Brian Liu
ENG 2150T
Professor Singleton
May 4, 2022
The act of war is used to fight terrorism for our freedom or to protect the nation’s borders. War caused a lot of bloodshed and affected many civilians’ lives. In the eyes of the people, war is seen as fighting for democracy but in fact, war is used for profit. Each war we fought becomes costlier. Military budgets have increased year over year, leaving an opportunity for big defense contractors to get a piece of these military contracts. There are many ways to profit from war. In a war, troops need weapons, goods to deliver them, and private security contractors. In order to fulfill these needs, the government turned to corporations like Lockheed Martin to fulfill their weapon demands and corporations like Halliburton to fulfill their logistics demands. Companies like Blackwater fulfill private security contractors for American troops. Profits earned from these wars come from questionable and corrupt business practices such as lobbying, price gouging, and fraud at taxpayers’ cost.
Military profits are increasing year over year. According to Pentagon officials and the White House, the “Department of Defense’s proposed base defense budget is $523.9 billion for next year, representing a whopping 82.54% increase over the base budget of $287 billion in 2001”(Persinos). War will always be profitable for defense contractors as long as the military budget keeps increasing. This will lead to more havoc and unnecessary wars in the name of profit. “As of August 2016, the US has already appropriated, spent, or taken on obligations to spend more than $3.6 trillion in current dollars on the wars in Iraq, Afghanistan, Pakistan, and Syria and on Homeland Security (2001 through fiscal year 2016)”(Lee). This increased expenditure has led to private contractors profiting off of this war and causing havoc in these countries. Funds used for war will create mass destruction against civilians and put them in political and economic distress. It’s a waste of resources that otherwise can be allocated towards education that will lead to greater human capital which in turn will boost our economy. Resources can be allocated to help improve our infrastructure so we can move goods and people efficiently and can boost the productivity of labor and private investment. War profiteers will continue to profit if military budgets are increasing so it is best to reallocate the military budget to other things that need our attention.
Military corporations price gouge in the name of profit. A corporation called Halliburton, a global logistics company, overcharged the government in their military contracts through tactics of wasteful spending, accepting high quotes, avoiding vendor competition, and relying on a list of inadequate vendors. Halliburton was awarded a 3.7 billion dollar LOGCAP [Logistics Civilian Augmentation Program] global logistics contract. LOGCAP utilizes civilian contractors to provide contingency support to augment the U.S Army forces. Corporations have an incentive to overcharge and price gouge because contracts are structured as a cost-plus benefit. A cost-plus benefit is when a corporation gets paid for all its expenses and gets an additional bonus which is a percentage of the total cost of the contract. “Halliburton’s LOGCAP contract is a cost-plus type contract. Under this arrangement, the U.S. government reimburses Halliburton for its costs and then pays the company an additional fee, which is a percentage of the costs. The higher Halliburton’s costs are, the larger its profits will be. Because there is little incentive for the company to control costs, this type of contract is notoriously prone to abuse. (Waxman)” This cost-plus benefit contract is a horrible arrangement the government provides to these contractors because it incentivizes them to inflate costs and they will inflate the cost because the government reimburses them for the original costs. The U.S government accepts the costs because it’s not coming from their pocket but from the taxpayers. Halliburton would be overcharging the government by doing wasteful spending such as buying embroidered towels for recreational use for the troops. “Regular towels, which cost between $2.50 and $3.00 each, would have adequately met their needs. However, Halliburton insisted on embroidered towels. The towels were intended for a unit responsible for “Morale, Welfare and Recreation.” They wanted the towels to read “MWR Baghdad.” The company submitted a requisition to purchase these towels at a cost of $7.50 each–about three times what should have been spent” (Waxman). This is an example of wasteful spending just to profit off of a tragedy of war. Purchases above $2,500 are subject to soliciting quotes from more than one vendor. The buyer could avoid soliciting quotes from more than one vendor if the purchase is under $2500. According to the text “Halliburton officials intentionally broke apart large requisitions into many smaller purchase orders of less than $2,500. This fragmentation would occur even if there were vendors that could handle the entire requisition. In addition, when Halliburton combined many small requisitions into a single purchase, they capped these orders at just under $2,500 even when they could have been consolidated further. Under both practices, Halliburton could avoid competition by soliciting a quote from just one vendor”(Waxman). This is a practice of minimizing vendor competition and this non-competitive approach is inflating costs at taxpayers’ costs. They would accept high quotes as long as it was under $2500 so they won’t need to solicit new quotes. In the text, it states “Halliburton frequently would copy a requisition, hand it to a single Kuwaiti vendor, and tell the vendor to submit any quote below $2,500 the next day” (Wexler). Halliburton’s use of a single vendor minimizes competition to request lower bids and quotes resulting in driving costs. Halliburton would have an inadequate list of 15 to 20 preferred vendors, These vendors would charge outrageous prices. When buying identical exercise equipment “the Halliburton official who sent the requisition suggested that a specific local vendor be used. Because Mr. Bunting took the time to solicit quotes from additional vendors, he was able to save $60,000 by awarding the purchase order to a U.S. firm. However, even with the benefit of Mr. Bunting’s efforts, Halliburton apparently opted for local firms instead of the cheaper U.S. company to fill two nearly identical requisitions for exercise equipment” (Waxman). They intentionally used local expensive vendors to benefit off of their cost-plus benefit arrangement for bigger profits.
