The economic mess and policy.

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Median income, adjusted for inflation, is about $3,600 less than when President George W. Bush entered the White House and about $2,100 less than when President Obama entered the White House. America has not recovered from the “Great Recession.” We are rolling up on fifteen years of falling incomes after a long period of rising incomes. In contrast, upper income groups are seeing their wealth and incomes rise. Something is wrong.

What do economists suggest about reviving economic growth? They suggest improving education because America has lost its one-time enormous lead over other nations in terms of human capital. They suggest improving our crumbling infrastructure because roads, bridges, airports, and telecommunications are all falling behind needs. They suggest sorting out the messy tax code to reduce distortions in economic activity. They suggest cutting the cost of health care, which drags on the economy and cuts down money wages.[1]

The problem with these sorts of policies is that they will take a long time to play out, have an uncertain effect, and are complicated to understand. Hence, both side look for nostrums that look good on a bumper sticker. For Republicans, the solution tends to be cuts in taxes on high income-earners and corporations. These are the “job creators.”

What do the Democrats want to do to raise stagnant incomes among middle-class “workers”?[2] Well, they haven’t done much for quite a stretch so far as voters can tell. It should surprise no one if lots of them sit out an election. To counteract this trend, Democrats have adopted the cause of a higher minimum wage. In the near future they may turn to a “middle-class tax cut.” It seems most likely that this “cut” would actually take the form of “tax-credits.” These could be presented as tax incentives to save for retirement or for college education. Democrats favor paying for these cuts through higher taxes on upper-incomes. This would be popular with most Americans, who want more money for themselves and resent wealthy people.

How likely is this to happen? On one sense, very likely. The anti-tax frenzy that has gripped America for several decades has led to all Americans paying lower taxes than the historical trend since the Second World War. President Obama was happy to make most of the Bush-era tax cuts permanent.

In another sense, very unlikely. Such policies would have to pass through the House of Representatives. According to one analysis, the House is almost certain to remain in the hands of Republicans for the next decade. Only 28 of the Republicans’ 244 House seats are in districts that voted for President Obama in 2012. The Democrats now hold 188 seats. If all of those seats were moved from Republican to Democrat candidates, then the two parties would tie in the House. Such a shift is very unlikely, given the advantages of incumbents and the unreliable turn-out among Democratic voters. For the last decade American politics has see-sawed between Republicans and Democrats, but what Americans seem to like is a divided government that can’t accomplish anything.

David Leonhardt, “The Great Wage Slowdown, Looming Over Politics,” NYT, 11 November 20014.

Nate Cohn, “The Enduring Republican Grip on the House,” NYT, 11 November 2014.

[1] In fact, health care costs have stopped rising and in some cases have fallen. The reasons for this are subject to debate. It seems unlikely that the Affordable Care Act has anything to do with this—yet.

[2] OK, I’ll leave aside the whole issue of how “workers” used to mean “blue-collar.” Don’t want to suggest that America is really confused about the whole issue of social class.

 

Islamism as a story.

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The current theater of operations for ISIS lies in the midst of ancient and modern historical places. On the one hand, Tel Megiddo, in northern Israel, is the place identified with Armageddon in the Bible’s Book of Revelations. Farther north, in Syria, Dabiq appears in the Hadith as the name of a village where a final confrontation between the armies of Islam and Christendom will fight to a decision. Dabiq is near the Syrian-Turkish border. In Summer 2014 it fell to the ISIS forces. In July 2014, during its own “surge” in Iraq, ISIS began publishing an on-line magazine called “Dabiq.”

On the other hand, it is commonplace for people in the Arab states to explain the decline from earlier Muslim power and prosperity by blaming Western intervention and exploitation.[1] Islamists extend this narrative. Islamists celebrate the breaking of the grip of the Byzantine Empire on Syria and Palestine, and the conquest of “al-Andalus” in the in the 7th and 8th Centuries. The Abbasid and Umayyad caliphates are held up as the ideal for what the Islamists hope to create. Similarly, the Medieval Crusaders are analogized to contemporary Western states.

