American De-Evolution: Tribalism, Extremism & The New Normal...

“We live on a placid island of ignorance in the midst of black seas of infinity, and it was not meant that we should voyage far.” - H.P Lovecraft.

The “animal spirits” of which Keynes spoke are on the prowl across the United States. Their mood is ugly. The spirits are wary and troubled. Corporations and individuals are hoarding cash, when they have any, because they’re not buying into the recovery.

On a weeklong visit, I found a mood of deep unease in an America that seems to have descended into tribalism — not ethnic, but political, economic and social. Uncertainty is pervasive. The government’s rescue of Wall Street combined with the acute difficulties of a middle class struggling to get by on stagnant or falling incomes has sharpened resentments.

This is not a momentary phenomenon. Nobody seems to think unemployment is going to fall significantly from 9.6 percent — a level more often associated with France — in the near future. Get used to the new normal.

I spoke to a retired Wall Street executive who got out a few years back and set up a small business where he had to make payroll (sobering), but was freed from the debilitating short-termism of financial institutions that, over his career, had become dominated by traders “who look at economic opportunity rather than economic conditions.” He said the final straw came in 2002. Top executives at the bank where he worked gathered to discuss their bonuses. The issue before them was whether to maintain those bonuses in a time of economic contraction, which would require firing 5 percent of the workforce, or take a 25 percent bonus cut, which would allow those jobs to be kept. “The guy running the meeting asked for a show of hands on who would accept a reduced bonus,” he said. “There were 30 of us in the room. Three raised their hands. I was one of them.”

The job losses went through, this executive left, and the bank today is still trying to claw out from its uncontrolled excess.

America is a land of associations. Solidarity has not vanished from the land. But it’s in retreat. None of those guys who wanted all their yummy money was anything but rich. Fragmentation holds sway. The stock market used to be a fair proxy for the state of the economy. Now it’s a market of traders, not investors. They want to know what the spread is today and tomorrow; they can make money on the way up or down; they care far less about U.S.A. Inc.

So the market goes where it goes — up of late but largely directionless (which makes it harder on those up-or-down traders) — while out on Main Street the struggle to make family payroll continues. People work longer hours, they juggle how to cover their kids’ needs, how to de-leverage just a little — and they’re still meant to “consume” for the economy’s sake.

The share of national income held by the top 1 percent of American families has doubled in recent decades to 20 percent. That’s a huge shift. I spoke to Doug Severance, a Vietnam vet who’s a hotel employee in Aspen, Colorado. “When I moved here in 1984 we were all family,” he said. “Now either you arrive in a Lear Jet or you’re a servant.”

Obama hope has dissipated in short order. He’s not entirely to blame and he’s not blameless. The exclamation from Velma Hart, a black Obama supporter, at a recent town hall meeting — “I’m exhausted of defending you,” — struck a national chord because so many people feel the same thing.

The policy debate in the United States is head-spinning. Nobody knows if there’s going to be more fiscal stimulus, after the first $787 billion, or how a row over taxes will end. Under an Obama proposal, Bush-era tax cuts are due to expire at year-end for affluent couples and small business owners earning over $250,000. Republicans are digging in, saying it’s crazy to raise taxes in a faltering economy.

It’s not crazy. Ending the tax cuts for the rich is a minimum signal for a divided land, a statement that the two Americas are acquainted with each other. But with Obama facing a stinging midterm defeat, it looks like a long shot. What is needed above all is some clarity and sense of direction — the kind Cameron has given in London and booming China consistently applies.

Without that expect the animal spirits to keep on hoarding, an inward-looking America bent on retrenchment, and a new normal that lasts and lasts...

VIOLETPLANET SAYS: ...and nothing lasts forever. Extremism is on the rise from religion to politics. The public education system ? A travesty of epic proportions. The news media is no longer news but a cross between "infotainment" and blatant propaganda which the majority buy into without question and... finally, according to the Supreme Court, corporations are people now. The end ? At this rate, it will not be a happy one. Soon...time to fly.

