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What Role Will Corporations Play in 21st Century Security?

by John Reed on November 2, 2010

 

I had the privilege of sitting in on a fascinating think session today put together by the U.S. Army focusing on future scenarios that could have serious impacts on U.S. national security in the coming decades and well, the role multinational corporations might play in those scenarios was one of the more interesting topics attendees were asked to look at.

Dubbed the Alternative Futures Symposium, the event asked mid-level officers and civilians from the U.S. Army and several other services and nations to look at what types of contingencies the U.S. may have to plan for in the event of a complete global economic collapse, the continued rise of Asia as an economic and political powerhouse and the proliferation of advanced military technology eroding the massive advantage U.S. forces have enjoyed for decades.  Their conclusions will ultimately be included in the Unified Quest program which is meant to challenge and inform the Army’s various “concepts” it uses to help shape itself to fight future wars. 

All these events were examined through the lens of current trends that are rapidly changing the world, from climate change and terrorism to demographic shifts, developments in computing technology and potential for fights over natural resources. However, one of the most interesting trends that participants were asked to consider in their debates about future threats was that of the growing power of  multinational corporations.

The Center for Strategic and International Studies’ Karen Meacham gave a presentation before before participants dove into the issues asking attendees to consider seven “revolutions” likely to occur in the coming decades and how they may shape the 21st Century security environment. One of these revolutions was the multinational corporation as an even bigger player in geopolitics than it already is.

Of the 50 largest economies in the world right now, seven are multinational corporation, according to Meacham. With this trend looking like it will continue to grow,  these corporations may become “almost equal to governments,” Meacham said. This means that, “in some cases, they need to figure out what they stand for.”

“We’re now well beyond the Westphalian” system of nation-state-centered government, Meacham added, noting the challenge to governance these corporations will present.

And the trend of non-state actors becoming more and more influential isn’t limited to corporations. In recent years, The Bill and Melinda Gates Foundation gave more grant money around the planet than the entire budget of the World Health Organization, according to Meacham. “Therefore, the influence they wield is staggering,” she said.

She ended her talk on the rise of multinational organizations by quoting Henry Kissenger (love him or hate him) as saying that governments must figure out how to balance the globalized economy and its multinationals with the traditional nation state construct.

One conference attendee raised another interesting angle to the multinational debate: Where do the loyalties of these extremely powerful corporations lie when their leadership is distributed around the globe? The attendee also raised the spectre of terrorists getting jobs in one of these corporations in order to infiltrate a country they seek to harm. (He, like most attendees, was speaking under Chatham House rules to encourage candid debate on a wide range of ideas.)

While massive companies influencing world affairs is nothing new, just look at the British East India Company or today’s energy companies, the number of new ones rising around the world today is. It’s interesting to see multinational corporations being looked at by the most powerful Army on Earth as it works to inform its future doctrine and operational concepts. Can’t wait to see the results of this session.

– John Reed

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{ 20 comments… read them below or add one }

kim November 2, 2010 at 9:10 pm

Articles like this is the most important reason I read DEFENSETECH.ORG. Incidentally, the readers' comments is the least important reason I read DEFENSETECH.ORG.

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Tom November 2, 2010 at 9:55 pm

Which companies they want to defend, there will nothing there in the near future, unless the army will learn speaking Chinese

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Matt November 2, 2010 at 10:03 pm

Excellent topic. And like with the British East India Company, there are the military and private military forces that help to defend the corporation's interest overseas. To me, China is definitely taking a page out of the old colonialism book. Look at their latest ventures in Africa or the various war zones?

One of the scenarios I have been playing in my mind is one in which a corporation's PMC/PSC would one day actually battle against a non-state actor or a nation's army? Or even another corporation's security apparatus? The corporation versus a country, or corporation versus a corporation? I have some hints as to how that would look like.

In the pre-westphalian time period, it was common to see a PMC fight a PMC. Or for a country to have hybrid armies that composed of a PMC, another country's army on loan or rented, and their own armies. It was also common for countries to use privateers and issue letters of marque and reprisal. There were all sorts of interesting scenarios during that time period.

