Military-industrial complex

The term military-industrial complex (MIC), or "Iron Triangle," usually refers to the combination of the U.S. armed forces, arms industry and associated political and commercial interests that grew rapidly in scale and influence in the wake of World War II and throughout the Cold War.

The term, which is often used pejoratively, refers to the institutionalized collusion amongst the private defense industry, the military, and the United States government. Such collusion includes practices such as the awarding of no-bid contracts to campaign supporters and the earmarking of disproportionate spending to the military. Many observers worry that this alliance is driven by a quest for profits rather than a pursuit of the public good.

In recent decades, the collusion within the "Iron Triangle" has increased dramatically, putting the United States' economy permanently in "war" mode; instead of building up the military for defense in reponse to armed agression, current government policy guarantees "readiness" by maintaining worldwide bases and spending large sums of money on the latest military technology. Furthering the problem is increased regional dependence on the defense industry for jobs and tax revenunes. Ff the government were to drastically reduce its spending on the military, many Americans working in plants throughout the country would lose their jobs; this reality makes it politically difficult for U.S. Representatives and Senators to vote against unnecessary spending.

The increasingly global nature of the U.S. military-industrial complex has led some to charge that the United States has established a new, worldwide empire based on its military might.

Origin of the Term

The term was first used publicly by President of the United States (and former General of the Army) Dwight D. Eisenhower in his Farewell Address to the Nation on January 17, 1961. Written by speechwriter Malcolm Moos, the speech addressed the growing influence of the defense industry:

A vital element in keeping the peace is our military establishment. Our arms must be mighty, ready for instant action, so that no potential aggressor may be tempted to risk his own destruction...

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence — economic, political, even spiritual — is felt in every city, every statehouse, every office of the federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals so that security and liberty may prosper together.

In the penultimate draft of the address, Eisenhower initially used the term military-industrial-congressional complex, indicating the essential role that the U.S. Congress plays in supporting the defense industry. But, it is said, that the president chose to strike the word congressional in order to avoid offending members of the legislative branch of the federal government.

Although the term was originally coined to describe U.S. circumstances, it has been applied, by extension, to the corresponding situations in other countries. It was not unusual to see it used to describe the arms production industries and political structures of the Soviet Union, and it has also been used for other countries with an arms-producing economy, such as Wilhelminian Germany, Britain, France and post-Soviet Russia. The expression is also sometimes applied to the European Union.

Background of the Military-Industrial Complex in the United States

Legal Framework

Intent of founders to limit government officials power or gain wealth off of citizens. Lack of U.S. industry and corporations at founding, plus small power of US made this a non-issue at the time

Civil War

Formation of Republican Party in 1854 based on industrial interests. Lincoln as ralroad lawyer. The industrialized North and tarriffs which helped northern industry and hurt the South's economy.

World War I

Problem of U.S. bank loans to Europe and a government bailout of J.P. Morgan through the war

World War II

The Lend-Lease deal with the United Kingdom and the eventual entry of the United States into World War II led to an unprecedented conversion of civilian industrial power to military production. American factories went into high gear, producing tanks, guns, ammunition, and the other instruments of war at an astonishing rate. (insert wartime production statistic here). Increased industrial production, however, was not the only change in American life brought on by the war. The military participation ratio—the proportion of people serving in the armed forces—was 12.2 percent, which was the highest that the U.S. had seen since the American Civil War.

World War II did not, however, cause the shift to a permanent military-industrial complex. For all practical purposes, the military demobilized after the war, and the American economy shifted back to peacetime production. After World War II, Chalmers Johnson writes, ". . . the great military production machine briefly came to a halt, people were laid off, and factories were mothballed. Some aircraft manufacturers tried their hands at making aluminum canoes and mobile homes; others simply went out of business."

Vietnam War/RMK-BRJ

Brown & Root

KBR (formerly Kellogg, Brown and Root) is an American engineering and construction company, a private military contractor and a subsidiary of Halliburton. After Halliburton acquired Dresser Industries in 1998, Dresser's engineering subsidiary, M.W. Kellogg, an engineering contractor begun as a pipe fabrication business by Morris W. Kellogg in 1900 and acquired by Dresser in 1988, was merged with Halliburton's construction subsidiary, Brown and Root, to form Kellogg, Brown, and Root. The legacy of Brown and Root is many contracts with the U.S. military during the 2003 invasion of Iraq, as well as during World War II and the Vietnam War.

KBR is the largest non-union construction company in the United States.