Corporations use their relationship with congress and lobbying tactics to secure lucrative contracts. Dick Cheney initiated the notion of privatizing logistics while serving as the secretary of defense during the George H.W Bush administration. He, later on, became the CEO of Haliburton until he became the vice president in the George W. Bush Administration. Cheney’s influential connection with the government has played a huge role in Haliburton’s success. In fact, “Mr. Cheney’s financial disclosure statements from 2001, 2002, and 2003 show that since becoming vice president-elect, he has received $1,997,525 from the company: $1,451,398 in a bonus deferred from 1999, the rest in deferred salary. He also holds options to buy Halliburton stock” (Rosenbaum). Cheney is one of the main beneficiaries of the Iraq war. Somehow after Cheney started privatizing logistics in 1993 and then later served as CEO of Halliburton, Halliburton managed to secure the biggest contract. In the process, he managed to be compensated handsomely through his connections between the Pentagon and Halliburton. His connections in congress and his being the former CEO of Halliburton have allowed Halliburton to secure big contracts and reached new heights. His political connections and former relationship with Halliburton are examples of corrupt business practices to profit off of tragedy. Another way corporations use their influence is by lobbying the government to spend more money on their defense weapons. “In the past two decades, their extensive network of lobbyists and donors have directed $285 million in campaign contributions and $2.5 billion in lobbying spending to influence defense policy”(Auble). Defense contractors influencing defense policy allow them to sell more weapons to the United States government. Their lobbying also allows the United States Government to approve them selling other weapons to foreign governments for profits. This led to “the U.S. The State Department approved its first major arms sale to the Kingdom of Saudi Arabia under U.S. President Joe Biden with the sale of 280 air-to-air missiles valued at up to $650 million” (Stone). In order to be the best war profiteer defense contractors have to supply other countries. Supplying both sides of the country in a war is the key to achieving huge profits. Companies show no loyalty or patriotism to their own country but show their loyalty to the money.
Military spending toward private corporations is good for stimulating our economy. Heightened military spending has created new employment opportunities. It was World War 2 that got us out of the Great Depression. The war reduced unemployment and created new job opportunities. Americans coming home from World War 2 have been more financially well off which leads to more consumer spending and economic stimulation. Military spending towards corporations allows corporations to build factories and manufacturing jobs for their weapons for low-skilled workers so it could support their local economy. According to the text “The annual average of $260 billion spent since 2001 has created approximately 1.8 million defense-related jobs” (Peltier). This shows military spending is great for our economy because it has created 1.8 million jobs. Military spending toward the private sector allows them to supply the military goods and services that the military requires. War profiteers get to profit while supplying jobs which may lead to more consumer spending to invest in our economy. However the military may have created 1.8 million jobs but “the military creates 6.9 jobs per $1 million, while the clean energy industry and infrastructure each support 9.8 jobs, healthcare supports 14.3, and education supports 15.2”(Peltier). For every dollar that goes to the military, it creates a wasted opportunity to fund other sectors that can produce more jobs which in turn create greater economic growth. If we spent that same amount of money on clean energy and infrastructure projects, we would create more jobs for the American people without causing bloodshed. Jobs in healthcare and clean energy provide social benefits for civilians to have a better life and cleaner air to breathe. These sectors create profitability without causing any harm or loss of lives while military spending may seem great for the economy but it may harm it instead.
As you can see, war is a business so corporations can make high-profit margins. Forget about what you have learned and how the war was always meant to protect our nation’s borders and freedom. War is a business that is meant to be profitable at the expense of our fallen troops and civilians’ lives. War Is not meant to be won to make peace and protect our borders. War is meant to be continuous so corporations can continue to use their corrupt business practices to supply their goods and services to the military. At the end of the war, everybody loses except the military-industrial complex.
Bibliography
Waxman, H. A., & Dingell, J. D. (2004). “Don’t worry about price”: whistleblowers sound the alarm on Halliburton in Iraq. Multinational Monitor, 25(3), 17–21. https://go-gale-com.remote.baruch.cuny.edu/ps/retrieve.do?tabID=T002&resultListType=RESULT_LIST&searchResultsType=SingleTab&hitCount=3&searchType=BasicSearchForm¤tPosition=1&docId=GALE%7CA116670697&docType=Article&sort=Relevance&contentSegment=ZONE-MOD1&prodId=AONE&pageNum=1&contentSet=GALE%7CA116670697&searchId=R3&userGroupName=cuny_baruch&inPS=true
Hartung, W. (2021). Profits of War: Corporate Beneficiaries of the Post-9/11 Pentagon Spending Surge. https://watson.brown.edu/costsofwar/files/cow/imce/papers/2021/Profits%20of%20War_Hartung_Costs%20of%20War_Sept%2013%2C%202021.pdf
Garrett-Peltier, H. (n.d.). War Spending and Lost Opportunities. https://watson.brown.edu/costsofwar/files/cow/imce/papers/2019/March%202019%20Job%20Opportunity%20Cost%20of%20War.pdf
Mike Stone,Patricia Zengerle. (2021, November 4). Saudi gets first major arms deal under Biden with air-to-air missiles. Reuters; Reuters. https://www.reuters.com/world/middle-east/us-state-dept-okays-650-million-potential-air-to-air-missile-deal-saudi-arabia-2021-11-04/
A Closer Look at Cheney and Halliburton (Published 2004). (2022). The New York Times. https://www.nytimes.com/2004/09/28/us/a-closer-look-at-cheney-and-halliburton.html
Persinos, J. (2016, May 21). 3 Ways to Profit From the Endless War on Terror. TheStreet; TheStreet. https://www.thestreet.com/markets/emerging-markets/3-ways-to-profit-from-the-endless-war-on-terror-13579490
Capitalizing on Conflict: How defense contractors and foreign nations lobby for arms sales. (2016). OpenSecrets. https://www.opensecrets.org/news/reports/capitalizing-on-conflict/defense-contractors
