- The Washington Times - Tuesday, December 22, 2009

ANALYSIS/OPINION:

SHADOW ELITE: HOW THE WORLD’S NEW POWER BROKERS UNDERMINE DEMOCRACY, GOVERNMENT AND THE FREE MARKET

By Janine R. Wedel

Basic Books, $27.50, 304 pages

Reviewed by Roger Lott

An apt thesis statement for the “Shadow Elite” by Janine R. Wedel, professor of international commerce and policy at George Mason University, would be, “The private sector is not the solution to bad government; the private sector makes government bad.”

Ms. Wedel mourns the “emasculation” of the government due to the increased role of contractors, for which she blames former Presidents Ronald Reagan, Bill Clinton and George W. Bush. “Gone are the days when government contractors primarily provided services such as printing, serving food, or landscaping,” says Ms. Wedel, who apparently thinks the private sector isn’t worthy of anything more important than mowing the White House lawn.

If there’s a chance the contractors may influence public policy, it’s off-limits, she argues. This includes military contractors. Boeing Co. or Lockheed Martin Corp., after all, may try to convince the government to buy its jets and helicopters. This would be influencing public policy with private, selfish interests at heart.

Defense Solutions tried to do this, hiring retired four-star Gen. Barry McCaffrey to use his major public persona to lobby Congress to purchase 5,000 armored vehicles from the company. Gen. McCaffrey also sent a letter to Gen. David H. Petraeus saying, “No other proposal is quicker, less costly, or more certain to succeed.” Ms. Wedel says Gen. McCaffrey “did the firm’s bidding” but fails to point out that the retired general may in fact have believed in what he was vouching for.

The author makes the case that contractors such as Defense Solutions simply fall through the holes of what she calls the “swiss-cheese bureaucracy” of the federal government. What Ms. Wedel does not point out is that different contractors have to compete with each other to earn the government’s business and in the process try to offer the best service at the lowest cost. Private contractors want to attract the business of the government just as they do with any customer.

According to the author, private contractors manage federal taxpayer dollars, choose and oversee other contractors, control crucial databases, run intelligence operations and execute military operations. Ms. Wedel says that these roles have intruded on the realm of “inherently governmental functions.”

The present role of contractors is indeed undeniably great, and many of the employees in government agencies are in the private sector; 95 percent of those working at the National Reconnaissance Office, for example, are contractors. However, the fact that the government is paying contractors to perform services doesn’t mean that the government is “abandoning” its “inherently governmental functions.” It just so happens that the government can more effectively serve the public by outsourcing to specialized private companies. As Reagan once said, “The best minds are not in government. If any were, business would hire them away.”

The book effectively illustrates just how important networking can be. Ms. Wedel recalls living in communist Poland in the early 1980s and how the family she was staying with had shopping lists that matched someone’s name to every item. There is, however, no mention that in a free-market system the rationing of the price system eliminates the importance of such personal networks.

Ms. Wedel attributes the prosperity of Poland during the 1990s to its finding of a balance between excessive government control and excessive influence of institutions that only appear to be private but are actually in the public domain (“institutional nomads”). Sounds kind of like finding a middle ground between public control and public control. Perhaps Ms. Wedel just has difficulty giving the free market credit.

The book lacks systematic evidence and relies mostly on anecdotes, which, weighed down with countless names and complicated personal networks, are sometimes difficult to follow and read a little like conspiracy theories. Ms. Wedel devotes 45 out of 205 pages to discussing how a close-knit “Neocon Core” permeating think tanks and various parts of the government masterminded the war in Iraq.

These stories are intended to show how the “Shadow Elite” schemes and subverts oversight through complex personal networks. Yet Ms. Wedel, who calls the “Shadow Elite” the “new” power brokers, doesn’t point out that using personal networks to one’s advantage is hardly something new. In fact, one could easily argue that with the rise of information technology, networking has become somewhat less important.

The book offers little quantitative data and doesn’t offer any cost analysis about the efficiency of government outsourcing. This may be because examples of the government outperforming private contractors are simply nonexistent. Indeed, it seems highly unlikely that the government could do a better job at making jets than Boeing, Lockheed Martin or Northrop Grumman.

“Many CEOs are not paid for performance but paid whatever their performance,” says Ms. Wedel, who then reasons that if the free market doesn’t hold the private sector accountable, then the “Shadow Elite” is certainly capable of avoiding accountability when employed by the government.

Her argument, however, rests on an unsupported and highly disputable assumption - that there isn’t much competition in the free market. Ms. Wedel often seems to take it for granted that the reader will accept what she says at face value.

“The Shadow Elite” makes a rather weak, primarily anecdotal case for assigning the blame for many of the shortcomings of the federal government to the increased role of the private contractors. The author’s level of substantiation is unimpressive for a winner of the prestigious $200,000 Grawemeyer Award for Ideas Improving World Order. In a society in which private companies already have an undeservedly bad reputation, Ms. Wedel does a disservice in casting the private sector as a villain.

Roger Lott is an editorial intern at The Washington Times.

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