The market economy as such does not respect political frontiers. Its field is the world.

—Ludwig Edler von Mises

The private military industry has surged since the end of the Cold War and is now a multibillion-dollar business. Today’s military firms are sophisticated multinational corporations with subsidiaries around the world and quarterly profit reports for investors. These companies are bought and sold on Wall Street, and their stocks are listed on the London and New York exchanges. Their boards consist of Wall Street magnates and former generals, their corporate managers are seasoned Fortune 500 executives, and their ranks filled with ex-military and law-enforcement personnel recruited from around the world. They work for governments, the private sector, and humanitarian organizations. The industry even has its own trade associations: the International Stability Operations Association (ISOA) in Washington, D.C., the British Association of Private Security Companies in London, and the Private Security Company Association of Iraq.

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Despite the surfeit of coverage in recent years, the industry remains confusing, because it is notoriously impervious to outside investigators. Consequently, little is known about how and why these private military actors exist.

Why So Little Is Still Known

The private military industry has become a fashionable subject for study over the past decade, but knowledge about the industry is still thin. The primary obstacle to research is the lack of data available on the industry. The firms themselves can be more opaque than the US military or intelligence agencies, because they are not subject to the Freedom of Information Act or similar legislative tools that impose transparency. Even members of Congress do not have direct access to the contracts by which these firms are employed, even though Congress is writing the checks.

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Journalists’ and academics’ analyses of PMCs are anemic, because the industry is media-phobic, owing to its roots in the military, which traditionally eschews public scrutiny. Reporters, who are typically not even allowed to interview members of, much less embed in, PMCs, can only record the events surrounding the industry. Academics depend almost entirely on the work of journalists for their analyses of these firms. Consequently, their mutual conclusions can be speculative and even factually erroneous. This has stultified understanding of the industry.

Government inquiry into the industry is limited and, at times, convoluted. Currently, there is little, if any, meaningful regulation of or reporting requirements from this industry, which is remarkable given that the firms are authorized to use lethal force abroad under the US flag. Reports produced by government watchdog agencies such as the Congressional Research Service, the Congressional Budget Office, the Special Inspector General for Iraq Reconstruction, the Special Inspector General for Afghanistan Reconstruction, and the Government Accountability Office offer excellent snapshots of discrete problems with the market but lack analysis of macro trends.

Remarkably, government investigators are often given limited access to the industry’s internal workings, owing to issues over proprietary knowledge. What genuine investigation has occurred is narrow and limited to three areas: the legal status of armed contractors on the battlefield; monetary fraud, waste, and abuse; and experiences in Iraq and Afghanistan. Wider ramifications of this industry are left relatively unexamined, such as how the commodification of conflict might undermine long-term foreign policy objectives. Congressional hearings on PMCs, such as those held by Congressman Henry Waxman, spotlight problems with these firms but do little tangibly to resolve them and are often little more than political theater.

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Much of the media discourse on the industry is framed in acrimonious and demonizing terms, owing in part to the sensationalistic lure of labeling PMCs as mercenaries and the promise of an audience. A sample of headlines from mainstream news outlets reveals some of this: “Dogs of War: From Mercenary to Security Contractor and Back Again,” “Making a Killing: The Business of War,” “Modern Mercenaries on the Iraqi Frontier.” Reporters-turned-authors fan the fire of conspiracy theorists by insinuating that PMCs represent a shadow government manipulating or coercing the national security establishment, with provocative books such as Jeremy Scahill’s best-selling "Blackwater: The Rise of the World’s Most Powerful Mercenary Army," Stephen Armstrong’s "War PLC: The Rise of the New Corporate Mercenary," and Robert Young Pelton’s "Licensed to Kill: Privatizing the War on Terror." Such distortions of the industry are more inflammatory than informative.

Industry defenders are equally problematic, as they tend to treat it as just another services industry, overlooking the moral, strategic, and policy complexities of the issue. They maintain that the private sector is more efficient and effective than the public sector at finding solutions to difficult security challenges but offer little evidence to outside researchers to corroborate these claims. They even inoculate the language used to describe the industry with euphemism. ISOA is disparaging of the terms private military company and private security company and promotes the softer phrase contingency contractors. Perhaps Erik Prince, founder and CEO of Blackwater, best articulates the industry’s self-image: “Our corporate goal is to do for the national security apparatus what FedEx did to the Postal Service.” However, after a handful of Blackwater personnel killed seventeen innocent Iraqi civilians at Nisour Square in Baghdad on September 16, 2007, his company rebranded itself from the militaristic “Blackwater,” a term used by Navy SEALs to describe covert nighttime underwater operations, to “Xe,” which stands for xenon, an inert, noncombustible gas. Some might view this as disingenuous and even cynical. The company has changed its name once again, to “Academi,” and Prince has since left the company and the country.

