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The Wall Street Issue

Killing People Overseas Will Always Be a Growth Industry

Today in America, foreign policy is enacted through corporations. Tasks that once would have been the sole province of the CIA or the military are routinely contracted out to firms listed on the New York Stock Exchange.

In 2004 I found myself in a peculiar position. I was in Burundi, a small African country, sipping a Coke with the country's president, the US ambassador, a woman I presumed was from the CIA, and the president's eight-year-old daughter. It was around 9 PM, and we were watching the local television news in his living room at the presidential palace, not speaking a word. There was nothing to say. The president's life was in danger. The United States had brought me in to keep him alive, and I wasn't sure how.


Ten years earlier the Rwandan genocide had spread through the region, shredding the country. US intelligence now believed the nation was on the cusp of more bloodshed. I was to keep the president alive and in public view, without anyone knowing it was a US program, including staff at the US embassy. This I did. Curiously, I was not a member of the CIA or part of a covert US military unit or even a government employee. I was from the private sector—a "contractor" to many and a "mercenary" to some—working for a large private military company (PMC).

This is increasingly how foreign policy is enacted today: through corporations. Superpowers such as the United States cannot win or sustain wars without contractors in places like Iraq and Afghanistan, which was not the case even a generation ago. Tasks that once would have been the sole province of the CIA or the military are routinely contracted out to firms listed on the New York Stock Exchange. The most disturbing aspect of this trend is the decision to outsource lethal force: Paramilitary, armed civilians patrol the streets of Baghdad and Kabul for their employer, the United States of America. These small private armies, the most infamous being Blackwater USA, are organized as multinational companies that commoditize conflict. Since 9/11, this industry has exploded from tens of millions to tens of billions of dollars in the chum slick of war contracts.


When Dwight Eisenhower warned the world against the military-industrial complex in his presidential farewell speech, he could not possibly have imagined that this industry would one day supply trigger-pullers to American wars. Since Ike's time, the United States has grown ever more dependent on Wall Street to go to war.

When we think of the "military-industrial complex" we think of companies like Lockheed Martin and Raytheon that provide products like fighter jets, satellites, and ships. Now the industry also supplies services like contractors and paramilitary units. PMCs are different from other multinational corporations in that they kill or train others to kill. Firms like Blackwater, Triple Canopy, and DynCorp International provide armed civilians on the battlefield and raise security forces for clients. These are not the armed guards one would see at American malls but former soldiers recruited from armies around the world to conduct military missions for their clients.

Unlike other armed non-state actors, PMCs are creatures of Wall Street and easily distinguished by their roots in international finance and norms. For example, they are bought and sold just like other corporations, sometimes listed on stock exchanges, and expected to turn a profit by shareholders and investors. DynCorp International offers a wide range of services and in 2013 earned more than $3 billion in revenue, according to its 10-K report. Over the past decade, DynCorp and its subsidiaries were acquired by Computer Sciences Corporation (CSC), broken up, and then sold to Veritas Capital Fund, a private equity firm. In 2006, the company went public on the New York Stock Exchange under the symbol DCP, and four years later was acquired by another private-equity investment firm, Cerberus Capital Management, for $1.5 billion.


M&A deals are common throughout the private military industry. After the 2007 Bagdad shootings, Blackwater rebranded to Xe and then again to Academi for business reasons. Earlier this year, Academi was bought by Constellis Group, a holding company fueled by private-equity money that also includes former PMC rival Triple Canopy. British PMC ArmorGroup International was listed on the London Stock Exchange in 2008 and then acquired by G4S, one of the largest security firms in the world, with operations in more than 120 countries. These firms behave just like any other company listed on the stock exchange or owned by private-equity companies, except that they go to war.

The role of corporations at war has increased over the decades. During World War II contractors accounted for only 10 percent of the military workforce, compared with 50 percent in the Iraq War––a 1:1 ratio of contractors to military personnel. In recent times, the number of contractors supporting operations in Iraq and Afghanistan has reached historic proportions. In 2010 the United States deployed 175,000 troops and 207,000 contractors in war zones.

In the past decade of war, contractors paid the ultimate sacrifice, accounting for 25 percent of all United States fatalities. In 2003 contractor deaths represented only 4 percent of all fatalities. That number rose to 27 percent from 2004 to 2007, and from 2008 to 2010 contractor fatalities accounted for 40 percent of the combined death toll.


In 2010 more contractors were killed than military personnel, marking the first time in American history that corporate casualties outweighed military losses. In the first two quarters of 2010 alone, contractor deaths represented more than half––53 percent––of all fatalities.

In a little more than a decade, the industry has expanded from a multimillion- to a multibillion-dollar affair. The market's value remains unknown—expert estimates range wildly from $20 billion to $100 billion annually. What is known is that from 1999 to 2008, US Department of Defense contract obligations––for both security and non-security functions—increased from $165 billion to $414 billion.

