|
|
|
|
 PART 6: Outsourcing public
security
By Henry C K Liu
PART 1: The failed-state
cancer
PART 2: The
privatization wave
PART 3: The business of private security
PART 4: Militarism
and mercenaries
PART 5: Militarism
and the war on drugs
Public security is the prime function of
government. Public security is supposed to be
provided by government to all citizens equally
regardless of levels of wealth. It is one of the
basic political goods government is obliged to
provide equally to all. It is as sacred to
democracy as the principle of one person, one
vote.
When public security is privatized,
there is a structural danger that adequate
protection, or at least added protection needed to
meet newly perceived threats, is available only to
those who can afford to pay for it. When the rich
and the corporate population can get additional
needed security from private contractors for a
fee, political pressure on government to provide
adequate public security for the general public is
invariably weakened, just as the proliferation of
private education reduces political pressure to
improve public education. With income disparity
increasingly institutionalized in market
economies, the privatization of public security
amounts to institutionalizing inequality in
government protection, just as the privatization
of other government services institutionalizes
inequality in the delivery of other basic
political goods by government. The US Supreme
Court has long since declared the segregation of
education by race unconstitutional, yet
segregation of education by wealth continues to be
widely accepted in the United States, despite an
obvious coincidence between race and poverty.
In response to increasingly inadequate
security protection provided by government against
rising levels of threat from terrorism and crime,
a key characteristic of failed statehood, private
security services have emerged as a major business
sector. Government policies in recent decades have
institutionalized income disparities, leading to
trends of increased needs for government
protection from threats generated by breakdowns in
social cohesion; yet such increased needs are left
unequally met by trends to privatize government
services. Such a combination of trends erodes the
role of government at both ends and is the most
glaring evidence of the failed-state syndrome.
Security in the homeland
In
recent years, the US government has escalated its
commitment of funding to homeland-security needs.
Including supplemental funding, the federal budget
allocated only US$17 billion ($62 per capita) to
homeland security in fiscal year 2001, which ended
on September 30, when, until September 11 of that
year, massively destructive threats from terrorism
had still been just a theoretical proposition. The
homeland-security budget after September 11, 2001,
increased to $29 billion ($105 per capita) in
fiscal year 2002. In fiscal year 2003, the federal
budget for homeland-security activities was $38
billion ($135 per capita). In fiscal year 2005, it
was $45.9 billion ($164 per capita). President
George W Bush administration's budget request for
fiscal year 2006 calls for $49.9 billion ($169 per
capita) in total funding for homeland security, an
increase of approximately 8.6% in real
(inflation-adjusted) terms over the fiscal year
2005 budget. While the rate of rise in federal
expenditure has moderated, the rate of increase in
the need for homeland security has not. The
slowdown in the rise in the federal budget for
homeland security can only be explained by a shift
of the cost to the private sector.
A 2003
review by the Federal Reserve Bank of New York
(FRBNY) suggests that the economic impact of
increased homeland-security spending will be
relatively small, and that it is unlikely to have
major effects on the fiscal discipline of the
government or on productivity in the private
sector. Government spending on homeland security
accounted for 0.35% of gross domestic product
(GDP) in 2003 - an amount only one-tenth the size
of national-defense outlays. In conjunction with
this spending, even if the private sector were to
double its security-related inputs, the report
estimates that the total annual direct costs of
homeland security would be only $72 billion, or
0.66% of 2003 GDP. Moreover, such a doubling of
inputs would at most reduce the private sector's
labor productivity level by only 1.12%.
The report attaches two caveats to its
conclusion. First, the results do not suggest that
the economic damage of the September 11 terrorist
attacks is negligible. The findings focus solely
on the economic effects of the expenditures
undertaken to prevent and prepare for future
incidents. Second, the results do not suggest that
homeland security is unimportant. The study is in
essence focused only on the cost side of a
cost-benefit analysis. The benefits of homeland
security are not easy to measure. One simply
cannot estimate or verify how many terrorist
activities, if any, are being prevented because of
increased security measures, or that if and when
an catastrophic attack does take place, how much
of its likelihood of occurrence would have been
reduced by added security spending.
Clearly, it is difficult to put a value on
the heightened sense of safety that the
homeland-security program provides. If such a
program is viewed as insurance against loss from
terrorist catastrophe, then the absence of
catastrophe will have justified the cost of the
insurance. Yet the value of prevention is not
automatically positive. A false sense of security
can come from the power of suggestion that when
something is being done, some positive effect will
result. It is known as the Hawthorne Effect, named
after the General Electric Co experiment in
Hawthorne, New York, to search for optimum
lighting levels for highest efficiency in
productivity by varying the levels of lighting.
The experiment discovered that changes in lighting
levels caused productivity to increase more than
any fixed level of lighting. Workers are energized
when they feel that they are being fussed over.
However, real prevention depends on the
real effectiveness of the spending. If directed
toward wrong targets, spending may not prevent
anything. Worse yet, it may divert focus and
resources from the real targets. Nevertheless,
given the relatively small expense of prevention
as compared with the cost of failure, proponents
of the homeland-security program argue that even
if it should prevent just one major incident over
the next several years, the return on
homeland-security expenditures would more than
justify the cost. Further, spending buys political
coverage from criticism of officials and
administrations. Unfortunately, the same generous
rationale is not applied to the expenditure of
removing the root causes of terrorism, ie, global
socio-economic injustice.
Privatization of
homeland security reduces government expenditure
by shifting part of the cost to the private
sector. Private security spending contributes more
than government spending to increases in GDP, and
thus it minimizes the economic burden of security.
The way the US plans to keep the increased cost of
homeland security to minimum adverse economic
impact is through the voodoo magic of input-output
econometrics. When homeland security is
privatized, its expenditure becomes a growth
industry. Thus, by the rules of econometrics,
preventing loss from threats to homeland security
is an input, and security spending becomes an
output that adds to GDP and creates little adverse
impact on the economy as a whole, albeit the price
is systemic inequality of protection. Further,
econometric analysis ignores the fact that if the
need for security is reduced, the output could
have been directed toward more constructive uses.