CREDITS:

-Roger Cohen, (Excerpt: “The New American Normal,” New York Times, 9.27.10. Image: -Oakland_Kate, "Hominids Out For A Stroll," 2010 ).

The Power Elite: Permanent War & Corporations = Mythical Peace...

"Non est potestas Super Terram quae Comparetur ei" (There is no power on earth to be compared to him), - Verse: Book of Job, Holy Bible.

How can we empower "the people" if "the people" have so little power...to empower themselves? -VioletPlanet (2009)

"The power elite is composed of men whose positions enable them to transcend the ordinary environments of ordinary men and women; they are in positions to make decisions having major consequences. Whether they do or do not make such decisions is less important than the fact that they do occupy such pivotal positions: their failure to act, their failure to make decisions, is itself an act that is often of greater consequence than the decisions they do make. For they are in command of the major hierarchies and organizations of modern society. They rule the big corporations. They run the machinery of the state and claim its prerogatives. They direct the military establishment. They occupy the strategic command posts of the social structure, in which are now centered the effective means of the power and the wealth and the celebrity which they enjoy.

The power elite are not solitary rulers. Advisers and consultants, spokesmen and opinion-makers are often the captains of their higher thought and decision. Immediately below the elite are the professional politicians of the middle levels of power, in the Congress and in the pressure groups, as well as among the new and old upper classes of town and city and region. Mingling with them, in curious ways which we shall explore, are those professional celebrities who live by being continually displayed but are never, so long as they remain celebrities, displayed enough. If such celebrities are not at the head of any dominating hierarchy, they do often have the power to distract the attention of the public or afford sensations to the masses, or, more directly, to gain the ear of those who do occupy positions of direct power. More or less unattached, as critics of morality and technicians of power, as spokesmen of God and creators of mass sensibility, such celebrities and consultants are part of the immediate scene in which the drama of the elite is enacted. But that drama itself is centered in the command posts of the major institutional hierarchies."

"In so far as the structural clue to the power elite today lies in the economic order, that clue is the fact that the economy is at once a permanent-war economy and a private-corporation economy. American capitalism is now in considerable part a military capitalism, and the most important relation of the big corporation to the state rests on the coincidence of interests between military and corporate needs, as defined by warlords and corporate rich. Within the elite as a whole, this coincidence of interest between the high military and the corporate chieftains strengthens both of them and further subordinates the role of the merely political men. Not politicians, but corporate executives, sit with the military and plan the organization of war effort.

The shape and meaning of the power elite today can be understood only when these three sets of structural trends are seen at their point of coincidence: the military capitalism of private corporations exists in a weakened and formal democratic system containing a military order already quite political in outlook and demeanor. Accordingly, at the top of this structure, the power elite has been shaped by the coincidence of interest between those who control the major means of production and those who control the newly enlarged means of violence; from the decline of the professional politician and the rise to explicit political command of the corporate chieftains and the professional warlords; from the absence of any genuine civil service of skill and integrity, independent of vested interests.

The power elite is composed of political, economic, and military men, but this instituted elite is frequently in some tension: it comes together only on certain coinciding points and only on certain occasions of CRISIS. In the long peace of the nineteenth century, the military were not in the high councils of state, not of the political directorate, and neither were the economic men — they made raids upon the state but they did not join its directorate. During the ‘thirties, the political man was ascendant. Now the military and the corporate men are in top positions.

Of the three types of circle that compose the power elite today, it is the military that has benefited the most in its enhanced power, although the corporate circles have also become more explicitly entrenched in the more public decision-making circles. It is the professional politician that has lost the most, so much that in examining the events and decisions, one is tempted to speak of a political vacuum in which the corporate rich and the high warlord, in their coinciding interests, rule.

Which of the three types seems to lead depends upon ‘the tasks of the period’ as they, the elite, define them. Just now, these tasks center upon ‘defense’ and international affairs. Accordingly, as we have seen, the military are ascendant in two senses: as personnel and as justifying ideology. That is why, just now, we can most easily specify the unity and the shape of the power elite in terms of the military ascendancy.

