Privatizing Security in Iraq and Elsewhere--Posner

There are reportedly 25,000 employees of private security firms in Iraq. Some 80 percent are employed by U.S. firms. It appears that most though not all of these employees are Americans, although I have not been able to locate a statistical breakdown. These employees provide armed guards for U.S. diplomats, journalists, and businessmen that ordinarily would be provided by the military, as well as providing military services (guarding convoys, training Iraqi troops, supplying food, and interrogation) under contract to the Pentagon. There is controversy over both the cost and discipline of these private security personnel. Privatization is a perennial issue in economics, and it was part of the deregulation movement that began in the late 1970s. The issue reflects the fact that there is no hard-and-fast line between the provision of services by government and by the private sector, and that private provision of services is generally more efficient than public because political interference is less. Conventionally it is thought that only government can provide services that cannot be denied to people who refuse to pay for them, so that efficiency in a broader sense requires public provision of such services. The classic example is national defense. If I install an antimissile defense in my back yard, it will of necessity protect my neighbor as well even if he refuses to contribute to its cost. Because of such free riding, the argument goes, national defense will be underprovided if it is left to the free market. That is correct, but it does not entail the actual provision of the service by government. The government must tax my neighbor to make him contribute to the national defense, but it can turn the tax revenues over to private companies to provide the actual service. The government already contracts out the manufacture of military weaponry. It could in principle contract out the operation of that weaponry as well. Education is a source of nonexcludable external benefits (everyone benefits from an educated population), so it is properly supported by taxes, but it doesn't follow that we need public schools, and indeed there is a great deal of private education indirectly financed by taxes; maybe all of it could be. And likewise there is a long history of mercenaries, including the Hessians whom the British employed against us in the Revolutionary War and the "soldiers of fortune" heavily employed in Africa's incessant civil wars. The Pope's Swiss Guards are a mercenary force. Swiss have been mercenaries since the Middle Ages. The French Foreign Legion is a quasi-mercenary force. Part of it rebelled against the DeGaulle government in the early 1960s over his decision to withdraw from Algeria, and disloyalty is a traditional concern about mercenaries, though surely not a concern about American private security personnel in Iraq. Indeed, the term "mercenary" is usually reserved for foreigners; that is why members of the U.S. armed forces today are not referred to as mercenaries even though they are employed voluntarily rather than conscripted. By the same token, however, non-Americans employed by private security companies in Iraq are mercenaries. Since we have a volunteer army, why should there be any concern about contracting out some or even many of its tasks? Many employees of the Defense Department are civilian; soldiers in a voluntary army are employees rather than slaves; and, as I mentioned, the manufacture of the weaponry is contracted out. Instead of just providing weapons and recruits, why not let the private market provide entire military formations? So Blackwater, one of the leading U.S. security contractors operating in Iraq, might be paid to furnish a tank battalion, complete with tanks and other equipment, officers, and enlisted personnel, to fight under U.S. command alongside army, marine, and national guard battalions. But that would probably be inefficient, because military units that fight together have to be very closely coordinated, and that is difficult when they have different organizational cultures. (The enlisted personnel of the French Foreign Legion are subject to full military discipline, and the officers are members of the regular French army; that is why I called the Legion only "quasi-mercenary.") The contract security personnel in Iraq do not fight alongside the U.S. military but instead operate in a service or supporting rather than combat role, though not without risk--hundreds of them have been killed and many others wounded. At first glance it might seem redundant for the military to hire contractors who in turn hire, say, armed guards, rather than to hire the guards directly, as soldiers. Soldiers are paid only between one-half and one-tenth as much as the security personnel furnished by contractors for service in Iraq, although the comparison is misleading because the soldiers tend to be less experienced (most of the private security personnel are veterans) and because pension, medical, housing, and other fringe benefits of soldiers are much more generous. This in itself is odd because if the two classes of worker--soldiers and contract security personnel--are doing the same work, why isn't the structure of their compensation the same? One reason is that for many soldiers the military is their career, while most of the contract security personnel in Iraq are temporary workers. Another is that there are nonpecuniary benefits to military service that are absent from its private substitute, including patriotic pride and the prestige that membership in our armed forces confers. The difference between temporary and permanent workers is the basis for the principal economic rationale for the heavy use of contract security personnel in Iraq. The military needs "temps." The need is not unique to the military, of course. The private sector has many companies that provide temporary workers on a contract basis to firms that could hire permanent employees to do the work, thus cutting out the middleman. But if the firm's demand for workers fluctuates, it may be cheaper to match supply to demand by contracting with companies that have arrangements with workers available for temporary jobs than to hire additional permanent employees but then lay them off when demand is slack, or to go hunting in the labor market, whenever there is a surge in demand, for qualified individuals who want to do temporary work. In the past, the end of a war or other national emergency that had caused a surge in the number of military personnel has led to large reductions in those personnel, which made a military career economically insecure. In order to place 20,000 additional soldiers on duty in Iraq, the military would probably have to hire a total of 60,000, since soldiers are rotated in and out of Iraq about every three years, and these soldiers might be surplus if the war ended or there was a large withdrawal of U.S. troops. Such fluctuations can be avoided by the use of temps. But of course we have temps built into the existing, pre-contracting-out system. They are the members of the National Guard and other reserve units. They are part-time soldiers available for temporary duty in Iraq and other war zones. So a proper cost-benefit analysis of the contracting-out program in Iraq (which has not to my knowledge been conducted) would compare the costs of the contracts with the cost of enlarging National Guard or other reserve formations to a point at which fewer or perhaps no contract security personnel would be needed. The comparison might favor the contractors simply because the private provision of services tends as I said to be more efficient than the public. There are, however, two residual concerns with the contract approach that should be considered. Both are political. The first is a suspicion that the use of the contractors is motivated not by cost considerations but rather by a political objective of concealing from the American public the extent of the U.S. commitment of troops to Iraq. The U.S. has about 130,000 troops in Iraq at present. The number would be about 150,000 if contract security personnel were replaced by U.S. soldiers; the number of casualties would also be higher. Increases in either number would reduce political support for the war. The second is that contract personnel are less restrained in their use of force than our soldiers because the U.S. military command is less concerned about misbehavior of contract personnel than misbehavior of soldiers. The contract personnel are not in the chain of command; apparently they are also immune from prosecution by Iraqi authorities. According to one U.S. general, "These guys run loose in this country and do stupid stuff. There's no authority over them, so you can't come down on them hard when they escalate force…They shoot people, and someone else has to deal with the aftermath. It happens all over the place." Yet the military is concerned with maintaining the goodwill of the Iraqi population, and that goodwill is impaired by excessive use of force by any foreign personnel. One might think, therefore, that the contracts would subject the employees to full military discipline--but if this were done, it would be difficult to maintain the fiction that they are not really soldiers and so shouldn't be counted in the total of U.S. military personnel in Iraq. Competition for these contracts should induce the contractors to screen the people they hire, but the screening is likely to be imperfect, and as a result the absence of a credible threat of criminal punishment, whether military or civilian, may indeed create a situation in which contract security personnel are less restrained in their use of force than our soldiers are.