For example, after September 11, the US
Congress provided the pharmaceutical industry with
incentives to develop drugs for terrorism-related
illnesses, including protection from normal
product liability and proposals to extend patent
rights on medication unrelated to homeland
security. This reduces the expenditure of
government research, but raised the price of drugs
generally by delaying the entrance of generic
drugs that are cheaper than brand-name drugs.
The measure of economic
failure
The science of econometrics deals
with economic measurements used to estimate the
magnitude of quantitative relationships among
economic variables within a model of the economy.
It is used to test hypotheses and forecast
outcomes, with wide application to business
forecasting and market planning. There are two
kinds of economic variables in a model: endogenous
variables that are found within the model; and
exogenous variables that are introduced from
outside the model. Security threats are exogenous
variables in an econometric model since their
levels and intensity are independent of the
internal construct of the model. Economists seek
insights by examination of data. This is known as
the inductive approach. They also attempt to
validate or disprove existing theories by
comparing theoretical claims against empirical
data. This is known as the hypothetical approach.
The two approaches are not mutually exclusive,
their difference is analogous to different
starting points in a conceptual circle.
William Stanley Jevons (1835-82), an
English economist and logician, simultaneously
with Viennese economist Carl Menger and French
economist Leon Walras launched the Marginalist
Revolution of 1871-74 (diminishing marginal
utility) that gave rise five decades later to
neo-classical economics, which emphasizes the
phenomenon of exchange over production.
Marginalist theory of value puts forth the idea
that the "natural value" of a good is determined
only by its subjective scarcity, ie the degree to
which people's desire for that good exceeds its
availability. When clean water was in abundance,
it had no economic value, even though its value to
life is paramount. When industrialization pollutes
the Earth's water supply, clean water commands a
high price. Thus pollution, like security threats,
serves an economic function in neo-classical
economics. Privatization of water depends on water
pollution for its economic justification.
The focus on scarcity is behind the rise
of market capitalism where price is not determined
by the cost of production but by scarcity of
supply. The cost of oil production remains around
$4 a barrel on land and $7 a barrel offshore. It
is scarcity that has driven the price of oil above
$50 per barrel in recent months. The cost of
production for additional copies of Microsoft's
Windows is near zero, yet each copy can sell for
$200 because Microsoft controls the supply through
its intellectual property rights.
Marginal
utility gives rise to market failure through the
emergence of monopolies and cartels whose purpose
is to keep prices high by limiting supply rather
than increasing production. It robs society of the
material benefits of rising productivity from
advanced technology. Surplus food from efficient
agro-technology is dumped in the sea to keep
prices high while billions starve around the
world. Money is constantly kept scarce to maintain
its value while poverty is kept widespread in a
world of idle production overcapacity made
possible by technological progress. If
overcapacity were to be fully utilized, prices
would have to fall or wages would have to rise to
increase public purchasing power to absorb the
added products. Both options are destabilizing to
the state of scarcity without which the entire
science of economics would have to be rethought.
Thus workers are kept unemployed or underemployed
to cut down on the production of goods they cannot
afford on their low wages. The concept of marginal
utility has created as much misery for mankind as
racism, by keeping basic human needs at a constant
level of scarcity. States that tolerate a failed
market are by definition failed states.
In
1803, Jean-Baptiste Say (1767-1832), in examining
the evolution of trade between Britain and Brazil,
observed that demand for a particular set of goods
can only be expressed by equivalent supply of
another set. Supply, therefore, "creates" its own
demand. Almost all of classical and most
neo-classical theory is based on this simple, even
tautological, assertion. Say's Law concludes that
general gluts cannot exist. Classical economists
assert that unemployment and market failures were
due to excess supplies over demands of particular
commodities and not excess supplies (or gluts) of
commodities generally as a whole. David Ricardo
(1772-1823) notes: "Mistakes can be made, and
commodities not suited to demand may be produced -
of these there may be a glut" and that "it is at
all times the bad adaptations of the commodities
produced to the wants of mankind which is the
specific evil, and not the abundance of
commodities. Demand is only limited by the will
and power to purchase." John Stuart Mill (1806-73)
concurs by noting that in these situations,
"production is not excessive, but merely
ill-assorted". Ricardo and Mill extended this
proposition to savings and investment. If one
produces more than one consumes, then the surplus
is saved and, by definition of terms, invested. No
one would produce in excess of consumption needs
if one does not have a desire either to exchange
it or invest it. Supply, therefore, generates
demand. This relationship virtually all the
classical economists held to be an irrefutable
truth.
Thomas Robert Malthus (1766-1834)
and French economist J C L Simonde de Simonde
(1773-1842) are the exceptions who believed
general gluts could exist. They reasoned that
income is distributed among workers, entrepreneurs
and landowners receiving wage income, profit and
land rents respectively. And landowners will
receive a portion of income, but they may choose
not to consume it. And when they don't, there will
be a general glut (excess supply of goods) even
though the investment-savings identity still
holds. Thus all classical economists, except for
Malthus and Simonde, were generally in agreement
over the validity of Say's Law, at least in the
long run. They all also agree on the identity of
savings and investment as well as the separation
of output from price theory. The most famous
under-consumption cycle theory was laid out by
John Maynard Keynes in his General Theory
(1936).
The neo-classical story is
often captured in diagrammatic form by the idea
that equilibrium prices and quantities of goods
are determined jointly and simultaneously by the
demand and supply for goods. Yet demand is blocked
by the need to skim off surplus value in the form
of return on capital through profits, which can
only come from lowering wages before the level of
cost of material and capital needed to produce
goods. Price is always the sum of cost of
material, capital and labor. Of the three costs,
labor is the only flexible variable. Yet if wages
consistently fall below the level of prices for
goods, a downward spiral of overproduction and
unemployment will result, which is the basis of
business cycles and long waves.