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Amid the public debate, a broad range of scholarly literature has emerged on the private military industry within international relations, law, political science, and economics, mainly dwelling on a few aspects of the issue: vague regulatory options for the industry at national, regional, and international levels; normative challenges to the state’s monopoly on force; and typologies that clarify the industry’s organizational structure. The conclusions drawn are generally theoretical and speculative, however, pointing out not only the lack of data needed for rigorous analysis but even disagreement about how to define a PMC.

Theoretical Confusion

Despite the glut of attention lavished on this topic in recent years, there still is no common definition, typology, or understanding of who exactly is a member of the industry. Consequently, there is a range of terms used to describe these firms, further confusing the issue: private military contractors, private security companies, private military companies, private security/military companies, private military firms, private security contractors, private military corporations, and military service providers. Some analysts and organizations, such as the International Committee of the Red Cross (ICRC), use terms interchangeably—say, private military company, private security company, and private military/security company (PMSC)—sowing further conceptual disorder. The US government generally favors private security company, yet this term means wholly different things to different parts of the bureaucracy, as noted in a congressional investigation into the matter, which itself uses the term in an exceptional manner. Still others use PMSC as a catchall definition, but such an all-encompassing category is not analytically meaningful. The lack of a common lexicon handicaps discourse on a topic already shrouded in secrecy.

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Definitions range from the very narrow to the overly broad, and both ends of the spectrum are unsuccessful from a critical perspective. Not surprisingly, the industry defines private security too narrowly as the commercial act of physically protecting a person, place, or thing—or, in the words of Doug Brooks, former president of the ISOA, private security is any activity directly related to protecting a “noun.” Similarly, the National Defense Authorization Act for fiscal year 2008 defines private security functions as the guarding of personnel, facilities, or properties and any other activity with armed personnel.

These definitions may sound fairly comprehensive, but they fail to account for the many activities the industry’s firms are involved in, such as intelligence analysis, military operational coordination, security force training, and logistical support in nonpermissive and hostile environments. Moreover, they ignore the moral aspects of conducting business when it comes to the application of lethal force.

Broad definitions also exist and tend to emanate from the academic community. The seminal book Corporate Warriors by Peter W. Singer catalyzed the debate over private military force in 2003 and remains one of the best analyses of the industry to date. Singer defines private military firms (PMFs) as “private business entities that deliver to consumers a wide spectrum of military and security services, once generally assumed to be exclusively inside the public context.” This definition provides a good baseline for study but ultimately depends on the subjective assessment of what military services are inherently governmental or “assumed to be exclusively inside the public context.” This will vary greatly from observer to observer.

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Another important book is Deborah Avant’s "The Market for Force," in which she divides the industry into two categories: external and internal security. External security consists of combat operations, military advice and training, and logistical support, whereas internal security includes policing, intelligence services, and static defense.

This is helpful, because it differentiates security based on what happens inside versus outside a state. External security deals with force projection and protecting national borders from invaders, while internal security maintains domestic order. One limitation of this approach is that it is highly state-centric in an era when national borders matter less and less; weak states have notoriously porous borders, while strong ones are plugged into a globalized world that frequently blurs the line between internal and external affairs.

Despite these difficulties, Singer and Avant represent some of the best scholarship on the topic. But, like many, they are challenged by a lack of industry data and insider knowledge, resulting in definitions that are too expensive to parse the complex private military industry. A new definition and a new taxonomy are needed, ones that provide analytical and theoretical coherence for modern private military actors.

The Market for Force Revealed

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The organization of the industry reflects the market and how it evolved. At present, the market for force is not a free market but rather a monopsony, a market with a single buyer. The current market marker for modern force is the United States, as it has turned to the private sector in unprecedented ways to support its wars in Iraq and Afghanistan. While other outfits exist, such as the French Foreign Legion, they are not part of today’s market for force, because they are not free-market actors, selling their services to different customers. The Foreign Legion is part of the French Army, is led by French officers, takes its orders exclusively from Paris, rewards its legionnaires with French citizenship, and only serves the French government at cut rates. It has little in common with the armed contractors operating in Iraq or Afghanistan.

The United States’ insatiable need for security in Iraq and Afghanistan fueled the growth of today’s private security industry. This also gave the United States market power as the consumer-in-chief to shape business practices and norms during the industry’s formative years, as it grew from a multimillion-dollar to a multibillion-dollar market. Not surprisingly, market actors now look very American, as firms naturally pattern themselves after their biggest client to attract more business. Owing to this, a fitting typology for the private military industry is based on the US military.

