Thanks to Snowden, we now know that BAH, a firm that draws 99 percent of its $5.76 billion annual revenues from government contracts, was one of the primary deciders of the Deep State. In that role, it was in a position to perpetuate and increase its profits by perpetuating and broadening the war on terror.
Deep State Proclaims Diseconomies to Scale
Hungry dogs are famous for believing only in meat.
BAH specifically shilled and lobbied for a cyberwar program to “re-engineer the Internet” to eliminate any vestige of privacy you might enjoy. As BAH puts it, the firm is oriented to “improving public safety with analytics.” That included writing speeches for politicians—BAH quite literally put words in their mouths. Talk about muppets.
BAH’s EBITA of $529 million pales compared to some of the other big military contractors such as United Technologies, Raytheon, General Dynamics, Northrop Grumman, and Lockheed Martin. Still, Booz Allen Hamilton contributes its share of employees to the top one-tenth of the 1 percent. Public filing show that five of its executives earned $3.5 million or more in 2013, topped by the $4,659,255 paid to John M. McConnell, executive vice president and former NSA director. McConnell was also the director of national intelligence under former president George W. Bush. He worked for BAH before taking that job and returned to the firm after leaving it. The company website reports that McConnell is responsible for its “rapidly expanding cyber business.”
Talk about crony capitalism. As commentator Glenn Greenwald put it in a March 2010 Salon article, “McConnell’s behavior is the classic never-ending ‘revolving door’ syndrome: public officials serve private interests while in office and are then lavishly rewarded by those same interests once they leave.”15 Greenwald pointed out that McConnell’s main role at Booz Allen is the same as it was in public office: outsourcing US intelligence and surveillance to private corporations. These private companies’ activities are even more shielded than normal from all accountability and oversight, while they generate massive profit at the expense of the public.
McConnell has been a straight-out advocate of authoritarian control over the Internet and cyberspace. He wants the US government and the for-profit Deep State firms to be able to monitor and control every message and transaction that goes over the Internet anywhere in the world.
In strict logic, McConnell’s proposed crackdown on cyberspace reflects the plunging scale at which violence can be organized in the Information Age. Unlike the situation through most of the modern period, where violence was almost entirely monopolized by nation states operating at ever-larger scale, violence in the twenty-first century can, in principle, be organized even at the individual level.
This means there is almost an infinite set of potential enemies or “terrorists” involving every living human in manifold combinations with every other individual.
In the paranoid world of the Deep State, anyone could be an enemy; indeed, as you learn anew whenever you go through the screening process to board an airplane, everyone is an enemy until proven otherwise in real time. You could be conspiring with one or more of 2,500 passengers with whom you once took a cruise to disable a utility network. That’s ridiculous, of course. But they won’t take your word for it.
And that makes for a huge problem. Quite apart from the usual difficulties that stand in the way of proving a negative, the ambition on the part of the Deep State to monitor and control every message and transaction on earth underscores the growing diseconomies inherent in a government attempting to control an economy at a continent-wide scale. Speaking for the Deep State, McConnell warns that an enemy could disrupt America’s financial and accounting transactions, equities and bond markets, and even retail commerce, resulting in chaos. US power grids, transportation, water-filtration systems, and telecommunications are also at risk.
A moment’s reflection shows that these vulnerabilities highlighted by McConnell reflect falling returns to the architecture of those large-scale systems. As Amory and Hunter Lovins detailed in their 1982 book, Brittle Power, a highly centralized energy-distribution system for electricity, oil, gas, and so on is vulnerable in the way that a distributed, decentralized system would not be.16 Clearly, the answer is to reconfigure the highly centralized systems’ architecture into a less vulnerable decentralized system.
If operating an economy on a continent-wide basis requires that an all-powerful state monitor every trace of human life on a real-time basis, then the cost and complexity this entails will inevitably drive down the scale at which economies function. Or to put the same conclusion in other words, the Deep State version of the command economy is bound to fail.