Probably the most relevant to this discussion was the use of private industry to colonize the Americas. Captain John Smith was a contracted soldier who was tasked to defend and lead colonists in early America, by a corporation called the Virginia Company of London. http://en.wikipedia.org/wiki/John_Smith_%28explor

Another famous American figure is Frederick Burnham, contracted by the British South Africa Company to fight in Africa. He later became one of the founders of the Scouting movement. Frederick was also contracted to protect mining interests in Mexico. http://en.wikipedia.org/wiki/Frederick_Burnham

Perhaps if we want to understand the forces that will impact this proposed future that challenges the 'post-westphalian' nation state, then we should be studying the past more? I know that is where I like to go for some answers.

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@Cr4shDummy November 5, 2010 at 10:03 pm

Excellent points, but the thing with a MNC is that they transcend national borders. The Virginia Company and East India Trading company were loyal to the British Crown (primarily because of Mercantilism ). The loyalties of a MNC are ambiguous at best, but I think unequivocally they will invariably act out of self-interest. That definitely leaves room for a PMC -under the mantle of a MNC- fighting a nation or non-state actor, without the US on UN condoning or sanctioning the action.

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Thomas L. Nielsen November 3, 2010 at 2:50 am

"Where do the loyalties of these extremely powerful corporations lie when their leadership is distributed around the globe?" – Their loyalties lie with making money! The almighty dollar (or yuan, euro, whatever…..).

Regards & all,

Thomas L. Nielsen
Luxembourg

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STemplar November 3, 2010 at 3:39 am

Exactly right, which in a sense make them more trustworthy than any international organization since their central motivation is a given. You know exactly what to expect from them.

It raises the very interesting notion of countries forming alliances with corporations in order to accomplish geo political goals while side stepping normal international law and such. You need look no further than Iran's support of Hamas and Hezbollah as two NGOs financed and supported to further a nation's goals.

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Locarno November 3, 2010 at 7:33 am

Doubly relevant with more and more defense firms getting involved with what you might describe as 'outsourced military'.

I don't imagine you'll see the Wall-Mart 103rd heavy armour rolling in any time soon, but an increasing number of countries now have (For example) Lockheed Martin and BAE Systems aircraft technicians on base as the day-to-day maintainers of aircraft, to the point you'd struggle to operate without them. What happens when Country X finds Countries A,B & C are suitably pressuring these companies not to support its armed forces?

(For example, imagine replaying the debates prior to the Iraq invasion with Lockheed Martin, Ratheon et al's equipment replaced with stuff provided and serviced by Dassault, MBDA and Thales)

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Ems November 3, 2010 at 4:26 am

the big diff. is current Corps. do not have their own security forces…they operate at the discretion of the governments of the respective nations. Look at Venezuela for example..the companies there are helpless against Chave's stupidity.

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Oblat November 3, 2010 at 7:52 am

>just look at the British East India Company

The decline of the British East India company with the British empire is an ironic example. As the empire crumbled they turned to government bailouts and was just such a bailout – the Tea act that triggered the Boston Tea party and the American revolution – thereby losing Britain it's largest colony.

Most of the big American corporations wont survive the decline of the empire. There is nothing new to this, corporations die naturally every day and every day new ones spring up in China and India. Undoubtedly many will turn to US government bailouts to under the patriotic pretext of sustaining the empire. The rest will just shrink steadily under the increased global competition.

The few that will survive will either be a lot smaller or switch loyalties to the larger markets. Already many of the companies that most Americans see as "American" are overwhelmingly dominated by staff in other countries with just a veneer of marketing left in the US. The American-ness is really just a marketing gimmick.

So will we see the US military bizarrely fighting to defend Chinese commercial interests – given the recent record of supporting Iranian regional interests – it shouldn't be discounted. We are also likely to see increasing pleas by the US military for help from foreign corporations. When they say these corporations are powerful that's what they mean – they can help rescue us. They already cry out to NGOs in Afghanistan and the Chinese regarding North Korea help them out of those quagmires while desperately paying anybody and everybody to stave off the war on terror.

The decline of empires is a long tortuous affair it's not likely to be anything else this time either.

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blight November 3, 2010 at 8:03 am

Eh? The various "Intolerable Acts" were acts by the British government to get the colonists to pay for their fair share of the costs of defending the colonies in the first place. The pressing issue was the lack of franchise in Parliament, which passed the taxes on the colonies. This begs the question of whether or not any colony had representatives in Parliament at all.

The government wasn't bailing anyone out, they were doing what any fiscal conservative would do after a world war: pay for it before the interest went out of control.

