-- St. Thomas Aquinas, Summa Theologica, II-2, Q 40, art. 1
War profiteering is as old as war itself, and with our passion for commerce, Americans have shown a particular aptitude for it. During the Revolutionary War, Benedict Arnold used his position as military governor of Philadelphia to shut down rival merchants. John Hancock had an interest in the progress of the war as president of the Continental Congress, but also as one of the Continental army's main provisioners.
But war is a complicated, dirty, and often urgent business, and what separates making a profit for providing a necessary service from profiteering is not always clear. Merriam Webster defines profiteering as taking "unreasonable" amounts in a time of emergency. But what's unreasonable? John D. Rockefeller financed his oil empire with profits he earned selling grain, livestock, and other commodities to the Union Army during the Civil War at inflated (but legitimate) wartime prices. J.P. Morgan notoriously bought 5,000 defective rifles for $3.50 from an arsenal in New York and resold them, unrepaired, to Federal troops in Virginia for $22.
The Morgan misadventure seems an obvious case of profiteering, but not every alleged instance is so clear-cut. Another of the so-called Robber Barons, Philip Armour, guessed correctly in the weeks before Lee's surrender that the war was headed for a swift completion. He duly sold pork futures short in New York. When the war ended and prices collapsed, he used his windfall to expand his canned ham empire. Today, free-market fans ask what harm Armour's fortune caused anyone. He was a sharp speculator, they point out, who capitalized on an honorable war that was winding down.
Popular opinion, however, doesn't seem to count victims when it comes to judging profiteers. A nation at war viscerally objects when some become rich while others are losing their lives. Anyone who rakes in the chips when the chips are down is tarred as a profiteer. Even as provisioning and post-war reconstruction has become an anguished process of competitive bids, government contracts are ever more closely matched against who awarded them, and why. In our reform-minded times, profits must be not reasonable but beyond reproach. "Ethics call for fairness, justice, and prudent behavior," said James Wall, former editor of The Christian Century magazine. "Principles of light rather than darkness. Hence transparency."
Last month, for instance, a contract awarded to extinguish and repair burning wells in Iraq's oil fields raised eyebrows inside and out of the oil industry. In Congress, the contract sparked an official investigation, and among the war's opponents, cries that there are devils in the details.
KBR's parent company Halliburton is of course Vice President Cheney's former firm, where he served as CEO from 1995 to 2000. (He has divested his stock holdings, retaining only stock options earmarked for charity, but will continue to receive six-figure deferred-compensation payments annually through 2005.) Officials there and at the Army Corps of Engineers defended the lack of competitive bidding by emphasizing the contract's urgency: oil wells were already burning in Iraq. The company had an existing security clearance, had employees in place in the region, and had already authored a contingency plan to fight oil-well fires and repair infrastructure in the event of war in Iraq. It was, spokesperson Wendy Hall told Dow Jones, "the only contractor that could commence implementing the complex contingency plan on extremely short notice."
Some critics were unconvinced by such pragmatic considerations. "These transactions have been planned for some time," said Max Sawicky, an economist at the liberal Economic Policy Institute in Washington. "There was ample time to have a real competition for this work."
Indeed, the contingency plan Halliburton submitted last fall makes it apparent that the Pentagon anticipated that the Iraqis would ignite their wells; why, common sense asks, was the project not put out to bid earlier? And if there was not time to put this job out to bid, how did the government manage to make a decision on a much larger $600 million contract to rebuild Iraq's roads, bridges, schools, and hospitals just a month later?
Halliburton, however, will still be eligible to work as a subcontractor on the USAID contract; it has been estimated that the winning bidder will subcontract up to half the value of the overall business.
Is Halliburton profiteering? It's hard on the one hand to fault the government's choice. Halliburton has been cleaning up after the Pentagon since before World War II. It was last oil-services company to do major reconstruction work in Iraq-after the last Gulf War. Why should the firm be penalized because George W. Bush hired away its CEO to be vice president?
But certainly, other firms could do the work. "Whatever Halliburton can do, other people can do," says Jason Selch, an energy analyst for Wanger Asset Management in Chicago, naming Fluor and Bechtel among U.S. firms alone. With protestors around the world repeating a refrain of "no blood for oil," choosing KBR and claiming emergency circumstances provided plenty of fodder that the truth turns out to be "blood for oil services."
Choosing another firm won't do a lot to clear up suspicions. While other possible bidders aren't as notoriously connected as Halliburton, they are similarly entrenched in the Republican-dominated defense-industry establishment. Former Secretary of State George Schultz sits on the board of Bechtel, for instance, and Defense Secretary Donald Rumsfeld is an old Bechtel hand. The non-partisan Center for Responsive Politics reports furthermore that since 1999, firms bidding for post-war contracts in Iraq have made over $3.5 million in political contributions. Sixty-six percent of that money has gone to Republicans.
(Republicans, of course, have no monopoly on taking contributions from interested parties. In less-regulated times, an earlier incarnation of KBR, Brown & Root, funded the rise to power of an obscure Congressman named Lyndon Johnson, often paying cash, in exchange for his support of billions of dollars in government contracts for everything from dams on the Lower Colorado River in Texas to military bases in Vietnam's Mekong Delta.)
"It's bad economics and, I would say, bad foreign policy," said Sawicky. Steven Kelman, professor of public management at Harvard's Kennedy School adds, "As both a matter of getting good performance and to reestablish multilateralism and internationalism, within the limits of the law, we should be awarding these contracts to the best qualified, best value provider, independent of nationality."
If, in addition, Iraqi oil revenues are used to fund the rebuilding, the picture will get worse. Selch called American administration of such funds "questionable": "If it's going to be paid for with Iraqi oil, through the oil-for-food program," he says "the UN will have to run the process." Sawicky states simply, "The Iraqi oil revenue belongs to the Iraqi people.and the revenues should not be diverted."
The outcry about the Halliburton contracts shows that many Americans feel the Bush administration implicitly created a covenant with them and the world in choosing to fight a war that will end hundreds of American lives (at minimum) and the lives of thousands of Iraqis. They trust that this action is being taken for just and ethical reasons. Cronyism--perceived or actual--in the allocation of wartime and post-war contracts severely undermines this trust.
For St. Augustine, the justness of a war depended on its ultimate goals. The Administration has said it is waging a moral war, and this claim demands public review of all current contracts in Iraq, followed by a bidding process that is competitive, open, and judicious. After the war, the world's gaze will fall on the Bush Administration's handling of rebuilding Iraq. The world will be expecting Augustine's "prosperity of peace" to be felt first foremost not by American corporations, but by the Iraqi people.