The attempt to hitch an evermore complex economy to a life-support system comprising serial asset bubbles in combination with politicians, a.k.a. Muppets, spending trillions upon trillions out of an empty pocket will end in tears. Equally, as in the last days of Rome, fighting expensive and pointless wars may enrich Deep State power, but it does little or nothing to enhance US security or long-term prosperity.
Taking the long view, the trashing of the Constitution by a Deep State desperate to increase national security funding should be viewed as a risk that accompanies the passing of an old order. As you read the news, it brims with stories that hint of the end of the American imperium. Typically, hegemonic systems collapse first at the periphery. That is happening now in Argentina, Venezuela, Thailand, Ukraine, Egypt, Libya, Yemen, Syria, Turkey, Greece, and throughout the Middle East. And the governments of Southern Europe are also bankrupt. As the terminal crisis moves from periphery to the center, all bets will be off.
Notes
1 Now published in book form: Lofgren, Mike, The Deep State: The Fall of the Constitution and the Rise of a Shadow Government (New York: Viking, 2016).
2 See “Ex-Official Warned against Testifying on NSA Programs,” Washington Times, January 11, 2006.
3 http://www.zerohedge.com/contributed/2014-03-25/quote-chair-senate-intelligence-committee-proves-intelligence-agencies-are-co.
4 Halsey, Ashley, III, “Billions Needed to Upgrade America’s Leaky Water Infrastructure,” Washington Post, http://www.washingtonpost.com/local/billions-needed-to-upgrade-americas-leaky-water-infrastructure/2011/12/22/gIQAdsE0WP_story.html.
5 http://www.nytimes.com/2007/07/26/world/middleeast/26reconstruct.html?_r=0.
6 Olson, Mancur, The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities (New Haven, CT: Yale University Press, 1982).
7 Olson, Logic of Collective Action, 49–50.
8 http://www.forbes.com/global/1999/0222/0204077a.html.
9 https://www.quora.com/Why-does-military-equipment-cost-so-much-compared-to-comparable-civilian-equipment.
10 See Marx, Karl, and Frederick Engels, The Communist Manifesto (Moscow: Progress Publishers, 1969), first published 1848, trans. Samuel Moore in cooperation with Frederick Engels, 1888; ch. 1: Bourgeois and Proletarians, 2.
11 Rankka, Maria, et al., “We Shouldn’t Take the ‘World’ Out of the ‘World Wide Web,’” Financial Times, March 27, 2014, 8.
12 Ibid.
13 See https://www.equitymaster.com/dailyreckoning/detail.asp?date=01/23/2013&story=8&title=Is-inequality-holding-back-recovery.
14 http://www.forbes.com/sites/phildemuth/2013/11/25/are-you-rich-enough-the-terrible-tragedy-of-income-inequality-among-the-1/#41589a4f1bb1.
15 Greenwald, Glenn, “Mike McConnell, the WashPost & the Dangers of Sleazy Corporatism: A Former Bush Director Uses the Washington Post to Advocate Dangerous Policies He Would Personally Profit From,” Salon, March 29, 2010, http://www.salon.com/2010/03/29/mcconnell_3/.
16 Lovins, Amory B., and L. Hunter Lovins, Brittle Power: Energy Strategy for National Security (Lawrence, MA: Brick House, 1982).
Chapter Fourteen
The Domino Effect
Crony Capitalism, Diminishing Returns, and the Theft of Middle-Class Wealth
What are these arguments? They are the arguments that kings have made fo
r enslaving the people in all ages of the world . . . the same old serpent that says you work and I eat, you toil and I will enjoy the fruits of it.
—Abraham Lincoln
A few months ago, I got a rare tutorial on what ails America from a fellow passenger on a Delta flight from Atlanta to Palm Beach. It is not usual that economic concepts can be spotted out the window from ten thousand feet. But it was a clear night with a bright moon, and I knew exactly to what the anonymous expert referred. The network of irrigation canals that crisscross Southern and Central Florida is well known to anyone who lives there. Such a canal crosses the back boundary of my property. Other than taking care that my wife’s Pomeranian doesn’t dive in to swim with the alligators, I seldom give it much attention.