In so far as the power elite has come to wide public attention, it has done so in terms of the military clique. The power elite does, in fact, take its current shape from the decisive entrance into it of the military. Their presence and their ideology are its major legitimations, whenever the power elite feels the need to provide any. But what is called the Washington military clique is not composed merely of military men, and it does not prevail merely in Washington. Its members exist all over the country, and it is a coalition of generals in the roles of corporation executives, of politicians masquerading as admirals, of corporation executives acting like politicians, of civil servants who become majors, of vice-admirals who are also the assistants to a cabinet officer, who is himself, by the way, really a member of the managerial elite.

Neither the idea of a ruling class nor of a simple monolithic rise of bureaucratic politicians nor of a military clique is adequate. The power elite today involves the often uneasy coincidence of economic, military, and political power.

- C. Wright Mills, Exerpt: The Power Elite, 1956. Image: -Abraham Bosse, Frontispiece of the book "Leviathan," by Thomas Hobbes, 1651).

Footnote: A main inspiration for the book was Franz Leopold Neumanns book Behemoth: The Structure and Practice of National Socialism in 1942, a study of how Nazism came in position of power in a democratic state as Germany. Behemoth had a major impact on Mills and he claimed that Behemoth had given him the "tools to grasp and analyse the entire total structure and as a warning of what could happen in a modern capitalist democracy". (C.Wright Mills:Power, Politics and People.New york .1963, p.174).

Bailed Out: Financial Wise Guys & The Wall Street Casino...

"The Congress told the American people to go to hell."-Lou Dobbs, on the passage of the 700 billion dollar Wall Street bailout plan, 10.1.08.

PART I: REPEALING ROOSEVELT

"The federal reserve is still struggling to contain what is already the most severe credit contraction since the Great Depression. Yet in all of the press coverage, commentators have scarcely acknowledged that this old-fashioned panic is a child of deregulation. During the past decade, the financial economy has repeated the excesses of the 1920s -- too much borrowing to underwrite too many speculative bets with other people's money, too far beyond the reach of regulators, setting up the entire economy for a crash.

The Roosevelt schema of financial regulation was built around two principles -- disclosure and outright prohibition of inherent conflicts of interest. All publicly listed and traded companies were required to disclose to the Securities and Exchange Commission and to the public all financial information deemed "material" to investor decisions. The New Deal also prohibited stock trading based on insider information, and it created structural barriers against the kinds of temptations that ruined the economy in the 1920s. The most notable of these was the 1933 Glass-Steagall Act, which prohibited the same financial company from being both a commercial bank and an investment bank.

The Glass-Steagall wall was devised to prevent a repeat of the 1920s' scams, in which banks made speculative investments, turned the debts into securities, and sold them off to unsuspecting investors with the blessing of the bank. With Glass-Steagall, commercial banks were tightly supervised and given access to federal deposit insurance, to keep savings secure and prevent runs on banks. Investment banks, meanwhile, were not government-guaranteed and were free to do more speculative transactions for consenting adult customers. But Roosevelt's newly created SEC subjected securities markets to much tighter structures against self-dealing and insider conflicts of interest.

The New Deal also acted on the home mortgage front. Millions of people were losing their homes and farms to foreclosures, both creating human tragedies and deepening the Depression. In response, the Roosevelt administration literally invented the modern system of home finance. Pre–New Deal mortgages had typically been short-term notes, where most of the principal was due and payable at the end of a brief term, often just three to five years. The New Deal devised the modern long-term, fixed-rate, self-amortizing mortgage. Congress created the Federal Housing Administration to insure these mortgages and win their acceptance among lenders. It also created the Federal National Mortgage Association to sell bonds and buy mortgages, and thus replenish the funds of local lenders. And the New Deal devised a system of federal home loan banks to supervise and advance capital to savings and loan institutions. Deposit insurance was extended to government-supervised mortgage lenders.