On April 15, 2006, Halliburton filed a registration statement with the Securities and Exchange Commission to sell up to 20 percent of its KBR stock on the New York Stock Exchange (NYSE) under the proposed ticker symbol "KBR". Halliburton will still own at least 80 percent of KBR should the statement be approved. Halliburton has stated in its SEC filings its intent to eventually dispose of its KBR holdings, believing the two companies would best be served by being separate from the other.

History/Lyndon Johnson Ties

Brown and Root was founded in Texas in 1919 by two brothers, George R. Brown and Herman Brown with money from their brother-in-law, Dan Root. The company began its operations by supervising the building of warships for the United States Navy.

One of its first large-scale projects, according to the book Cadillac Desert, was to build a dam on the Texas Colorado River near Austin during the Depression years. For assistance in federal payments, the company turned to the local congressman, Lyndon B. Johnson.

During World War II, Brown & Root built the Naval Air Station Corpus Christi and a series of warships for the U.S. Government.

In 1947, Brown & Root built one of the world's first offshore platforms.

Following the death of Herman Brown, Halliburton acquired Brown & Root in December 1962. According to Dan Briody, who wrote a book on the subject, the company became part of a consortium of four companies that built about eighty-five per cent of the infrastructure needed by the Army during the Vietnam War. At the height of the war resistance movement of the 1960s, Brown & Root was derided as "Burn & Loot" by protesters and soldiers.

In September 2005, under a competitive bid contract it won in July 2005 to provide debris removal and other emergency work associated with natural disasters, KBR started assessment of the cleanup and reconstruction of Gulf Coast Marine and Navy facilities damaged in the aftermath of Hurricane Katrina. The facilities include: Naval Station Pascagoula, Naval Station Gulfport, the John C. Stennis Space Center in Mississippi, two smaller U.S. Navy facilities in New Orleans, Louisiana and others in the Gulf Coast region. KBR has had similar contracts for more than 15 years.

Current Issues

Iraq and Beyond

Technological advances and the rebuilding of Iraqi infrastructure have further entrenched the U.S. military-industrial complex. One corporation in particular, Halliburton Energy Services, has become instrumental in the Iraqi war effort.

Halliburton

Halliburton Energy Services (NYSE HAL) is a multinational corporation with operations in over 120 countries, and is based in Houston, Texas. Halliburton operates two major business segments: The Energy Services Group, which provides technical products and services for oil and gas exploration and production, and Kellogg, Brown and Root (KBR), which is a major construction company specializing in the building of refineries, oil fields, pipelines, and chemical plants. 2005 revenues were $20.99 billion USD, and the company employs over 106,000 people worldwide.

Political connections

Brown and Root had a well-documented relationship with U.S. President Lyndon Johnson which began when he used his position as a Texas congressman to assist them in landing a lucrative dam contract. In return they gave him the funds to "steal" the 1948 Senate race from the popular Coke R. Stevenson. The relationship continued for years, with Johnson funneling dozens of military construction contracts to B&R.

U.S. Vice President Richard B. Cheney was chairman and chief executive officer of Halliburton from 1995 to 2000. He has been accused by political opponents of supporting the 2003 invasion of Iraq and providing work to KBR under contingency contracts to financially benefit himself and his business associates. The contract that KBR won from the US Army in a competitive bid process is referred to as LOGCAP (Logistical Civilian Augmentation Program) and is managed by the US Army. (KBR won the first LOGCAP contract, Dyncorp the second, and KBR the current one, dubbed "LOGCAP III".) It is a contingency based contract which is invoked at the convenience of the US Army; the orders under the contract are not competitively bid (as the overall contract was) and thus the reason for the confusion. When the contract was invoked during the Balkans crisis there was no controversy and very litte scrutiny of the contract. KBR performed under this agreement in the Balkans for over 10 years and still maintains a LOGCAP presence there to this day. It was only after the OIF invasion that the LOGCAP contract became a political issue.^{[citation needed]}

Activities in Afghanistan

KBR was awarded a $100 million contract in 2002 to build a new U.S. embassy in Kabul, Afghanistan, from the State Department.

KBR has also been awarded 15 LOGCAP task orders worth more than $216 million for work under Operation Enduring Freedom, the military name for operations in Afghanistan. These include establishing base camps at Kandahar and Bagram Air Base and training foreign troops from the Republic of Georgia.

