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Ending War for Profit

by Katrina Vanden Heuvel

Based on the work of Nobel Prize-winning economist Joseph E. Stiglitz and Harvard public finance lecturer Linda J. Bilmes, the American Friends Service Committee (AFSC) recently determined that the Iraq war costs $720 million per day, $500,000 per minute - enough to provide homes for nearly 6,500 families, or health care for 423,529 children in just one day.

AFSC is using ten, seven-foot banners displayed at legislative and congressional offices around the country to illustrate the costs of the war and the human needs that could be addressed with those same resources. The National Priorities Project (NPP) also has a new report on the Bush Administration's latest $50 billion spending request, which would bring the total cost of the Iraq War to $617 billion.

In addition to these staggering costs, we're also learning more about how this war has served as a boondoggle for defense contractors, with war profit-making gone out of control. The Nation's Jeremy Scahill was way ahead of the curve in reporting on Blackwater's role in the most radically privatized, outsourced war in history. (Last week, Jeremy was asked to testify before the Democratic Policy Committee about his work and reporting--which may well lead to some good reforms. )

The Institute for Policy Studies and United for a Fair Economy has done important research in this area. Here are some of the more disturbing facts: CEOs of defense contractors are paid more in four days than a general earns in a year; since September 11, CEOs at top defense contractors have received annual pay gains between 200 percent to 688 percent; between 2002 and 2006, the seven highest paid defense contractor CEOs made nearly $500 million - General Dyanmics' CEO, Nicholas Chabraja, alone was paid $97.9 million, averaging $19.6 million per year. (David Lesar of Halliburton pocketed a mere $16 million per year during that period, and Lockheed Martin's Robert Stevens has cashed in on stock options to earn over $19 million so far this year.) Many of the CEOs profitted from stock options as their companies' stock prices soared with the increased revenues from the Defense Department.

Sarah Anderson, Director of the Global Economy Program at the Institute for Policy Studies, and Charlie Cray, Director of the Center for Corporate Policy, suggest that defense contractors' CEO pay be addressed directly by conditioning contracts on reasonable pay practices. For example, requiring that the CEO not make more than 25 times the lowest paid worker within the company or, alternatively, not more than 10 times the pay of a military general. This could be combined with other eligibility criteria such as no companies that relocated offshore, have a history of significant violations, or do business with states that sponsor terrorism. (Also, the disclosure rules for defense contractors should be broadened. Right now, privately held corporations are not required to make public their executive compensation. Thus, major players like Bechtel and Blackwater can keep their pay figures secret.) But Anderson and Cray believe that CEO pay is a symptom of a much broader problem - one that will only be addressed if we recognize that the entire defense and war contracting system is out of control.

"Companies like Halliburton/KBR and Blackwater are only the tip of the iceberg," Anderson says. "We now have contractors conducting intelligence background checks, processing Freedom of Information Act Requests, writing the President's daily brief, helping run prisons like Abu Ghraib, etc."

After years of almost zero oversight, these broader questions are finally being examined - at least to a degree. Certainly Representative Henry Waxman is doing his part as Chair of the House Committee on Government Oversight and Reform, looking at Iraq reconstruction corruption. And Senators Claire McCaskill and Jim Webb introduced legislation to establish a Commission on Wartime Contracting - a Truman-like Commission - to investigate waste and fraud in contracting. (Anderson and Cray suggest that the mandate for the Commission be broadened to look at the corporatization of war, intelligence, and other inherently governmental functions.) Other common-sense pieces of legislation include: the "Transparency and Accountability in Security Contracting Act", introduced by Rep. David Price, to ensure that private security contractors like Blackwater are accountable; and two 2006 contract reform bills - Rep. Waxman's "Clean Contracting Act" and Sen. Byron Dorgan's "Honest Leadership in Government Contracting Act" - both bills would limit no-bid contracts, provide criminal sanctions for fraud, and address conflicts-of-interest, revolving door and other issues.

It is a systemic problem for a democracy to link corporate profits and war-making, and it has metastasized as this war has been increasingly privatized (there are now more contractors than soldiers in Iraq). Good small-d democrats need to keep watch on current legislation, hold our representatives accountable and and demand that they take bolder action to bring this system to an end. Katrina Vanden Heuvel is editor of The Nation.

© 2007 The Nation

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