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.

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