The system worked like a watch, combining sound lending standards with expanded opportunity. The rate of home ownership rose from 44 percent in the late 1930s to 64 percent by the mid-1960s. Savings and loan associations almost always ran in the black, there were no serious scandals, and the government deposit-insurance funds regularly returned a profit.

If you fast forward to 2000, much of this protective apparatus has been repealed. Regulators who didn't believe in regulation and a compliant Congress have allowed financial engineers to evade what remains. In the 1980s, regulators began allowing exceptions to Glass-Steagall. In 1999, Congress finally repealed it outright, permitting financial supermarkets like Citigroup to operate ANY KIND OF FINANCIAL BUSINESS THEY DESIRED, and profit from multiple conflicts of interest. The scandals that pumped up the dot-com bubble of the late 1990s, as well as the most flagrant cases like Enron, and the crash that followed, were the result of the SEC and the bank regulators CEASING TO POLICE CONFLICTS OF INTEREST. In the scandals of the 1990s, corporate CEOs, their accountants, and stock analysts working for their bankers, all conspired to puff up corporate balance sheets and pump up stock prices on which executive bonuses depended. This is a little harder today, thanks to the honest accounting requirements of the 2002 Sarbanes-Oxley Act (which the Bush administration hopes to water down). But the same kinds of conflicts and potentials for abuse exist when a mega-bank underwrites a leveraged buyout by an affiliated hedge fund, and then hypes the sale of securities when the fund is ready to sell the company back to the public.

Meanwhile, the once staid and socially directed system of providing home mortgages was seized by financial wise guys and turned into another casino. In the early 1980s, exploiting the Reaganite theme of government-bashing, the savings and loan industry persuaded Congress to substantially deregulate S&Ls -- which then speculated with government-insured money and lost many hundreds of billions, costing taxpayers upward of $350 billion in less than a decade.

In 1989 when Congress reregulated S&Ls, the financial engineers just did another end run. Mortgage companies that were exempt from federal regulation came to dominate the mortgage lending business. This loop of the story begins in 1968 with the privatization of Roosevelt's Federal National Mortgage Association. In the wake of that move, investment bankers invented a daisy chain known as "securitization" of mortgage credit. Through securitization, a mortgage broker could originate a loan, sell it to a mortgage banker, who would then sell it to an investment bank like Salomon Brothers, who in turn would package the mortgages into securities. These were then evaluated and coded (for a fee) by private bond-rating agencies according to their supposed risk, and sold off to hedge funds or pension funds. Each of these worthies took their little cut, raising the cost of credit to the borrower. Rather than diffusing risks, securitization concentrated them, because everyone was making the same bet on real-estate inflation.

In the sub-prime sector, you could get a loan without a full credit check, or even without income verification. The initial "teaser" rate would be low, but after a few years the monthly payment would rise to unaffordable levels. Both borrower and lender were betting on rising real-estate prices to bail them out, by allowing an early refinancing. But when a soft housing market dashed those hopes, the whole sub-prime sector crashed, and the damage spilled over into other financial sectors.

How aggressively the Fed should move has been the subject of extensive commentary. If the Fed moves too slowly or doesn't cut enough, it ends up playing catch-up behind an advancing panic. If it moves too quickly or too generously, it just invites the next round of speculation with cheap money, and in passing might erode confidence in the none-too-robust dollar. But all of this commentary misses the larger point: If monetary policy is the only tool the government has at its disposal, the Fed can't possibly solve the larger crisis (or prevent the next one) by using interest rates alone.

Indeed, until Congress dismantled financial regulation, the Fed was not called upon to mount these heroic rescues, which have become so common in recent years. Until the 1960s, the central bank could keep interest rates low, confident that they would underwrite the growth of the real economy rather than risky financial speculation, for the simple reason that entire categories of speculation did not exist.