The American invasions of Afghanistan in 2011 and of Iraq in 2003 certainly gave the proponents of this view a lot of material with which to work. Young Islamists have mastered modern social media just as well as have young non-Islamists, along with young everyone else. Al Qaeda led the way by launching a media campaign: audio cassettes, DVDs, and Internet forums preached the Islamist interpretation.

Recognizing that people like Anwar al-Awlaki[2] had played a role in fomenting and recruiting for terrorism, in 2011 the United States Department of State created a Center for Strategic Counter-Terrorism Communications (CSCC). One chief function of the CSCC is to engage in on-line debate with Islamists. The goal here is to dissuade young people from supporting or joining Islamist groups.[3] The CSCC has a Digital Outreach Team with members working in Arabic, Urdu, Punjabi, Somali, and English.

The means to the goal is to propose a different narrative of history than the one upheld by many Muslims. The CSCC’s counter-narrative focuses on recent history, rather than on a more remote past. It emphasizes the tolerance of pre-Islamist Muslim society. This view clashes with both the restriction imposed under the Islamists’ version of sharia and the brutality with which it is enforced.

The question–not much addressed by Western scholars or journalists or counter-propagandists–is why the messages of either an “End of Days” or a revival of the Caliphate appeals so strongly to thousands of young Muslims. What are they missing about motivation?

 

Shatha Almutawa, “Historical Narrative in American Counterterrorism Operations,” American Historical Association, Perspectives, September 2014, pp. 12-13.

Noor Malas, “Ancient Prophecies Motivate Islamic State,” WSJ, 19 November 2014.

[1] This explanation ignores the pervasive weaknesses of Medieval Arab society that exposed the region to conquest by successive waves of Muslim Turkish tribesmen, followed by the long decline caused by the decay of the Ottoman Empire. Western imperialism had a much briefer period of influence. Not all of those influences were negative. However, the performance of the post-independence Arab states contrasts badly with those of other “developing” societies.

[2] See: “Just like imam used to make.”

[3] One might be forgiven for believing that another purpose is to draw them out so that their other communications can be tracked by the NSA. I’m all for it, but it could lead to “getting flamed” for some hasty remark—by a drone.

Spiderman on Net Neutrality.

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There are three parties to the “net neutrality” debate. There are Internet Content Consumers (ICCs, individuals and businesses); Internet Content Providers (IPCs); and Internet Service Providers (ISPs). Since the ISPs connect the ICCs with the ICPs, they’re the subject of proposed regulations.

Unlike the public highways, the Internet is private property. To what degree is it legitimate for government to regulate private property? Should the Internet be treated like a utility or like normal company selling goods or services? A utility bills a customer for how much of the service or good that s/he consumes. It does not distinguish between customers, nor is it involved in competition with other providers, nor does it inquire into what purpose s/he uses the service or good.[1] A normal company competes with other companies for customers by offering new and attractive products at as low a price as possible. Which of these business forms does the Internet most closely resemble?

The Obama Administration argues that the Internet is like electricity, a utility. The President professes to fear (or serves as the mouthpiece for ICPs who fear) that ISPs will be able to “restrict the best access or pick winners and losers in the online marketplace.”

Internet Content Providers are not all equal in that some of them (Netflix, Hulu) require a lot more bandwidth than do many others. Internet Service Providers want to be able to charge these customers a different price than they charge other users. They analogize on-line content to cable television content. Being able to charge differential rates has led to an explosion of widely desired content in cable television (HBO for example). The same will happen with on-line content.

Internet Content Consumers and Internet Content Providers both hate this idea. Customers see the ISPs as positioning themselves to gouge money out of consumers by forcing them to pay for “packages” that include content that they don’t want or to pay premium prices for content that they do want. ICPs see the ISPs forging alliances with whoever has the deepest pockets, while squeezing anyone who doesn’t have great wealth yet out of the “fast lane” and into a “slow lane.”

