by Naomi Klein
For the six years that he held office, Rumsfeld had to leave the room whenever talk turned to the possibility of avian flu treatment and the purchase of drugs for it. According to the letter outlining the arrangement that allowed him to hold on to his stocks, he had to stay out of decisions that “may directly and predictably affect Gilead.”13 His colleagues, however, took good care of his interests. In July 2005, the Pentagon purchased $58 million worth of Tamiflu, and the Department of Health and Human Services announced that it would order up to $1 billion worth of the drug a few months later.14
Rumsfeld’s defiance definitely paid off. If he had sold his Gilead stocks at inauguration, in January 2001, he would have received a mere $7.45 each. By keeping them through all the avian flu scares, all the bioterror hysteria and through his own administration’s decisions to invest heavily in the company, Rumsfeld ended up with stocks worth $67.60 each when he left office—an 807 percent increase. (By April 2007 the price had reached $84 each.)15 That meant that when Rumsfeld left his post as defense secretary, he did so a significantly wealthier man than when he arrived—a rare occurrence for a multimillionaire in public office.
If Rumsfeld never really left Gilead behind, Cheney was equally reluctant to fully sever his ties to Halliburton—an arrangement that, unlike Rumsfeld’s with Gilead, has been the subject of a great deal of media attention. Before stepping down as CEO to be George Bush’s running mate, Cheney negotiated a retirement package that left him loaded with Halliburton stocks and options. After some uncomfortable press questions, he agreed to sell some of his Halliburton shares, making an impressive $18.5 million profit in the process. But he didn’t cash out entirely. According to The Wall Street Journal, Cheney hung on to 189,000 Halliburton shares and 500,000 unvested options even as he entered the vice presidency.16
The fact that Cheney still maintains such a quantity of Halliburton shares means that throughout his term as vice president, he has collected millions every year in dividends from his stocks and has also been paid an annual deferred income by Halliburton of $211,000—roughly equivalent to his government salary. When he leaves office in 2009 and is able to cash in his Halliburton holdings, Cheney will have the opportunity to profit extravagantly from the stunning improvement in Halliburton’s fortunes. The company’s stock price rose from $10 before the war in Iraq to $41 three years later—a 300 percent jump, thanks to a combination of soaring energy prices and Iraq contracts, both of which flow directly from Cheney’s steering the country into war with Iraq.17 Iraq seems to fit Kinzer’s formula perfectly. Saddam did not pose a threat to U.S. security, but he did pose a threat to U.S. energy companies, since he had recently signed contracts with a Russian oil giant and was in negotiations with France’s Total, leaving U.S. and British oil firms with nothing; the third-largest proven oil reserves in the world were slipping out of the Anglo-American grasp.18 Saddam’s removal from power has opened vistas of opportunities for the oil giants, including ExxonMobil, Chevron, Shell and BP, all of whom have been laying the groundwork for new deals in Iraq, as well as for Halliburton, which, with its move to Dubai, is perfectly positioned to sell its energy services to all these companies.19 Already the war itself has been the single most profitable event in Halliburton’s history.
Both Rumsfeld and Cheney could have taken simple measures to divest themselves completely of their disaster-related holdings, thereby eliminating any doubt about what role profit has played in their enthusiasm for disaster-producing situations. But then they would have missed the boom years in their own industries. Asked to choose between private profit and public life, again and again they chose profit, forcing the government ethics committees to adapt to their defiant stance.
During the Second World War, President Franklin D. Roosevelt spoke out strongly against war profiteers, saying, “I don’t want to see a single war millionaire created in the United States as a result of this world disaster.” One wonders what he would have made of Cheney, whose millions in war profits accumulated while he was a sitting vice president. Or Rumsfeld, who, in 2004, couldn’t resist cashing in a few Gilead stocks, making an easy $5 million, according to his annual disclosure report, while he was defense secretary—a small taste of the profits that awaited him when he left office.20 In the Bush administration, the war profiteers aren’t just clamoring to get access to government, they are the government; there is no distinction between the two.