Comments

[N.E.Hatfield]

I wouldn't say that to an Irishman in the Irish Brigade in a dark alley in New York. Or a Legionaire in a dark alley in Paris or a Gurkha in London. Don't forget there is something called Esprit de Corps that transcends Nationality. ;)

[John Noble]

Your attribution of the gap between the payroll cost of soldiers and private security workers to the fact that "for many soldiers the military is their career, while most of the contract security personnel in Iraq are temporary workers," strikes me as counter-intuitive. In most industries, it's the other way around. And while men and women who make the military a career enjoy generous benefits at retirement, most enlistees leave on their own after one or two tours, and most of the rest are weeded out by the military's "up or out" policy.

It seems to me that private security is setting FMV, and the gap reflects a distortion that would correct if contractors competed with the military for enlistments and reinlistments in the unskilled labor market. But the government tilts the market to its advantage by contract requirements that limit private sector competition to the market for /experienced/ unskilled labor -- the retired soldiers who already turned down the government's last and best offer.

Whatever the efficiencies of privatization, they can't match the government's unique ability to raise capital; control the supply and cost of unskilled labor; and avoid the liability costs associated with a very risky enterprise by barring negligence claims for injuries suffered by soldiers in the line of duty, Feres v. United States, 340 U.S. 135, and shifting the cost of shared negligence to the competition under Stencel Aero Eng'g v. U.S., 431 U.S. 666.

