#002 The Business of War

“The sinews of war, unlimited money”

The economic dimensions of conflict and war represent a Gordian knot of sorts - a nexus of power, corruption, neoliberal ideology, and ideas about what is considered legal and illegal. In this short essay I hope to untangle some of these complexities, beginning with the circular relationship between legal and illegal economies. I’ll then tease out the close rapport that neoliberalism and militarism share, with particular reference to the privatisation of militaries and corporate media’s role in the naturalisation of war’s necessity.

Governments are intensifying the allocation of national capital toward militaries and conflict, drawing from funds that could otherwise be spent on the wellbeing of communities, a choice that is ultimately reproducing and nurturing structural violence and gross inequality both within and between states. World government military spending exceeded $2 trillion for the first time in 2021¹, while it is estimated by some that just 10 percent of this could eliminate global poverty.

REVOLVING DOOR: IL/LEGAL ECONOMIES

Anthropologist Carolyn Nordstrom² poignantly captures the visible and hidden realities of war in the twenty-first century. Through ethnographic research of epicentres of political violence, she walks her readers through the vast extra-legal networks that fuel war and economic empires, revealing that the rigid dichotomy between legal and illegal is something of a fallacy. Incomprehensible sums of money stream through channels that sit beyond what is accepted as legal and yet, flow close enough to trickle through the banks (pun absolutely intended) and profoundly shape the political and economic dynamics of the world. Just as swiftly, money that began its journey in the formal economy can drift over to muddy, illicit waters. The way that money circulates under and over and through the world is really the tango of the informal and formal; the legal and illegal. Best performed, or particularly evident when exploring the economic dimensions of warfare.

The Stockholm International Peace Research Institute (SIPRI) attributes corruption in the arms trade, just one aspect of warfare, to about 40% of all corrupt financial transactions globally³. The Panama Papers helped to expose the tax-evading tendencies of major arms manufacturers and international defence companies – entities that are employed legally by state powers and authorities. As it turns out, many of the head offices and subsidiaries of these arms manufacturers are sittin’ pretty in known tax havens and secrecy jurisdictions – Panama, Delaware, the Netherlands, and the Cayman Islands (to name a handful). Lockheed Martin is the largest of them and is dished out government contracts from at least fifty countries. It is quite likely that there has been a Lockheed Martin V Lockheed Martin supplied war. But they are not limited to arms as per se - they supply anything from fighter jets, to interrogators in Guantanamo, to nuclear waste disposal services. In 2020 alone, they received USD 72.9 billion from the US Department of Defence⁴. With a head office in Delaware and known holdings in a slew of other tax havens, Lockheed Martin highlights the well-trodden path from the legal to the illegal. From the pockets of the taxpayer, to the government, to the arms manufacturer through private government contracts, to the offshore banking network through capital flight and profit-shifting. Charting a slightly more unambiguous and brazen journey from legal to illegal is the case of yet another arms company featured in the Panama Papers – Finmeccanica. The Italian Government directly owns thirty percent.

Once dollars enter the world outside of legal channels, they can become involved in a slew of illicit activities which support nations in times of conflict – trade in unregistered diamonds, smuggling high-value seafood products, bribing government officials, and so on. Eventually, most of the cash finds a way back into the formal economy. The United Nations Office on Drugs and Crime estimates that anywhere between $800 billion to $2 trillion of dirty cash is “washed” through the global economy every year⁵. Accountants, attorneys, notaries, bankers, and real estate brokers form the foundation of this bridge. From prominent banks in the City of London to cryptocurrency entrepreneurs in North Korea, money laundering is ubiquitous. Legitimate business owners and bankers launder cash, and employees of legitimate companies conceal illicit operations. These kinds of operations are glamorised in the media. Ozark. The Wire. The Laundromat. The Wolf of Wall Street. Narcos. Etc.

Governments rarely acknowledge that income earned in the shadow economy can positively affect the formal economy by way of raising consumer spending, general economic growth, and revenues from indirect taxes. But it most definitely does. Cash flow from illicit networks to formal institutions is particularly significant in bolstering the economy during periods of conflict and war – when industries collapse, national currencies are shunned, trade routes become defunct, and communication systems crumble. War is also ridiculously expensive. Nordstrom suggests that natural resources become the “hard currencies” of choice to raise much-needed capital. Interestingly, but perhaps self-evidently, nations well-endowed with natural resources are four times more likely to be engaged in political conflict than states that do not enjoy such abundance. The Persian Gulf War and the recent conflict in the South China Sea were deeply connected to oil. Civil wars in Angola, the Democratic Republic of Congo, and Liberia revolved around high-value resources like diamonds, gold, minerals, and timber. The Cod Wars saw tensions rise between the UK and Iceland over fishing rights. Fighting between India and Pakistan over Kashmir concerned access to water.

A MATCH MADE IN HEAVEN: NEOLIBERALISM AND MILITARISM

Within academic circles, there is much interesting debate enfolding the cause of the initial outbreak of war. Individual profit-seeking and funding opportunities are described as the “greed” side of the argument, while group identities combined with political concerns like ethnic discrimination and inequality constitute the “grievance” camp⁶. Those partial to the greed argument might say that war and conflict are organising principles of society in the sense that they are mechanisms that produce poverty and inequality, enabling the few to reap the rewards. Those reasoning grievance might say that the actual root of war lies in poverty and inequality. In a sense, the grievance and greed debate is a self-fulfilling, constantly spinning prophecy. Whichever comes first aggravates or enacts the other. Inequality leads to conflict, and conflict leads to inequality.

