How Corporate America Cashed in on the Post-9/11 Pentagon Spending Surge
By William HARTUNG
The costs and consequences of America's twenty-first-century wars have by now been well-documented - a staggering $8 trillion in expenditures and more than 380,000 civilian deaths, as calculated by Brown University's Costs of War project. The question of who has benefited most from such an orgy of military spending has, unfortunately, received far less attention.
Corporations large and small have left the financial feast of that post-9/11 surge in military spending with genuinely staggering sums in hand. After all, Pentagon spending has totaled an almost unimaginable $14 trillion-plus since the start of the Afghan War in 2001, up to one-half of which (catch a breath here) went directly to defense contractors.
"The Purse is Now Open": The Post-9/11 Flood of Military Contracts
The political climate created by the Global War on Terror, or GWOT, as Bush administration officials quickly dubbed it, set the stage for humongous increases in the Pentagon budget. In the first year after the 9/11 attacks and the invasion of Afghanistan, defense spending rose by more than 10% and that was just the beginning. It would, in fact, increase annually for the next decade, which was unprecedented in American history. The Pentagon budget peaked in 2010 at the highest level since World War II - over $800 billion, substantially more than the country spent on its forces at the height of the Korean or Vietnam Wars or during President Ronald Reagan's vaunted military buildup of the 1980s.
And in the new political climate sparked by the reaction to the 9/11 attacks, those increases reached well beyond expenditures specifically tied to fighting the wars in Iraq and Afghanistan. As Harry Stonecipher, then vice president of Boeing, told the Wall Street Journal in an October 2001 interview, "The purse is now open... [A]ny member of Congress who doesn't vote for the funds we need to defend this country will be looking for a new job after next November."
Stonecipher's prophesy of rapidly rising Pentagon budgets proved correct. And it's never ended. The Biden administration is anything but an exception. Its latest proposal for spending on the Pentagon and related defense work like nuclear warhead development at the Department of Energy topped $753 billion for FY2022. And not to be outdone, the House and Senate Armed Services Committees have already voted to add roughly $24 billion to that staggering sum.
Who Benefitted?
The benefits of the post-9/11 surge in Pentagon spending have been distributed in a highly concentrated fashion. More than one-third of all contracts now go to just five major weapons companies - Lockheed Martin, Boeing, General Dynamics, Raytheon, and Northrop Grumman. Those five received more than $166 billion in such contracts in fiscal year 2020 alone. To put such a figure in perspective, the $75 billion in Pentagon contracts awarded to Lockheed Martin that year was significantly more than one and one-half times the entire 2020 budget for the State Department and the Agency for International Development, which together totaled $44 billion.
While it's true that the biggest financial beneficiaries of the post-9/11 military spending surge were those five weapons contractors, they were anything but the only ones to cash in. Companies benefiting from the buildup of the past 20 years also included logistics and construction firms like Kellogg, Brown & Root (KBR) and Bechtel, as well as armed private security contractors like Blackwater and Dyncorp. The Congressional Research Service estimates that in FY2020 the spending for contractors of all kinds had grown to $420 billion, or well over half of the total Pentagon budget. Companies in all three categories noted above took advantage of "wartime" conditions - in which both speed of delivery and less rigorous oversight came to be considered the norms - to overcharge the government or even engage in outright fraud.
The best-known reconstruction and logistics contractor in Iraq and Afghanistan was Halliburton, through its KBR subsidiary. At the start of both the wars in Afghanistan and Iraq, Halliburton was the recipient of the Pentagon's Logistics Civil Augmentation Program contracts. Those open-ended arrangements involved coordinating support functions for troops in the field, including setting up military bases, maintaining equipment, and providing food and laundry services. By 2008, the company had received more than $30 billion for such work.