On the other hand, differential pricing and “congestion” pricing are both well-established practices in business, government, and education. The toll on the bridge over the Delaware-Chesapeake Canal goes up on the week-end; colleges discount their price to students by providing different amounts of financial aid to different students; stores have sales.

The Internet is one of the engines of the future growth of the American economy. The Internet is not a “mature” industry or technology. Therefore the single most important issue is to decide what policy best encourages productive investment in and maximum expansion of the Internet. ISPs picking and choosing between customers sounds like a prescription for favoring established interests over new interests in a segment of the economy that is undergoing rapid development, innovation, and change. Ponderous—and perhaps politicized or paralyzed—government regulation sounds like a prescription for driving away badly-needed investment.

“One gives you cancer and the other stunts your growth.” You choose.

Neil Irwin, “A Super-Simple Way to Understand Net Neutrality,” NYT, 11 November 2014.

Eduardo Porter, “The Pitfalls of Net Neutrality,” NYT, 12 November 2014.

[1] I wonder if this is actually true in some place like Humboldt Country, CA, where there are a ton of grow houses?

 

What We Learned From the Report of the 911 Commission X

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In the mid- to late-Eighties, Khadr Abu Hoshar, a Palestinian terrorist resident in Jordan, was recruiting young men who had been through the Afghan training camps. In 1996 Abu Hoshar was imprisoned for a time by the Jordanians. By 1998 he had been released and was back to his old tricks. During 1998 he and a group of 15 fellow terrorists worked up an ambitious plan for attacks. During 1999 he got in contact with some Islamic terrorist jihadis in Afghanistan who had some sort of ties to OBL. They were providing technical advice and training to Abu Hoshar’s group. (pp. 252-253.)

Abu Hoshar’s security practices had not improved during his stretch in a Jordanian prison, however, because the Jordanian intelligence service spiked his phone and kept his whole group under observation. On 30 November 1999 the Jordanians intercepted a conversation between Abu Hoshar and Abu Zubaydah, the Afghan with connections to OBL, which seemed to herald an imminent attack. They rolled up all but one of the group, turned the screws on the prisoners until they got a bunch of intelligence in short order, and told the Americans what was up. (pp. 252-253.)

The CIA situated this report in a larger context during the first few days of December 1999 by reporting the possibility of a planned series of attacks by OBL at the “millennium,” some of which might involve weapons of mass destruction. (pp. 253-254.) Various efforts were made to hinder any such attacks by various means: by diplomacy (the Taliban were threatened, the Paks were cozened); by disruption in cooperation with friendly intelligence services; by loosening the leash on CIA operations. (pp. 254-255.) In December 1999 the leader of the Northern Alliance offered to plaster al Qaeda’s training camp at Derunta with rockets. Again, the CIA thought that this would violate a ban on assassinations, so they waved him off. (p. 270-271.)

Canada was awash in terrorists and aspiring terrorists in the late Nineties. Ahmed Ressam, a Moroccan petty criminal who had managed to find refuge in Canada in 1994, was recruited in 1998 by another jihadi then resident in Canada. Ressam spent part of 1998 training an Afghanistan terrorist camp. Here he joined a group of other Algerian jihadis who had been recruited for anti-American terrorist action. Back in Canada in the first half of 1999, Ressam received assistance from three other Algerians who were hiding out in Canada from French authorities, who wanted to talk to them about some stuff that had happened in France. By December 1999 he was in Vancouver, BC, preparing to enter the United States to attack LAX. (p. 255.)

On 14 December 1999 Ressam behaved oddly when attempting to enter the United States at Port Angeles, Washington, and was arrested. (p. 257.) The Ressam arrest coming on top of the report of the Jordanian plot caused great alarm in Washington. The FBI started tapping numerous telephones under FISA warrants. Richard Clarke’s office warned that “Foreign terrorist sleeper cells are present in the US and attacks in the US are likely.” Clarke also asked Berger rhetorically “Is there a threat to civilian aircraft?” (pp. 258-259.) In late December 1999 the US received a report from a foreign intelligence service that OBL planned to bomb several transatlantic flights. (p. 259.)

