NCPA - National Center for Policy Analysis


October 30, 2007

Recent events have brought the military's use of private contractors into question.  But whatever the possible sins of these companies, the overall problem is not private contracting in itself; contractors do not set the tone but rather reflect the sins and virtues of their customers, namely their sponsoring governments, says Tyler Cowen,  professor of economics at George Mason University.

Part of the problem may stem from economic incentives.  Consider Blackwater USA, a private security firm currently employed in Iraq:

  • If Blackwater is assigned to protect a top American official, who is later assassinated, Blackwater may lose future business.
  • A private contractor doesn't have a financial incentive to protect Iraqi citizens, who are not paying customers.
  • Ultimately, this reflects the priorities of the United States military itself; American casualties are carefully recorded and memorialized, but there is no count of Iraqi civilian deaths.

Yet the use of contractors is not a free lunch for governments, says Cowen:

  • Compared with the military, contractors are not subject to direct scrutiny by Congress and they are not covered by international law with the same clarity.
  • Excessive use of private contractors erodes checks and balances, and it substitutes market transactions, controlled by the executive branch, for traditional political mechanisms of accountability.
  • When it comes to Iraq, we've yet to see the evidence of a large practical gain in return; instead, use of contractors may have helped to make an ill-advised venture possible.

Private contractors may not respect virtue for its own sake, but like most businesses, they will respect the wishes of their most powerful customers, in this case the sponsoring governments.  What is wrong with Blackwater may, most of all, mirror what is wrong with the U.S. government, says Cowen.

Source: Tyler Cowen, "To Know Contractors, Know Government," New York Times, October 28, 2007.


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