On this particular evening, however, we were too close to landing for me to dig through the book bag for another read. I had just finished Every Bitter Thing, a dark novel by the late Leighton Gage, so I was already ruminating about corruption and injustice, but with attention to spare for the comments of my seatmate, a civil engineer traveling to Palm Beach with an eye to landing a lucrative contract with the South Florida Water Management District (SFWMD).
With about 2,000 miles of canals, another 2,800 miles of levees or berms, nearly 70 pump stations and more than 650 water control structures and 700 culverts, SFWMD has a lot of expensive infrastructure to maintain. And they are 50/50 partners with the federal government in a $20-billion, thirty-year project to rework the whole water infrastructure of South Florida.
As we discussed his ambitions, I asked the engineer to educate me on the purpose of the ubiquitous canals. I expected him to spout some politically correct assurances about protecting and restoring ecosystems. But he didn’t.
“Oh, that’s easy,” he said. “They are part of a gigantic subsidy to sugar farmers.”
I was taken aback. As Emerson reminds us in his “Essay on Compensation,” quoting Edmund Burke, “No man had ever a point of pride that was not injurious to him.” Or as my father preferred to put it, “Every point of pride is a point of weakness.”
I confess: I have tended to pride myself on mindfulness and a sometimes-acute ability to observe what others miss. But here I was clearly in a daze. Having grown up in Maryland, where the landscape had not changed appreciably since my ancestors arrived there in the seventeenth century, I was simply taking solid ground for granted, unaware that my house in Wellington, and indeed, the whole neighborhood where I live, are sitting on ground reclaimed from the Everglades. Bedding down not fifty yards from an irrigation canal, I should have realized that I was an interloper living on former swampland.
After all, I had read a number of Carl Hiaasen novels some years ago, beginning with Strip Tease, which I received as a present from the lovely Morgan Fairchild, an intelligent woman with whom I used to pal around. The opposite of a “dumb blonde,” Morgan was, and probably still is, a keen fan of mystery novels and Hiaasen in particular. This was years before I moved to Florida. Now that I am installed here, I can see that some of Hiaasen’s stock characters—the corrupt congressman, murderous political fixers and lobbyists, and yes, greedy sugar barons who despoil the environment—are more true to life than I imagined on first reading.
Obviously, I must have rushed my reading of Strip Tease, or I would have been less taken aback to be reminded that the true stories of the great rip-offs in twenty-first-century America are indeed stranger than fiction. And so simple, as seen by an expert in water infrastructure. Not so simple, as seen out the back window by the typical Florida homeowner. I may not share the same perspective as the “typical Florida homeowner,” but immediately when the engineer told me the irrigation canal in my backyard was part of a sweet deal to plutocrats in the sugar industry, I saw some familiar landscape in a wholly new light.
Further research showed that the expected, politically correct assurance that South Florida’s massive water projects actually are about restoring ecosystems would have been marginally true but misleading. The tens of billions now to be spent are all about restoring damage done by previous water projects, particularly by sugar farming that only became possible because of massive civil engineering boondoggles undertaken at public expense.
I should perhaps explain that heretofore, I was not entirely uninformed about the unpalatable antics of Sugar Daddies in profiting at our expense through politics. But I was only aware in a limited accounting sense. I had known since my lost youth as a campaigner for the forgotten taxpayer in Washington that sugar farmers pocket some of the most lavish subsidies that crony capitalism affords. On several occasions, my colleagues and I at the National Taxpayers Union had tried to forward legislative proposals to roll back the annual tribute paid to the sugar barons. We did not try very hard, however, as we soon found this was impossible. The sweet deal for Sugar Daddies was one of the more sacred line items of the federal budget.