Halliburton's role would prove controversial indeed, reeking as it did of self-dealing and blatant corruption. The notion of privatizing military-support services was first initiated in the early 1990s by Dick Cheney when he was secretary of defense in the George H.W. Bush administration and Halliburton got the contract to figure out how to do it. I suspect you won't be surprised to learn that Cheney then went on to serve as the CEO of Halliburton until he became vice president under George W. Bush in 2001. His journey was a (if not the) classic case of that revolving door between the Pentagon and the defense industry, now used by so many government officials and generals or admirals, with all the obvious conflicts-of-interest it entails.
Once it secured its billions for work in Iraq, Halliburton proceeded to vastly overcharge the Pentagon for basic services, even while doing shoddy work that put U.S. troops at risk - and it would prove to be anything but alone in such activities.
Starting in 2004, a year into the Iraq War, the Special Inspector General for Iraq Reconstruction, a congressionally mandated body designed to root out waste, fraud, and abuse, along with Congressional watchdogs like Representative Henry Waxman (D-CA), exposed scores of examples of overcharging, faulty construction, and outright theft by contractors engaged in the "rebuilding" of that country. Again, you undoubtedly won't be surprised to find out that relatively few companies suffered significant financial or criminal consequences for what can only be described as striking war profiteering. The congressional Commission on Wartime Contracting in Iraq and Afghanistan estimated that, as of 2011, waste, fraud, and abuse in the two war zones had already totaled $31 billion to $60 billion.
A case in point was the International Oil Trading Company, which received contracts worth $2.7 billion from the Pentagon's Defense Logistics Agency to provide fuel for U.S. operations in Iraq. An investigation by Congressman Waxman, chair of the House Government Oversight and Reform Committee, found that the firm had routinely overcharged the Pentagon for the fuel it shipped into Iraq, making more than $200 million in profits on oil sales of $1.4 billion during the period from 2004 to 2008. More than a third of those funds went to its owner, Harry Sargeant III, who also served as the finance chairman of the Florida Republican Party. Waxman summarized the situation this way: "The documents show that Mr. Sargeant's company took advantage of U.S. taxpayers. His company had the only license to transport fuel through Jordan, so he could get away with charging exorbitant prices. I've never seen another situation like this."
A particularly egregious case of shoddy work with tragic human consequences involved the electrocution of at least 18 military personnel at several bases in Iraq from 2004 on. This happened thanks to faulty electrical installations, some done by KBR and its subcontractors. An investigation by the Pentagon's Inspector General found that commanders in the field had "failed to ensure that renovations... had been properly done, the Army did not set standards for jobs or contractors, and KBR did not ground electrical equipment it installed at the facility."
The Afghan "reconstruction" process was similarly replete with examples of fraud, waste, and abuse. These included a U.S.-appointed economic task force that spent $43 million constructing a gas station essentially in the middle of nowhere that would never be used, another $150 million on lavish living quarters for U.S. economic advisors, and $3 million for Afghan police patrol boats that would prove similarly useless.
Perhaps most disturbingly, a congressional investigation found that a significant portion of $2 billion worth of transportation contracts issued to U.S. and Afghan firms ended up as kickbacks to warlords and police officials or as payments to the Taliban to allow large convoys of trucks to pass through areas they controlled, sometimes as much as $1,500 per truck, or up to half a million dollars for each 300-truck convoy. In 2009, Secretary of State Hillary Clinton stated that "one of the major sources of funding for the Taliban is the protection money" paid from just such transportation contracts.
A Two-Decade Explosion of Corporate Profits
A second stream of revenue for corporations tied to those wars went to private security contractors, some of which guarded U.S. facilities or critical infrastructure like Iraqi oil pipelines.
The most notorious of them was, of course, Blackwater, a number of whose employees were involved in a 2007 massacre of 17 Iraqis in Baghdad's Nisour Square. They opened fire on civilians at a crowded intersection while guarding a U.S. Embassy convoy. The attack prompted ongoing legal and civil cases that continued into the Trump era, when several perpetrators of the massacre were pardoned by the president.
