The Growth of the “Camo Economy” and the Commercialization of the Post-9/11 Wars

Summary of Study

Bottom line: The privatization and commercialization of foreign policy objectives through military contractors has led to increased government costs because contractors lack competitive pressures to reduce the prices they charge the government. Military contractors also distort labor markets. These hidden costs of the "Camo Economy" must be part of any debate about the consequences of U.S. intervention in the 21st century.

Military spending has grown rapidly since September 11, 2001 in line with the use of military contractors. In 2019, the Pentagon spent $370 billion on contracting -- 164% more than in 2001 -- making up more than half of the total defense-related discretionary spending. Over that period, contractor spending increased about 20 percent more than personnel spending. Expensive military contractors have led to the War on Terror costing American taxpayers over $6.4 trillion.

This commercialization of U.S. foreign policy through increased military contractors is known as the Camo Economy because it hides the true financial and human costs of America’s post-9/11 wars. Consider that in 2019, there were 53,000 U.S. contractors compared to 35,000 U.S. troops in the Middle East. Since 2001, an estimated 8,000 U.S. contractors have died, in addition to around 7,000 U.S. troops.

The Camo Economy has grown due to three main drivers:

  • Ideological drivers: Neoliberalism and the promise of cost savings through competition.
  • Political drivers: Camouflaging the level of deployment and the number of deaths.
  • Economic drivers: Excess supply creates its own demand.

In contrast to popular opinion, military contractor firms do not face the same competitive pressures as the private market for the following reasons: the nature of the contracts, natural and de facto monopolies, and the profitability of contracting that burdens contracts with bureaucratic waste.

The extreme profitability of military contractors distorts labor markets because defense company giants can afford to offer dramatically higher wages than elsewhere in the economy. This misallocation of capital contributes to war profiteering.

Reforms needed to reform the Camo Economy include: reducing military spending overall, decreasing contracting as a percentage of military spending, and refashioning the contracting process to reduce waste, excessive profits, and labor demand by contractors. Labor demand from other economic sectors that have a crossover with military and contractor labor must also increase. 

Read the full report HERE

Feature Charticle

DoD Contracts, 2001–2019

Watson Institute

Findings:

  • Military spending has grown rapidly since September 11, 2001 in-line with the use of military contractors. 
  • In 2019, the Pentagon spent $370 billion on contracting -- 164% more than in 2001 -- making up more than half of the total defense-related discretionary spending.
  • The privatization and commercialization of foreign policy objectives through military contractors -- a.k.a., the "Camo Economy" -- has led to increased government costs because contractors lack competitive pressures to reduce the prices they charge the government.
  • These hidden costs of the Camo Economy must be part of any debate about the consequences of U.S. intervention in the 21st century. 

Read the full report HERE