Big Money and the NSA Scandal … How Dangerous is the “Security/Digital Complex”?

It should be self-evident that recent NSA revelations bring up some grave concerns about civil liberties. But they also raise other profound and troubling questions – about the privatization of our military, our culture’s inflated expectations for digital technology, and the increasingly cozy relationship between Big Corporations (including Wall Street) and Big Defense.

Are these corporations perverting our political process? The campaign war chest for Sen. Dianne Feinstein, who today said NSA whistleblower Edward Snowden committed “treason,” is heavily subsidized by defense and intelligence contractors that include General Dynamics, General Atomic, BAE Systems, Northrop Grumman, and Bechtel.

One might argue that a politician with that kind of backing is in no moral position to lecture others about “treason.”

But Feinstein’s funders are decidedly old-school Military/Industrial Complex types. What about the new crowd? This confluence of forces hasn’t been named yet, so for the time being we’ll use a cumbersome label: the “Security/Digital Complex.”

With computers and communications encompassing an ever-larger portion of human activity, we may someday learn that this new force dwarfs even its predecessors in the Feinstein camp when it comes to its impact on our democracy, our economy and our values.

There’s much we don’t know yet, so it’s wise to be cautious in describing this new force. But Edward Snowden’s revelations, and the reactions to them, are offering us a glimpse into rarely-seen intersections of Wall Street wealth, information technology, and the national security state.

Revolving doors.

Reports say that Snowden left government and joined the private sector as part of the massive privatization of government functions, including national security. His recent employer, Booz Allen Hamilton, earns more than 98 percent of its revenue from the government.

Privatization is an ideological pathway. It’s also, as with bank regulation, a path to riches for pliant officials. And, as with Wall Street, the officials feeding at the trough are entirely “bipartisan.” From a New York Times article:

“As evidence of the company’s close relationship with government, the Obama administration’s chief intelligence official, James R. Clapper Jr., is a former Booz Allen executive. The official who held that post in the Bush administration, John M. McConnell, now works for Booz Allen.”

That’s the revolving door in its purest form, spinning like an electron in your digital profile.

And there’s a lot of money to be made. Last February Booz Allen Hamilton announced two new contracts with Homeland Security, worth a total of $11 billion, for “program management, engineering, technology, business and financial management, and audit support services.”

Wonder who signed off on that deal – and where they’ll be working next year?

It’s who you know.

Booz Allen Hamilton is now a part of the Carlyle Group, the leverage-buyout firm which has contributed to the personal enrichment of a number of very well-known public figures from Administrations of both parties. They include:

Former President George H. W. Bush; Bush’s Secretary of State, James Baker, and Defense Secretary Frank Carlucci; Arthur Levitt, Bill Clinton’s Chairman of the Securities and Exchange Commission (SEC); and Mack McLarty, Clinton’s White House Chief of Staff.

The Bin Laden family was a major shareholder, too, until both parties concluded that the relationship with the Al Qaeda leader’s family (and the source of his wealth) was “receiving more attention than it deserved.”

Carlyle invests in both old-school and digital defense contractors. Members of the Carlyle Group’s Board also have board seats or other affiliations with corporations that include ExxonMobil, MCI Communications, Sprint Nextel, Duke Energy, Reuters, and Ford Motors. Bank affiliations among Carlyle’s leaders include Morgan Stanley, Goldman Sachs, and Bank of America.

As a “leveraged buyout” firm, the Carlyle Group purchases companies with borrowed money, and then lays the debt onto its acquisitions. That means it relies heavily on Wall Street connections, Wall Street wealth … and Wall Street’s solvency, which was protected by the 2008 bailouts.

It also means that those companies, including government contractors have to be very profitable. They need to pay off those debts and enrich their new owners, while seeing to it that the financial institutions which underwrite these loans are kept whole.

(Note to Carlyle Board: Sen. Feinstein will be available in 2018 when her current term ends.)

Birth of the Booz

Booz Hamilton Allen is a $5.9 billion company. Most of the work it does would have been performed in by military or civilian government employees – at no markup whatsoever. Thanks to privatization, Booz Allen earned nearly a cool billion in taxpayer-funded profit for those two years alone.

Booz Allen has profited greatly from the explosive growth in national security privatization since 9/11. (It created a chart to illustrate its growth between 2001 and 2010, which we’ve reproduced below. It’s impressive.)

The Times informs us that roughly 23 percent of the company’s revenue over the last decade has come directly from intelligence contracts. Booz says it has a backlog of $10.8 billion in additional “sold” work, which means it’s on track to receive nearly another billion in taxpayer money as profits (if current margins hold).

Booz says it has approximately 25,000 employees. More than three quarters of them hold government security clearances. Roughly half hold clearances of “Top Secret” or higher.

Private Eyes

And yet, for all that, it’s only eighth on the list of the top 100 government contractors.

Dana Priest and William Arkin conducted an intensive two-year investigation of national security for the Washington Post. They identified 1,931 private companies working in “about 10,000 locations” around the country, with 854,000 of their employees holding top-secret clearances.

They also found enormous redundancy and waste, along with an inability for human beings to effectively absorb and use all the information produced. Analysts were then publishing some 50,000 intelligence reports each year. And since this report was completed nearly three years ago, things can only have grown worse.

The huge drain on public coffers is only one of the downsides of this behemoth. Another is the lack of accountability when private employees do government work. That danger was eloquently described to the Times by Stewart A. Baker, former General Counsel to NSA and ex-Homeland Security official.