John Noble

[anonymous coward]

Although the points are well taken the examples of mercenaries are none of them well chosen. George was still ruler in Hesse as Victoria, a woman, later could not be (Salish law). Thus the Hessians were household troops of the head of state - they were mercenary only in the sense that the laws of Hesse required George to pay them from his own purse (or English funds) when the soldiers were used in a diversion. That is Hesse would cover the cost of its own army when used in the interests of Hesse - otherwise not. Hessian soldiers were paid strictly as elements of the Hessian forces and not the sort of excess current wage but without long term committment commonly associated with the somewhat pejorative term mercenary. The Swiss Guard - all good catholics and much more - are no more mercenaries in any commonly accepted usage than the Italian police who also work for the Vatican as a foreign state in Italy. Rather the Swiss Guards are a military order - does one speak of the Jesuits as mercenaries? Notice that much of the logistic tail of the Swiss Guards is furnished by a woman's order.

[r.friedman]

Hope this is not too far off-topic, but I want to comment on Posner's speech about the legitimacy of surveillance programs shown on C-SPAN Saturday 6/3.
First, I was shocked at the nakedly result-oriented jurisprudence. Do we really expect our judges to act as philosopher kings, decide what would be a desirable outcome, and then see whether they can reach it by appropriately chopping legislation, precedent and logic? No. While am sufficiently legal-realistic to believe that judges do chop facts and logic to reach results they desire, I do not see that as a normative statement.
Second, Posner says he tried to read FISA but could not make sense of it. Of course, we cannot trust his reading because FISA stands in the way of reaching his desired position and must be chopped away. But let us assume for the moment that Congress in FISA and the contemporaneous wiretap legislation intended to occupy the entire subject matter of domestically occurring interception of communications, with wiretap procedures required for US persons and FISA warrants for non-US persons. How can Posner's method give effect to such a congressional action when he doesn't even look at the law until he's already decided that national security surveillance is desirable and incompatible with what Congress intended?
Third, I contend that what I assumed in the previous paragraph is in fact what happened. Posner complains that the wartime provisions of FISA are illogical, but again, because of his need to chop, he refuses to consider them in light of the contemporaneous War Powers Act. Certainly Congress knew about the possibility of Congress being dispersed or destroyed by the onset of a war, this was after all during the period of mutually assured destruction. And certainly Congress knew about terrorism, already dealing with the PLO and airline hijacking as instances of it. The founding fathers distrusted a standing army because they feared it would be turned against the people. And now that it is being so used, Posner cites it as an example of the commander-in-chief power trumping that of Congress.
Fourth, Posner contends that people are willing to give up their birthright of privacy for the pottage of web-enabled shopping. Tell that to Justice Douglas. When I was growing up, I was taught that the difference between our civil rights as natural rights approach and the European civil rights as gifts of the state approach could be seen in that we had no internal passports that we could be required to show. What about the experience of East Germany? Everybody knew they were being watched, does that mean that they liked it or they were entirely sanguine when the release of the Stasi records revealed which of their neighbors had been informing on them? We do not want to live in a police state regardless of whether Posner consders we have a legitimate expectation of privacy to resist it. Posner complains about having to specify how a person is connected to a terrorist organization before getting a wiretap whose purpose is to find out whether the person is so connected. But Congress considered this a repulsve police state practice and rejected it.
Fifth, Posner is completely disingenuous about what is to be done with adherents of terrorist organizations. He says that information gathered by legally unauthorized intelligence means should not be used for proceedings in the civilian courts. (Of course, he is ahistorical about what "intelligence" has been gathered and against whom. Haven't we already heard child molesters being called terrorists who terrorize our children?) Then he refers to the World War II experience where captured German spies were either turned into double agents or "treated as unlawful combatants" i.e. shot after trial before a military commission. Perhaps he also allowed for deportation (goodbye Rosa Luxemburg, citizen though you are). Maybe if he read the Combatant Status Review summaries he would understand why the Guantanamo detainees should not already have been shot.
Posner may resemble Mr. Burns, but Mr. Burns is a kinder, gentler guy. He buys his Congressmen just like any other good businessman, he doesn't cut the cloth of the law to suit his taste.

[Edward Bernstein]

The true temps here are those from National Guard Units. That was in fact their primary intended purpose. Contracting out what the guard can do is foolish and costly.

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