The Power and the Money

“Frankly, I’d like to see the government get out of war altogether and leave the whole feud to private industry.”

Thus spoke Major Milo Minderbinder in 1943.

Was he right? Does contracting out combat support functions save money? I mean, that is not quite the whole feud, but it is some of it.

The best answer comes from study published by John McGrath, at Fort Leavenworth. Below are the figures from Table B-2 for various American wars. The figures apply only to the Army but rightfully include staging areas in Korea and both Gulf Wars: Japan and Kuwait, respectively.

So what do we got? At first glance, success! A higher tooth-to-tail ratio, awesome sauce!

We are back to the levels of World War 2! (AEF = American Expeditionary Force of WW1; ETO = European Theater of Operations in WW2.) Hooah!

Only, well, that does not include the contractors. We really should put them back into the mix, since they did jobs that soldiers did in Gulf 1 and before.

Ah. Well. Not so good.

Now, to be fair, these figures do not include the extensive host-country support the U.S. received in Korea, which would make that war look pretty bad. (Korea would fall to 28% combat troops on a BOTE calculation.)

They also do not include potential cost savings. After all, if private contractors are cheaper, then you would expect that the military would use more of them. Calculating that, however, is incredibly complex, because American operations have become far more capital and resource-intense over time. The simple calculations show ever-rising real deployment costs, but that could be a reflection of the fact that the American soldier in Gulf 2 was rather more lethal (and well protected) than the American soldier of Gulf 1, who was both more lethal and better protected (and better fed) than the American soldier in Vietnam, who was more lethal than the American soldiers who beat Hitler.

It is hard to figure.

But the headline figures should induce skepticism.

This, note, is just for outsourcing support functions; we have not gotten into questions of outsourcing actual genuine combat. You know, what Major Minderbinder really wanted to see. That is an even less-satisfying topic for another post.

“We are trying to do for the national security apparatus what FedEx did for the Postal Service”

Thus spoke Erik Prince in 2007.

Looks like my decision to take a look back at Blackwater was prescient. (Well, I had some inside information.) Today the New York Times reported that people within the Trump administration persuaded Erik Prince to try to sell the Defense Department on expanding the U.S. operation in Afghanistan by using private military contractors.

This proposal begs several questions, not least: would it save any money? But let’s punt on that for a moment. Here I just want to briefly review America’s history with private military companies.

The first clear-cut use of American private contractors to carry out a core state function — perhaps the core state function, the use of violence to defend the people — dates back to the Revolution. The fledgling United States needed to interdict British supplies and defend its commerce with its French and Spanish allies. The problem was that the rebel states had no standing navy, and lacked the time to construct one. Congress solved the problem by issuing “letters of marque” to private merchantmen. Once possessed of a letter of marque, private merchantmen would finance the outfitting of their ships with weaponry and proceed to attack British and Loyalist shipping in return for a bounty per enemy ship destroyed. The Continental Navy never numbered more than 40 vessels — Congress commissioned only 64 ships over the course of the Revolution — whereas the number of privateers peaked around 450. Almost 1,700 private vessels conducted combat operations for the United States in 1776-82.

The U.S. again turned to privateers when it again went to war with Britain in 1812, Congress having refused to appropriate money for a standing navy. In that war, privateers earned approximately $40 million — 5.1 percent of the country’s GDP at the time.

Congress again turned to contractors during the Mexican-American War. When the Army needed to make an amphibious landing at Veracruz in March 1847, it chartered 54 private steamships and 249 other boats. The Army also hired teamsters, laborers, and mechanics for service in Mexico. Civilian personnel, however, refused to serve for longer than six months, demanded exorbitant wages, and many proved to lack the skills they claimed. Reports complained of price gouging. [1] An embarrassed Quartermaster-General suggested that the Army establish a corps of enlisted laborers and proposed that the Navy should operate transports: “[I was] constantly embarrassed by the want of that practical knowledge which nautical men only possess.” [2] Congress did not follow his suggestion, and the Army again employed contractors against the Seminole Indians in Florida during the 1850s. [3]

When the Civil War broke out in 1861, both sides found themselves unprepared. Confederate privateers attacked Northern shipping. The U.S. side, however, broke with the past and did not employ privateers. Rather, Congress drafted 600 civilian vessels into armed service, and recruited 70,000 sailors to man them. Congress did, however, contract with civilians to move military supplies. One entrepreneurial New Yorker purchased a used ship for $12,000 and earned $833,000 from the government — the modern equivalent of $1.2 billion. [4]

The U.S. may not have employed armed contractors at sea during the Civil War, but it did on land. The Army of the Potomac under George McClellan hired Allan Pinkerton’s “National Detective Agency” to gather intelligence in the South and conduct counterintelligence operations in the North. A problem arose, however, when the commander-in-chief of the U.S. Army, Winfield Scott, contracted with Lafayette Baker to provide similar services. In at least two cases, agents of one contractor wound up arresting employees of the other. More seriously, when President Lincoln fired McClellan in 1862, Pinkerton also resigned and took with him all the intelligence that he possessed about Confederate operations. [5] The Army eventually wound up bringing intelligence functions in-house. [6]