According
to the theory of marginal utility, since fear
drives up demands for security, the demand and
therefore the price for private security will rise
if the supply of government provided security is
reduced. Higher prices for private security are
not inflationary if the value of the benefit
(perceived safety) also rises. Thus rising fear
from terrorism is good economics in that it
creates rising demand for private security
services at rising prices that are not
inflationary because of rising fear, and
contributes to a rising GDP. Such is the warped
logic of econometrics employed by the FRBNY review
on the economic impact of terrorism-induced
homeland-security expenditure.
The
inductive approach has a long history of producing
esoteric, at times bizarre theories. Jevons
discerned from data evidence of a sunspot-driven
business cycle (1875, 1884). Clement Juglar
(1819-1905), a French doctor, statistician and
father of business-cycle theory, was an early
proponent (1862) of the development of an economic
theory of the business cycle by identifying the
"Juglar seven-to-11-year industrial cycle" that
has since been associated with his name. His
findings on credit cycles spurred the subsequent
efforts of overinvestment theorists. Juglar saw in
financial tables evidence for a credit-driven
cycle. Similarly, Henry Ludwell Moore (1869-1958),
a student of Menger in Vienna and an early
disciple of Walras in France, was the only
American member of the original Lausanne School
grouping around the Frenchman Walras and the
Italian Vilfredo Pareto. The central attribute of
the Lausanne School was its development of general
equilibrium theory and its extension of the
applicability of the neo-classical approach to
economics. Moore also delved deeply into
discovering the connection between commodity
business cycles and equilibrium theory. His theory
of the cycle was externally driven by eight-year
cycles of rainfall. His magnum opus, Synthetic
Economics (1929), was a Herculean attempt to
estimate Walras' general equilibrium system. Moore
used the inductive approach in 1914 to argue for a
weather and astral-driven cycle.
The
hypothetical approach was also used by economists
to attempt to fit data to demand curves, as
represented by Nikolai D Kondratiev (1892-1931?),
Russian economist and founder of the Moscow
Institute for Business Conditions. Kondratiev
identified the half-century "long wave" in his
famous 1922 tract and 1926 article "The Long Waves
in Economic Life". One of the architects of the
first Soviet Five Year Plan, he was imprisoned in
a Siberian camp in which he died some time in the
1930s. Wesley C Mitchell and the National Bureau
of Economic Research (NBER) used the hypothetical
approach in their research. NBER today is the
official diagnostician of recessions in the US
economy. The measurement of business cycles was
the main topic in the hypothetical approach. The
NBER does not record Kondratiev Cycles (or "long
waves") as its researchers do not believe these
cycles exist. Nonetheless, four Kondratiev waves
have been identified:
1. The Industrial
Revolution (1787-1842) is the most famous
Kondratiev wave: the boom began in about 1787 and
turned into a recession at the beginning of the
Napoleonic age in 1801 and, in 1814, deepened into
a depression. The depression lasted until about
1827, after which there was a recovery until 1842.
As is obvious, Kondratiev rode on the development
of textile, iron and other steam-powered
industries after 1842.
2. The Bourgeois
Kondratiev (1843-1897): After 1842, the boom
re-emerged and a new Kondratiev wave began, this
one as a result of the railroad age in Northern
Europe and the US and the accompanying expansion
in the coal and iron industries. The boom ended
approximately in 1857 when it turned into a
recession. The recession turned into a depression
in 1870, which lasted until about 1885. The
recovery began after that and lasted until 1897.
3. The Neo-Mercantilist Kondratiev
(1898-1950?): The boom began about 1898 with
the expansion of electric power and the automobile
industry and lasted until about 1911. The
recession that followed turned into depression in
about 1925 and lasted until around 1935. This
third wave entered into a recovery immediately
afterward, which one might suspect lasted until
around 1950.
4. The Fourth Kondratiev
(1950- 2010?). There has been much debate
among believers on the dating of the fourth wave,
largely because of the confusions generated by the
low fluctuation in price levels and the issue of
Keynesian policies, and hence this debate is yet
to be resolved. Perhaps the most acceptable set of
dates is that the boom began around 1950 and
lasted until about 1974, wherein recession set in.
When (and if) this recession fell into its
depression phase may be more difficult to
ascertain (circa 1981?), but what has been more or
less agreed upon is that in 1992 (or thereabouts)
the recovery began and has been projected to give
way to a boom, and thus a new Kondratiev wave,
around 2010 or so.
Simon Kuznets
(1901-85), neither a Keynesian nor an
econometrician, took his cues from Mitchell's
institutionalism. His initial work was on the
empirical analysis of business cycles (1930) - a
15-20-year cycle he identified was later attached
to his name, the "Kuznets Cycle". Kuznets was also
one of the earliest workers on developmental
economics, in particular collecting and analyzing
the empirical characteristics of developing
countries. His major thesis, which argued that
underdeveloped countries of today possess
characteristics different from those that
industrialized countries faced before they
developed, helped put an end to the simplistic
view that all countries went through the same
"linear stages" in their history and launched the
separate field of development economics - which
now focused on the analysis of modern
underdeveloped countries' distinct experiences.
Among his several discoveries that sparked
important theoretical research programs was that
of the inverted U-shaped relation between income
inequality and economic growth; he also discovered
the patterns in savings-income behavior. Kuznets
won the Nobel Prize for economics in 1971 while he
was at Harvard University.
Private
security industry giants
Wackenhut
Services, a subsidiary of the Wackenhut Corp,
provides security services to private and public
clients, including facilities operations and
maintenance, emergency preparation and response,
fire protection, hazardous-material management,
and security and law-enforcement services. The
company also operates a homeland-security division
that provides border security, information
analysis, and emergency response for situations
involving chemical agents, biological warfare, and
weapons of mass destruction. US government and
public agencies, including the Internal Revenue
Service, the National Aeronautics and Space
Administration (NASA), the Department of Energy,
and the US Army, are paying clients.