At the moment American forces are implicitly fighting for Chinese interests in Afghanistan, as Chinese engineers are working on re-establishing the mining industry. However it hasn't progressed to the point of the Army being at someone else's beck and call…yet?

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falk November 3, 2010 at 10:05 am

In regards to your statement, "The few that will survive will either be a lot smaller or switch loyalties to the larger markets," I just wanted to point out the example of Haliburton which moved its base of operations to Dubai a couple years ago. In fact, I wouldn't be surprised if most of our big corporations survive in such a way. Keep in mind that just about all of our big corporations have big stakes in companies all around the world (think how manufacturing companies like Ford have a global presence but sell their cars under different brands or how all our big ibanks have subsidies or own parts of their competition in other countries). They pretty much are already global companies and only remain "American" in name (and I guess in the majority of their tax expenses).

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Scott November 3, 2010 at 11:01 am

You'd be wrong about that majority of their tax expenses part too…

Halliburton moved specifically to AVOID american tax liability and the newest wall street trend is for large corporations to run bond auctions on the open market literally issuing a bond on the moneys they have out of the country so that they can run operations inside the us without bringing the money here thereby avoiding tax liability!!

And or just see the recent spate of articles about google paying a 2% average tax rate
which cost the treasury 60 billion in lost revenue LAST YEAR

The reality is these corporations are the problem along with incipient (and insipid) globalism! every time american workers fight to gain protections or fight to get congress to pass laws that would penalize goods produced in country's with wages that undercut ours the corporations go on a blitz and talk about how we live in a FREE MARKET

But it's only free when the proposed legislation goes AGAINST their interests… Otherwise they're more than happy for things like Health Scare "reform" and "deregulation" (note on deregulation check your phone bills there is an itemized charge for "federally allowable infrastructure maintenance" Silly me I thought that's what part of the original 39.95 a month I was quoted was for… but deregulation allows these corporations to double and triple dip charging us for things that should be included in billing while receiving subsidies and or tax breaks for "maintaining vital infrastructure" which supposedly takes some of the capital burden off of state and federal funds but when people have less money to spend because they pay a higher tax rate than ANY BUSINESS ANYWHERE then have to pay double and triple padding in their bills then this money goes overseas right away and sits in a holding account avoiding tax liability thereby denying some of the revenue that was supposed to pay for the subsidies and or tax breaks which causes more tax burden on the consumer…. You get the idea…

We're in a death spiral and it's all because of very simple black and white unavoidable facts built into the basic premise of how our system operates. We have no choice but to allow a crash every 84 or so years to let the debt bombs reset or interest rates go geometric and we kill ourselves trying to Dig our way out of a hole ….

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blight November 3, 2010 at 1:30 pm

They probably remain "American" in that the name they retain was that of a company that was American at some point, with money moved around the world, investors from across the globe and perhaps corporate influences based on repeated mergers/acquisitions.

Corporations will be multinational, but the nature of multinationalness suggests divided loyalty. Will a corporation even be beholden to a nation-state agenda?

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Matt November 3, 2010 at 1:45 pm

One example of corporations using standing armies is the drug cartels in Mexico. They have folks who wear uniforms, use military type weapons, and they are tasked with defense and offensive actions against competitors. Each cartel is a company, and they are purely driven by profit and gaining or holding territory. Countries and/or the Mexican government just get in the way of the battles between these corporations/cartels.

The Chinese oil companies in places like Iraq use chinese military and local security officers. In Africa, they do the same thing.

The World Bank is another interesting one. They have a protection unit that follows the CEO and leadership around all over the world. Some folks call these guys executive protection specialists or close protection specialists. But in reality, they are a guard force that is armed and is assigned to protect the company's assets and people. Most large companies have these types of specialists.

Google is another example. In order for them to get their 'street view' stuff, they contracted with companies that protected the guys that filmed that stuff. So all the mapping done in places like Iraq or Afghanistan, was done with the help of heavily armed security specialists. Of course Google subcontracts this in order to say 'we don't use PSC's in war zones', but in reality, it is their money and product they are trying to develop.

Google's little tiff with China was very interesting to me, and this is a prime example of what the author was talking about. Corporations versus countries.

