The Pentagon as Betting Parlor

What Was Behind the Pentagon’s Betting Parlor? by David Morse

Published on Monday, August 4, 2003 by CommonDreams.org

http://www.commondreams.org/views03/0804-11.htm

What was behind the Pentagon’s screwball scheme to establish an
online futures market for acts of terrorism?

The $8 million betting parlor was scuttled only three days before
its scheduled debut on August 1. Was it just a one-time fluke? If so,
it raises questions about who is running the Pentagon. If it was part
of a pattern, then it raises some serious questions about the Bush
administration.

The announced purpose of the Policy Analysis Market, as it was
known, was to harness the "anonymous forces of market capitalism" to
predict the likelihood of acts of terrorism - much as
commodity-trading speculates on the future price of coffee or pork
bellies. The Pentagon’s justification was that "markets are extremely
efficient, effective and timely aggregators of dispersed and even
hidden information."

But critics in the Senate raised moral, as well as tactical
concerns, in pointing out the obvious. Not only were markets faulty
predictors of the future (witness the last stock market bubble and its
collapse), but if anonymous online traders could bet on the
probability of various acts of terrorism in the Middle East -
assassinations and coups - the setup was an invitation to mischief,
including insider-trading by terrorists themselves. This may have been
the Pentagon’s real intent all along: to use its cyber-surveillance
capability to track buyers and sellers. But even as a long-term sting
operation, it was ripe for abuse by speculators of every stripe.

"Can you imagine," asked Senator Byron Dorgan of North Dakota, who
helped blow the whistle in the Senate, "if another country set up a
betting parlor so that people could go in - and is sponsored by the
government itself - people could go in and bet on the assassination of
an American political figure?"

The new toy was the latest brainstorm from its Defense Advanced
Research Project Agency, DARPA, created to spearhead the War on
Terrorism, and headed by the notorious John M. Poindexter. DARPA was
trumpeted by Paul Wolfowitz, Deputy Secretary of Defense, as
"brilliantly imaginative."

The idea was anything but brilliant, of course. It was, as one
Congressman put it, "unbelievably stupid." A New York Times editorial
called it "wacky," and demanded Poindexter’s resignation, without
asking how the idea had gotten past Wolfowitz. In response to the
bipartisan outrage, Wolfowitz lost no time distancing himself from the
project, suggesting that the brainstormers at DARPA "got too
imaginative."

The project was scuttled. Poindexter resigned. Heads of state in
the Middle East can presumably sleep better. Was it a fluke? The facts
suggest otherwise.

First, never mind that this is the same rear admiral John
Poindexter who was indicted during the Reagan years for his role in
the scheme by which arms were sold to Iran and the proceeds funneled
to the right-wing rebels in Nicaragua. Never mind that Poindexter lied
to Congress, and escaped a prison sentence on a technicality. Never
mind, even, that the Bush administration put this same John Poindexter
in charge of DARPA, where he concocted a plan for wholesale
surveillance of U.S. citizens.

The problem goes far wider and deeper than Poindexter or his boss,
Wolfowitz. Or Wolfowitz’s boss, Donald Rumsfeld. Or Condi Rice. Or
even George W. Bush..

Poindexter’s follies are the quintessence of what this
administration has been about from the beginning. This latest scheme
simply exposes the tip of an ideological iceberg that is no less wacky
or dangerous, but which has escaped such noisy condemnation because it
floats in a sea of general acceptance. It is the ideology of
privatization, carried to extreme.

At its most benign, this ideology rests on the very dubious
assumption that every aspect of government, from elections to social
institutions, to foreign policy, can be governed by the so-called free
market. At its most vicious, it is simply monopoly capitalism
masquerading as government: profoundly antidemocratic, as well as
anti-competitive, with no thought beyond lining the pockets of the
powerful.

The war on Iraq reflects this more vicious mode. The war was
motivated by corporate greed, and sold with false advertising. Allies
were bullied and bought. Underlying the administration’s steamroller
approach was the arrogance of a monopoly. No alternatives would be
considered. The largest-ever mass demonstrations around the world were
brushed off like consumer complaints.

The Pentagon itself is run according to a more competitive model.
Troops were delivered to Iraq in accordance with industry’s
just-in-time standards of efficiency, with Donald Rumsfeld playing the
role of a CEO downsizing the Pentagon as if it were a recent
acquisition. Instead of the supplying the 240,000 or so troops
requested by Pentagon brass, Rumsfeld delivered 170,000 - not enough
to perform the many tasks of occupation

In both cases, the corporate model is flawed. Wholesale greed does
not yield intelligent foreign policy. And a military occupation is not
the same as a corporate takeover.

As the occupation grinds on, with more loss of American lives and
political rumblings at home, the corporate brainstormers running the
administration have resorted ever more desperately to the ploys one
would expect from runaway capitalism - the placing of bounties on
Saddam Hussein, dead or alive, the degrading attempt to buy the
loyalty of former Iraqi army troops with hundred dollar bills. The
cynicism of these devices, and the grumbling of our own troops, all
convey the essential failure to secure a just peace for the Iraqi
people. But that objective was missing all along.

The corporate model for the war is flawed in other ways as well.
The Pentagon outsourced some of its manpower requirements to Mexican
nationals who were willing to join the U.S. Army. But while this may
blunt the political impact at home, it does not translate into lower
wages - the Army being the Army, and not a multinational sweatshop. We
are still spending $4 billion a month in Iraq. And Americans reading
of mounting U.S. casualties might not notice how many surnames are
Hispanic.

As for those fat, cost-plus contracts awarded to Halliburton and
other politically connected U.S. firms for rebuilding Iraq’s
infrastructure, they will cost U.S. taxpayers far more than would the
services of European firms that are more competitive and better
positioned geographically to do the job.

Which takes us to the essential fallacy so evident in the wacky
betting parlor scheme. It is not just Poindexter’s folly; it is the
bogus assumption that privatization translates into efficiency and
that marketplace greed should govern human affairs.

David Morse is a journalist whose work has appeared in Esquire,
The Nation, Japan Economic Journal, and elsewhere. He writes about the
globalized economy and the impact of privatization on public policy.