After the Civil War, military contracting went into eclipse. [7] The U.S. chartered private ships for use in the Spanish-American War of 1898, but only under strict military control. The federal government allowerd merchant vessels to arm themselves during both World Wars, but the centralized structure of the Merchant Marine bore little resemblance to the private contracting of the 19th century. In the Korean War, the South Korean government provided the U.S. Army with 50,000 civilian laborers to move supplies to the front, but the “Civilian Transport Corps” was never really a private organization, and the U.S. and Korean governments soon reorganized it into the paramilitary Korean Service Corps. [8] During the Vietnam War, the Military Sea Transportation Service hired private vessels to transport materiel to the war zone, but their crews were given Naval ranks and uniforms and came under military discipline while in-theater. [9] The Army employed private contractors to construct bases and ports in Vietnam, but military engineers outnumbered civilian ones 2-to-1. [10]

And that was that until the late 20th century. When the NATO occupied Bosnia and later Kosovo, the Clinton administration was reluctant to make the sort of mass reserve call-ups needed to sustain the occupying troops in the field. The figures are rather muddled and they include all sorts of non-support personnel, but about half of all DOD-funded people in the Balkans were technically civilians employed by somebody other than the U.S. government.

Which brings us to the modern era and another post.

Department of Things That Will Obviously End Well

Many years ago, in what seems like another life, I wrote a case about Blackwater. When I began researching the case in 2008, not long after my time in Afghanistan, the company was at the peak of its ambitions. It’s training ground in Moyock, North Carolina, was very impressive — and it still is — but the amazing part of Erik Prince’s vision was that he wanted the company to manufacture, deploy and operate a panoply of advanced hardware. These included the Grizzly APC (interior pictured), an armed frigate (see page 53), armed reconnaissance blimps, and a small private air force.

There is a rationale behind the idea of privatizing some military functions. Much of what is called “combat service support” has a civilian equivalent. In theory,  a private company could maintain a large reserve support capacity and rent it out to various clients, including the military, for less than it would cost any of those clients to maintain such capacity internally. In practice, it’s less clear that outsourcing logistical and support functions generates savings or improves readiness, but that’s an issue for another day.

The issue for today is that Russian Federation appears to be deploying private organizations to take and hold Syrian territory in return for oil and mining concessions. (The link is to the New York Times.) This is bad on about a hundred different levels. The small problems have to do with the problems of outsourcing core military functions to private organizations. The big ones have to do with the incentives.  

Not only do these contracts encourage Russian companies to go buccaneering, they encourage Moscow to broaden the war as much as possible. They also encourage Moscow to pressure Damascus into fighting to the bitter end and give corrupt Russian officials incentives dump public resources into subsidizing ostensibly private military operations. The officials don’t even have to be corrupt in a Venezuelan bribe-taking sense; all you need is an open-door between public service and lucrative private posts in the companies that stand to benefit.

Private military forces are, sadly, a thing. Erik Prince is running a small private air force for the UAE in Libya. But I’m not sure that I’ve heard of mercenaries paid with contingency fees financed out of the spoils of war. That seems new. I am sure that there must be a giant hole in my logic and this experiment with profit-driven pacification will end well.

The president-elect and private contractors

  On July 2nd, a Defense Department journalist interviewed Barack Obama.  Here is what the then-candidate said about private contractors:

Senator Obama:  “When it comes to private contractors, there is room for private contractors to work in the mess hall providing basic supplies and doing some logistical work that might have been done in-house in the past. I am troubled by the use of private contractors when it comes to potential armed engagements. I think it puts our troops in harm's way. I think it creates some difficult morale issues when you've got private contractors getting paid 10 times what an Army private's getting paid for work that carries similar risks. When it comes to our special forces, what we've seen is that it's a potential drain of some of our best-trained special forces, and you can't blame them if they can make so much more working for Blackwater than they can working as a master sergeant. That, I think is a problem.”

Defense interviewer:  “Blackwater would argue that they're a bargain: that you get a higher level of ability, that they can put people there, they can keep top-level talent there perpetually.”

Senator Obama:  “I am not arguing that there are never going to be uses for private contractors in some circumstances. What I am saying is if you start building a military premised on the use of private contractors and you start making decisions on armed engagement based on the availability of private contractors to fill holes and gaps that over time you are, I believe, eroding the core of our military's relationship to the nation and how accountability is structured. I think you are privatizing something that is what essentially sets a nation-state apart, which is a monopoly on violence. And to set those kinds of precedents, I think, will lead us over the long term into some troubled waters.”