Investing in War • Center of Public Integrity #CarlyleGroup #iraq #afghanistan #911truth

Originally Published on November 18, 2004

Source: The Center for Public Integrity

A dozen companies in which Carlyle had a controlling interest netted more than $9.3 billion in contracts.

Overall, six private investment firms, including Carlyle, received nearly $14 billion in Pentagon deals between 1998 and 2003. (See related report, “The Sincerest Form of Flattery.”)

From its founding in 1987, the Carlyle Group has pioneered investing in the defense and national security markets, and through its takeover of companies with billions of dollars in defense contracts became one of the U.S. military’s top vendors, ranking among better known defense firms like Lockheed Martin, Boeing Co., Raytheon Co., Northrop Grumman and General Dynamics.

Unlike those firms, however, the Carlyle Group itself is not a manufacturer. It offers no services directly to the Pentagon, and has no defense contracts. Rather, it manages investments—some $18.4 billion from 600 individuals and entities in 55 countries, according to its Web site. The firm’s business is making money for these investors, the vast majority of whose identities are not disclosed to the Securities and Exchange Commission or other government bodies.

Though Carlyle itself has won no contracts, the companies it has owned or controlled have done billions of dollars worth of business with the Pentagon. The Carlyle unit that brought in the largest share—$5.8 billion—was United Defense Inc., which manufactures combat vehicles, artillery, naval guns, missile launchers and precision munitions. United Defense also owns the country’s largest non-nuclear ship repair, modernization, overhaul and conversion company, United States Marine Repair Inc. Its most famous product may well be the Bradley fighting vehicle. United Defense brought in more than 60 percent of Carlyle’s defense business.

Carlyle took United Defense public in 2001; by April 2004 it had sold all its shares in the company.

Lear Siegler Services, a leading contractor in aircraft logistics support, maintenance, pilot training and ground support, received contracts worth more than $1 billion. Carlyle sold the company in August 2002.

Southwest Marine Inc. also received contracts worth more than $1 billion since 1998, and Norfolk Shipbuilding & Drydock received contracts worth $827 million. In 1998, Carlyle merged these two companies into United States Marine Repair.

Vought Aircraft Industries, a large subcontractor doing work for military cargo planes, bombers, and fighters, received contracts worth $85 million. Vought is among the few defense contractors that the Carlyle Group has not sold.

Among other private equity firms, New York-based Veritas Capital Management firm that employs many former high-ranking military officials received Pentagon contracts to the tune of more than $2.2 billion. Veritas is the 41st ranked defense contractor.

Companies under the ownership of Vectura Holding Co., another New York-based group, got deals to the tune of $1 billion, while companies controlled by Berkshire Hathaway, led by billionaire investor Warren Buffett, won contracts worth $688 million. Companies owned by Green Equity Investors II LP ($275 million) and Gores Technology Group ($153 million) also received substantial defense money.

New market

Private equity firms did not have any significant presence in the defense industry until the end of the Cold War. Traditionally, the Defense Department depended on mega contractors such as Boeing Corp., Lockheed Martin and Raytheon for weapons and services. But since the 1990s, the military has increasingly outsourced to private contractors a variety of jobs and services, ranging from planning of operations to the supply of linguistic services. A U.S. government decision in the 1990s to encourage small-business participation in contracts also contributed to the expansion of the market for smaller, privately-owned companies.

The Carlyle Group acquired controlling interests in several underperforming defense contractors, installed its own management teams and revitalized the companies, in part by landing big Pentagon contracts. Then, they sold the contractors to other investors for a large profit.

“There have always been [private equities] that went in with management and bankrolled management,” said Stuart McCutchan, editor of Defense Mergers & Acquisitions. “What Carlyle has done differently is they have taken it to a new level both in terms of size and in terms of being committed to an entire sector.”

“Carlyle is the biggest single success in Washington of a venture capital firm,” Dr. Loren B. Thompson Jr., a national security expert at the libertarian Lexington Institute, said.

In 1997, for example, the group made a 650-percent profit when it sold BDM International Inc., a McLean, Va., defense contractor. And in December 2001, Carlyle sold off the majority of its holdings in United Defense Inc. Altogether, Carlyle earned $1 billion in profit from the United Defense investment.

