ISIS: Military Contractors’ “Gravy Train” To Profits

“Wall Street’s looking ahead and saying, ‘War’s good for business and companies are going to cash in,’” the director of a think tank aimed at addressing war and corruption, among other issues, tells MintPress News.
By @seannevins |
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    WASHINGTON — Since the beginning of the year, the defense stocks of America’s top five arms producers — Lockheed Martin, Boeing, General Dynamics, Raytheon and Northrop Grumman — have risen substantially. Last month, Bloomberg reported that “the biggest U.S. defense companies are trading at record prices as shareholders reap rewards from escalating military conflicts around the world.”

    These conflicts include the Afghanistan War, NATO’s arms buildup to monitor Russia in Ukraine, military intervention against the Islamic State of Iraq and Syria, and armaments for governments wishing to suppress internal dissent.

    Arms contractors are “trying to exploit the crisis,” said William Hartung, director of the Arms and Security Project at the Center for International Policy, a Washington-based think tank aimed at addressing war, corruption, inequality and climate change. It appears they’re succeeding this regard, as investors are greedily buying up stocks of weapons manufacturers. For example, Lockheed Martin’s share prices have risen from $146 a share at the beginning of the year to $174 today.

    “Wall Street’s betting that this war’s going to go on for awhile, and that the Pentagon is going to get rid of budget cuts,” Hartung said of the conflict with ISIS. “It’s going to be a gravy train. Companies are sort of saying, ‘I don’t know how much we’re going to make,’ but Wall Street’s looking ahead and saying, ‘War’s good for business and companies are going to cash in.’”

    However, he added that despite calls for more war, he believes the budget caps will hold because there are still so many Republicans that care about the deficit and don’t want to raise taxes. “Unless they just throw away the idea of reducing the deficit, then they could do whatever they want,” he said.


    The DOD budget, contractors and the people

    The military’s entire budget comes from discretionary spending, which means it directly competes with other programs, such as education and unemployment, for funds. When the military’s budget is inflated, those other programs suffer.

    Military spending for 2015 “is projected to account for 16 percent of all federal spending and 55 percent of all federal discretionary spending,” according to the National Priorities Project. Meanwhile, only 6 percent of the discretionary budget will go to education, 2 percent to transportation, and 1 percent to food and agriculture.

    A large percentage of the funds allocated for the military ends up in the bank accounts of private contractors that manufacture weapons and other systems, such as General Dynamics and Northrop Grumman. The money being doled out to defense contractors in the current push against ISIS had been allocated at the beginning of fiscal year 2015 (from Oct. 1, 2014 to Sept. 30, 2015) through the discretionary budget. This budget goes through an appropriations process every year that includes the president and Congress, as well as influence from lobbying organizations and other factors. Thus, ordinary citizens have the power to affect the budget process and how much money is distributed to war profiteers by engaging with the civic process through voting and organizing in their communities and legislative districts.

    Budget caps on Pentagon spending were put in place in 2011 by the Budget Control Act. These caps were raised by $22 billion in fiscal 2014 and $9 billion for fiscal 2015, so the Pentagon now has $521 billion in discretionary spending. But the Pentagon has another source of what some may see as unlimited money in the form of the Overseas Contingency Operations budget, which is not subject to these caps. For fiscal 2015, the Pentagon requested $79 billion in OCO funding.

    Despite those additional funds, contractors and some in Congress would like to see budget caps removed from the Pentagon’s budget. Of the BCA caps, Buck McKeon, chairman of the House Armed Services Committee, recently told The Wall Street Journal, “You can’t cut the military while we keep asking them to do more.”


    Think tanks and war drums

    However, the Center for International Policy’s Hartung says the dangers posed by ISIS are not great enough to justify another raise in the limits on Pentagon spending. “It’s not a big enough threat to justify all the stuff they buy. I mean, they’re buying missiles, submarines, and they want to build a new bomber. They’re spending billions on the F-35, which they don’t really need over there,” he said.