The
late George R Wackenhut, a former US Federal
Bureau of Investigation (FBI) agent, built the
Wackenhut Corp into an international security firm
that promoted the use of private guards at
prisons, airports and nuclear power plants. From
the McCarthy era on, when a communist could be
found hiding under almost every bed in the United
States, the country's appetite for private
security escalated into hysteria. George Wackenhut
cashed in by persuading thousands of communities
and government agencies to put private guards in
public jobs, a move long resisted in vain by
law-enforcement officials. Started in 1954 as a
three-man detective agency in Miami, the
struggling company turned to providing guard
services to stay afloat and later earned contracts
with Lockheed Martin and the Kennedy Space Center
in Florida to protect classified projects from
communist spies. To impress potential clients,
Wackenhut dressed his guards in helmets and
paratrooper boots, and he recruited former members
of the Central Intelligence Agency (CIA), the FBI
and elite military forces to join management and
the company's board. Over the next four decades,
Wackenhut personnel guarded corporate buildings
during labor strikes, managed security for
airlines at nearly 90 airports, and supplemented
municipal services such as fire fighting and
emergency medical services in several small
communities. Its guards patrolled the Atomic
Energy Commission's nuclear test site in Nevada
and even a handful of US embassies.
The
company's expansion into prison security and other
correctional operations in the 1980s became its
most profitable move. It was one of the first
private security firms hired by the Federal Bureau
of Prisons and has since received federal
contracts from the US Marshals Service and the
immigration and customs enforcement division of
the Department of Homeland Security. The
privatization of prisons has had its critics and
Wackenhut's guards have been accused of abusing
inmates in Florida, Texas and Louisiana. The
Wackenhut Correction Corp, the company's prisons
subsidiary, now manages more than 40,000 prison
beds, mostly in the United States, the United
Kingdom, Australia and New Zealand.
According to a head count taken in the
middle of 2002, the 50 US states, the District of
Columbia and the federal government held 1,355,748
prisoners (two-thirds of the total incarcerated
population), and local municipal and county jails
held 665,475 inmates, with a total of more than 2
million inmates. US jails held one of every 142 US
residents. Males were incarcerated at the rate of
1,309 inmates per 100,000 men, while the female
incarceration rate was 113 per 100,000 female
residents. Of the 1,200,203 state prisoners, 3,055
were younger than 18 years of age. In addition,
adult jails held 7,248 inmates under 18. As of
June 30, 2002, state and federal correctional
authorities held 88,776 non-citizens, a 1%
increase from the 87,917 held a year earlier.
Sixty-two percent were held in state prisons and
38% in federal institutions. Privately operated
prisons held 86,626 inmates. By comparison, the US
has 983,000 hospital beds, less than half of the
number of prison beds. That is a failed-state
syndrome if there were ever one.
As his
company grew, Wackenhut recruited prominent
directors such as Clarence M Kelley, former head
of the FBI; James J Rowley, former director of the
US Secret Service; and Frank C Carlucci, former US
defense secretary and former CIA deputy director.
Before president Ronald Reagan appointed him
director of central intelligence, William J Casey
was Wackenhut's outside legal counsel. Such
connections fueled speculation that the company
was a front for the CIA, which Wackenhut denied.
Wackenhut, outspoken in his conservative
politics, was occasionally seen as overly zealous
in his investigative assignments. In 1967, when
governor Claude R Kirk Jr of Florida appointed him
chief of a private police force to investigate
organized crime, Wackenhut was criticized for
saying publicly that he and his officers would not
limit themselves to suspected criminals but would
"investigate everyone and anyone who needs
investigating". The police force was short-lived,
but the company's tactics created a dispute again
in 1991, when a congressional inquiry found that
it had spied on an environmental advocate by
installing miniature cameras in his hotel rooms
and illegally taking documents from his home in
his absence.
Kroll is another major
private security company. Its experts in security,
protection, engineering, business continuity and
emergency management help clients prevent, prepare
for and respond to the many threats they face at
home and abroad that the state fails to provide.
Kroll's approaches are designed to respond quickly
to changing threat conditions and ensure
operational continuity in the wake of a crisis.
Global threats are forcing companies to take a
harder look at their security programs. From
assessment to implementation, clients are told
they can benefit from Kroll's seamless integration
of services, resulting in a more efficient,
cost-effective security program, albeit at times
outside the law even if technically not illegal.
Kroll experts develop proactive, tiered approaches
that can respond quickly to changing threat
conditions and help ensure operational continuity
in the wake of a crisis. Private security programs
can be free of civil-rights restraints. Kroll's
2003 sales were $485.5 million, with year-on-year
sales growth of 67.9%. Last May 18, Kroll Inc and
Marsh and McLennan Companies (MMC), the insurance
broker now under investigation, announced that
they had entered into a merger agreement under
which MMC would acquire Kroll Inc in a $1.9
billion cash transaction. In October, New York
Attorney General Elliot Spitzer sued Marsh &
McLennan, the world's largest insurance broker,
accusing it of rigging bids and fixing prices
while steering business to insurers that paid the
highest placement fees. In January, Marsh agreed
to pay $850 million to settle the suit, in line
with placement fees it collected in 2003, and
agreed to change its business practices. Marsh
took a pretax charge of $618 million in the fourth
quarter for the settlement, in addition to a $232
million charge taken in the third quarter. The New
York-based company reported a 2004 fourth-quarter
loss of $676 million, or $1.28 a share, compared
with a profit of $375 million, or 69 cents a
share, a year earlier. In essence, US taxpayers
paid for MMC settlement costs.