A windfall of war

The group cashed out many of its investments when the stock of defense companies rose dramatically in the aftermath of September 11 and the buildups to the Afghanistan and Iraq wars.

“Defense properties are too expensive these days,” explained Carlyle spokesman Chris Ullman.

In 1997, Carlyle liked the price of United Defense, and beat out General Dynamics and Alliant Techsystems, which also coveted the underperforming artillery firm. General Dynamics bid more than Carlyle offered for the company, but potentially faced a lengthy, drawn out antitrust battle if it acquired United Defense. Carlyle ended up winning the bid.

Carlyle finally sold its stakes in United after taking it public in the aftermath of the September 11 attacks. The Washington Post called the hugely successful public offering “one of the most successful single venture investments of recent years.”

But United did not seem all that lucrative before September 11.

“They [Carlyle] were really kind of in a pickle with United Defense,” McCutchan said. “They wanted to cash out on the equity. There wasn’t much money to be made… When 9/11 happened and the defense budget took off, suddenly they had a winner on their hands.”

Even Carlyle, which typically does not disclose its financial and operational details, crowed over the sale.

“It was one of Carlyle’s best investments,” Carlyle’s Ullman told the Center. “We did make more than a billion dollars on that deal, and we are very pleased that we served our investors quite well.”

The reason Carlyle’s defense portfolio is lean at the moment is the high value of defense firms, thanks in part to the ongoing U.S. wars. “If there comes a time when defense properties are priced in a way that we think makes sense for private equity investors, then we will certainly consider investing more of our dollars in that sector,” Ullman told the Center.

Investment expertise

Carlyle has a diversified portfolio, focusing its investments in sectors that have heavy government regulation and contracting—defense, telecommunications and banking. Carlyle has matched its investments with the expertise of high ranking government officials, whom the firm has courted almost from its inception.

It was under the leadership of former Defense Secretary Frank Carlucci—first as a managing director, from 1989 to 1993, and as chairman from 1993 to 2003—that Carlyle grew from a small private equity to a global investment giant, and became a major player among defense contractors.

Other former government officials who have recent or current ties to the firm include former British Prime Minister John Major and former Philippines President Fidel Ramos; former Office of Management and Budget director Richard Darman; former Clinton chief of staff Thomas F. “Mack” McLarty; former Securities and Exchange Commission chairman Arthur Levitt and former Federal Communications Commission chairman William E. Kennard. Former Secretary of State James Baker works for the firm, as did his former boss, President George H.W. Bush, who was an adviser for the firm’s Asian investment funds until he left Carlyle in 2003.

Critics have long denounced Carlyle’s practice of recruiting former high-ranking government officials at the same time as it invests in companies regulated by their former agencies, dubbing it “access capitalism.” For example, Kennard, who served as Bill Clinton’s FCC chairman, is now managing director for Carlyle’s global telecommunications and media group, directing the firm’s business investments in companies he regulated.

“Carlyle would never have gotten to the level that it is at today had it not been for this premeditated commingling of business and politics,” said Dan Briody, author of The Iron Triangle: Inside the Secret World of the Carlyle Group, a book that takes a critical look at the rise of the firm.

One of Carlyle’s most controversial hirings was of former president Bush to serve as a senior adviser for its “Asia advisory board.”

“The fact that George H.W. Bush was working for them while his son was president, while his son, in fact, was dramatically increasing defense spending—that seems to me one of the most blatant conflicts of interests in history,” Briody said.

Bush—who joined Carlyle in 1998, before his son, George W. Bush, became president—ended his relationship with the firm in October 2003, Ullman told the Center. But that hasn’t stopped the former president from continuing to give speeches for Carlyle, which he did at a Shanghai event sponsored by the firm in April 2004.

Ullman refused to disclose the remuneration Bush received for his services. “That’s not information that we disclose,” he said. “That’s his personal business. You are certainly welcome to ask him.”

Bush’s office did not respond to the Center’s request for an interview. Written questions faxed to the former president’s Houston office, at an aide’s request, did not elicit any response.

Though none are placed as closely as the president’s father, Carlyle’s other Washington insiders have ties to current Bush administration officials. Current Defense Secretary Donald Rumsfeld and Carlucci went to college together, for example, and Secretary of State Colin Powell was Carlucci’s deputy on the National Security Council in the mid-1980s.