But during the past quarter-century, as deregulation has turned the economy into a casino, the Federal Reserve has had to mount major rescues at least six times. In the early 1980s, it bailed out the big New York banks, some of which lost more than the total amount of their capital in failed speculative third world loans; the money-center banks would have been adjudged insolvent if the Fed hadn't bent its usual capital-adequacy rules. Next, the Fed poured huge quantities of liquidity into financial markets after the stock market crash of 1987, in which the market lost more than 20 percent of its value in a single day. The Fed intervened again on several occasions after speculators destabilized several third world currencies and economies from Mexico to Malaysia. The Fed cleaned up after the aforementioned Long Term Capital Management collapse. It flooded markets with money after the dot-com crash and the attacks of September 11, and most recently in the credit crunch of summer 2007.

Indeed, markets have become so reliant on the Fed's bailouts that they even have a term for it -- "the Greenspan put." A put is a financial term meaning a right to sell a financial security at a predetermined price. The knowledge that the Fed would cheapen money in a crisis reassured speculators that they could always unload their paper. That awareness also influenced financial insiders to behave more recklessly."

PART II: WHOSE TO BLAME?

"There's plenty of blame to go around, and it doesn't fasten only on one party or even mainly on what Washington did or didn't do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility ... with hard-working homeowners and billionaire villains each playing a role." Here's a partial list of those alleged to be at fault:

• The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.
• Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.
• Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.
• Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.
• The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
• Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
• Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.
• Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.
• The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.
• An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
• Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.

The U.S. economy is enormously complicated. Screwing it up takes a great deal of cooperation."

-Robert Kuttner, PART I: "The Bubble Economy," The American Prospect, 9.24.07 , Part II: –Joe Miller & Brooks Jackson "Who Caused the Economic Crisis?" Factcheck.org, 10.1.08. Image: -John Wardell, "Roulette Wheel," Flickr 1.1.06).

Prophecies of Presidents: Dwight D. Eisenhower & Ronald Reagan...

"Government is not a solution to our problem, Government is the problem."
- President Ronald Reagan (Inauguration Speech, 1.20.1981).

"President Dwight D. Eisenhower introduced the idea of the “military-industrial complex”to the public in his farewell address of January 17, 1961:

“Our military organization today bears little relation to that known by any of my predecessors in peacetime or indeed by the fighting men of World War II and Korea… We have been compelled to create a permanent armaments industry of vast proportions… We must not fail to comprehend its grave implications… We must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.”

Since 1961, there has been too little serious study of, or discussion of, the origins of the military-industrial complex, how it has changed over time, how governmental secrecy has hidden it from oversight by members of Congress or attentive citizens, and how it degrades our Constitutional structure of checks and balances.

In the formative years of the military-industrial complex, the public still deeply distrusted privately owned industrial firms because of the way they had contributed to the Great Depression.

In the late 1930s and early 1940s, Roosevelt’s use of public-private “partnerships” to build up the munitions industry, and thereby finally overcome the Great Depression, did not go entirely unchallenged. The leading Italian philosopher of fascism, the neo-Hegelian Giovanni Gentile, once argued that it should more appropriately be called “corporatism” because it was a merger of state and corporate power.

Some critics were alarmed early on by the growing symbiotic relationship between government and corporate officials because each simultaneously sheltered and empowered the other, while greatly confusing the separation of powers. Since the activities of a corporation are less amenable to public or congressional scrutiny than those of a public institution, public-private collaborative relationships afford the private sector an added measure of security from such scrutiny. These concerns were ultimately swamped by enthusiasm for the war effort and the postwar era of prosperity that the war produced.

Beneath the surface, however, was a less well recognized movement by big business to replace democratic institutions with those representing the interests of capital. This movement is today ascendant. Its objectives have long been to discredit what it called “big government,” while capturing for private interests the tremendous sums invested by the public sector in national defense.