Washington
Group International Inc, based in Boise, Idaho,
with approximately 27,000 employees at work in
more than 40 US states and more than 30 countries,
provides professional, scientific, management, and
development services in more than two dozen major
markets. Founded in 1964 by Dennis R Washington in
Missoula, Montana, the company rose to the top of
the civil-construction market in Montana, and
expanded into mining, industrial construction, and
environmental clean-up work. As his company grew
into a major regional firm, Washington's vision
for the future continued to expand also, leading
to a series of acquisitions that produced the
international powerhouse the company is today. In
1993, Washington Construction Co expanded its
heavy civil-construction operation when it merged
with Kasler Corp, a California-based firm with
large-scale operations in heavy civil
construction. In 1996, Washington Construction
acquired Morrison Knudsen, gaining an 84-year
heritage of mining, engineering and construction
globally. With the acquisition, the company had
capabilities and services that reached across five
markets: infrastructure, mining,
industrial/process, energy and environment, and
power. In 1999, the company acquired the
government-services operations of Westinghouse
Electric Co, becoming a science and technology
services leader. In 2000, the company expanded its
market leadership by acquiring Raytheon Engineers
and Constructors to produce one of the largest
companies in the industry.
Today,
Washington Group holds leading positions in six
top markets and a service offering that spans the
entire range of its clients' needs, unifying a
vision that has been 10 years in the making. Being
the undisputed leader in the destruction of US
stockpiles of chemical weapons, Washington Group
has contracts with the US government worth more
than $4.2 billion to design, build, operate, and
close chemical-weapons destruction plants at four
sites in the United States. Washington Group's
Westinghouse Savannah River Co has operated since
1989 the 803-square-kilometer Savannah River Site
(SRS) for the US Department of Energy (DOE). The
site is home to the Defense Waste Processing
Facility, the largest high-level
radioactive-liquid stabilization plant in the
world. The site's approximately 9,000 employees
are engaged in environmental remediation and
maintenance of the nation's nuclear stockpile.
Washington Group's involvement at SRS is ever
changing from production of weapons-grade
plutonium and tritium during the Cold War to
cleanup and disposal today. The SRS continues to
meet the changing needs of the DOE.
Cold
War nuclear deterrence was based on the doctrine
of mutually assured destruction (MAD) with
long-range delivery systems armed with
independently targetable re-entry warheads. The
SRS in South Carolina was constructed in the early
stages of the Cold War. The site's main purpose
was to produce basic materials used in the
fabrication of nuclear weapons, primarily tritium
and plutonium-239. The five reactors built at the
site produced weapons-grade nuclear materials that
were used in weaponry as well as plutonium-238 for
power sources for NASA deep-space missions. The
SRS has operated for almost half a century. When
Westinghouse Savannah River Co took over the site
in 1989, its task was to re-engineer and upgrade
three of the five 1950s-era nuclear reactors that
produced plutonium and tritium.
By the end
of the decade the global balance of power had
shifted. With the end of the Cold War, and the
dissolution of the Soviet Union, the role of the
Savannah River Site and other DOE defense-related
facilities changed.
Washington Group's
history at the SRS is one of dealing with the
changing needs of the DOE. It is a large and
complex site and one of the many challenges the
company tackles is how to adapt to new DOE
missions and changing national priorities. As a
result of privatization of DOE functions, private
profit became a legitimate factor in the
deliberation in the nation's nuclear policy.
With the passage of arms-reduction
treaties, the need for plutonium and tritium
declined. The SRS mission shifted from nuclear
armament to disarmament in areas such as
groundwater remediation, cleaning up inactive
waste sites, and waste management, pollution that
had been part of the armament process. By the
middle of the 1980s, construction was started on a
major facility that would immobilize high-level
radioactive waste and convert it into a durable
glass form through a process called vitrification.
The Defense Waste Processing Facility (DWPF) would
become the world's largest system for stabilizing
radioactive waste in glass.
The terrorist
attacks of September 11, 2001, heightened the
United States' awareness of the wide-ranging
consequences of such attacks. To reduce America's
vulnerability to terrorism and other disasters,
President Bush issued the National Strategy for
Homeland Security (NSHS) to protect public health
and safety and key assets vital to US government,
economy and morale. Its mission is twofold: 1) to
mobilize the entire nation in a concerted effort
to protect its homeland from terrorists and 2) to
ensure a high level of security in a free and
ever-changing society.
Washington Group
International sees itself playing a crucial role
in homeland security, helping to prevent, protect,
and prepare for catastrophic threats to the US as
well as developing recovery techniques should such
attacks occur. These efforts are focused on
protecting military bases, both at home and
abroad, securing critical infrastructure against
modern threats, such as dirty bombs, by utilizing
innovative detection and mitigation systems.
Washington Group provides a wide range of
engineering, construction, and threat-analysis
services to government customers. These
specialized services include: Real-time threat
simulation; security vulnerability analysis and
mitigation; emergency and crisis response;
security-related technology integration and
deployment; hazard assessment; and threat and
consequence assessment.
Washington Group
International claimed a leading role in ridding
the US and the world of weapons of mass
destruction (WMD) when operations began last
August 9 at the Anniston Chemical Agent Disposal
Facility (ANCDF) in Alabama. Over the next seven
years, Washington Demilitarization Co and its
subsidiary, Westinghouse Anniston, is scheduled to
destroy hundreds of thousands of chemical weapons
stored at the Anniston Army Depot.
In the
former Soviet Union (FSU), Lugar-Nunn legislation
is providing funding to help former Soviet states
dismantle their arsenals of WMD. Washington Group
International is the first foreign organization
successfully to license and design, construct and
operate a Cooperative Threat Reduction (CTR)
facility in the FSU. Washington Group was awarded
six contracts by the US Defense Department's
Defense Threat Reduction Agency (DTRA) to build a
Neutralization and Dismantling Facility (NDF) in
Dniepropetrovsk, Ukraine, where the company
disassembled, eliminated, disposed and salvaged
SS-19 missiles.
After the collapse of the
Soviet Union, Ukraine, a country of 52 million
people, inherited the world's third-largest
nuclear arsenal. There were more than 180
intercontinental ballistic missiles (ICBMs) with
more than 1,200 warheads on Ukrainian territory.
The stockpile consisted of 133 SS-19s and 46
SS-24s armed with nuclear warheads. There were an
additional 14 SS-24s present in Ukraine but not
deployed with warheads. Ukraine also inherited
several dozen bombers with nuclear capabilities
that were armed with approximately 600
air-launched bombs and more gravity bombs. As many
as 3,000 tactical weapons rounded out the arsenal
that totaled about 5,000 strategic and tactical
weapons. A trilateral agreement signed in January
1994 by the US, Russia and Ukraine that would send
the nuclear warheads back to Russia was the first
step in making Ukraine a nuclear-free nation.