The continued presence of Baker and Carlucci riles critics such as Briody. “If you look at the relationship that Frank Carlucci still maintains with Don Rumsfeld and Colin Powell and the reach that he has to those folks—and he has in fact used that reach in the past and tried to influence decisions those folks were making, decisions that could directly or indirectly affect Carlyle’s fortune,” Briody said.

Carlyle dismisses the notion that Carlucci or any other former government or military leader on its payroll has any conflicts of interest. “Are you aware of any solicitations from [Carlucci] to Secretary Rumsfeld to ask for any particular benefits to United Defense or any of our other portfolio companies?” Ullman said. “All they [Carlyle critics] do is, they say: ‘Oh, Carlucci used to work in the government and he went to college with Donald Rumsfeld, and Carlyle has defense investments, and now Secretary Rumsfeld is secretary of defense. Therefore, there is a conflict of interest.’”

Despite Ullman’s assertions, media accounts have noted occasions when former government officials working for Carlyle have approached the Pentagon brass. For example, Fortune magazine reported in March 2002 that Carlucci had contacted at least two senior Pentagon officials, though Carlyle claimed these contacts did not constitute lobbying.

Ullman added that all former government officials working for Carlyle abide by “all of the conflict of interests rules related to lobbying former colleagues for a year.” He pointed out that the Pentagon had cancelled the Crusader artillery system, produced by United Defense, adding, “So if we are as powerful as everyone thinks, why did they cancel it?”

Rumsfeld announced in May 2002 the termination of the artillery system; until then, the Pentagon had paid United Defense some $2 billion to develop the Crusader.

Researcher Sheetal Doshi contributed to this report.

The value of the revolving door: Political appointees and the stock market • VoxEU/CEPR #Halliburton #Cheney

Originally Published on September 27, 2012

Source: VoxEU/CEPR

The presidential election campaign is in full swing in the US. Whoever wins the presidential race will face the challenge of filling top positions in the federal administration. Since some political appointees traditionally come from the private sector, allegations of conflicts of interest will emerge. But are connected firms really expected to profit? This column sheds light on this issue.

The presidential election campaign is in full swing in the US. Whoever wins the presidential race in November will face the challenge of filling top positions in the federal administration with political appointees. Inevitably, he will tap the reservoir of private-sector experts. And with that, allegations of conflicts of interest will emerge since some appointees come from firms that fall under the regulatory jurisdiction of the respective agency or from firms that may hope to win procurement contract awards. For example, on the very same day that President Obama tightened anti-lobbyist rules, he nominated Raytheon executive William J Lynn III as Deputy Secretary of Defense. The revolving door between industry and government is an old phenomenon but evidence on its consequences is surprisingly scarce. Whether and to what extent firms benefit from the political appointment of one its members largely remains a matter of speculations and anecdotes. This column sheds light on this issue.Preferential treatment against all (institutional) odds?

Political appointees can treat their former employers preferentially in procurement, regulatory and oversight, or merger and acquisition decisions. Indirectly they can favour their former employers through long-term strategic planning or through better access to decision makers and information. At the same time, there are various institutional safeguards against conflicts of interests, ranging from specific provisions embodied in ethic codes to congressional committees and a vigilant free press. However, it is unclear how effective these safeguards are. Often, political appointees get waivers or simply fail to adhere to the rules. Time and again, political appointees were involved in decisions with immediate consequences for their former employer. For example, Senator Al Gore complained that Gerald Cann was responsible at the Navy for selecting a weapon system that he developed at his former employer General Dynamics: “It is a little wrong to be involved with a weapon system [in industry] and then be put in charge of deciding [at the Department of Defense] what system will replace the one that’s performing the mission now” (cited in Aerospace Daily 1991). Therefore, it is ultimately an empirical question, if firms benefit from political connections.Assessing the value of the revolving door