Specifically, the mold of the modern private military industry is the US Army, for two reasons. First, these new firms are land forces and fundamentally private armies, as the United States has hired no private navies or air forces. Second, former US Army and Marine Corps personnel fill the management ranks of these companies to instill confidence in and ensure interoperability with the client, because they understand the operations and culture of the US military. The boards of directors for these corporations are stocked with retired generals to help win contracts from the US government, anticipate future government needs, and lend credibility to the firm for its chief customer. This produced a US-centric industry to appeal to its primary customer.

The categorization of activities required to support land warfare is similar regardless of private versus public providers, although different armies have slightly different approaches. Because combat can occur anywhere in the modern theater of war, the typology is based on function rather than location in the battlespace. For the US Army, military units fall into one of three general categories based on their function or mission: combat arms, combat support, and combat service support. The function of combat arms units is to kill or train others to kill the enemy in foreign lands, unless a foreign enemy is invading the homeland. Combat arms units include infantry, special forces, armed aviation, and armor (e.g., tanks). Combat service units provide operational support to the combat arms units, allowing them to engage the enemy more effectively, but they do not directly engage the enemy themselves unless in self-defense. These units include the military police and military intelligence. Combat service support units provide logistical and administrative support to combat arms and combat service units, thereby supplying and sustaining the force. Like combat service units, combat service support components are not expected to engage the enemy unless in self-defense. This category includes quartermaster, ordnance, transportation, adjutant general, finance, and medical services corps. The chief distinction between combat service and combat service support is that the former offers operational support while the latter offers logistical and administrative support to combat arms units.

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Like the US Army, the private military sector consists of three categories of units or companies analogous to combat arms, combat service, and combat service support. The private military companies (PMCs, the focus of this book) are the private sector equivalent of combat arms, since their job places them in the line of fire. PMCs are expeditionary conflict entrepreneurs structured as multinational corporations that use lethal force or train others to do so.

Five characteristics distinguish PMCs from other armed nonstate actors in global politics. First, they are motivated more by profit than by politics. This is not to suggest that all PMCs disregard political interests and serve merely at the whim of the highest bidder, but they are fundamentally profit-seeking entities. Second, they are structured as multinational corporations and participate in the global financial system. These are not shady “lone wolf” mercenaries stalking the jungles of the Congo during the wars of African liberation. Third, they are expeditionary in nature, meaning that they seek work in foreign lands rather than providing domestic security services. There are exceptions to this, especially when it comes to homeland defense, but in general, these firms are foreign focused and are not domestic security guards. Fourth, they typically deploy force in a military manner, as opposed to a law-enforcement one. The purpose of military force is to defeat or deter the enemy through organized violence, while law enforcement seeks to deescalate violent situations to maintain law and order. This intrinsically affects how they operate. Fifth and most important, PMCs are lethal and represent the commodification of armed conflict. There will always be exceptions to these five features, but they serve as a good test of whether an armed nonstate actor is a PMC.

There are two kinds of PMCs: mercenary and military enterpriser. Mercenary companies are private armies that can conduct autonomous military campaigns, offensive operations, and force projection. At present, there are no large mercenary firms, but they have existed in the recent past. For example, the now-defunct firm Executive Outcomes, based in South Africa, conducted independent military campaigns in Africa during the 1990s. In 1993, the Angolan government hired Executive Outcomes to defeat the rebel group National Union for the Total Independence of Angola (UNITA), retake oil facilities in the harbor town of Soyo, and train government soldiers for $40 million a year. Two years later, Sierra Leone’s government hired Executive Outcomes to defeat the Liberian-backed Revolutionary United Front (RUF), retake the Kono diamond area, and force a negotiated peace for $35 million. Executive Outcomes provided its own combat units, air forces, global supply chain, and so forth, to defeat the enemy. The United States has shunned strong PMCs, and consequently, they are absent from today’s market for force.

Distinct from mercenaries, military enterprisers raise armies rather than command them. Historically, this type of conflict entrepreneur trains, equips, and fields whole regiments to fight for their clients. Most modern PMCs are military enterprisers and make their money not by deploying their own armies but by making them for someone else. For example, the United States has relied on contractors to develop the Afghan National Army and the Afghan National Police, even awarding DynCorp International a contract worth up to $1 billion to train the police.

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Raising foreign forces is inherently a PMC function, because only combat arms units can transfer their unique skill sets from one to another. Only an infantry unit can train another country’s infantry units, which is standard practice in military training. The reason is self-evident. Military professional training is derived from the knowledge and credibility of field experience, which cannot be duplicated by a textbook or imitated by a pretender. A quartermaster unit cannot train platoon patrol tactics, nor can an infantry platoon train brigade resupply operations. Nonveteran civilians are unqualified to train military units, which is why PMCs draw their personnel from the ranks of former military and police units worldwide. Furthermore, training others to kill occupies the same moral universe as killing itself and must be considered within the ambit of PMCs.

