Private military companies are entrepreneurial,pro fiting from land wars in Afghanistan, Iraq, and Syria aswell as Somali piracy in the Indian Ocean. Are private militarycompanies dogs of war or pussycats of peace?
This industry dates back to thousands of years ago, is visiblein TV news, is global in nature, and has annual sales of $100billion. Yet, participants do not even agree on how to label it,and most outsiders are clueless about its entrepre-neurial natureand ethical dilemma. So, what industry is this? Many journalistsand scholars call it the “private mili-tary industry.” Others labelit the “private security industry.” A leading British industryassociation calls itself the British Association of PrivateSecurity Companies (BAPSC). A leading American industry associationnames itself the International Peace Operations Association (IPOA)and has coined such postmodern labels as the “peace and sta-bilityindustry” and the “peace operations industry.” For compositionalsimplicity, in this case, we call this industry “private militaryindustry” to emphasize its twin nature of private and military.Companies in this industry are thus called “private militarycompanies” (PMCs). From Rome to Syria The roots of this industrycan be found in mercenaries. In fact, the very word soldier derivesfrom solidus, the Roman gold coin. In other words, a soldier, byclassical definition, is one who fought for money. During theAmerican Revolution, mercenaries from Germany (the Hessians) foughton the British side. A common stereo-type of mercenaries is the“dogs of war” who help win civil wars and topple governments(usually in resource-rich African countries). However, modern PMCshate to be associated with mercenaries. Today’s PMCs are proud oftheir profession-alism and value added. They prefer to have theirpersonnel called “contractors.” Led by entrepreneurs who are oftenretired military officers, PMCs compete globally. There are 1) Thisresearch was supported by the Jindal Chair at the Jindal School ofManagement, University of Texas at Dallas. All views and errors arethose of the author. © Mike W. Peng. Reprinted with permission.three main types. First, closest to the battlefield are mili-taryprovider firms that supply hired guns (often known as “privatecontractors”) who serve alongside national mili-tary forces.Blackwater is perhaps the best-known mili-tary provider firm.Second, military consulting firms offer assistance but do notdirectly engage in the battlefield. One example is MilitaryProfessional Resources, Inc. Third, military support firms, such asHalliburton, provide nonlethal support, such as intelligence,logistics, techni-cal support, and transportation. One of the rarepublicly listed PMCs is DynCorp International, which went public in2006 (NYSE: DCP). It has more than 16,800 employees and generatesover $2 billion in revenue around the world. Entrepreneurs thriveon chaos. To PMCs, the war in Iraq and Afghanistan was a pot ofgold. While the United States and its allies were withdrawing theirforces, PMCs rushed in. In Afghanistan, in 2009, PMCs were thelargest military force (130,000 personnel), outnumbering both theAfghan National Army (100,000 personnel) and the US (national)forces (64,000 personnel). In Iraq, PMCs were the second-largestmilitary contingent (about 113,000 personnel) after the US(national) forces (130,000 per-sonnel at its peak). Long after theofficial withdrawal of the US (national) military in Iraq in 2011,PMCs remain active in the country. The State Department alone atone point employed 5,000 PMC personnel in Iraq. In early 2021,President Joe Biden announced that all of the 3,300 US troops whowere in Afghanistan would be with-drawn by September 11 of thatyear. However, he did not mention that in early 2021, theDepartment of Defense employed more than 16,000 private militarycontractors in Afghanistan—five times the remaining US troops. Ofthose, over 6,100 were US citizens. After the complete withdrawalof US (national) forces from Afghanistan in August 2021, nobodyknows how many PMC personnel remain in Taliban-controlledAfghanistan. Private soldiers drive convoy trucks, build camps,guard dignitaries, and gather intelligence. The most lucrative jobis not “guns on trucks,” but less glamorous but more steady worksuch as logistics. Well-muscled men with wrap-around sunglasses maysteal headlines (especially after they allegedly shot Iraqicivilians), but the real money is in other lines of work. Longbefore Iraq, the use of PMCs alongside US troops had become anindispensable component of America’s “Total Force.” In an age ofoutsourcing, the Pentagon has followed suit, contracting dozens ofPMCs to carry out essential military work that were onceexclu-sively performed by uniformed soldiers. Not surprisingly, thedriver behind such outsourcing is cost—both politi-cal andfinancial. Dead private soldiers mean fewer dead uniformedsoldiers. National military casualties are care-fully recorded andoften provoke fierce antiwar protests. Neither the media nor thepublic seem to care about PMC casualties, although about 1,800 diedand 40,000 were wounded in Iraq and Afghanistan. One study reportedthat PMCs absorbed over 25% of the killed in action in Iraq.Overall, given the scale and scope of PMC involvement (representing50% of the defense workforce deployed to the Balkans, Iraq, andAfghanistan, as shown in Exhibit 1), many experts now believe thatthe US (national) military is incapable of successfully carryingout large missions without PMCs. Global Competition and EthicalChallenges While well-connected American PMCs often win bigcon-tracts handed out by the US government, the competi-tion isglobal. British PMCs, whose services represent Britain’s biggestexport to Iraq and Afghanistan, grab more work from the privatesector. Why are the British so competitive in this line of work?Three reasons. First, many British PMCs are first movers, tracingtheir roots to the days when they were real mercenaries active inAfrica when the British Empire collapsed in the 1950s and the1960s. Second, British PMCs benefit from the agglome-ration(clustering) of many energy and mining companies
- Integrative Case 3 2 Private Military Companies Private Military Companies Are Entrepreneurial Pro Fiting From Land War 1 (89.83 KiB) Viewed 35 times
1. From an institution-based view, explain what is behind therise of this industry.
2. From a resource-based standpoint, explain (a) how PMCs canoutperform national militaries and (b) how certain PMCs outperformothers.
3. Why are industry associations such as the IPOA and BAPSC sointerested in self-regulation?
4. ON ETHICS: As an investor, would you consider buy-ing stockof a PMC such as DynCorp? Why or why not? Do you have any ethicalreservations?
5. ON ETHICS: As an oil company executive setting up operationsin a politically unstable but oil-rich coun-try, would you considerhiring PMC contractors as security personnel?
Exhibit 1 Personnel of Private Military Companies as Percentage of Defense Workforce in Three Recent US Operations Balkans Afghanistan 50% 62% Iraq 47% Three operations combined 50%