The Bush years have, of course, been characterized by some of the seediest and most blatant corruption scandals in recent memory: Jack Abramoff and his golfing vacations offered to members of Congress; Randy “Duke” Cunningham, now serving eight years for accepting bribes and donating his yacht the Duke-Stir as part of a “bribe menu” listed on official congressional letterhead to a defense contractor; and the parties at the Watergate hotel with courtesy prostitutes—all sounding very much like Moscow and Buenos Aires in the mid-nineties.21
Then there is the whirling revolving door between government and industry. It has always been there, but for the most part political figures used to wait until their administration was out of office before cashing in on government connections. Under Bush, the nonstop homeland security market bonanza has proved too tempting for many administration officials to resist. So, rather than wait until the end of their terms, hundreds, from a wide range of government agencies, have already charged for the door. According to Eric Lipton, who has tracked this phenomenon in the Department of Homeland Security for The New York Times, “veteran Washington lobbyists and watchdog groups say the exodus of such a sizable share of an agency’s senior management before the end of an administration has few modern parallels.” Lipton identified ninety-four examples of civil servants who had been working on domestic security and who are now working in some aspect of the homeland security industry.22
There are far too many such cases to detail here, but a few stand out, since they involve the key architects of the War on Terror. John Ashcroft, former attorney general and prime mover behind the Patriot Act, now heads up the Ashcroft Group, specializing in helping homeland security firms procure federal contracts. Tom Ridge, the first head of the Department of Homeland Security, is now at Ridge Global and an adviser to the communication technology company Lucent, which is active in the security sector. Rudy Giuliani, the former New York mayor and hero of the September 11 response, started Giuliani Partners four months later to sell his services as a crisis consultant. Richard Clarke, counterterrorism czar under Clinton and Bush and an outspoken critic of the administration, is now chairman of Good Harbor Consulting, specializing in homeland security and counterterrorism. James Woolsey, head of the CIA until 1995, is now at Paladin Capital Group, a private equity firm that invests in homeland security companies, and a vice president at Booz Allen, one of the leaders in the homeland security industry. Joe Allbaugh, head of FEMA on September 11, cashed out just eighteen months later to start New Bridge Strategies, promising to be the “bridge” between business and the lucrative world of government contracts and investment opportunities in Iraq. He was replaced by Michael Brown, who bolted after only two years to start Michael D. Brown LLC, specializing in disaster preparedness.23
“Can I quit now?” Brown wrote in an infamous e-mail to a fellow FEMA staffer in the middle of the Hurricane Katrina disaster.24 That is pretty much the philosophy: stay in government just long enough to get an impressive title in a department handing out big contracts and to collect inside information on what will sell, then quit and sell access to your former colleagues. Public service is reduced to little more than a reconnaissance mission for future work in the disaster capitalism complex.
In some ways, however, the stories about corruption and revolving doors leave a false impression. They imply that there is still a clear line between the state and the complex, when in fact that line disappeared long ago. The innovation of the Bush years lies not in how quickly politicians move from one world to the other but in how many feel entitled to occupy both worlds simultaneo
usly. People like Richard Perle and James Baker make policy, offer top-level advice and speak in the press as disinterested experts and statesmen when they are at the same time utterly embedded in the business of privatized war and reconstruction. They embody the ultimate fulfillment of the corporatist mission: a total merger of political and corporate elites in the name of security, with the state playing the role of chair of the business guild—as well as the largest source of business opportunities, thanks to the contract economy.
Wherever it has emerged over the past thirty-five years, from Santiago to Moscow to Beijing to Bush’s Washington, the alliance between a small corporate elite and a right-wing government has been written off as some sort of aberration—mafia capitalism, oligarchy capitalism and now, under Bush, “crony capitalism.” But it’s not an aberration; it is where the entire Chicago School crusade—with its triple obsessions—privatization, deregulation and union-busting—has been leading.