What We Learned From the Report of the 911 Commission IX.

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In February 1999, there seems to have been no confusion among the NSC and CIA people about what they wanted to accomplish: they prepared to use intelligence about Bin Laden visiting a desert hunting camp favored by some important people from the United Arab Emirates to launch another cruise missile strike (and tough luck for any Emiratis who happened to be present). The report seems to me to suggest that Clarke first blocked this strike because he saw the UAE as America’s ally in the fight against terrorism, then in March 1999 basically exposed to the Emiratis the CIA’s knowledge that the campers welcomed Bin Laden. The camp immediately folded up and Bin Laden never passed through there again. (p. 202.)

In February 1999 Tenet persuaded President Clinton to allow the CIA to try to recruit the Northern Alliance to capture or kill Bin Laden. The Northern Alliance leader showed little enthusiasm for capturing an enemy and, besides, the Northern Alliance had no ready access to the areas where Bin Laden was located. (pp. 203-204.)

In May 1999 the CIA thought it had a 50-50 chance of nailing Bin Laden in Kandahar, but they had just botched the targeting of a “smart bomb” in Belgrade and had hit the Chinese embassy. Naturally a little touchy about accuracy, Tenet seems to have backed away when it looked like everyone was getting ready to John-the-Baptist him if the attack did not succeed. (pp. 205-206.)

The rest of 1999 got frittered away trying to come up with a plan to get Bin Laden in Afghanistan. Nothing emerged. However, in 1999, and again in 2000, a group of Americans from different agencies traveled to Saudi Arabia in an effort to sort out the source of al Qaeda’s money. To their surprise they discovered that Bin Laden was not financing operations out of a vast private fortune—as had long been the assumption. Belatedly, they discovered that Bin Laden had rebuilt the “Golden Chain” of donations. How to penetrate, let alone destroy, that network remained a mystery to the CIA. (p. 268.)

These developments really left the US with no option but to try to disrupt any offensive operations outside of Afghanistan. What were they doing on this front during 1998-2001? For one thing, the National Security Agency kept watch on the communications of known terrorists.

Real trouble was at hand. In 1994 a group of Algerian terrorists had hijacked a jet, possibly with the intention of crashing it into the Eiffel Tower. Later in 1994, Ramzi Yousef, then based in the Philippines, plotted to bomb twelve US airliners flying over the Pacific. (p. 90.) This plot was broken up. In early 1995, Ramzi Yousef’s accomplice in the Manila airlines plot told interrogators that the two men had discussed crashing a plane into CIA HQ. Khalid Sheik Mohammed had adopted this plan.

In mid-1996 KSM had pitched OBL on a plan to crash airliners into American buildings. (pp. 214-215.) OBL did not commit and KSM seems to have doubted that OBL was serious about attacking the Americans.

Then the embassy bombings persuaded KSM that OBL was serious about attacking the United States. He renewed his proposal for al Qaeda support for the “planes operation.” In March or April 1999, OBL agreed to support the plan. (pp. 216, 223.)

Thus, during 1999 both the Americans and al Qaeda were searching for ways to get at one another to deadly effect. Of the two, al Qaeda operated with fewer restraints and more imagination.

Week End Update I.

