Cry of the Halliburton

In January 1919 came a huge oil strike at Burke-Burnett, Texas. Soon afterward, Erle Halliburton founded a company to provide services and supplies to oil companies. As the oil industry spread from the United States to foreign countries in Latin America, the Middle East and Africa, Halliburton extended its operations. In 1962 Halliburton merged with Brown and Root, a big Texas construction company. Soon thereafter, the company started doing a booming business with the United States government. In 1992, near the end of the presidency of George H. W. Bush, the Defense Department began spinning off many of its logistical and support functions to private contractors. The argument ran that private industry could achieve greater efficiency and flexibility than could a huge federal bureaucracy like the Defense Department, which needed to concentrate on its own specialty—waging war.

During the presidency of Bill Clinton Halliburton’s business dealings with the American and foreign governments, and with oil companies zoomed upward. Halliburton earned $5.7 billion in 1995 and $12 billion in 2000. The company’s business with the United States government grew still more as a result of the second Iraq War. By 2007 the company’s revenues topped $22 billion. Halliburton’s oilfield services division gained the contract for repairing Iraq’s badly damaged and deteriorated oil industry; its logistics and construction division provides all sorts of services to American troops.

What sort of controversies surround Halliburton? First, it has been accused any number of times of over-charging the United States government. In one particularly embarrassing case, it charged the government for 42,000 meals delivered to US forces in Iraq when it had only delivered 14,000. “Oops, my bad,” said Halliburton. Second, people complain that the company was awarded no-bid contracts by the government, so they have no incentive to hold down prices. Both the Defense Department and Halliburton have countered that there are only a few companies in the world that could handle the work. Halliburton has long experience in this work and employs 100,000 people in 120 countries around the globe. Furthermore, not all of the equivalent companies are American. The work was not going to go to a French, Chinese, or Russian company under any circumstances. It was going to go to Halliburton, they argue, so why waste time with bidding when the need was urgent?

Third, the company has long cultivated strong political connections. Brown and Root had always supported Lyndon Johnson when he was the Senator from Texas and they reaped the benefit, say critics, when Johnson became president. Later, in 1992, the Secretary of Defense who initiated the shift to using private contractors to support Defense Department operations abroad was Dick Cheney. In 1995 Halliburton named Cheney as Chief Executive Officer (CEO). He remained CEO until 2000, when he left to become Vice President. Subsequently, Cheney was a proponent of war with Iraq and Halliburton has reaped the benefits described above.

In a large sense, Halliburton may be a symbol for a number of controversial developments. First, there is the issue of the “revolving door” as people cycle between companies that seek government contracts and the government agencies that award those contracts. Second, there is the whole issue of the uneven distribution of benefits in American society. Cheney made $45 million while at Halliburton and Halliburton’s stock quadrupled in value after 2003 while most people’s incomes stagnated.

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