Crony Capitalism, Democracy, and Defense

I’m currently in Colorado visiting my girlfriend, and I bought a copy of The Economist to skim on my flight. I was pretty excited about it, since the title for the issue was The New Age of Crony Capitalism. I remember thinking “Finally. A mainstream, widely-read magazine is taking on the problem of corruption in developed democracies.”

Of course, that turned out to be a complete pipe dream. The titular article was about the problem of crony capitalism in developing countries, and seemed to be optimistic that is was, or soon would be, on the decline. It mentioned similar problems in what we traditionally think of as developed democracies/the West only in passing.

It’s been a while since I read The Economist, to be honest, but I remember when I was first starting to study political science and it was one of my go-to sources for news and analysis. Which is why now I really want to discuss the ways I think they are mistaken in their current issue.

There are two key points I want to make. Since I am American, this will mostly focus on issues within the U.S. political system.

The first is that the magazine’s analysis completely ignores the damage done to democracy in America by the Citizens United Supreme Court decision. The increased secrecy in campaign finance has allowed the wealthiest individuals and corporations to wield unprecedented influence in American political campaigns from the local to the national level.

The second is that although The Economist acknowledges the corrosive influence that “rent-seeking” industries (industries where often the most money is made through political connections, rather than a truly competitive process) such as mining, oil/gas production, and banking can have on politics (just look at the bailouts following the economic crisis), it ignores one of the biggest rent-seeking industries and sources of corruption in the U.S., and much of the rest of the world: the defense industry.

It is very convenient that this issue came to my attention just as I was finishing the book The Shadow World: Inside the Global Arms Trade by Andrew Feinstein. (Which I would highly recommend to anyone interested in the defense industry, arms dealing, the links between illegal arms dealers, corporate giants, and intelligence/the armed forces, etc.) Unless otherwise indicated, the information below is from that source.

As of 2005, which I realize is a little out of date, the arms trade was responsible for 40 percent of all corruption in world trade

According to Feinstein, “the combination of the sheer magnitude of the contracts, the very small number of people who make the purchasing decisions and the cloak of national security lends itself to bribery and corruption on a massive scale.” To give just one example, the U.S. is spending over $380 billion on a fighter jet that “has been described by a former Pentagon aerospace designer as ‘a total piece of crap.’”

Part of the problem is the “revolving door” between policymakers and the industries they are often supposed to regulate. Companies offer high-paying executive positions to former supposed public servants who were in charge of approving deals with those same companies. People like former vice president Dick Cheney have crossed back and forth between the private and public sector multiple times, and seem to benefit with each transition. Sometimes, arms company directors also serve on advisory bodies that help the Department of Defense approve new weapons systems.

Another is the fact that arms manufacturers have implemented a clever strategy where they have a different factory in as many states and congressional districts as possible. As a result, representatives and senators across the political spectrum fight to preserve projects and weapons systems that are costly, ineffective, over-budget and under-performing, and often not particularly relevant to our current ways of fighting simply to maintain a manufacturing base that employs some of their constituents and might stimulate their local economy. In other words, the defense industry is the source of most of the “pork-barrel” projects politicians so often pledge they will eliminate.

Other arms producer chicanery includes the tendency to deliberately underestimate the cost of a weapons system when bidding on a contract and over-promise its future performance capabilities, and start jacking up the price once the contract has been secured.

The problem was compounded exponentially under the neoconservative administration of George W. Bush, whose cabinet and top advisors were deeply convinced that contracting out military functions was not only more efficient (in turns out it wasn’t,) but also more patriotic: they conflated the private interest with the public interest. This ignores what seems like a pretty basic fact: companies will want to get the highest profits and least scrutiny possible, while the public will be best served by cheaper deals and as much scrutiny as possible.

And these companies profit more when the United States goes to war, since that is the single best way to drive greater demand for weapons and defense programs.

This all contributes to the development of a permanent “war economy” that costs us far more, in terms of peace and money, than it gives us


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