Military enterprisers are PMCs in another way, too. With their stronger mercenary cousins, military enterprisers share the same competences and could easily be transformed into mercenary firms. In other words, if one has the ability to raise an army, then one also has the aptitude to deploy it, since the skill sets are closely related. In fact, most modern PMCs blend the two categories. The United States contracts PMCs to help raise Iraqi and Afghan security forces, but these firms also augment the US military there, using deadly force (mostly) for defensive purposes. Examples of these tasks include protecting fixed or static sites, such as housing areas, reconstruction work sites, or government buildings. Other tasks include providing armed escorts to convoys traveling through risky areas or offering bodyguards in dangerous places. Bodyguard teams, called personal security details (PSDs) in industry parlance, protect high-ranking individuals in conflict zones, such as Afghanistan President Hamid Karzai, who was protected by DynCorp International in 2002.

PMCs routinely deploy armed personnel, convoys, and helicopters to protect people and things for their clients. In 2005, the State Department’s Worldwide Personal Protective Services II (WPPS) contract awarded up to $1.2 billion to Blackwater, Triple Canopy, and DynCorp International, which collectively provided some fifteen hundred “shooters,” or armed civilians authorized to kill, in Iraq alone. This contract provided armed escorts for US government personnel around the world, with license to kill under limited circumstances. This contract, though lethal, is not equivalent to the military campaigns waged by Executive Outcomes in Africa, but it does demonstrate that mercenaries and military enterprisers are related and in the same category.

The security support companies are the private sector version of the US Army’s combat services units and are generally unarmed. Examples of security support companies range from Science Applications International Corporation (SAIC), which provides intelligence analysis, to the Lincoln Group, which conducts strategic communication in Iraq, to CACI and Titan, which provide interpreters to the US military, to Total Intelligence Solutions, which runs spy rings for the US government overseas. Security support companies are as controversial as PMCs, even though they typically are unarmed and do not employ lethal force. CACI and Titan contractors were implicated in the Abu Ghraib prison scandal, and Lincoln Group instigated an uproar when journalists discovered that the US government had hired the company to propagandize the US cause in the Iraqi free press.

General contractors are equivalent to the US Army’s combat service support units and provide logistical support through supply, maintenance, transportation, medical, and other services that combat units require. General contractors are not members of the private military or security industry, as they perform nonlethal tasks that are not uniquely military or security-related in nature. However, it is important to include them within this typology and acknowledge their presence and complicity in conflict-affected areas. Typical general contractor tasks include equipping soldiers, maintaining vehicles, constructing buildings, driving trucks with supplies, cooking meals, building bases, and performing routine administration. The bulk of contractors in conflict-affected areas fall into this category.

Focusing on function in relation to combat operations and recognizing the influence of the US Army’s organizational and operational influence on the emerging private military industry produce a more logically coherent typology than earlier attempts, especially for typologies created before the wars in Iraq and Afghanistan, which shaped the industry in substantial ways. Table 2.1 depicts this new typology. A few of the larger companies, such as DynCorp International, operate in all three categories, but this is exceptional; most companies specialize in only one category.

US military officers frequently discuss tooth-to-tail ratios in campaigns. Tooth refers to combat arms units, while tail refers to combat service and combat service support. How the private sector’s tooth-to-tail ratio compares with that of the US military is unknown and worthy of further study. Based on preliminary numbers of armed contacts and trainers, such as the WPPS or security force assistance contracts, one would expect the private sector ratio to be overwhelmingly tail compared with that of the US national army. But as the Nisour Square and Abu Ghraib scandals demonstrate, numbers may not be the best measure of campaign significance, as the mistakes of a few contractors had a strongly negative strategic effect for their employer. Owing to these and other incidents, PMCs remain the most controversial component of private armies: they represent for-profit killing and the commodification of conflict.

Secrecy and lack of data have hobbled understanding of the private military industry, leading to confusing and conflicting accounts of who is and is not a member. The best way to comprehend the contours of the industry is in terms of the United States’ own military. The United States birthed this industry for its wars in Iraq and Afghanistan, and, unsurprisingly, the industry mirrored the client’s own army. PMC leadership, culture, and operational concepts are all derivative of the US military, which is very appealing to the client.

However, this raises disconcerting questions about the relationship between client and companies. Are the bonds between the United States and the private military industry too close? Do conflicts of interest exist? Does this relationship ultimately extend or limit American power? When the United States invaded Iraq, few imagined at the time that it would also introduce a new norm in modern warfare: the privatization of war. The next chapter explores the deepening dependency between the superpower and the private military industry and implications for the American way of war.

Excerpted from "The Modern Mercenary: Private Armies and What They Mean For World Order" by Sean McFate. Published by Oxford University Press. Copyright © 2014 by Sean McFate. Reprinted by permission of the publisher. All rights reserved.