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In Western Civilization there is a deeply ingrained dread of human inventiveness. Witness the stories of Prometheus (fire) and Icarus (flight). Former reporter and novelist Dan Fesperman applies this lesson to contemporary drone warfare in a novel grounded in facts. The plot centers on a drone attack gone-awry in Afghanistan. A dozen civilians are killed and others are gravely wounded. Darwin Cole, the controller who fired the “Hellfire” missile on orders from some mysterious above, comes apart at the seams after the attack. Booted from the Air Force, abandoned by his wife and children, and seeking solace in the proverbial bottle, Cole is approached by a team of journalists. They’re snuffling after a war-crimes story wrapped in a war-profiteering story hidden inside a corporations-own-America story. Having escaped the proverbial bottle, Darwin Cole soon encounters the proverbial scientist-tortured-by-guilt. This scientist, Nelson Sharpe, provides the means to voice Fesperson’s research into drone technology: it isn’t that complicated, it’s readily available to whoever wants to use it, and governments can’t control it any better than they control firearms or drugs. Islamist fanatics, Mexican drug lords, Montana militias, and private military companies all can—and will–seize this terrible technology. Then they’ll hire a bunch of pimply gamers to fly the things—probably from Arkansas trailer parks converted from meth labs, instead of from “secret” command posts in Nevada.[1] http://www.youtube.com/watch?v=myhnAZFR1po

Well, probably. However, the next story to consider is that of likely counter-measures. On the one hand, one can envision hordes of little fighter-drones circling in constant Combat Air Patrol over sensitive sites, unnoticed by the people below until there is a sudden flash of light in the sky as some approaching danger—or flock of seagulls—is eliminated. On the other hand, one can envision a further expansion of the “requirements” lists submitted to the NSA. Anyone who expresses an interest in unmanned aerial vehicles on-line should expect to have his or her name added to a watch list. So, you might look at Dan Fesperman, Unmanned (Knopf, 2014).

 

For good and ill, the United States military isn’t what it once was. The end of the Cold War led to big cuts in forces. Contractors took over many support functions, then spread into providing security services. For budget reasons, they’re here to stay. However, their mis-steps attract a lot of bad press. So the question becomes how to harness the contractors for the benefits they provide while limiting the damage they can do. One approach has been to try to create international norms for the use and behavior of private military contractors. In September 2008 the United States and sixteen other countries signed a pledge to require companies to “comply with international humanitarian or human rights law.” A 2010 document asked private military contractors to follow well-defined standards of behavior, to maintain transparency, and to be held accountable for their actions. The number of companies that have “taken the pledge”—as my Welsh grandmother used to say of temperance oaths—is a good measure of the spread of private military contractors as a form of business. Seven hundred as of 2013. Most are small companies that sub-contract work from the big boys: Xe (the re-labeled Blackwater), DynCorp, and Aegis.

If private military contractors are a business, will “regulation” prove successful? In any event, Ann Hagedorn, The Invisible Soldiers (Simon and Schuster, 2014), provides a lot of interesting information on the private contractors.

[1] This is probably bad news for any out-of-work airlines pilots who sign on the fly drug shipments into the United States. One more career avenue closed off.

Colleges Bobbing for French Fries.

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Education has always been a commodity like any other. Sellers set the price at what the market will bear. Calling colleges and universities “not-for-profit” hides from this reality. The only difference between Chrysler and a college is that colleges have no shareholders or proprietors.[1] Therefore, increased revenue goes directly to the employees. The reverse is also true. In a period of revenue constraint, the costs are taken out of the hide of the employees.

Suzanne Mettler has argued that the political gridlock in Washington has kept federal aid, like Pell grants, from rising enough to keep an increasing burden for tuition from falling on ordinary families. At the state level, the requirement to balance budgets and a widespread hostility to taxes has intersected rising costs for Medicaid and prisons to force cuts to state aid to public institutions.[2] Access to college is becoming a privilege of wealth instead of motor of American prosperity.

Barton Swaim isn’t buying it.[3] First, he sees a huge expansion of the scale and activities on the part of colleges and universities since the mid-1980s. “Departments and schools have multiplied, lavishly expensive student facilities and high-tech research centers have gone up even during recessions, well-paid administrators have multiplied like locusts, and federal grant-money has poured in at ever-increasing rates.” Why has this happened? “When government pays the bills, prices always go up.” Sellers charge what the market will be bear. Second, Swaim argues that the supposed recent “cuts” in state-funding for education are usually presented in terms of a falling share of state budgets, rather than as inflation-adjusted real dollars. (Swaim himself doesn’t bother to give any figures to support his alternative interpretation.) Implicitly, what is needed is some market discipline. Third, Swaim’s interpretation fits into the narrative of the unforeseen—and disastrous–consequences of liberal good intentions. Mettler, he says, “is right that American higher education is no longer the force of equality and opportunity that predominantly liberal policy makers intended it to be. What she misses is that those policy makers are to blame.”