The Iraq War (2003)

Today, KBR employs over 30,000 men and women in Iraq. Halliburton's work in Iraq is diverse and complicated. In addition to troop support, Halliburton also provides air traffic control support; produces 74 million gallons of water a month for consumption, hygiene and laundry; deploys as many as 700 trucks a day to deliver essentials to American forces; and provides firefighter and crash-rescue services, as well as working to restore Iraqi oil infrastructure.

Business Overview

Energy Services, the company's historical bedrock, includes: drilling & formation evaluation, digital & consulting solutions, production volume optimization, and fluid systems. This business continues to be profitable, and the company is a world leader in this industry; Schlumberger is the company's closest competitor.

With the acquisition of Dresser Industries in 1998, the Kellogg-Brown & Root division (in 2002 renamed to KBR) was formed by merging Halliburton's Brown & Root (acquired 1962) subsidiary and the M.W. Kellogg division of Dresser (which Dresser had merged with in 1988). KBR is a major international construction company, which is a highly volatile undertaking subject to wild fluctuations in revenue and profit. Asbestos-related litigation from the Kellogg acquisition caused the company to book over $4.0 billion U.S. in losses from 2002 through 2004.

As a result of the asbestos-related costs, Halliburton lost approximately $900 million U.S. a year from 2002 through 2004. A final non-appealable settlement in the asbestos case was reached in January 2005 which allowed Halliburton subsidiary KBR to exit Chapter 11 bankruptcy and returned the company to quarterly profitability.

At a meeting for investors and analysts in August 2004, a plan was outlined to divest the KBR division through a possible sale, spin-off or initial public offering. Analysts at Deutsche Bank value KBR at up to $2.15 billion, while others believe it could be worth closer to $3 billion by 2005.

Iraq controversy

Halliburton is the only company mentioned by Osama bin Laden in an April 2004 tape in which he claims that "this is a war [in Iraq] that is benefiting major companies with billions of dollars."

The United States army hired Kellogg, Brown and Root to provide housing for approximately 100,000 soldiers in Iraq in a contract worth $200 million, based on a long-term contract signed in December 2001 under the Logistics Civil Augmentation Program (LOGCAP). Other LOGCAP orders have included a pre-invasion order to repair oil facilities in Iraq; $28.2 million to build prisoner-of-war camps; and $40.8 million to accommodate the Iraqi Survey Group, which was deployed after the war to find hidden weapons of mass destruction.

In the competition for the current LOGCAP contract, the Army Corps of Engineers asked competitors to develop a contingency plan for extinguishing oil well fires in Iraq. The Army chose KBR's plan in November 2001, though it remains classified.

On March 24, 2003, the Army announced publicly that KBR had been awarded five task orders in Iraq potentially worth $7 billion to implement the plan. One of the task orders, obtained by the Center for Public Integrity, required KBR to "procure, import and deliver" fuels to Iraq. In fact, the contract was awarded more than two weeks earlier, without submission for public bids or congressional notification. In their response to Congressional inquiries, Army officials said they determined that extinguishing oil fires fell under the range of services provided under LOGCAP, meaning that KBR could deploy quickly and without additional security clearances. They also said that the contract's classified status prevented open bidding.

The Army's actions came under fire from Congressman Henry Waxman, who, along with John Dingell, asked the General Accounting Office - the investigative arm of Congress to investigate whether the U.S. Agency for International Development and the Pentagon were circumventing government contracting procedures and favoring companies with ties to the Bush administration. They also accused KBR of inflating prices for importing gasoline into Iraq.^{[citation needed]} In June 2003, the Army announced that it would replace KBR's oil-infrastructure contract with two public-bid contracts worth a maximum total of $1 billion to be awarded in October. However, the Army announced in October it would expand the contract ceiling to $2 billion and the solicitation period to December. As of October 16 2003, KBR had performed nearly $1.6 billion worth of work. In the meantime, KBR has subcontracted with two companies to work on the project: Boots & Coots, an oil field emergency-response firm that Halliburton works in partnership with (CEO Jerry L. Winchester was a former Halliburton manager) and Wild Well Control, both of Texas.

Revenues

The company's contracts in Iraq are expected to have generated more than $13 billion in sales by the time they start to expire in 2006, but most offer low margins — less than 2% on average in 2003 and just 1.4% this year for the logistics work ^{[citation needed]} making these contracts less profitable than Halliburton's core energy business. The contracts in Iraq will be more profitable after the US Army reimburses them for costs that were originally investigated as potentially inflated. [1]

Despite statements that the company receives low profit margins from their Iraq contracts, their stock value has gone from $9 in mid-2002 all the way up to $69 as of late-2005. Yearly revenues as of December 31st 2002 were $12.5 billion, and as of December 31st 2004 Halliburton revenues have climbed to $20.5 billion. (Yahoo Finance) The stock hit a record high in January 2006.