In the wake of those killings, Blackwater was rebranded several times, first as XE Services and then as Academii, before eventually merging with Triple Canopy, another private contracting firm. Blackwater founder Erik Prince then separated from the company, but he has since recruited private mercenaries on behalf of the United Arab Emirates for deployment to the civil war in Libya in violation of a United Nations arms embargo. Prince also unsuccessfully proposed to the Trump administration that he recruit a force of private contractors meant to be the backbone of the U.S. war effort in Afghanistan.
Another task taken up by private firms Titan and CACI International was the interrogation of Iraqi prisoners. Both companies had interrogators and translators on the ground at Abu Ghraib prison in Iraq, a site where such prisoners were brutally tortured.
The number of personnel deployed and the revenues received by security and reconstruction contractors grew dramatically as the wars in Iraq and Afghanistan wore on. The Congressional Research Service estimated that by March 2011 there were more contractor employees in Iraq and Afghanistan (155,000) than American uniformed military personnel (145,000). In its August 2011 final report, the Commission on Wartime Contracting in Iraq and Afghanistan put the figure even higher, stating that "contractors represent more than half of the U.S. presence in the contingency operations in Iraq and Afghanistan, at times employing more than a quarter-million people."
While an armed contractor who had served in the Marines could earn as much as $200,000 annually in Iraq, about three-quarters of the contractor work force there was made up of people from countries like Nepal or the Philippines, or Iraqi citizens. Poorly paid, at times they received as little as $3,000 per year. A 2017 analysis by the Costs of War project documented "abysmal labor conditions" and major human rights abuses inflicted on foreign nationals working on U.S.-funded projects in Afghanistan, including false imprisonment, theft of wages, and deaths and injuries in areas of conflict.
With the U.S. military in Iraq reduced to a relatively modest number of armed "advisors" and no American forces left in Afghanistan, such contractors are now seeking foreign clients. For example, a U.S. firm - Tier 1 Group, which was founded by a former employee of Blackwater - trained four of the Saudi operatives involved in the murder of Saudi journalist and U.S. resident Jamal Khashoggi, an effort funded by the Saudi government. As the New York Times noted when it broke that story, "Such issues are likely to continue as American private military contractors increasingly look to foreign clients to shore up their business as the United States scales back overseas deployments after two decades of war."
Add in one more factor to the two-decade "war on terror" explosion of corporate profits. Overseas arms sales also rose sharply in this era. The biggest and most controversial market for U.S. weaponry in recent years has been the Middle East, particularly sales to countries like Saudi Arabia and the United Arab Emirates, which have been involved in a devastating war in Yemen, as well as fueling conflicts elsewhere in the region.
Donald Trump made the most noise about Middle East arms sales and their benefits to the U.S. economy. However, the giant weapons-producing corporations actually sold more weaponry to Saudi Arabia, on average, during the Obama administration, including three major offers in 2010 that totaled more than $60 billion for combat aircraft, attack helicopters, armored vehicles, bombs, missiles, and guns - virtually an entire arsenal. Many of those systems were used by the Saudis in their intervention in Yemen, which has involved the killing of thousands of civilians in indiscriminate air strikes and the imposition of a blockade that has contributed substantially to the deaths of nearly a quarter of a million people to date.
Forever War Profiteering?
Reining in the excess profits of weapons contractors and preventing waste, fraud, and abuse by private firms involved in supporting U.S. military operations will ultimately require reduced spending on war and on preparations for war. So far, unfortunately, Pentagon budgets only continue to rise and yet more money flows to the big five weapons firms.
To alter this remarkably unvarying pattern, a new strategy is needed, one that increases the role of American diplomacy, while focusing on emerging and persistent non-military security challenges. "National security" needs to be redefined not in terms of a new "cold war" with China, but to forefront crucial issues like pandemics and climate change.
It's time to put a halt to the direct and indirect foreign military interventions the United States has carried out in Afghanistan, Iraq, Syria, Somalia, Yemen, and so many other places in this century. Otherwise, we're in for decades of more war profiteering by weapons contractors reaping massive profits with impunity.