Perhaps the country’s leading theorist of democracy, Sheldon S. Wolin, has written a new book, Democracy Incorporated, on what he calls “inverted totalitarianism." He warns of “the expansion of private (i.e., mainly corporate) power and the selective abdication of governmental responsibility for the well-being of the citizenry.” He also decries the degree to which the so-called privatization of governmental activities has insidiously undercut our democracy, leaving us with the widespread belief that government is no longer needed and that, in any case, it is not capable of performing the functions we have entrusted to it. Wolin writes:

“The privatization of public services and functions manifests the steady evolution of corporate power into a political form, into an integral, even dominant partner with the state. It marks the transformation of American politics and its political culture, from a system in which democratic practices and values were, if not defining, at least major contributory elements, to one where the remaining democratic elements of the state and its populist programs are being systematically dismantled.”

The military-industrial complex has changed radically since World War II or even the height of the Cold War. The private sector is now fully ascendant. The uniformed air, land, and naval forces of the country as well as its intelligence agencies, including the CIA (Central Intelligence Agency), the NSA (National Security Agency), the DIA (Defense Intelligence Agency), and even clandestine networks entrusted with the dangerous work of penetrating and spying on terrorist organizations are all dependent on hordes of “private contractors.” In the context of governmental national security functions, a better term for these might be “mercenaries” working in private for profit-making companies.

Tim Shorrock, an investigative journalist and the leading authority on this subject, sums up this situation devastatingly in his new book, Spies for Hire: The Secret World of Intelligence Outsourcing. The following quotes are a précis of some of his key findings:

“In 2006… the cost of America’s spying and surveillance activities outsourced to contractors reached $42 billion, or about 70 percent of the estimated $60 billion the government spends each year on foreign and domestic intelligence… [The] number of contract employees now exceeds [the CIA’s] full-time workforce of 17,500."

“To feed the NSA’s insatiable demand for data and information technology, the industrial base of contractors seeking to do business with the agency grew from 144 companies in 2001 to more than 5,400 in 2006… At the National Reconnaissance Office (NRO), the agency in charge of launching and maintaining the nation’s photoreconnaissance and eavesdropping satellites, almost the entire workforce is composed of contract employees working for [private] companies..."

“If there’s one generalization to be made about the NSA’s outsourced IT [information technology] programs, it is this: they haven’t worked very well, and some have been spectacular failures…"

In 2006, the NSA was unable to analyze much of the information it was collecting… As a result, more than 90 percent of the information it was gathering was being discarded without being translated into a coherent and understandable format; only about 5 percent was translated from its digital form into text and then routed to the right division for analysis.

“The key phrase in the new counterterrorism lexicon is ‘public-private partnerships’… In reality, ‘partnerships’ are a convenient cover for the perpetuation of corporate interests.”

Several inferences can be drawn from Shorrock’s shocking exposé. One is that if a foreign espionage service wanted to penetrate American military and governmental secrets, its easiest path would not be to gain access to any official U.S. agencies, but simply to get its agents jobs at any of the large intelligence-oriented private companies on which the government has become remarkably dependent. These include :

Science Applications International Corporation (SAIC), with headquarters in San Diego, California, which typically pays its 42,000 employees higher salaries than if they worked at similar jobs in the government;

Booz Allen Hamilton, one of the nation’s oldest intelligence and clandestine-operations contractors, which, until January 2007, was the employer of Mike McConnell, the current director of national intelligence and the first private contractor to be named to lead the entire intelligence community;

CACI International, which, under two contracts for “information technology services,” ended up supplying some two dozen interrogators to the Army at Iraq’s already infamous Abu Ghraib prison in 2003.

Remarkably enough, SAIC has virtually replaced the National Security Agency as the primary collector of signals intelligence for the government. It is the NSA’s largest contractor, and that agency is today the company’s single largest customer. As David Bromwich, a political critic and Yale professor of literature, observed in the New York Review of Books:

“The separate bookkeeping and accountability devised for Blackwater, DynCorp, Triple Canopy, and similar outfits was part of a careful displacement of oversight from Congress to the vice-president and the stewards of his policies in various departments and agencies. To have much of the work parceled out to private companies who are unaccountable to army rules or military justice, meant, among its other advantages, that the cost of the war could be concealed beyond all detection.”