Cold Fusion

A lot of people are getting rich from national security data contracts. And, coincidentally or not, this corporate-driven national security apparatus seems especially interested in protecting Wall Street banks and bankers.

We’ve seen collusion between corporations and law enforcement on the local level, especially after then-Mayor Rudy Giuliani started renting out the New York City police force to big banks as rent-a-cops under a program called “Paid Detail.” That cozy relationship made it unsurprising, if no less deplorable, when city police officers teamed up with private security guards to evict Occupy demonstrators from Zuccotti Park.

A report on regional “fusion centers, which the Department of Homeland Security created to support inter-agency cooperation and data sharing,suggests that this relationship has been replicated on the national level through the Federal security apparatus. The study by DBA Press and the Center for Media and Democracy is an exhaustively researched glimpse into the cozy relationship between corporations and the National Security State.

The report’s author, Beau Hodai, documents the exhaustive use of government anti-terrorism resources against Occupy, a legal and nonviolent protest movement. Hodai also includes an interesting case study: the Arizona Fusion Center’s close collaboration with bank security personnel at JPMorgan Chase to protect CEO Jamie Dimon during a 2011 visit to Phoenix.

Booz Allen appears to be heavily involved in fusion centers. Its white paper on the topic reads like a sales pitch, and as of this writing more than 500 Booz employees on LinkedIn include the phrase “Fusion Center” in their job titles or descriptions.

JPMorgan Chase, whose CEO received such personal service from the Arizona Fusion Center, has close ties to Booz and the Carlyle Group, with projects that include backing Carlyle’s 2012 acquisition of a Philadelphia refinery; help in finding a buyer for aerospace company Arinc (which was part of Booz); reviewing Virgin Media for a possible takeover bid; and handling the initial share offering for Carlyle itself.

Complex Temptations

Our government’s accelerated dependence on Big Data technologies – one might even say its “fetishization” of them – has troubling implications for the workings of democracy and the apparatus of state.

In naming the “military/industrial complex,” General-turned-President Dwight D. Eisenhower warned us that, in meeting crises, “there is a recurring temptation to feel that some spectacular and costly action could become the miraculous solution to all current difficulties.”

“Spectacular.” “Costly.” “Miraculous.” “Temptation.”

And they say the General was a taciturn man.

The would-be miracle du jour at the core of today’s scandal is “metadata”: data about data. The corporate and intelligence worlds are infatuated with it. You might even call this wave of fascination a “bubble.”

The Data Bubble

Like any bubble, the “metadata” craze takes something of genuine value and inflates it far beyond its worth. This corporo-bureaucratic fashion trend is contributing to the new Complex’s explosive growth. But, as Priest and Arkin observe, the problem isn’t that there isn’t enough data or “metadata.” It’s that the data isn’t sifted, refined, and evaluated by human beings with human judgment.

“Metadata” is all the rage on Wall Street too. When “market makers” like Goldman Sachs and JPMorgan Chase capture a large chunk of the trades in a given area (the top five US banks control well over 90 percent of all derivatives trades, for example) that data gives them extraordinary economic power.

In a very real way, financial institutions are now data institutions – and the “too-big-to-fail” ones are grabbing all the power that comes with the hoarding of information.

Still, it’s a sign of Big Data’s limitations that these banks would have failed anyway if taxpayers hadn’t rescued them. We’ve forgotten that metadata, whether it’s used for credit scores, algorithmic trading, or national security, is inherently subject to flaws – flaws which can’t be fixed when it’s operated in secret or purely out of self-interest.

Metadata as Ideology

Eisenhower warned that the Military/Industrial Complex’s “total influence – economic, political, even spiritual (emphasis ours) – is felt in every city, every state house, every office of the Federal government …”

We face, in Eisenhower’s words, a spiritual threat, that of Metadata as Ideology. We idealize this algorithmic methodology, even surrender our liberties to it, while overlooking the flawed human origin of the process itself. Speaking as a former designer of large information systems, I recognize that it’s a very useful analytical technique. But as an ideology it’s antithetical to a democratic society:

Where democracy serves the human, metadata serves the mechanical and quantifiable.

Where democracy serves a society, metadata serves its masters.

Where democracy values the individual, metadata values the “set.”

Where democracy is self-correcting (at least in design), metadata is self-replicating and self-reinforcing.

The Long Struggle

The technology is new, but the struggle is old: Corporations like the Dutch East Indies Company and the British East India Company used traded goods to drive a wave of global colonization. Corporations in the Military/Industrial Complex made money from mass-produced weapons of iron and steel.

The weapons of the 21^st Century are made of electrons, not metal. But human nature doesn’t change. The Military/Industrial Complex robs our nation of its wealth and many people of their lives. the Security/Digital Complex takes our wealth and has the potential to invade and monitor virtually every aspect of our lives. In the end, that could make it even more powerful than its predecessor.

Booz Allen Hamilton’s corporate slogan is “Delivering results that endure.” Results that endure? That’s exactly what should worry us.

(UPDATE: I chose the word “whistleblower” with care. The AP Standards Editor says that term means “a person who exposes wrongdoing.” I believe there is clear evidence that “exposing wrongdoing” is precisely what Snowden has done.)

(Graph: Booz Allen Hamilton’s Post-9/11 Growth)