Washington Group went to Ukraine in 1994
in a partnership with Thiokol, a rocket-motor
maker. Thiokol needed a company with construction
and engineering experience for work in the FSU.
The US partners won the contract that turned into
a disassembly and elimination project with the
Defense Nuclear Agency, later renamed the Defense
Threat Reduction Agency. From 1994 through 2003
the Department of Defense awarded Washington Group
a series of contracts to disassemble, dispose,
eliminate, salvage and store Soviet ICBMs for the
DTRA. An early contract called for the design,
construction management and operation of a
2694-square-meter Neutralization and Dismantling
Facility (NDF) in the southern oblast of
Dniepropetrovsk, a Soviet industrial/technology
center that had produced trucks from 1944 until
May of 1951, when production switched to ballistic
missiles. During the final stages of the Cold War,
Leonid Kuchma directed operations at the
Dniepropetrovsk plant that produced missiles,
space-launch vehicles, satellites and rocket
engines. In the waning years of the Soviet regime,
maintenance on the facility diminished as the
Soviet economy collapsed. After the dissolution of
the USSR, Kuchma became Ukraine's prime minister
(1992-93) and then its second president in July
1994. He remained in power until January 23, 2005,
when his hand-picked successor, Viktor Yanukovych,
lost the presidential election to Viktor
Yushchenko.
Guardsmark is the world's
largest employer of former FBI agents and also one
of the largest security firms in the United
States. Guardsmark operates in some 400 cities in
North America, where it provides security services
to the financial, utility, transportation, and
health-care industries. The company offers
security guards, private investigation, and
drug-testing services. It consults with architects
and builders to design security programs.
Guardsmark also conducts background checks
(employment, education, and criminal history) and
provides outsourcing services (Peoplemark).
Chairman and president Ira Lipman owns the
company, which he founded in 1963.
Allied-Barton Security Services, formerly
Allied Security, is one of the largest private
security firms in the US. The company serves more
than 2,100 clients through more than 60 offices in
37 states. The company primarily provides security
guards and staffing services for shopping malls,
office buildings, hospitals, corporate complexes,
and universities, but also offers 24-hour alarm
monitoring, closed-circuit television systems,
access-control systems, and burglar- and
fire-alarm systems. In addition, Allied Security
provides consulting services and facility
assessment. The company, which is owned by
MacAndrews and Forbes Holdings, has acquired and
merged with Barton Protection Services. Sales in
2003 were $550 million, year-on-year sales growth
was 10%, and it had 23,000 employees, boasting
year-on-year employee growth of 21.1%.
Inter-Con Security Systems, one of the
largest private security consulting firms in the
US, provides custom-designed security programs for
commercial, governmental, and industrial clients
in 25 countries on four continents. Its services
include security consulting, protection,
investigations, and training. It also provides
security-guard and patrol services. Inter-Con's
clients have included NASA, the Academy Awards,
and the US government. The company, founded in
1973, is owned by chief executive officer Rick
Hernandez and the Hernandez family. Sales in 2003
were $1 billion, and the company had 25,000
employees.
Run by former US Secret Service
agents, Vance International, a part of SPX's
Security and Investigations Unit, offers executive
protection, uniformed guards, investigations and
training. It also provides asset protection and
temporary labor for companies during strikes or
natural disasters. Serving corporations and
government agencies, as well as the occasional
celebrity, Vance International has been called the
"Rolls-Royce" of security firms; clients have
included Bill Gates, Nelson Mandela and Arnold
Schwarzenegger. President and chief executive
officer Chuck Vance founded the firm in 1984,
acquired by SPX in 2002.
Security on
the cheap
By September 2001 there were an
estimated 1 million to 2 million workers in some
13,000 private security companies in the US, and
some say there are now twice as many private
security workers as police officers. The number of
workers in the industry grew nearly 20% in the
last decade, and according to the Bureau of Labor
Statistics, it will continue to increase as
companies beef up security to allay fears of
crime, vandalism and terrorism.
These
guards, however, are not police officers. Instead,
they are uniformed watchmen, usually unarmed, who
patrol airports, shopping malls, private
businesses and college campuses. As companies
downsize, they often have their security personnel
- typically provided by third-party contractors -
perform two jobs at once. These "guards" also
double as receptionists or customer service
workers. Even the government, in efforts to cut
costs, sometimes subcontracts security in prisons
and federal buildings to private security
companies.
And of course, these companies
have been used to break union picket lines and
defend strikebreakers. Public-sector unions are
also keeping a wary eye on the small but growing
trend of private security guards replacing
unionized public employees. Unlike their
public-sector or in-house counterparts, these
private security guards are not highly trained or
well paid.
And while many in the security
industry, including the managers of some security
companies, are pushing for national standards
concerning training and skill level, the industry
does not pay enough to attract and maintain
qualified personnel. Richard Marinaro, Long Island
director of Boston-based Unico Security Services,
told Newsday in 1998 that the security companies
"can't get people at these wages, and we're in
competition with the McDonald's and the Wendy's
[fast-food chains] of the world". Yet the jobs
that these guards are asked to do - working
eight-hour shifts without a lunch break, showing
restraint and judgment when dealing with the
general public, serving as witnesses in court -
require more skill, training, and dedication than
working in fast food.
Stories of shoddy
work and/or theft by the security guards who are
supposed to protect people and property are
surprisingly commonplace among the companies that
specialize in providing private security in the
US. For example, workers for Argenbright, a
company that provides workers for security
checkpoints in airports, were involved in four
airport security breaches in less than a year in
1997-98, as well as one that required an
evacuation of the United Airlines terminal at
Chicago's O'Hare Airport in 1999. In April 2000,
federal prosecutors also found that Argenbright
officials at Philadelphia International Airport
routinely falsified records, hired convicted
felons, and provided low-paid employees with
answers to federally required tests for baggage
screeners.
