In a recent posting, I looked at the high budgetary and human costs of the 20 year-long War on Terror. Once again, thanks to the Watson Institute, we have access to research which shows how profitable the war has been for the defense industry. Let's look at some of the highlights of the report.
Since the beginning of the War on Terror in the fall of 2001, there have been dramatic increases in funding for the Pentagon as shown on this graphic:
The trillions of budgetary dollars have found a nice, cozy home in the pockets of America's defence contractors. Companies have three main ways to benefit from the ongoing war economy:
1.) supplying weapons
2.) private security contracting
3.) logistics and reconstruction
The surge in defense spending began immediately after the attacks on September 11, 2001 with the Pentagon's budget (base budget plus the Overseas Contingency Operations (OCO) account increasing by over 10 percent in the first year after the attacks and the beginning of the war in Afghanistan followed by incra succession of year-over-year increases for and unprecedented 10 years in a row. Spending by the Pentagon peaked in 2010 at over $800 billion in 2021 dollars, its highest level since World War II, rising by nearly one-third over the period from 2001 to 2010. As well, the increase in the Pentagon's spending between Fiscal 2002 and Fiscal 2003 was more than the entire military budget of any other nation including Russia and China.
Since Fiscal 2001, total Pentagon spending for all purposes reached $14.1 trillion (in 2021 dollars) with $4.4 trillion being spent on weapons, procurement and research and development, categories that directly benefit the defense industry. The remaining funds of $9.7 trillion were spent on pay and benefits for military and civilian personnel and expenditures required to operate and maintain the United States military.
Let's go back to the $4.4 trillion that was funnelled to the U.S. defense industry. One-quarter to one-third of all Pentagon contracts in recent years have gone to five major weapons contractors; Lockheed Martin, Boeing, General Dynamics, Raytheon and Northrop Grumman. From Fiscal 2001 to Fiscal 2020, these five companies split $2.1 trillion (in 2021 dollars) worth of contracts between them.
Here is a table showing the total value of the contracts issued to these five companies for Fiscal 2020 and Fiscal 2021 alone:
These five companies supplied most of the combat aircraft, attack and transport helicopters, armoured vehicles, bombs and missiles used in both Afghanistan and Iraq. In total, between Fiscal 2001 and Fiscal 2010, the pentagon spent more than $1 trillion on weapons and services (including the purchasing of an entirely new generation of armoured vehicles) with nearly 25 percent of that spending sourced from supplemental funding which was intended to support the war efforts in Afghanistan and Iraq. A 2016 study by Action on Armed Violence found that the Pentagon had also issued contracts for $40 billion worth of guns and ammunition between September 2001 and September 2015 which included the provision of 1.452 million guns to Iraq and Afghanistan as shown here, noting that the DoD is unable to account for hundreds of thousands of guns that it sent to both nations, including 190,000 AK-47s:
One other significant area of spending was associated with the increasing use of private military contractors which supplied the Pentagon with logistics and reconstruction. Given the chaos present int eh war zone, the massive volume of funding supplied by the Pentagon and the lack of government oversight, an environment which enabled massive fraud, waste and abuse was created. One of the largest suppliers of contractors was Halliburton through its Kellogg, Brown and Root (KBR) subsidiaries. KBR received an opened arrangement from the Pentagon's Logistics Civil Augmentation Program to coordinate support functions for troops in the field including setting up military bases and supplying them with food and laundry services to maintain equipment. These contracts grew ten-fold between Fiscal 2002 and Fiscal 2006 and by August 2009 the company had received over $30 billion in funding from the PentagonA December 2003 report showed that KBR had overcharged the Pentagon by tens of millions of dollars for fuel. In addition, the Director of the Defense Contract Audit Agency testified in 2009, that after auditing $1.2 billion in Diining Facility Costs from KBR, that he took exception to approximately $352 million of the total because KBR was billing the Pentagon for meals that were not actually provided. Other companies were also guilty of price gouging; the International Oil Trading Company which received $2.7 billion worth of contracts to supply fuel was found guilty of overcharging the Pentaong for fuel it brought into Iraq which netted a profit of #200 million on sales of $1.4 billion between 2004 and 2008, one-third of which went to its owner, Harry Sargeant III who just happened to serve as the finance chairman of Florida's Republican Party.
Here is an interesting example of another company that "played the game":
Other examples include:
1.) a U.S.-appointed economic task force that spent $43 million on a gas station that was never used, another $150 million on lavish living quarters for U.S. economic advisors, and $3 million for patrol boats for the Afghan police that were also never used
2.) a Congressional investigation found that a significant portion of $2 billion worth of transportation contracts to U.S. and Afghan firms ended up as kickbacks to warlords, police officials, or payments to the Taliban, sometimes as much as $1,500 per truck, or up to half a million dollars for each large convoy of 300 trucks.
Let's close with this quote from the paper's recommendations:
"Reining in excess profits for weapons contractors, preventing waste, fraud and abuse, and increasing transparency and accountability over private firms involved in conducting or preparing for war involves three major types of initiatives.
1.) reduce spending on war and preparations for war in line with a more modern, realistic defense strategy. A new strategy should increase the role of diplomacy, focus on emerging and persistent non-military security challenges, and reduce direct and indirect foreign military interventions of the type the United States has engaged in Iraq, Afghanistan, Syria, Somalia, Yemen and so many places beyond. The Center for International Policy’s Sustainable Defense Task Force has outlined an approach that could save over $1.2 trillion over the next decade by adopting a more realistic approach to the challenges posed by Russia and China; relying more on allies to address security risks in their own regions; pursuing diplomatic solutions to actual and potential nuclear proliferation in Iran and North Korea; rolling back the Pentagon’s $1.7 trillion, three decade long nuclear rearmament program; and cutting excess bureaucracy, including reducing the Pentagon’s employment of over 600,000 private contract personnel
2.) more rigorous monitoring and regulation of spending including strengthening the role of inspectors general, auditors, and contracting officers in rooting out corruption and negotiating fair prices with corporate suppliers of everything from spare parts to finished weapons systems; and increasing transparency in Pentagon spending, including getting the department’s financial house in order so that it can finally pass an audit.
3.) measures to reduce the political power of arms manufacturers including reforming public financing of elections and other initiatives to reduce the value of private money in the political process, and curbs on the revolving door between government and industry. Revolving door reforms should include imposing longer cooling off periods between government service and employment in the arms industry, closing loopholes in current laws, and increasing detailed reporting on revolving door employment and the post-government activities of personnel who move from Congress, the Pentagon, and other key agencies to positions in the defense sector.104 In addition, think tanks should be transparent about funding sources and identify potential conflicts of interest tied to corporate donations.
If Washington were really serious about reducing the profiteering from war, it would take steps to reduce the incentive to go to war in the first place but we all know that this is never going to happen given this:
Click HERE to read more from this author.