KBR has contracts in Iraq worth up to $18 billion, including a single no-bid contract known as "Restore Iraqi Oil" (RIO) which has an estimated worth of $7 billion.

An audit of KBR by The Pentagon’s Defense Contract Audit Agency (DCAA) found $108 million in "questioned costs" and, as of mid-March 2005, said they still had "major" unresolved issues with Halliburton.

Ties to Dick Cheney

In recent years the company has become the center of several controversies involving the 2003 Iraq War and the company's ties to US Vice President Dick Cheney. Cheney retired from the company during the 2000 U.S. presidential election campaign with a severance package worth $20 million^{[citation needed]}. As of 2004, he had received $398,548 in deferred compensation from Halliburton while Vice President. Cheney also retains unexercised stock options at Halliburton, which have been valued at nearly $8 million.

Concerns have been raised regarding the possible conflict of interest resulting from Cheney's deferred compensation and stock options from Halliburton. However, before entering office in 2001, Cheney bought an insurance policy that guaranteed a fixed amount of deferred payments from Halliburton each year for five years so that the payments would not depend on the company's fortunes. He is legally bound by an agreement he signed which turns over power of attorney to a trust administrator to sell the options at some future time and to give the after-tax profits to three charities. The agreement specifies that 40% will go to the University of Wyoming (Cheney's home state), 40% will go to George Washington University's medical faculty to be used for tax-exempt charitable purposes, and 20% will go to Capital Partners for Education. The agreement states that it is "irrevocable and may not be terminated, waived or amended," preventing Cheney from taking back the options at a later date.

Allegations of fraud

Allegations of fraud by Halliburton, specifically with regard to its operations in Iraq, have persisted since before the Iraq War. The associations between Cheney and Halliburton had led many to speculate with regard to improprieties and profiteering from the war.

On 27 June, 2005, the Democratic Party held a public committee, aired on C-SPAN 3, at which former civilian employees based in or administering operations in Iraq, testified to specific instances of waste, fraud, and other abuses and irregularities by Halliburton and its subsidiary Kellogg, Brown and Root (KBR).

Among the senators and representatives present at the hearing were Byron Dorgan (presiding), Henry Waxman, Frank Lautenberg, and Mark Dayton.

Among those testifying were Bunny Greenhouse, former Chief Contracting Officer of the U.S. Army Corps of Engineers, Rory Mayberry, former Food Program Manager for Halliburton subsidiary, and Allan Waller, of the Lloyd-Owen International security and operations firm.

Greenhouse, who provided the bulk of testimony, spoke for several minutes about her involvement in the evaluation and crafting of government Army contracts, and explaining how her superiors undermined and dismissed her concerns of illegal business practices. "Ultimately my main concern was the repeated insistence RIO contract be awarded to KBR without competitive bidding," Greenhouse said. She testified to have been given misinformation in answer to her complaints, saying she was "overtly misled."

Mayberry, still in Iraq, testified by video from questions prepared by the committee. He said that KBR routinely sold expired food rations to the Army.

The recorded interviewer asked, "Are you saying that Halliburton deliberately falsified the number of meals they prepared and then submitted false claims for reimbursement and that they did this to make up for past amounts auditors had disallowed?" Mayberry firmly answered "yes." He said that serving expired food rations was "an everyday occurrence, sometimes every meal." He also explained that Halliburton systematically overcharged for the number of meals as well, saying, "they were charging for 20,000 meals and they were only serving 10,000 meals." Dorgan later commented, "obviously there's no honor here, by a company that would serve outdated food to our troops in Iraq."

Halliburton and its subcontractors contend that billing discrepencies for the dining facilities stemmed from interpretive differences in their contracts, which required them to be prepared to serve a minimum number of meals per day. When they billed for these minimum numbers however, the DCAA countered that they should only be required to pay for meals served. Of the over $200 million in question, $51 million was eventually retained by the U.S. Army Field Support Command.

Mayberry also claimed would-be whistleblowers were threatened "to be sent to Fallujah" and other "places under fire" if they talked to media or governmental oversight officials. In 2003 and 2004, Fallujah had been well known as dangerous for foreign troops and civilians. "I personally was sent to Fallujah for three weeks. The manager told me that I was being sent away until the auditors were gone, because I had talked to the auditors," Mayberry said.

