The war in Iraq has torn apart the lives of many innocent civilians and devastated families of the soldiers killed in a battle, that many regard as being both unnecessary and illegal. Yet ironically the war can be expected to provide a major boost to a stagnating US economy. This is because of the reduced price of oil after US control over the supply of Iraqi oil, as well as the positive impact on the profits of a wide range of private sector companies benefiting from military expenditure. In this article we will show how the military and private sector industrial interests are interwoven into the fabric of the US economy. The purpose is to show how this could be a factor in both the causes and consequences of this and future wars.

President Dwight D. Eisenhower was the first to reveal the existence of an integral link between the military and private industry in the US. In his farewell address of January 1961 he said, "we have been compelled to create a permanent arms industry of vast proportions ----- we annually spend on military security alone more than the net income of all United States corporations ------ the total influence (of the military industrial complex) - economic, political, even spiritual - is felt in every city, every state house, every office of the Federal Government."

In the post Second World War period military expenditure has been the single most important factor in stimulating growth, maintaining high employment and achieving economic stability in the US economy. John Kenneth Galbraith has shown that military expenditure as a percentage of GNP (Gross National Product), was 1.7 percent during the Great Depression in 1929, and increased to 8.4 percent in the mid 1960s. Similarly Herb Gintis has pointed out that with the growth of the Cold War and the American Military Industrial Complex, Federal Government expenditure rose to 20 percent of GNP. This is the same order of magnitude as private sector investment. Public sector expenditure on welfare projects, has been traditionally opposed by business interests, on grounds of government intrusion into the domain of the private sector. However maintaining large and growing military expenditures has been politically feasible on grounds of national security and the massive contribution to private sector corporate profits through subcontracting military production. Apart from this the employment effect of defence expenditure is also substantial with 20% of the work force being directly or indirectly employed due to defence spending.

While the military sector of the US economy is massive in size, it would be incorrect to imagine (as many do), that it constitutes an 'enclave', that is isolated from the rest of the economy. Evidence shows that military production through a system of contracts and subcontracts to private civilian industries is in fact diffused throughout the economy and affects its very structure. For example Nathanson has estimated that most of the top 25 corporations in the US are amongst the largest contractors of the Defence Department. Apart from the corporations, which have direct contracts there is a wide range of firms which receive subcontracts from the primary contractors. According to Robert Oliver in 25 sectors of the US economy ranging from aircraft production to textile products, a significant percentage of employment in every sector is attributable to military expenditures.

In recent years a new dimension of the military industrial complex in the US private sector industry has emerged. This consists of the private military companies (PMCs) which are symbiotically linked with military recruitment, training, logistics and even military operations. The PMCs include corporations such as Halliburton's KBR, Cubic, DynCorp, ITT, and MPRI. These corporations have grown rapidly in size due to the Pentagon policy of outsourcing a wide range of its functions. As a recent Defence Department Study (September 11/2001), concludes: "any function that can be provided by the private sector is not a core government function." Consequently in the late 1990s as the Fortune Magazine (March 24, 2003) points out, Halliburton's KBR Unit was given the contract for providing food, water, laundry, mail, and heavy equipment to US troops stationed in the Balkans. It may be pertinent to mention that the military has paid US $ 3 billion to KBR which is a company whose Chief Executive during the 1990s was none other than Mr. Dick Cheney who is currently the US Vice President and was Defence Secretary in the first Bush (Sr) Administration. Business in KBR has boomed as it got contracts for support bases in Kuwait for the Iraq war.

Not only do PMCs provide a wide range of non-combat services but in a few cases they are also providing services that blur the boundaries between combat and non-combat operations. For example according to Fortune Magazine, DynCorp has a contract from the State Department to protect Afghan leader Hamid Kharzai. Similarly a number of companies including Northrop Grumman receive upto US $ 1.2 billion from the US government to fly the planes that spray suspected coca fields and to monitor smugglers in the war against drugs in Columbia.

Apart from the massive diversion of resources into military production and the consequent dependence of the private sector on military contracts, the technological development in the US has also been heavily influenced by military requirements. In the Post Second World War period most of government research and development expenditure has gone into the defence industry. Consequently the US has an overwhelming superiority in weapons technology compared to any other country or any imaginable combination of countries. At the same time European countries and Japan may have a competitive edge over many civilian products due to their focus on civilian rather than military research. This asymmetry between overwhelming military power and a relatively lesser strength in its economic competition with emerging economic rivals such as France, Germany, and Japan, has an important implication for State behaviour. It creates in the US a propensity to use military power in claiming economic resources and thereby acquiring leverage in the economic competition.

Given the large and increasing size of the defence sector and its organic connection with the structure of the US economy, it would not be surprising if the defence industry influenced US defence policy. The future of democracy in the US and global peace will depend on the US leadership being aware of this fact and exercising necessary caution in the conduct of government policy. President Eisenhower made a prescient remark in his farewell address of 1961: "We must never let the weight of this combination (military industrial complex) endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together."