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.

Pentagon spending has totaled over $14 trillion since the start of the war in Afghanistan, with one-third to one-half of the total going to military contractors. More than half of the annual Department of Defense budget is now 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. A large portion of these contracts have gone to just five major corporations: Lockheed Martin, Boeing, General Dynamics, Raytheon, and Northrop Grumman. 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 U.S. 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.

Weapons makers have spent $2.5 billion on lobbying over the past two decades, employing, on average, over 700 lobbyists per year over the past five years. That is more than one for every member of Congress.

Key Findings 

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

  • Pentagon spending has totaled over $14 trillion since the start of the war in Afghanistan, with one-third to one-half of the total going to military contractors.
  • Defense contractors’ practices, including profiteering, fraud, waste, and corruption, have raised major concerns.

Recommendations

  • Congress should implement wartime contracting reforms.

  • 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 September 2021