Euphemisms are words intended to deceive. The United States is already close to drowning in them, particularly new words and terms devised, or brought to bear, to justify the American invasion of Iraq — coinages Bromwich highlights like “regime change,” “enhanced interrogation techniques,” “the global war on terrorism,” “the birth pangs of a new Middle East,” a “slight uptick in violence,” “bringing torture within the law,” “simulated drowning,” and, of course, “collateral damage,” meaning the slaughter of unarmed civilians by American troops and aircraft followed — rarely — by perfunctory apologies.

The wholesale transfer of military and intelligence functions to private, often anonymous, operatives took off under Ronald Reagan’s presidency, and accelerated greatly after 9/11 under George W. Bush and Dick Cheney. Often not well understood, however, is this:

The biggest private expansion into intelligence and other areas of government occurred under the presidency of Bill Clinton. He seems not to have had the same anti-governmental and neoconservative motives as the privatizers of both the Reagan and Bush II eras. His policies typically involved an indifference to — perhaps even an ignorance of — what was actually being done to democratic, accountable government in the name of cost-cutting and allegedly greater efficiency. According to Shorrock:

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

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

The Privatization — and Loss — of Institutional Memory

The end result is what we see today: a government hollowed out in terms of military and intelligence functions. The costs — both financial and personal — of privatization in the armed services and the intelligence community far exceed any alleged savings, and some of the consequences for democratic governance may prove irreparable.

On November 14, 2002, the New York Times published a column by William Safire entitled “You Are a Suspect” in which he revealed that DARPA had been given a $200 million budget to compile dossiers on 300 million Americans. He wrote, “Every purchase you make with a credit card, every magazine subscription you buy and medical prescription you fill, every web site you visit and every e-mail you send or receive, every bank deposit you make, every trip you book, and every event you attend — all these transactions and communications will go into what the Defense Department describes as a ‘virtual centralized grand database.’” This struck many members of Congress as too close to the practices of the Gestapo and the Stasi under German totalitarianism, and so, the following year, they voted to defund the project.

However, Congress’s action did not end the “total information awareness” program. The National Security Agency secretly decided to continue it through its private contractors. The NSA easily persuaded SAIC and Booz Allen Hamilton to carry on with what Congress had declared to be a violation of the privacy rights of the American public — for a price.

The most serious immediate consequence of the privatization of official governmental activities is the loss of institutional memory by our government’s most sensitive organizations and agencies.

This means that the CIA, the DIA, the NSA, and the other 13 agencies in the U.S. intelligence community cannot easily be reformed because their staffs have largely forgotten what they are supposed to do, or how to go about it. They have not been drilled and disciplined in the techniques, unexpected outcomes, and know-how of previous projects, successful and failed.

As numerous studies have, by now, made clear, the abject failure of the American occupation of Iraq came about in significant measure because the Department of Defense sent a remarkably privatized military filled with incompetent amateurs to Baghdad to administer the running of a defeated country. Gates believes that we are witnessing a “creeping militarization” of foreign policy — and, though this generally goes unsaid, both the military and the intelligence services have turned over far too many of their tasks to private companies and mercenaries.

Nonetheless, the current situation represents the worst of all possible worlds. Successive administrations and Congresses have made no effort to alter the CIA’s role as the president’s private army, even as we have increased its incompetence by turning over many of its functions to the private sector. We have thereby heightened the risks of war by accident, or by presidential whim, as well as of surprise attack because our government is no longer capable of accurately assessing what is going on in the world and because its intelligence agencies are so open to pressure, penetration, and manipulation of every kind."

-Chalmers Johnson ( Excerpt: "The Military-Industrial Complex It’s Much Later Than You Think," TomDispatch.com 7.28.08. Image: Military Industrial Complex: skizumberlin.wordpress.com).