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Through which institutions are these interests able to have disproportionate influence on foreign policy?

(This post follows on from the discussion in Part 1 of this four part series)

This is a matter of the means by which a special interest group X identified in Part 1 can influence the relevant foreign policy makers in the US government. As with any special interests, these ones are likely to seek to influence policy through lobbying and campaign finance. This influence can target both the executive branch (through political parties) and Congress. A ‘revolving door’ between highly placed officers in these companies and highly placed officers in the executive branch of government also raises concerns about conflict of interest improprieties. An additional influence of defence companies on congresspersons is through the threat of removing skilled defence jobs from the congressional district. The degree of influence afforded by such mechanisms is disproportionate to the number of voters benefiting from the decision. The majority of voters may have little to gain from the policy, and may even be against military intervention. However, organised, wealthy and well-connected special interests have greater influence on policy makers through lobbying and campaign contributions than do unorganised, relatively poor and relatively poorly connected voters.

Lobbying, campaign contributions, political engineering and front-loading

A six year study (1998-2003) of Department of Defense contracts, finds that the ten largest defense contractors all spent heavily on both campaign contributions (a combined $35.7 million) and lobbying ($414.6 million). The return on their investment was a combined $340 billion in contracts over that time (Center for Public Integrity 2004). Other major lobbying industries include the energy industry. Campaign contributions and lobbying are aimed both at congresspersons and at the executive. To influence the executive branch, attention might be lavished on senior members of the relevant political parties, and on the presidential candidates.

Former Defense Dept military analyst Franklin Spinney describes the two techniques of front-loading and political engineering used by defense companies. Political engineering involves defense contractors spreading jobs and profits over as many congressional districts as possible. Complex weapons systems often involve sub-systems that are sub-contracted to other firms. Such sub-contracting increases the ability to spread production across congressional districts. This maximises the number of congresspersons who stand to lose jobs and revenue for their district’s economy (and potentially stand to lose votes as a consequence) in case the defense contract is cancelled. Such pork barrel politics also allows congresspersons to ingratiate themselves with constituents by ‘winning’ defense contracts for their district.

Those approving a defense program may have qualms about its cost. Front loading is the idea of attaining this approval by quoting unrealistically low figures in order to get the seed money for the program. Once the program is begun, it is easier to get approval for the actual, higher, costs, since failure to approve the costs would leave nothing to show for the seed investment. The approval is also made easier by political engineering, as many congresspersons stand to lose jobs and revenue in their district. By low-balling the cost, the contract is made easier to approve. By political engineering, the contract is made difficult to terminate.

Individuals in the Pentagon or Department of Defense are happy with the setup as they get control over a growing volume of resources and weapons. Individuals in the Congress are happy because this funnels government money (via Department of Defense and via defense contractors) to their districts. The contractors are happy as they ensure greater demand for their products. Spinney 1998 [originally 1990]

Revolving door

An example of the institution of a revolving door is in private equity firms. A growing number of private equity firms are investing in defense companies in order to win contracts from the Department of Defense and the newly created Department of Homeland Security. This growth is understandable given the size of the potential pool available to contractors in this area. Half of the Defense Department budget (approximately $900 billion between 1998 and 2003) has gone to contractors rather than paying for direct costs such as payrolls for the uniformed armed services (Center for Public Integrity: 2004). A 2004 report on private equity firms investing in defense companies revealed that such equity firms employ five of the past nine defense secretaries, two secretaries of state, two national security chiefs, two CIA directors and dozens of distinguished retired military officials (Ismail 2004b). For a discussion of the Carlyle Group, the private equity firm with some of the greatest revenue from defense contracts in recent years, see (Ismail 2004a).

Here is an example of a revolving door between the Defense Dept and the defense industry. In 1992, Dick Cheney, held the office of Secretary of Defense. In that year, the Defense Dept paid the company Brown & Root a total of $8.9 million to produce a classified report detailing how private companies could help provide logistics for American troops. In the same year, that company won a contract to provide logistics for American troops. Between 1992 and 1999 the Defense Dept paid Brown & Root over $1.2 billion for its work.

Cheney left the office of Secretary of Defense in 1992 and between 1995 and 2000 he was CEO of Halliburton (of which Brown & Root was as subsidiary). When Cheney began his tenure at Halliburton, the latter was doing less than $300 million a year in business with the Defense Dept. By 1999, this figure had grown to over $650 million (Bryce 2000).

The obvious worry is that the these ex-officials will be able to gain influence with their former colleagues in government and gain a competitive edge for their defense companies over competitor companies. Another worry is that if government officials are promised lucrative careers in a company after retirement from office, they may be willing to pull strings to favour that company in the awarding contracts.

References:

Bryce, Robert; 2000 (Aug 25); “The candidate from Brown & Root”; The Austin Chronicle; accessed at http://www.austinchronicle.com/gyrobase/Issue/story?oid=oid%3A78397 on 10 May 2009

Center for Public Integrity; 2004 (Sep 29); “Summary: Center Report Finds $362 Billion in No-Bid Contracts at the Pentagon since 1998”; Center for Public Integrity; accessed at http://projects.publicintegrity.org/pns/default.aspx?act=summary on 10 May 2009

Ismail, Asif M.; 2004a (Nov 18); “Investing in War: The Carlyle Group profits from government and conflict”; Center for Public Integrity; accessed at http://projects.publicintegrity.org/pns/report.aspx?aid=424 on 10 May 2009

Ismail, Asif M.; 2004b (Nov 18); “The Sincerest Form of Flattery: private equity firms follow in Carlyle Group’s footsteps”; Center for Public Integrity; accessed at http://projects.publicintegrity.org/pns/report.aspx?aid=425 on 10 May 2009

Spinney, Franklin; 1998; Defense Power Games; original version published by Fund for Constitutional Government in 1990; updated 1998 version accessed at http://www.d-n-i.net/fcs/def_power_games_98.htm on 10 May 2009