What does Swaim get right and what does he get wrong? First, he’s right about the fact of the huge expansion in activities since the mid-1980s. He’s just wrong about the cause of it. Simply put, there are too many colleges and universities relative to the demand for them. They compete by multiplying academic program to reflect the latest fad, degrading academic standards, engaging in an amenities arms race, and multiplying recruitment and support staffs (i.e. administrators). We need a shake-out.

Second, he’s wrong on the cuts-in-state-financing-causing-tuition-increases issue. Tuition at public school has spiked much more than has tuition at private ones. This is the product of cuts in state aid. (See: “College costs: the old eat the young,” 27 September 2014.)

Third, he misses (or dodges) the chance to talk about the equivalent unforeseen—and disastrous–consequences of conservative good intentions. The war on drugs and the conversion of tax cuts from a rational policy choice into a primitive fetish (of the religious, rather than the sexual sort[4]) have been just as much exploding cigars as anything liberals have advocated.

[1] On the other hand, when is the last time you heard of a student recall? Jus sayin.

[2] Suzanne Mettler, Degrees of Inequality (Basic Books, 2014).

[3] Swaim, review of Mettler, Degrees of Inequality, WSJ, 14 March 2014.

[4] Although I suppose that someone could work up a funny patter on the parallels with BDSM. If that’s how you roll.

The International Trade in Jobs and Workers

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It is an article of faith among most economists and businessmen that barriers to trade between nations create inefficiencies and lower standards of living.[1] What kinds of barriers to trade exist? Tariffs are taxes on imported goods that raise the sales price to a level that makes the import uncompetitive with a domestic product. Government subsidies (payments) to domestic producers of some goods allow them to hold down prices compared to imports. Government regulations and standards for goods which vary from one country to another can force adaptation costs onto foreign producers, thus raising the price of their goods to a point where it isn’t worth the trouble to sell in a foreign market. The effect of these barriers is to reduce competition, efficiency, and specialization, while raising the cost of living for consumers.

So, trade barriers are bad. In 1994 businessmen won passage of the international treaty called the North American Free Trade Agreement (NAFTA). This treaty abolished tariffs and other barriers to trade on 70 percent of the goods produced and consumed in Mexico, the United States, and Canada. What is the up-side of this agreement? Trade between Mexico and the US tripled during the decade and a half after passage of the treaty; Canadian exports also tripled. What is the down-side of the agreement? Wages haven’t gone up in either Mexico or the US.

In the United States the response to NAFTA is ambivalent. The normal line of development in an advanced economy is that low-wage foreign competitors in low-skill sectors take jobs from the advanced economy, while the advanced economy creates jobs in high-skill and high-wage sectors. That is one of the things that seem to be happening in the United States. By 2008, three million American manufacturing jobs had been lost since the passage of NAFTA. This doesn’t count the many more jobs lost during the “Great Recession.” On the other hand, more jobs were created in those years than in the fourteen years before passage of the treaty. Similarly, highly-mechanized North American farming is far more productive and cheaper than is much Mexican farming, so agricultural exports to Mexico have also greatly increased. However, neither American politicians nor American media have been very good about pointing out the realities of the situation. Job-loss and displacement normally gets a lot more media attention than does job creation. “If it bleeds, it leads.” Those three million manufacturing jobs that went up in smoke since 1994? Mostly they went to China and India, not to Mexico.

