Watson Institute for International and Public Affairs
Costs of War

Corporate Power, Profiteering, and the “Camo Economy”

Large defense contractors have played a central role in fighting the post-9/11 wars. They have provided workers who have engaged in direct combat and provided supplies, logistical services, and arms to coalition forces and the new Iraqi and Afghan governments. Private contracting has grown to such a level that, by 2011, there were more private contract employees involved in the wars in Iraq and Afghanistan than uniformed military personnel.  By 2019, the ratio of contractors to troops had grown to 1.5:1, or 50% more contractors than troops in the U.S. Central Command region that includes Iraq and Afghanistan.

More than half of the Department of Defense budget now is spent on military contractors, and payments to contractors have risen more than 164% since 2001, from about $140 billion in 2001 to about $370 billion in 2019.  Military contracting can be called the “Camo Economy” because it camouflages from public view the full costs of the wars both in human and economic terms — the number of contractors employed, injured, and killed is not transparent, nor is there detailed information on the dollars flowing from the Pentagon through prime contractors and many layers of sub-contractors.

While billions of dollars are spent on DoD-funded contracts in Iraq and Afghanistan, many of the individuals working for those contractors and their sub-contractors receive extremely low pay while working long hours in bad work environments with minimal labor and legal protections. More than half of the people working under US contracts are either “Host Country Nationals” or “Third Country Nationals” – the latter is the term used for migrant laborers who often face the worst exploitation.

Critics have raised major economic and security concerns including the concentration of defense contracts among just a handful of large firms, exorbitant prices for goods and services, fraudulent contracts, and the “revolving door” between the large defense contractors and government, such as that between Halliburton and the Bush administration.

The growth of private contracting has increased not only in the military, but also in the Central Intelligence Agency (CIA), National Security Agency (NSA), and the Department of Homeland Security (DHS), where private contract employees outnumber government employees in United States intelligence operations.

Defense contractors have also played a significant role in arms sales to the Iraqi government. Those sales put a budgetary strain on Iraq when it has yet to restore important services disrupted by the war. Significant numbers of those arms have also since been diverted to the Islamic State or otherwise misused.


Key Findings 

  • The post-9/11 wars have caused military contracts to increase to their highest levels since World War II.

  • Outsourcing of intelligence is so pervasive that there are now more contract than government employees working in the intelligence community.

  • Defense contractors’ practices, including profiteering, fraud, waste, and corruption, have raised major concerns, as has Iraq’s potential misuse of newly purchased arms.

Recommendations

  • Congress should continue to implement wartime contracting reforms passed as part of the 2013 National Defense Authorization Act.

  • Through its Defense Contract Audit agency, the Department of Defense should continue to assess whether contract costs are lawful and reasonable.

  • The Pentagon should fix its accounting procedures so that it can pass an audit. 

(Page updated as of July 2021)