The Latest on the Military Industrial Complex and the Privatization of Intelligence from Chalmers Johnson

The wholesale transfer of military and intelligence functions to private, often anonymous, operatives took off under Ronald Reagan's presidency, and accelerated greatly after 9/11 under George W. Bush and Dick Cheney. Often not well understood, however, is this: The biggest private expansion into intelligence and other areas of government occurred under the presidency of Bill Clinton. He seems not to have had the same anti-governmental and neoconservative motives as the privatizers of both the Reagan and Bush II eras. His policies typically involved an indifference to -- perhaps even an ignorance of -- what was actually being done to democratic, accountable government in the name of cost-cutting and allegedly greater efficiency. It is one of the strengths of Shorrock's study that he goes into detail on Clinton's contributions to the wholesale privatization of our government, and of the intelligence agencies in particular.

Reagan launched his campaign to shrink the size of government and offer a large share of public expenditures to the private sector with the creation in 1982 of the "Private Sector Survey on Cost Control." In charge of the survey, which became known as the "Grace Commission," he named the conservative businessman, J. Peter Grace, Jr., chairman of the W.R. Grace Corporation, one of the world's largest chemical companies -- notorious for its production of asbestos and its involvement in numerous anti-pollution suits. The Grace Company also had a long history of investment in Latin America, and Peter Grace was deeply committed to undercutting what he saw as leftist unions, particularly because they often favored state-led economic development.

The Grace Commission's actual achievements were modest. Its biggest was undoubtedly the 1987 privatization of Conrail, the freight railroad for the northeastern states. Nothing much else happened on this front during the first Bush's administration, but Bill Clinton returned to privatization with a vengeance.
According to Shorrock:

"Bill Clinton… picked up the cudgel where the conservative Ronald Reagan left off and… took it deep into services once considered inherently governmental, including high-risk military operations and intelligence functions once reserved only for government agencies. By the end of [Clinton's first] term, more than 100,000 Pentagon jobs had been transferred to companies in the private sector -- among them thousands of jobs in intelligence… By the end of [his second] term in 2001, the administration had cut 360,000 jobs from the federal payroll and the government was spending 44 percent more on contractors than it had in 1993." (pp. 73, 86)

These activities were greatly abetted by the fact that the Republicans had gained control of the House of Representatives in 1994 for the first time in 43 years. One liberal journalist described "outsourcing as a virtual joint venture between [House Majority Leader Newt] Gingrich and Clinton." The right-wing Heritage Foundation aptly labeled Clinton's 1996 budget as the "boldest privatization agenda put forth by any president to date." (p. 87)

After 2001, Bush and Cheney added an ideological rationale to the process Clinton had already launched so efficiently. They were enthusiastic supporters of "a neoconservative drive to siphon U.S. spending on defense, national security, and social programs to large corporations friendly to the Bush administration." (pp. 72-3)

The end result is what we see today: a government hollowed out in terms of military and intelligence functions. The KBR Corporation, for example, supplies food, laundry, and other personal services to our troops in Iraq based on extremely lucrative no-bid contracts, while Blackwater Worldwide supplies security and analytical services to the CIA and the State Department in Baghdad. (Among other things, its armed mercenaries opened fire on, and killed, 17 unarmed civilians in Nisour Square, Baghdad, on September 16, 2007, without any provocation, according to U.S. military reports.) The costs -- both financial and personal -- of privatization in the armed services and the intelligence community far exceed any alleged savings, and some of the consequences for democratic governance may prove irreparable.
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...the current situation represents the worst of all possible worlds. Successive administrations and Congresses have made no effort to alter the CIA's role as the president's private army, even as we have increased its incompetence by turning over many of its functions to the private sector. We have thereby heightened the risks of war by accident, or by presidential whim, as well as of surprise attack because our government is no longer capable of accurately assessing what is going on in the world and because its intelligence agencies are so open to pressure, penetration, and manipulation of every kind.

You can read his full article here