The outer limits of economics
'Rolling back the boundaries of the State.' 'Too important for governments.' 'Best left to private initiative.' These are all catch phrases du jour, indeed de la decade. Nagged by such a seductive and generally unchallenged philosophy, governments across the world are pulling out of transport, water supply and electricity.
Plans are afoot, indeed apace, to privatize education and welfare. In some areas, private security forces are taking over from the police. Even imprisonment, one of the most basic reserve powers of government, is now being subcontracted to private companies, some of which are floating their less than desirable residences as Reits. It can only be a matter of time before someone has the bright idea of injecting private capital into death row.
So what does that leave for the state? Only the military and diplomatic services. But these are surely too important to leave to government. Former commerce secretary Ron Brown was well on the way. If he didn't quite privatize, he certainly commercialized diplomacy, taking a plane load of corporate presidents and VPs with him on all his extensive travels. Perhaps Niri should bid to replace the State Department. What better ambassadors than IROs - skilled at smoothing fears and ruffled feathers and putting a good spin on the most dire results.
Just look at the heart-stopping swoop on Wall Street when Japanese prime minister Ryutaro Hashimoto merely hinted that Tokyo would dump its US Inc stock. Wasn't this a prima facie case for investor relations skills to be deployed in diplomacy? What are IROs for if not to keep their doubting investors happy?
But sometimes even diplomacy fails. Then, according to Carl Von Clausewitz, it must be continued by other means - warfare. Now if you can't trust an institution to run a welfare system or a train service, how on earth can you sleep at night with politicians and civil servants running the military?
Instead of all those nauseatingly fatuous books about applying the military secrets of Attila the Hun or Sun Tze to business, let's have a clap for the invisible hand of the market and let business tell the generals how to run things properly. After all, it was Wall Street, not the Pentagon, that won the Cold War. Just ask the Journal. Doesn't the idea of irresponsible bureaucrats being able to start World War Three send frissons of cold fear up your spine? Can you imagine a surer road to defeat?
There are even good historical precedents. The American revolution was to a large extent fought by hired troops. On the one side, the British hired Hessians, who admittedly would have been better backing a carpet; but redeemingly for the argument, the most successful contingents of the revolutionary forces were French conscripts and mercenaries whose commitment to liberty and independence was as dubious as their masters'. After all, the French themselves were shortly to chop off King Louis's head for his manifestly insufficient enthusiasm for the freedom the American colonists were arrogating to themselves.
Even now, the most frightening British troops are the Ghurkas, who are by any definition mercenaries. Or look at the French foreign legion, which showed immense courage and fortitude while fighting for both sides at the same time in World War Two.
Effectiveness apart, modern warfare is inherently anti-capitalist. With the inspired exception of the neutron bomb, modern war destroys property on a huge scale. In the good old days, as any fan of Patrick O'Brian's Aubrey-Maturin tales knows, military men had every incentive to minimize property damage because they stood to benefit from any booty or prizes they could capture. They could also be relied upon to curb profligacy in their use of weaponry since they had to pay for the ammunition.
At present we have the worst of all possible worlds. We have a military that is often gadget happy because a rapidly declining number of major armaments suppliers are eager to produce new and destructive toys for them; and all are confident that they have unlimited access to the taxpayers' pockets, no matter what other programs are slashed. As for the individual servicemen and women, they get pretty much the same pay whether they fight or not.
What we need is some market discipline. Give the troops an incentive to fight and the Lockheed-Northrops and Boeing-McDonnells an incentive to economize. Of course, as with other privatized industries, we need rules to enforce competition. The marine corps, air force, navy and army could be split off, and perhaps tender for each operation. Maybe the conglomerates could tender for the Pentagon. This could actually reduce wars since a successful bidder might find margins seriously reduced if they actually had to get involved in messy belligerence, but would have every incentive to win quickly and cleanly once war started.
This businesslike approach might look somewhat far-fetched, but so, a decade ago, did what is now happening to utilities, health services and prisons. Companies like Executive Outcomes in Africa have already pioneered combined operations between the market and the battlefield. In the end, it surely is better to have the unerring if invisible hand of the market directing this most important aspect of modern life, than the all-too-visibly anfractuous hands of government.
The Speculator