The trend toward a neoliberal global economy and the prevalence of militaries and militarism globally are often treated as separate phenomena. But are they? Just as fire demands oxygen, neoliberalism requires the ongoing privatisation and commodification of public goods, and the constant transnational movement of commodities and profits. Its thirst for new fields of capital accumulation and growth has seen domains of all kinds transferred from the people to the few. Even the domain of warfare. German sociologist Max Weber defines a state as being a “human community that (successfully) claims the monopoly of the legitimate use of physical force within a given territory”. Within this context, does neoliberalism’s desire for smaller state structures then relate to the attrition of their monopoly on violence? Perhaps one of the most visible indicators of this marriage between neoliberalism and militarism is the existence and proliferation of private military companies. In this sense, the movement toward privatisation has directly played a role in the rise of an industry comprised of paid military experts, mercenaries, and the above-mentioned weapons manufacturers.

Neoliberalism has provided a “philosophical, political and economic justification for overthrowing the bureaucratic but formally accountable form of warfare conducted by a state standing military” in favour of services provided by the private military industry. The widespread use of private contractors and sub-contracting has created an absolute mess whereby oversight, accountability, and reliable information are seriously lacking. Where there are large corporations manufacturing arms, there will be environments exploited to dig up raw materials to produce those arms, and there will be people exploited to use those arms against others. The elite will reap the benefits of all this destruction and oppression, probably from afar; while everyday people will be left to deal with the mess it creates. Directly, but also indirectly through their taxpaying dollars. Neoliberalism and militarism are dangerously capable of producing and perpetuating structural inequalities, which ultimately increases the potential for further conflict and war (read: profit).

Another instance of neoliberalism and militarism’s partnership can be found in the way that governments and media have spectacularly naturalised and justified the need for war. Some see the Military-Industrial-Complex as the siphoning of public money into private hands under the guise of national security. But security from what?

Judith Butler⁷ explains that the media’s portrayal of armed conflict is integral to how the West prosecutes their wars. Globally, media outlets are owned and dominated by a few powerful elites. With their financial and business success, they enjoy political power and back politicians by conveying messages that might help to justify military intervention or wars as necessary for “national security” or allude to a government’s concern with human rights. They might invoke patriotism, and lean heavily into notions of ethnocentrism and ideas about the other. The media have characterised many recent conflicts as ethnic and cultural conflicts based on old enmities and aggressions, however, Butler argues that this narrow focus on ethnic tensions and religious discord masks economic factors, such as the structural class inequalities that neoliberal economies produce. In harnessing the media’s power to feed people’s fears about national security and concerns for human rights, governments create an opportunity for themselves to appease and deal with those fears. Swollen defence budgets rise each year, absorbing resources that could instead be spent on education, healthcare, welfare, and other democratic institutions. While economies of violence are a source of power and capital for the elite, they are also sources of employment for proletariat households. So often, we tend to see governments waving the job creation flag around when military spending is bumped.

The media does not just serve to justify, rationalise and normalise, but also romanticise. The experiences of both the architects of war and ordinary people are deleted from media accounts and replaced with gallant and exciting stories about soldiers, weaponry, and battles. In Australia, ANZAC Day represents just one of the ways in which the government has been systematically militarising the nation’s history and attaching a loaded narrative that combines Australian history and identity with current Australian foreign policy. In America, the Department of Defence has its very own Entertainment Media Unit that works alongside Hollywood to ensure that military activities and ethics maintain a certain public image. Not only are films used to romanticise US imperialism, but they play an important part in the recruitment process whereby young adults in particular become encapsulated by incredibly glamorised notions of bravery, patriotism, and duty.

Financing the military and generating strong ideological support for it amongst constituents has become a crucial task for the State and media.

War is an opportunity. Shadow economies thrive in the unstable political and social contexts surrounding conflict because the state is distracted and thrown into chaos, leaving little resources for dismantling crime and corruption. While a large proportion of cross-border trade in small arms is illegal but highly profitable for manufacturers, dealers, brokers, shippers, and financiers; this illegal activity is also a robust way for poorer countries to earn “hard currency” and repay foreign debt (which is another form of austerity and structural adjustment symptomatic of neoliberalism’s spread). It is worthwhile to distinguish between people who participate for profit and power, and those who are either coerced to work or have no other choice. Sorensen⁴ differentiates between everyday people's small-scale activities or "survival strategies" and illegal economic activity by governments or large-scale organised groups.

As global military spending rises year after year, governments allocate fewer resources to public goods and democratic institutions. Harvey⁵ asks readers to reflect on this – in whose interest is it that state authorities take a neoliberal stance to economic policy, and in what ways have those interests used neoliberalism to further their own agendas. As many have demonstrated, war is ensnared in struggles over the crafting of economic empires, both legal and illegal. It is supported by multi-trillion-dollar financial networks. Entangling many, rewarding the few.

¹ https://www.sipri.org/media/press-release/2022/world-military-expenditure-passes-2-trillion-first-time

² Global Outlaws: Crime, Money and Power in the Contemporary World by Carolyn Nordstrom.

³ Armaments, Disarmament and International Security by Feinstein, A; Holden, P; and Pace, B.

⁴The Shadow Economy, War and State Building: Social Transformation and Re-stratification in an Illiberal Economy by Sörensen, J.

⁵Neoliberalism as creative destruction by Harvey, D.