In 2010 the DOD obligated $366 billion to contracts (54 percent of the total DOD obligations), an amount seven times the United Kingdom's entire defense budget. Moreover, this sum only entails DOD contract obligations and does not include contracts made by other government agencies like the State Department or USAID through its "implementing partners." The actual amount the United States paid for security contracts remains unknown.

The roles of wartime contractors are also changing. The vast majority of contractors in Iraq and other places are unarmed and provide nonlethal logistical support, performing construction, maintenance, and administrative duties. Logistics is the traditional role of contractors on the battlefield, and today's largest contracts remain logistical in nature, such as the US Army's Logistics Civil Augmentation Program (worth a lifetime maximum value of $150 billion).


What is new, and controversial, is the presence of armed contractors. To many, the decision to outsource lethality to armed civilians in foreign lands, who are tasked to kill people when necessary, smacks of mercenarism.

In 2010, armed contractors accounted for 12 percent (11,610 persons) of the overall contracting force in Iraq and 13 percent (14,439) of that in Afghanistan. But size does not matter when it comes to armed contractors. Even though they are fewer in number than their unarmed brethren, their actions resonate disproportionately louder, owing to the nature of their work: They kill people. When a handful of Blackwater personnel slaughtered 17 innocent civilians at Nisour Square in Baghdad on September 16, 2007, they created a firestorm of anti-US sentiment that undermined the United States' counterinsurgency strategy of "winning hearts and minds" and generated such international ill will that Secretary of State Condoleezza Rice had to publicly address the shooting and launch an official investigation.

Despite the pandemonium, the Blackwater contractors walked free because they are immune from Iraqi law, in accordance with Order 17 of the Coalition Provisional Authority. Many were outraged, including Iraqi Prime Minister Nouri al Maliki, who angrily declared: "It cannot be accepted for a security company to carry out a killing. There are serious challenges to the sovereignty of Iraq."


This trend suggests a growing United States dependence on corporations to go to war. Unless the United States decides to significantly withdraw from military engagement abroad or reinstitute the draft, this trend toward the privatization of war will continue.

Most PMCs are headquartered in the United States, and the senior management consists largely of United States citizens, but like all multinational corporations, the companies maintain offices in several countries. Should one government, such as the United States or United Kingdom, impose strict regulations, they could move offshore. Dubai is a favorite hub for the industry because of its proximity to the markets (i.e., the Middle East and Africa) and its business-friendly laws.

Like mercenary companies in the Middle Ages, the people who fill the ranks of today's private military corporations are densely international. In Iraq, only 26 percent of contractors in 2010 were United States citizens. In Afghanistan the number in 2010 was only 14 percent.

In other words, most American PMC personnel are not American. Where will these non-Americans go once PMCs leave Afghanistan? Many will likely form their own, smaller PMCs back home or seek new companies in other war zones. Today, PMCs are emerging from Russia, Uganda, and elsewhere. And they are less picky about whom they work for and how they do it.

The United States' decision to lean on the private military sector, and Wall Street by extension, to wage war has produced the modern mercenary. Half of America's military force structure consisted of contractors in Iraq and Afghanistan, and, short of conscription, it is unlikely that the superpower could have sustained two multiyear wars simultaneously without them. This was a convenient political solution for the country's leadership at the time, since premature withdrawal from Iraq and Afghanistan would look like Vietnam-era defeat and a national draft was unthinkable.

However, this solution came at a cost. In the process, the superpower unleashed a new norm in international relations: the legitimate use of private military force, or mercenarism to many.

This has slowly unleashed a new type of warfare in the world––contract warfare––where any country that can afford the means of war can wage it. Mercenaries were how medieval Europe often waged war, and mercenaries make war: They can generate demand for their own supply through racketeering and marauding. This trend is unfolding slowly but assuredly. A world with private war will mean more war.

It is doubtful this industry can be regulated. Senator Obama proposed legislation to do this that he then ignored as president. The simple fact remains that these companies are cheaper than public-sector alternatives, both financially and politically. The White House can deploy contractors instead of troops to fight the Islamic State in Iraq, because they're not seen as troops. This industry affords plausible deniability and political top cover to their clients. Any attempt to regulate these firms will simply drive them offshore. Instead, they will exist tomorrow as they do today: in a legal gray area.

The private military industry's future is sanguine. There are four mutually reinforcing trends in the private military industry: resilience, globalization, indigenization, and bifurcation. The industry will endure after the United States withdraws from Afghanistan, seeking new clients. In fact, it is already doing so, globalizing as new customers and companies appear around the world. And as the industry goes global, it is concurrently indigenizing or "going native." Warlords and others have adopted the private military model to make a living, and international clients, including the United States, are buying. Finally, the industry is beginning to bifurcate between a mediated market with military enterprisers and a free market populated by mercenaries. These trends will unfold gradually over time. Whichever trajectory wins the market in the coming years is important, because it will influence the future of war and peace.

Sean McFate is author of the forthcoming book The Modern Mercenary: Private Armies and What They Mean for World Order (Oxford University Press), from which portions of this piece were adapted.