Perhaps because real life members of Congress from both parties, like the fictional Congressman Dilbeck is in Strip Tease, were showered with contributions from sugar barons, it was literally unimaginable that Congress would curtail the flow of money from your pocket to theirs. According to the Audobon Society, Big Sugar donated more money to politicians and political parties than General Motors. (And look at all the billions GM got back on their political investments.) Even though it does not make the headlines, Big Sugar has done as well or better. In December 2013, the Washington Post quoted a leading lobbyist: “The sugar guys win votes because they are better at politics than anyone else.” Note the way the system works: the game is won not by those who are better at doing business, or serving consumers, but by those who are “better at politics than anyone else.”1
I was well aware that the sugar barons had succeeded through politics in requiring you to pay two to three times the world price for sugar. In fact, if you know anything about commodity trading, you know there are two different futures markets for sugar: World Sugar No. 11 and US Sugar No. 16. There is no chemical difference between the two, but there is a price discrepancy—a result of fat subsidies and a tariff program that supports US sugar farmers.
A sweet deal for them, if not for you. The Washington Post reports that government and academic studies have estimated that elevated prices cost food makers and consumers at least $1.9 billion a year. A lowball estimate.
That much I had known for years. What I had not fully realized until I talked to the anonymous water engineer, was that the Sugar Daddies did not stop short at ripping off you and other taxpayers and consumers for a couple of billion dollars a year. Their sights were set much higher. In fact, the whole landscape of South Florida, with its thousands of miles of canals and levees is an expensive monument to the triumph of crony capitalism. Even though the US climate is not well suited for growing sugar—and it’s cheaper to do so in countries like Brazil and India that have better climates for sugar cultivation—the US government provides a lucrative price for US sugar producers, while limiting imports.2
Taxpayer subsidies were an essential prerequisite for the launch of the Florida sugar industry in the first place. It got its start early in the twentieth century courtesy of Everglades Drainage District, a tax-funded initiative of Governor Napoleon Bonaparte Broward, who promised “to drain that abominable pestilence-ridden swamp” for agricultural use.3 As you may infer from Governor Broward’s comment, it dates from a time before the Democratic Party was in thrall to environmentalism, a long time ago—1904.
In those days, sugar farming in Florida was confined to small plots of dry land on the southernmost tip of the Florida Peninsula. A few hardy pioneers planted cane in Flamingo on Cape Sable, an area made famous in the late nineteenth century for its hellish infestation of insects. (Naturalist Leverett White Brownell reported that he had seen an oil lamp in Flamingo extinguished by a cloud of mosquitoes.) By comparison, the sugar farming farther north on Florida’s west coast seemed almost civilized.
The 1910 census reported that 144 people were living in th
e southwest communities of Everglades Township and Chokoloskee Island, in Collier County near Naples, where they primarily engaged in labor-intensive farming of sugarcane. But even the most adept farmers had to fish and hunt to make a living. In those hardscrabble conditions, there was no sugar lobby any more than there was an asparagus lobby or an eggplant lobby—just small farmers trying to scratch out a living.
Yet even when sugarcane production in the United States was negligible, the sugar beet lobby was busy rigging markets, with mischievous effects, at the end of the nineteenth century and early in the twentieth.
It is a little known fact that Cuba would have become a US state in the wake of the Spanish-American War if not for the fierce opposition of Western sugar beet farmers. Cuba had become the chief sugar producer in the world after 1860. Following the Spanish-American War, the Treaty of Paris assumed the United States would occupy Cuba. As a result of US occupation, tariffs on Cuban sugar were reduced by 52 percent. This exposed Western sugar beet farmers to competition, to which they proved predictably allergic. Not to worry: Senator Henry Teller of Colorado had proposed and enacted the Teller Amendment prohibiting the annexation of Cuba, out of fear that annexation would open the inefficient US sugar market to competition.4
Teller’s scheme was only partly successful. As the twentieth century unfolded, Americans invested in Cuban sugar production. By 1920, there were ninety-six Cuban sugar refineries, sixty-two of which were owned by Americans. Up to three-quarters of Cuban sugar was shipped to the United States, and with significant US ownership, Cuban sugar was soon exempted from tariffs. Even after the Great Depression revived protectionism, the infamous Smoot-Hawley Tariff imposed only a 14 percent rate for sugar, compared with an average of 69 percent for all agricultural products.
The Breaking Point Page 27