In Mexico the response has been profoundly hostile. Mexicans dislike NAFTA by about two-to-one. Why is that? About forty percent of Mexicans still live in poverty. Small and inefficient Mexican farms have been unable to compete with low-cost imports from North America, so many Mexican farmers have been driven to the wall. There was been a huge increase in illegal immigration to the United States, until the “Great Recession” hit. Eight million of the twelve million Mexican illegal immigrants in the United States have come since the passage of NAFTA. Is NAFTA solely or even principally to blame for the flood of illegal immigrants? Not necessarily. One Mexican observer argues that the upper classes have creamed off all the rewards of expanded trade. This has kept the benefits of increased trade from flowing downward in society through higher taxes on the well-off, better services for ordinary people, and higher wages for most workers.

This raises the possibility that the Mexican upper-class is intentionally exporting much of its population to the United States in order to defend an inequitable social order at home.

[1] “Coming to terms with NAFTA,” The Week, 30 May 2008, p. 13.

What God abandoned these defended

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Soldiers who fight for pay, rather than for a cause, are generally seen as disreputable. For example, American Patriots hated Hessian “mercenaries.” In contrast, idealists who go to war eventually command a degree of respect. One recent estimate has been that 16,000 Islamist enthusiasts have flocked to the black banner of ISIS. Clearly, ISIS represents a cause worth fighting for in the minds of many young Muslims, just as did the Spanish Republic in the 1930s for many young leftists.

In 1992 the American military began spinning-off many of its logistical and support functions to private contractors. (See: Cry of the Halliburton.) The recent wars in Afghanistan and Iraq led to a huge increase in the number of contractors in the combat areas: at their peak 155,000 in Iraq and 207,000 in Afghanistan. These numbers equaled or exceeded the number of US troops present. About as many contractors have been killed in the two wars (6,800) as have US military personnel (6,838). The use of the contractors has raised several concerns.[1]

On the one hand, there is the venerable anxiety over “waste, fraud, and abuse” (WFA).  The US paid out $200 billion for “contractors.” In 2008 Congress created a Commission on Wartime Contracting to search out WFA. Inevitably, it found many instances of over-billing and under-performance. Its estimates of spending lost to waste or fraud range between one-seventh and almost one-third of money spent, depending on what they were looking at.[2]

On the other hand, there have been concerns over unjustified violence visited on civilian populations by armed contractors. The case of Blackwater guards who shot-up Baghdad’s Nisour Square in 2007, killing 17 Iraqi civilians, has led to the conviction of one guard for murder and three others for manslaughter.

Still, contractors may be used in the current unpleasantness in Iraq and Syria. President Obama has pledged that there aren’t going to be American combat troops in Iraq. However, no one in the American government wants to totally cede the ground to Iranian advisors either. Using security contractors might offer a way to square this circle. Many of them are veterans of the US or other military forces. They could train Syrian “moderates” (to the extent that anyone can find some) and Kurdish immoderates. They could even be grouped into small combat units to directly engage ISIS forces. Backed up by US air strikes, they might make a useful contribution to the war without a name.

Contractors offer an attractive solution to several sorts of problems. First, having contractors handle logistics, maintenance, and other support functions allows the US military to concentrate its troops on war-fighting. The number of contractors can be expanded and contracted rapidly to meet the circumstance. The alternative would be to maintain a permanent large force of regular troops to handle these missions in both wartime and in peace time.

Second, nobody but their families care if they get killed. Their wounded don’t go to Walter Reed Hospital. They don’t get veterans benefits. The names of their dead don’t get printed in agate type at the bottom of an inside column in the New York Times and their faces don’t get broadcast in respectful silence on the PBS NewsHour. There isn’t going to be a Monument to the Fallen Contractor on the Washington Mall anytime soon.

[1] “Paid boots on the ground,” The Week, 14 November 2014, p. 11.

[2] The Iraq War cost at least $1.1 trillion and the long-term price may run as high as $3 trillion. Since the war itself offers an example of WFA, I’m not sure that getting nickel-and-dimed by private contractors should be our first area of concern.  See: http://en.wikipedia.org/wiki/Financial_cost_of_the_Iraq_War

 

Cry of the Halliburton

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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.