing supplemental reading.
Although the number of security contractors was not great, they had a significant impact well beyond misbegotten outlays. Explained Hartung: “The use of private contractors reduces transparency and accountability for what happens in war zones, on occasion with disastrous results. The lack of transparency, with respect to the activities of private contractors, has been compounded by the Pentagon’s 2018 decision to stop reporting on the numbers of U.S. troops engaged in combat overseas.”
As the U.S. military market shrinks, Hartung predicted that firms will look overseas for business. He observed:
An additional cause for concern is the post-war drive of U.S. contractors to seek more foreign clients. Although less lucrative than the flood of U.S. funding for private contractors tied to the Iraq and Afghan wars, the foreign market is growing, and the activities of contractors employed in this fashion has been deeply disturbing. For example, a U.S. firm—Tier 1 Group, which was founded by a former employee of Blackwater—trained four of the Saudi operatives involved in the murder of U.S.-resident Saudi journalist Jamal Khashoggi in an effort funded by the Saudi government.
The biggest money is in weapons. Although this area might seem straightforward, there is significant waste, fraud, and abuse even there. And the U.S. is the biggest arms exporter on earth. A dubious honor, even though the money is good.
In Yemen the Obama and Trump administrations made Americans accomplices to Saudi war crimes by arming the Kingdom of Saudi Arabia, servicing its weapons, and aiding its airstrikes. Noted Hartung:
While Donald Trump made the most noise about Middle East sales and their benefits to the U.S. economy, the U.S. actually sold more arms to Saudi Arabia, on average, during the Obama administration, including three major offers in 2010 that totaled over $60 billion and included combat aircraft, attack helicopters, armored vehicles, bombs, missiles, and guns—virtually an entire arsenal. Many of these systems were used by Saudi Arabia in its intervention in Yemen, which commenced in March of 2015 and involved killing thousands of civilians in indiscriminate air strikes and imposing a blockade that has contributed substantially to the deaths of nearly a quarter of a million people to date.
Although one should be careful accusing any company of supporting war for the purpose of increasing demand for its products and services, individuals and firms have found it easy to convince themselves that they are doing good while doing well. And having spent years or decades in the “threat creation” business, contractors are ready to seek, and perhaps concoct, the next big thing to supersede the fading GWOT.
The obvious choice: the People’s Republic of China. Hartung warned about special interest pressure to turn Beijing into the next defense budget-busting adversary. He wrote:
As the U.S. has reduced the size of its military footprint in Iraq and Afghanistan— relying more heavily on deployments of smaller units of Special Forces, training of allied militaries, and arms transfers to exert military influence—exaggerated estimates of the military challenges posed by China have become the new rationale of choice in arguments for keeping the Pentagon budget at historically high levels. Overseas military engagements will meanwhile continue to be a source of ample profits for contractors of all types, given that the U.S. military will still be involved in counterterrorism operations in over 85 nations; will maintain hundreds of overseas military bases; is engaged in significant new base construction in a number of areas including Guam and the Marianas; and will continue to serve as the world’s largest weapons-supplying nation, with over $110 billion in arms sales offers under the U.S. government’s Foreign Military Sales program in 2020 alone. But claims about China’s rise and the need for a robust military response are now dominating the budget debate in Washington.
Of course, the PRC poses a serious challenge to America. However, today, at least, Beijing’s threats are more economic than military. To get the response right requires that policy not reflect partisan or profit advantage, thereby distorting Americans’ understanding of both threats and responses. China should not become the latest excuse for Uncle Sam to purchase ever more weapons and contract ever more services.
War is good for denizens of the Beltway. They collect promotions and raises almost irrespective of performance. The defense industry is similarly insulated from reality. The rest of America is stuck with the bill, as average folks across the country die in and pay for America’s many wars. If Joe Biden’s “foreign policy for the middle class” means anything, it should ensure that Washington drops the idea of “wars of choice” and makes Americans fight only as a last resort when the country’s vital interests are genuinely at stake.
Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to President Ronald Reagan, he is author of Foreign Follies: America’s New Global Empire.