Rumsfeld’s and Cheney’s dogged refusals to choose between their disaster-connected holdings and their public duties were the first sign that a genuine corporatist state had arrived. There are many others.
The Power of the Formers
One of the distinguishing features of the Bush administration has been its reliance on outside advisers and freelance envoys to perform key functions: James Baker, Paul Bremer, Henry Kissinger, George Shultz, Richard Perle, as well as the members of the Defense Policy Board and the Committee for the Liberation of Iraq, to name just a few. While Congress played a rubberstamp role during the pivotal decision-making years, and Supreme Court rulings are treated as little more than gentle suggestions, these mostly volunteer advisers have wielded enormous influence.
Their power stems from the fact that these advisers used to perform key roles in government—they are former secretaries of state, former ambassadors and former undersecretaries of defense. All have been out of government for years and, in the meantime, have set up lucrative careers in the disaster capitalism complex. Because they are classified as contractors, not staff, most are not subject to the same conflict-of-interest rules as elected or appointed politicians—if they are subject to any restrictions at all. The effect has been to eliminate the so-called revolving door between government and industry and put in “an archway” (as the disaster management specialist Irwin Redlener put it to me). It has allowed the disaster industries to set up shop inside the government, using the reputations of such illustrious expoliticians as cover.
When in March 2006 James Baker was named cochair of the Iraq Study Group, the advisory panel charged with recommending a new way forward in Iraq, there was palpable bipartisan relief: here was a politician of the old school, one who had steered the country in more stable times, a grown-up. Certainly Baker is a veteran of a less reckless era of U.S. foreign policy than the current one. But that was fifteen years ago. Who is James Baker now?
Like Cheney, when he left office at the end of Bush Sr.’s term, James Baker III made a fortune from his government contacts. Particularly lucrative were the friends he made in Saudi Arabia and Kuwait during the first Gulf War.25 His Houston-based law firm, Baker Botts, represents the Saudi royal family as well as Halliburton and Gazprom, Russia’s largest oil company, and is one of the leading oil and gas law firms in the world. He also became an equity partner in the Carlyle Group, earning an estimated $180 million stake in the highly secretive company.26
Carlyle has benefited enormously from the war, thanks to sales of robotics systems, defense communications systems, and a major Iraq contract to train police awarded to its holding, USIS. The $56 billion company has a defense-oriented equity firm that specializes in collecting defense contractors and taking them public, a very profitable enterprise in recent years. “It’s the best 18 months we ever had,” said Carlyle’s chief investment officer, Bill Conway, referring to the first eighteen months of the war in Iraq. “We made money and we made it fast.” The war in Iraq, already clearly a disaster, translated into a record-breaking $6.6 billion payout to Carlyle’s select investors.27
When Bush Jr. pulled Baker back into public life by naming him his special envoy on Iraq’s debt, Baker did not have to cash out of the Carlyle Group or Baker Botts, despite their direct interests in the war. At first, several commentators pointed out these serious potential conflicts. The New York Times published an editorial calling on Baker to resign his posts at the Carlyle Group and Baker Botts to preserve the integrity of the debt envoy position. “Mr. Baker is far too tangled in a matrix of lucrative private business relationships that leave him looking like a potentially interested party in any debt-restructuring formula,” stated the editorial. It concluded that it wasn’t enough for Baker to “forgo earnings from clients with obvious connections to Iraqi debts…. To perform honorably in his new public job, Mr. Bakermust give up these two private ones.”28
In keeping with the example set at the top of the administration, Baker simply refused, and Bush backed his decision, leaving Baker in charge of the effort of persuading governments around the world to forgive Iraq’s crushing foreign debt. After he had been in the role for nearly a year, I obtained a copy of a confidential document that proved that he was in a far more serious and direct conflict of interest than previously understood. The document was a sixty-five-page business plan submitted by a consortium of companies, including the Carlyle Group, to the government of Kuwait, one of Iraq’s main creditors. The consortium offered to use its high-level political connections to collect from Iraq $27 billion in unpaid debts to Kuwait stemming from Saddam’s invasion of Kuwait—in other words, to do exactly the opposite of what Baker was supposed to be doing as envoy, which was to convince governments that Saddam-era debts should be canceled.29
The document, titled “Proposal to Assist the Government of Kuwait in Protecting and Realizing Claims against Iraq,” was submitted almost two months after Baker’s appointment. It named James Baker personally eleven times, making it clear that Kuwait would benefit from working with a company that employed the man in charge of erasing Iraq’s debts. But there was a price. In exchange for these services, the documents said, the government of Kuwait would have to invest $1 billion with the Carlyle Group. It was straight-up influence peddling: pay Baker’s company to get protection from Baker. I showed the document to Kathleen Clark, a law professor at Washington University and a leading expert on government ethics and regulations, and she said Baker was in a “classic conflict of interest. Baker is on two sides of this transaction: he is supposed to be representing the interests of the United States, but he is also a senior counselor at Carlyle, and Carlyle wants to get paid to help Kuwait recover its debts from Iraq.” After examining the documents, Clark determined that “Carlyle and the other companies are exploiting Baker’s current position to try to land a deal with Kuwait that would undermine the interests of the U.S. government.”