Another example is the shipping industry. There are numerous companies hiring fully armed security specialists to protect their boats against non-state actors. I even found one insurer that was trying to stand up a private navy to defend the assets of their clients. Or you have countries like Yemen who offer the services of their navy, for a price, to private industry. Lots of examples.

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Oblat November 4, 2010 at 7:22 am

American multinationals don't stick around in America because they like paying the taxes. They stay because it's worth thier while to have the head office where the customers and finance was. Both the profligate American consumer willing to sell his future for shiny consumer goods and the cash of the easy cash of the financial bubbles are not things that will last much longer.

So the answer is that the military wont have a much reduced role. There wont be companies to defend and America's overseas interests will evaporate.

Of course the navy will still be sailing around "defending the seas" from everyone except anything bigger than pirates in wooden canoes and saving itself for the return of the Imperial Japanese Fleet. The Airforce will still be chattering on about maintaining a level of air adequacy and the army will be bogged down in multiple overseas quagmires that nobody can work out the purpose of. In other words change will just mean more of the same.

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blight November 4, 2010 at 9:00 am

Well, considering multinational corporations tend to be subdivided into regional divisions anyways, there's no pressing need to have a global headquarters in the United States. A presence in the US will probably always be there, and anything owned by that particular division will be subject to the high taxes of the country-in-question. Haliburton can move world HQ to Dubai, and continue to have Haliburton North America.

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William Peterson November 3, 2010 at 9:03 am

Oh, please…
It's not going to happen, and it shouldn't!
The problem isn't with the money, it's with who we give it to, and who we take it from…
You're a huckster salesman, a pro athlete, an entertainer, or a politician?
Here, have great heaping bags of cash!
You're a working man, a teacher, a soldier, or a firefighter?
Don't be silly, you're of no value to Society!
Huh?

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blight November 3, 2010 at 11:26 am

A google search of Intolerable Acts calls it "sponsored by Lord North and passed by Parliament in 1774".

With regards to quartering troops, three different laws deal with quartering. Mutiny Act of 1765, Quartering Act of '65 and Quartering Act of '74. The '74 act; in the absence of colonies offering housing for troops enabled troops to be quartered in places other than those mentioned in the quartering act of '65 (to include occupied homes), but has no provisions for the homeowners to feed those troops. However I suspect when you have men with weapons in your house, they could probably take what they wanted.

Quartering was done by the Continental Army as well out of need, so the practice isn't exclusive to the British Army. The quartering act of '74 is part of a long chain of events. Britain concludes an expensive global war with France, and tries to offset costs in the American colonies by having the locals pay for some of it. The locals object, as taxation was passed through Parliament where they are not even represented (however, they would probably be outvoted so I suspect the point is moot). Letters and correspondence on the issue are exchanged to peaceably resolve the greivances of the colonies (to no avail). At the same time, groups like the Sons of Liberty engage in civil disobedience. The acts of the latter lead to the escalation to the full Intolerable Acts and the deployment of troops, which compounds to the perceived costs that Britain must recoup. It just snowballs from there, but it starts from a refusal to pay taxes for "a strong military".

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STemplar November 3, 2010 at 1:25 pm

Hamas and Hezbollah are terrorist orgs, but clearly more than just that. They hand out goods and services, clearly simply buying loyalty from the people, but the hearts and minds approach has allowed them to claim half of any Palestine, and essentially annex part of a sovereign nation in Lebanon.

I do agree about some CEOs but at the end of the day, any company not committed to growth and profit doesn't last long.

In regards to companies not having standing militaries, they do in fact hire them. There are a myriad of security firms, Blackwater being the most famous, but droves of ex-military SPECOPS and intel folks contracting all kinds of 'services' to 3rd world governments and really the mineral and oil companies they've signed contracts with.

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Thomas L. Nielsen November 4, 2010 at 3:00 am

"There are a myriad of security firms, Blackwater being the most famous, but droves of ex-military SPECOPS and intel folks contracting all kinds of 'services' …"

I'm reminded of something Terry Pratchett points out in "Jingo":
There are two basic problems with employing mercenaries*: One, you have to pay them to start fighting and two, unless you are very lucky, you end up having to pay them even more to stop.

Regards & all,

Thomas L. Nielsen
Luxembourg

*) And I know they like to call themselves "Security Contractors" or "Private Military Corporations" these days, but that doesn't change the fact that they are, for all intents and purposes, mercenaries.

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