One trend that has coincided
with the increase in incidents involving private
security and their low wages is the industry's
drift toward consolidation. Last August,
Pinkerton, a subsidiary of Sweden-based Securitas,
merged with Burns International Corp, another
industry leader, to create a private security
giant with more than 600 offices internationally
and annual revenue of more than $2.5 billion. Two
Pennsylvania companies, Allied Security and
SpectaGuard, also merged in 2000, making the
company the largest independently held security
company in the country and giving it business in
more than 250 cities across the US.
With
consolidation has come corporatization of the
industry, something that in the eyes of some
industry insiders has led industry leaders to
sacrifice quality service for an image that sells.
"Pinkerton sold out to a low-end, minimum-wage
type of service," said Roger Schmedlen, president
of Loss Prevention Concepts Ltd, a Michigan-based
security consulting agency, as he described
Pinkerton's entry into lower-level watchman
service in the early 1980s. "They put out all of
these slick brochures and took on a national
advertising campaign, and it changed the industry.
They have some great pictures of guys that look
like Superman, but government studies show that
the typical security guard doesn't have much more
than an eighth-grade education, and is elderly."
But Pinkerton, and most other companies, also
offer more "high end" security guards - ones who
are better trained, more skilled, and better paid.
"There are some really good guards out there,"
Schmedlen noted. "But a lot of these companies
just go for the low bid and take it."
Ultimately, these companies, which have
reaped the benefits of exploding demand for
security guards in the US, have skimped on wages
whenever possible to maximize profit. "They're
profit-making enterprises, and they have
stockholders and shareholders," explained one
industry observer. "In any kind of safety
operation, the bulk of the expense goes towards
personnel compensation. So if you want to try to
make a profit, the first thing you make cuts in
are wages and benefits."
With its low
wages, low standards, and poor working conditions,
the private-security industry is one that, on the
surface, seems ripe for unionization. But a
provision of the National Labor Relations Act
stipulates: "No labor organization shall be
certified as the representative of employees in a
bargaining unit of guards if such organization
admits to membership, or is affiliated directly or
indirectly with an organization which admits to
membership, employees other than guards" (source:
Section 159, Title 29 of the US Labor Code). This
provision, known more commonly as the "Guard Law",
gives management the right to refuse workers'
petitions to join a union such as the Teamsters,
the Service Employees International Union (SEIU),
or any other international union that has members
outside of the security sector. While it was
originally written to prevent potential conflicts
of interest in labor disputes (if United Auto
Workers guards were assigned to defend against a
UAW plant strike, for example), it also serves to
undermine efforts by unions to gain an organizing
foothold in the industry.
There is,
however, a loophole that unions can use to gain
recognition. Management can voluntarily choose to
recognize guards as part of a larger union, as
some have in card-check elections. Argenbright
airport workers in Los Angeles and San Francisco
were able to do this when they voted to join the
SEIU. Mitigating circumstances, such as public
pressure or the fact that many companies prefer to
deal with a union instead of individual employees,
have helped international unions gain recognition
from some of these security companies. And while
other security guards have the option of joining
other small, unaffiliated unions that represent
only security personnel, still less than 10% of
the US industry is organized.
As with many
of the increasing number of low-paying service
jobs that have sprung up in the past decade, the
growing ranks of private security guards represent
another challenge for organized labor. If they are
going to maintain their foothold among the
blue-collar workforce, unions need to adapt and
adjust to the realities of exploitative industries
that will continue to sacrifice both quality
service and decent wages until their workers gain
a decent voice on the job.
The employees
of the private security sector, in essence a
private army, are greater in number than the
soldiers in the US Army. This private army thrives
on social instability and state failure. These
private security companies have no financial
incentive to promote peace and stability. The
dependence of the state on their contracted
service gives them an influential voice in
formulating state policies. Security threat is big
business and any reduction of threats in fact
threatens the economy.
Markets provide a
variety of incentives to producers, their
customers, and local communities to guard against
a wide range of risks, including the possibility
of terrorism. Private producers of goods and
services generally will benefit from safe
operating practices (including physical security)
and the purchase of insurance to help limit any
financial losses. But the incentives for private
businesses to reduce their vulnerability to
attack, and the potential losses for those who
would be affected, may be inadequate when the
private costs of the threat of terrorism are lower
than the social costs, or equivalently, when the
private benefits from security measures are less
than the social benefits.
Private costs
would be closely associated with damages to
production and distribution facilities and the
harm to industry workers, as well as the potential
loss of business. But the total social costs could
go further and include the harm or loss of life to
individuals such as the neighbors of a targeted
facility or the consumers of a tainted product,
damage to the local environment, and negative
effects on other businesses dependent on the
targeted industry. If the product of the targeted
industry became a potential weapon in attacks
elsewhere, the social costs could be broader
still. For example, stolen chemicals could be used
to attack an office building. If the disparity
between private costs and social costs is
significant, the result is that private firms have
insufficient incentive to meet social objectives.
Many of the US government programs that
existed before September 11 are intended to bring
private and social costs into line. Many firms had
long been subject to extensive government
intervention because of the dangers that those
industries' operations or products can pose to
public safety, environmental quality, and local
economies.
Existing government programs
provide a starting point for examining possible
new efforts. Those programs may be adequate to
prompt businesses to address much or all of the
increased terrorist threat. But if private efforts
are inadequate, policy options for prompting
additional efforts will probably build on the
incentives generated by existing requirements.
Cost-effective policies for enhancing homeland
security may involve expanding some programs that
have non-security goals while reducing others. For
example, programs that were intended primarily to
help protect the public from relatively common
threats, such as industrial accidents or food
contamination, could be expanded to help address
the terrorist threat. But programs that were
intended to disseminate information on critical
industries, such as the production and storage
capacities of hazardous facilities, might need to
be curtailed to keep that information out of the
hands of terrorists.