"The threat of being sent to a camp under fire was their way of keeping us quiet. The employees who talked to auditors were sent to camps under more fire than other camps, and Anaconda." This report led Dorgan and others to voice considerable outrage.

Allan Waller testified to specific examples of how KBR officials had conspired in blocking of Lloyd-Owen fuel transports, and using other coercive means against its competitor. British based Lloyd-Owen has a direct contract with the Iraqi government to provide fuel to various parts of the country.

In his introductory remarks, Dorgan explained that Senate Republicans had blocked any attempts at having a formal bi-partisan hearing, resulting in a separate committee.

Preventing Conflicts of Interest and Collusion

A serious look at laws and checks and balances is required. After WorldCom and Enron scandals the Sarbanes/Oxley legislation was passed. However, that was government regulation of business/accounting collusion that did not directly impact opportunities for further business/government collusion. "Insider trading" is still "legal" for members of Congress for example.

Tackling collusion between government and large corporations will be as difficult as getting members of congress to reduce their own pay.

(some thoughts)

1. Conflict of interests in campaign financing and awarding of contracts.
2. Award contracts through votes where individual representatives and senators are identified (not committees)
3. Disclosure and transparency at a level which the IRS requires of non-profits.
4. Competitive bidding of contracts, to include bids from corporations from other countries when on foreign soil.
5. Disentangle foreign aid from conditions that dictate suppliers and products for which aid is given.
6. Principles of foreign policy consistent with domestic policy (golden rule). Foreign policy is now largely conducted at the pleasure of the executive branch.

See also

• War is a Racket (book by Smedley Butler)
• Why We Fight (documentary by Eugene Jarecki)
• Corporatism
• Militarism
• Prison-industrial complex

Sources

• Eisenhower, Dwight D. Public Papers of the Presidents, 1035-40. 1960.
• "Dwight D. Eisenhower's Farewell Address to the Nation." In The Annals of America. Vol. 18. 1961-1968: The Burdens of World Power, 1-5. Chicago: Encyclopaedia Britannica, 1968.
• Gottlieb, Sanford. Defense Addition: Can America Kick the Habit?, Boulder, CO: Westview Press, 1997.
• Hartung, William D. "Eisenhower's Warning: The Military-Industrial Complex Forty Years Later." World Policy Journal 18, no. 1 (Spring 2001).
• Johnson, Chalmers The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic, New York: Metropolitan Books, 2004.
• Kurth, James. "Military-Industrial Complex." In The Oxford Companion to American Military History, ed. John Whiteclay Chambers II, 440-42. Oxford & New York: Oxford University Press, 1999.
• Nelson, Lars-Erik. "Military-Industrial Man." In New York Review of Books 47, no. 20 (Dec. 21, 2000): 6.
• Nieburg, H. L. In the Name of Science, Quadrangle Books, 1970
• Singer, P.W. Corporate Warriors: The Rise of the Privatized Military Industry. Ithaca, NY: Cornell University Press, 2003.

External links

General

• Schema-root.org: military industry 38 military industry topics, each with a current news feed
• Open Secrets: Top Defense Contributors to Federal Candidates and Parties database
• War Resisters: Piechart and info on defense spending
• Military-industrial complex on SourceWatch
• National priorities project chart showing how your federal income tax is spent
• Quotes on Money and Banking and Militarism
• Flows of Money and Patronage from Washington Truth in Recruiting
• Why We Fight : A Film by Eugene Jarecki exploring the effects of the Military Industrial Complex

Halliburton

• Halliburton official corporate site
• World Internet News: "Big Oil Looking for a Government Handout," April 2006.
• HAL: Summary for HALLIBURTON HLDG CO - Yahoo! Finance
• The World According to Halliburton
• Halliburton Watch
• Halliburton at SourceWatch
• Independent Media TV - Dick Cheney and Halliburton media watch
• Halliburton Company from The Handbook of Texas
• Halliburton Is a Handy Target for Democrats from The Washington Post 18 September 2004
• The Halliburton Agenda: The Politics of Oil and Money from Democracy Now 17 May 2004
• A Halliburton Primer from The Washington Post 11 July 2002
• A Bill to Disclose Halliburton's Business with Iran
• "Halliburton worker (Glenn Allen Powell) admits bribes" with KBR @ BBC News
• What's Up With Cheney And Halliburton? from About.com Conservative Politics
• Frontline: Private Warriors PBS special on Halliburton, KBR and other contractors in Iraq and Afghanistan

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