The day after my story about Baker was published in The Nation, Carlyle backed out of the consortium, forfeiting its hope of landing the $1 billion; several months later, Baker cashed out of the Carlyle Group and resigned as general counsel. But the real damage had been done: Baker had performed miserably as envoy, failing to secure the kind of debt forgiveness that Bush had pledged and Iraq required. In 2005 and 2006, Iraq made $2.59 billion in reparation payments for Saddam’s war, most to Kuwait—resources that were desperately needed to meet Iraq’s humanitarian crisis and to rebuild the country, especially after U.S. firms pulled out with the aid money squandered and the job left undone. Baker’s mandate was to erase 90 to 95 percent of Iraq’s debt. Instead, the debt was merely rescheduled and is still equivalent to 99 percent of the country’s GDP.30
Other key aspects of Iraq policy were also handed to freelance envoys whose companies earned record profits from the war. Former secretary of state George Shultz headed up the Committee for the Liberation of Iraq, a pressure group formed in 2002 at the request of the Bush White House to help it build the case for war in the public mind. Shultz certainly
obliged. Since his role was at arm’s length from the administration, he was able to whip up hysteria about the imminent danger posed by Saddam, entirely free from any burden of proof or fact. “If there is a rattlesnake in the yard, you don’t wait for it to strike before you take action in self-defense,” he wrote in The Washington Post in September 2002 under the headline “Act Now: The danger is immediate. Saddam Hussein must be removed.” Shultz did not disclose to his readers that he was, at the time, a member of the board of directors of Bechtel, where he had served many years earlier as CEO. The company would collect $2.3 billion to reconstruct the country that Shultz was so eager to see destroyed.31 So, in retrospect, it seems worth asking, when Shultz called on the world to Act Now, was he speaking as a concerned elder statesman or as a representative of Bechtel—or perhaps Lockheed Martin?
According to Danielle Brian, executive director of the Project on Government Oversight, a nonprofit watchdog group, “It’s impossible to tell where the government ends and Lockheed begins.” It’s even harder to tell where Lockheed ends and the Committee for the Liberation of Iraq begins. The group Shultz headed and used as a pro-war platform was convened by Bruce Jackson, who, just three months earlier, held the job of vice president for strategy and planning at Lockheed Martin. Jackson says that he was asked to form the group by “people in the White House,” but he stacked it with old colleagues from Lockheed. Besides Jackson, Lockheed’s representatives included Charles Kupperman, Lockheed Martin’s vice president for space and strategic missiles, and Douglas Graham, Lockheed’s director of defense systems. Even though the committee was formed at the explicit request of the White House to be the propaganda arm of the war, no one had to step down from Lockheed or sell his shares. Which was certainly good for committee members, since Lockheed’s share price jumped 145 percent thanks to the war they helped engineer—from $41 in March 2003 to $102 in February 2007.32