If a
chemical-production facility were subject to an
attack, for example, the ensuing fire or explosion
could expose the surrounding community to
dangerous toxins. That added exposure would
represent a social cost that the private firm
would not face - especially if the damage exceeded
the limits of the owner's insurance coverage and
other financial resources. As a result, the owner
would have less incentive than otherwise to guard
against such attacks, scale back operations, or
relocate. Current government programs affecting
the safety of chemical-plant operations and
supporting local emergency preparations are a
response to that social cost and also contribute
to homeland security. However, the increased
awareness of the terrorist threat since September
11, if not the threat itself, also may indicate a
need to step up security efforts since the social
benefits of spending on security have increased.
The type of intervention that would force
industry to internalize the costs of security and
for which it would bear the immediate costs would
include requirements to take preventive measures,
assessment of penalties for failing to take
certain actions, or imposition of taxes on certain
activities or products.
The type of
intervention that would have the government
socialize the cost - so that everyone paid for the
enhanced security - would include new programs
that rewarded industry for taking measures to
protect vulnerable facilities or make those
facilities less dangerous, for example, by
supporting the adoption of safer production
processes or the use of safer chemicals.
Alternatively, rather than force or pay industry
to make certain changes, new programs could help
inform nearby residents of the dangers of an
attack or inform industry of currently available
options for reducing its vulnerabilities.
The use of mercenaries in
war
The Guardian reported that with the
casualty toll ticking ever upward and troops
stretched thin on the ground in Iraq and
Afghanistan, the Bush administration is looking to
mercenaries to help control Iraq. These
soldiers-for-hire are veterans of some of the most
repressive military forces in the world, including
that of the former Chilean dictator Augusto
Pinochet and South Africa's apartheid regime. In
February 2003, Blackwater USA, a North
Carolina-based Pentagon contractor, began hiring
former combat personnel in Chile, offering them up
to $4,000 a month to guard oil wells in Iraq. The
company flew the first batch of 60 former
commandos to a training camp in North Carolina.
These recruits will eventually wind up in Iraq
where they will spend six months to a year.
"We scour the ends of the Earth to find
professionals - the Chilean commandos are very,
very professional and they fit within the
Blackwater system," Gary Jackson, the president of
Blackwater USA, told the Guardian early last year.
While Blackwater USA is not nearly as well known
as Halliburton or Bechtel - two mega-corporations
making a killing off the reconstruction of Iraq -
it nevertheless is doing quite well financially
thanks to the White House's "war on terror". The
company specializes in firearms, tactics and
security training, and in October 2003, according
to Mother Jones magazine, the company won a $35.7
million contract to train more than 10,000 sailors
from Virginia, Texas and California each year in
"force protection".
Business has been
booming for Blackwater, which now owns, as its
press release boasts, "the largest privately owned
firearms training facility in the nation". In an
interview with the Guardian, Jackson said: "We
have grown 300% over each of the past three years
[before March 2004] and we are small compared to
the big ones. We have a very small niche market -
we work towards putting out the cream of the crop,
the best."
The practice of using
mercenaries to fight wars is hardly new, but it
has become increasingly popular in recent years.
During the first Gulf War (1990-91), one out of
every 50 soldiers on the battlefield was a
mercenary. That number climbed to one in 10 during
the Bosnian conflict (1996). Currently there are
thousands of Bosnian, Filipino and US soldiers
under contract with private companies serving in
Iraq. Their duties have ranged from airport
security to protecting Paul Bremer, the former
head of the Coalition Provisional Authority.
Apart from Chile, the other popular source
for military recruits is South Africa. The United
Nations recently reported that South Africa "is
already among the top three suppliers of personnel
for private military companies, along with the UK
and the US". There are more than 1,500 South
Africans in Iraq today, most of whom are former
members of the South African Defense Force and
South African police.
According to the
Cape Times, among the South African companies
under contract with the Pentagon are Meteoric
Tactical Solutions, which "is providing protection
and is also training new Iraqi police and security
units", and Erinys, a joint South African-British
company, which "has received a multimillion-dollar
contract to protect Iraq's oil industry," the Cape
Times reported early last year.
The
recruitment of its citizens, however, leaves the
Chilean and South African governments less than
happy. The Regulation of Foreign Military
Assistance Act prohibits South African citizens
from direct participation as a combatant in armed
conflict for private gain. Michelle Bachelet,
Chile's former defense minister, ordered an
investigation into whether such recruitment was
legal under Chilean laws. Bachelet also was
troubled by stories that soldiers on active duty
were leaving the company to sign up as
mercenaries.
It is also only a matter of
time before US soldiers grow unhappy with the
presence of mercenaries in their midst. The high
salaries and shorter terms of employment offered
to mercenaries will inevitably make a serious dent
on the military's budget. As Blackwater's Jackson
acknowledged in the Guardian, "If they are going
to outsource tasks that were once held by
active-duty military and are now using private
contractors, those guys [on active duty] are
looking and asking: Where is the money?"
Raenette Taljaard, a member of the South
African parliament, has describes the ubiquitous
reach of this "booming cottage industry" of
private security companies: "In addition to
becoming an integral part of the machinery of war,
they are emerging as cogs in the infrastructure of
peace. US-allied military officials and civilians
in Iraq and Afghanistan are quickly becoming
familiar with the 'brand services' provided by
companies." In the era of neo-liberal
globalization, war has become just another
industry to be outsourced.
Next:
Lessons of the Thirty Years' War for the "war
on terrorism"
Henry C K Liu is chairman
of the New York-based Liu Investment Group.
(Copyright 2005 Asia Times
Online Ltd. All rights reserved. Please contact us
for information on sales, syndication and republishing.) |
|
|
|
|
|
|
|
 |
|
|
|
|
|
All material on this
website is copyright and may not be republished in any form without written
permission.
© Copyright 1999 - 2005 Asia Times
Online Ltd.
|
|
Head
Office: Rm 202, Hau Fook Mansion, No. 8 Hau Fook St., Kowloon, Hong
Kong
Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
|
|
|
|
