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Goin' Broke Paying for War:
Annual Conference Speaker Details
Iraq War Costs

Hendrik van den Berg
UNL Professor of Economics

Along with the reckless tax giveaways to the rich and the meltdown in the mortgage lending system, the War in Iraq deserves its share of the blame for triggering the biggest economic crisis in America since the Great Depression. For five-and-a-half years, the authentic cost of this economic, social and political fiasco has been obscured by everything from claims that Iraqi oil revenues would pay for the war to accounting ploys that kept war appropriations off the federal budget. But at the 2008 Annual Peace Conference on October 18 in Lincoln, University of New Mexico Associate Professor Michelle Chwastiak clearly laid out the fiscal damage in a no-holds-barred talk entitled, “The True and Actual Cost of the War in Iraq (minus the Accounting Tricks).”

In her keynote address at the conference sponsored by Nebraskans for Peace and the University of Nebraska-Omaha School of Social Work, Chwastiak outlined three major elements to the war’s sobering price tag. Two of these perspectives are familiar to the readers of the Nebraska Report, or to those who have read the work of Nancy Bilmes and the Nobel Prize-winning economist Joseph Stiglitz. Chwastiak provided further insight and support for Bilmes and Stiglitz’s three trillion-dollar estimate ($3,000,000,000,000) for the full economic and social cost of the U.S. invasion and occupation of Iraq.

Second, she presented the Iraqi component of the war and her examples suggesting that the cost to Iraq is, at the very minimum, of a similar order of magnitude as the cost to the U.S.

Then, Chwastiak covered new ground by outlining a third, hitherto undisclosed and undiscussed cost of our invasion of Iraq: namely that the previously estimated war costs are only the beginning of the actual financial burden that has been quietly built into our economic and political system through the privatization of war.

Professor Chwastiak elaborated on this third component in her afternoon workshop at the conference. In her well-researched paper, “War, Incorporated: Private, Unaccountable and Profitable,” she notes that the invasion and occupation of Iraq by the U.S. has depended to an unprecedented extent on outside contractors. For example, in the first Gulf War in 1991, the ratio of U.S. military personnel to ‘private military contractors’ (PMCs) was more than 50 to 1. During the current occupation of Iraq, however, the ratio is about 1 to 1!

Today, the employees of PMCs under contract to the U.S. military (or, increasingly, employees of firms subcontracted by those PMCs) perform most of the routine support tasks formerly performed by the military itself. In effect, rather than the 150,000 or so U.S. troops stationed in Iraq, we effectively have at least doubled that number in the country. But, because these are people who work for PMCs, they are completely off the radar screen. Over 1,200 employees of PMCs are known to have been killed in Iraq, even though they are routinely described as providing only support services and not directly involved in military actions.

However, Chwastiak shows that, in fact, PMCs increasingly perform actual military actions in Iraq — such as guarding facilities, protecting key personnel and training foreign military personnel. Among the private firms operating in Iraq, she points out that DynCorp trains Iraqi police forces, Vinnell trains the Iraqi Army, MPRI advises the Iraq Defense Ministry in strategic planning and budgeting, Blackwater guards U.S. diplomats and assorted U.S. government officials in Iraq, CACI provides interrogation and intelligence services, Erinys guards Iraqi oil pipelines, and Aegis oversees the security of U.S. contractors engaged in Iraqi reconstruction projects.

This privatization of war is justified by standard business management theory. Since Chwastiak teaches in the Anderson School of Management at the University of New Mexico, she well understands the business case for outsourcing. Here at the College of Business Administration at the University of Nebraska-Lincoln, we similarly teach our students to embrace the concept of outsourcing: firms should ‘internalize’ only their ‘core competencies’ (specializations) and they should ‘outsource’ all the other tasks and services that can be performed more cheaply by other firms.

The U.S. military embraced this concept some 25 years ago during the Reagan Administration, when the U.S. Army established the “Logistics Civil Augmentation Program.” This program authorized the U.S. military to actively establish relationships with private contractors who could provide logistical support beyond what the all-volunteer Army could provide with its active and reserve forces. In 1992, Dick Cheney, then the Secretary of Defense under the first President Bush, authorized a classified study by a Halliburton subsidiary on outsourcing of core military activities. Not surprisingly, the study concluded that outsourcing was a good idea, although at that time it was still qualified as an option of last resort to be used only when active and reserve units could not perform a task.

That changed with the current Bush Administration. Chwastiak pointed to a speech by Donald Rumsfeld on, ironically, September 10, 2001, as the turning point when privatization went from being an option of last resort and became standard operating procedure. Rumsfeld said:

Like the private sector’s best-in-class companies, DOD [Department of Defense] should aim for excellence in functions that are either directly related to war fighting or must be performed by the Department. But in all other cases, we should seek suppliers who can provide these non-core activities efficiently and effectively.

The events of the day after Rumsfeld’s speech provided the Bush/Cheney Administration with the opportunity to quickly put this new business case for the privatization of the military into practice.

There are clearly many disturbing issues surrounding the privatization of military services. For instance, the privatization of war keeps the costs of war off the front page and out of Congressional debate. The subcontracting of military services to PMCs (and the further subcontracting by the PMCs to other U.S. and foreign firms) is now under the complete control of the executive branch of the government. There is, literally, no Congressional oversight. Furthermore, the PMCs, as private firms, are not subject to the Freedom of Information Act, contracts under $50 million need not be bid competitively, and many of the private firms demand their employees sign agreements under which they are prohibited from discussing their jobs with outsiders.

In short, while the U.S. military is open to some scrutiny, the PMCs are effectively under the full control and secrecy of the White House. The contractors do not fall under the jurisdiction of the Iraqi government either, because of an exemption pushed through early during the U.S. occupation of Iraq. The U.S. insists on similar arrangements for PMCs in other countries as well. Chwastiak brought up many horror stories of how the PMCs operate in Iraq, each of which provides justification to bring this process of privatization under tight Congressional control.

However, the numerous deaths and huge waste of taxpayer money are small compared to the most disturbing implication of the privatization of war: permanent war. Because the outsourcing of war services has become standard operating procedure, providing such services has now become a huge business for what have become huge war corporations. These corporations are different from the traditional “Military-Industrial Complex” that President Eisenhower warned us about nearly 50 years ago. Those firms provided mostly equipment, and purchases were politically justified even when the U.S. was not at war.

The war services currently provided by the PMCs, however, are only needed when a war is actively being carried out. In short, through the ‘privatization’ of war, we now face a huge, well-positioned industry that, according to Chwastiak, has “a vested interest in keeping conflicts going.” This privatization of war is the third cost of the Iraq invasion and occupation. The potential cost of an endless ‘hot war,’ engineered by the privatized war services industry and its lobbyists in Washington, could easily dwarf even the estimated $3 trillion cost of the Iraq invasion and occupation. All of which means that, as a nation, we are permanently on our way to ‘Goin’ Broke Paying for War.’