    Yet he also expressed concern about the noise being created to end budget cuts coming from places other than contractors and Congress.

    A New York Times investigation recently revealed that “[m]ore than a dozen prominent Washington research groups have received tens of millions of dollars from foreign governments in recent years while pushing United States government officials to adopt policies that often reflect the donors’ priorities.”

    “The money is increasingly transforming the once-staid think-tank world into a muscular arm of foreign governments’ lobbying in Washington,” it continues.

    However, what the investigation also implicitly reveals is that think tanks can act as lobbying organizations for their donors, whether they are foreign governments or not.

    With regards to uncapping the Pentagon’s budget restrictions, prominent think tanks that continually ring the alarm bells to increase funding for defense include the Center for a New American Security and the Institute for the Study of War, which has ties to military contractors like Academi (formerly known as Blackwater) and General Dynamics.

    The Nation Institute recently revealed that The New York Times and the BBC received much of their data about ISIS from the Institute for the Study of War, a group whose board is chaired by Gen. Jack Keane (Ret.). Keane, reports Lee Fang in The Nation, is a “special adviser to Academi, the contractor formerly known as Blackwater… a board member to tank and aircraft manufacturer General Dynamics; a ‘venture partner’ to SCP Partners, an investment firm that partners with defense contractors, including XVionics, an ‘operations management decision support system’ company used in Air Force drone training; and… president of his own consulting firm, GSI LLC.”

    Fang argues that portraying Keane and the Institute for the Study of War as objective analysts of American war adventurism is inaccurate, as Keane reaps profits from war. Fang writes, “For the General Dynamics role alone, Keane has been paid a six-figure salary in cash and stock options since he joined the firm in 2004; last year, General Dynamics paid him $258,006.”


    Turning the tables on American militarism

    Hartung explained that this crisis isn’t without a solution, though. First, people need to be educated about “how much money we’re wasting on the Pentagon,” he said. Then, people need to organize and advocate for issues unrelated to defense. Miriam Pemberton at the Institute for Policy Studies, a Washington-based think tank, has argued that peace advocates should work around issues that promote peace and growth in the economy as a whole.

    One of the challenges, Hartung argues, is getting people out of their despondency. He said, “People don’t want to hear about it [defense contractors profiting from war] because they think it’s depressing, or they think the government is rigged. And even if you protest and lobby them, it’s more or less going to come out the same.”

    But it’s quite the contrary, Hartung says, explaining that ordinary people can do a lot. They can change the world and the nature of the American political process in the same way that militaristic groups ensure the stability of their enterprises.

    “I think that people are going to have to let go and realize that they can make a difference. If we speak out in large enough numbers, if we lean on Congress, if we get the media, and we organize the groups we’re in, the churches, the synagogues, your union halls, or work with local officials who feel the impact indirectly of all this stuff… I think we could make a difference,” he said.

    He used the National Rifle Association as an example. “If you look at the NRA, which everybody’s so afraid of, they have 4 million members out of 300 million people in the country, and a relatively small number of them are the ones screaming and writing letters to Congress. You need a well-organized passionate group of people to make a difference,” he explained, noting that he doesn’t believe this currently exists because the public is “too discouraged.”

    However, there are organized groups of people affecting legislative change for the purposes of peace rather than war. The Friends Committee on National Legislation is a lobby group that claims to field “the largest team of registered peace lobbyists in Washington, D.C.” Hartung himself works at the Center for International Policy, a think tank aimed at informing the public and “decision makers in the United States and in international organizations on policies to make the world more just, peaceful and sustainable.”

    The Council for a Livable World, a Washington-based nonprofit, is “dedicated to reducing the danger of nuclear weapons and increasing national security.” Peace Action boasts that it has the largest grassroots peace network in the country, and there are other organizations that work on specific issues, such as the National Iranian American Council, which has galvanized public opinion to oppose war with Iran.

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