How can we assess the benefits of the revolving door for affected firms? The benefits of political connections may come in many forms and materialise slowly. Further, political connections are but one among a myriad of factors of firm performance. Finally, successful firms are likely to attract the brightest people who also make attractive nominees for government service. Thus, analysing the effect of political connections is fraught with all sorts of endogeneity and measurement issues. One approach to avoid these problems is to look at stock market reactions to announcements of political appointments. Stock-market reactions are immediate, which makes it easier to relate cause and effect and abstract from confounding factors. Further, stock market reactions are a comprehensive measure of potential benefits. In this vein, Fisman et al. (2006) investigated stock market reactions to news about Cheney and his health of firms with either Cheney or other Halliburton directors on the board of directors. They find no evidence for connections to matter. In contrast, Acemoglu et al. (2010) find large stock market reactions to the nomination of Treasury Secretary Geithner for firms connected to Geithner through his positions as the head of the New York Fed or for firms with personal ties to Geithner. Thus, the previous evidence on the value of political connections in the US is conflicting. More importantly, the two studies are not primarily concerned with the revolving door phenomenon, and mainly analyse other forms of connections.New evidence

In a recent study (Luechinger and Moser 2012), we explicitly look at the value of the revolving door by using unique data on corporate affiliations and announcements of all Senate-confirmed US Defense Department appointees of six administrations. According to the results, investors clearly expect firms to profit from their political connections. The one- and two-day average cumulative abnormal returns amount to 0.82% and 0.84%. These estimates are not driven by important observations, volatile stocks, or industry-wide developments, and placebo events yield no effects. Effects are larger for top government positions and less anticipated announcements, i.e., announcements for which the actual nominee was not rumoured to be the main candidate. Figure 1 below displays the baseline results and the results for the less anticipated events together with the temporal pattern of average cumulative abnormal returns for the four trading weeks prior to and after the announcement day.

Figure 1. Cumulative abnormal returns around announcements of political appointments


Overall, our results suggest that concerns over conflicts of interest voiced by politicians, the press, and government watchdogs are not unfounded. However, our results do not imply that recruiting political appointees from the private sector is necessarily a bad thing. Our results highlight one important cost of doing so but they are silent about potential benefits. Neither do our results suggest that tightening ethics regulations is worthwhile. Already now, they entail substantial compliance costs. But this is unlikely to happen anyway. Whoever wins the presidential race this time, neither of the candidates campaigned on the promise of closing the revolving door.References

Acemoglu, Daron, Simon Johnson, Amir Kermani, James Kwak, and Todd Mitton (2010), “The Value of Political Connections in the US,” mimeo, Harvard University.

Aerospace Daily (1991), “Navy Official Denies Conflict of Interest with Tomahawk Variant,” June 10.

Fisman, David, Ray Fisman, Julia Galef, and Rakesh Khurana (2006), “Estimating the Value of Connections to Vice-president Cheney,” mimeo, Columbia University.

Luechinger, Simon and Christoph Moser (2012), “The Value of the Revolving Door: Political Appointees and the Stock Market,” KOF Working Papers No. 310 and CESifo Working Paper No. 3921.

Conspiracy Theorist circa 1958

“So brush the insiders dust out of your eyes, my friends, and the communist soap suds out of your Brain, and ask yourselves in all honesty, what on Earth is wrong with the United States simply minding its own business, or with having its foreign policy function primarily for the safety and benefit of the American people.

Which is exactly what we had done for the first 140 years of our existence as a nation, to the incredible advantage of ourselves and everybody else, everybody that is, except a numerically small clique of power lusting conspirators who have somehow inflicted themselves on a gullible world.”

Robert W. Welch Jr.

Will the Military Industrial Complex Permit Good Relations Between the U.S. and China? • Strategic Culture Foundation


The world would benefit enormously if Joe Biden terminated its ascent by coming to terms with China and Russia, Brian Cloughley writes.

At the recent semi-successful United Nations COP26 conference on climate change there was an unexpected revelation that the U.S. and China had engaged in some thirty virtual meetings on the subject over the past year. Their decision to “jointly strengthen climate action” was very welcome from the environment point of view, and even more welcome because it demonstrated that Washington and Beijing could actually get along in one aspect of international relations. It also raised the question as to whether they could ever sit down together and discuss the equally pressing problem of looming conflict.

When U.S. climate envoy John Kerry announced the agreement he acknowledged that although “the United States and China have no shortage of differences” it seemed that “on climate, cooperation is the only way to get this job done.” In this, however, he seemed to be taking a different track to President Joe Biden, who played into the ever-welcoming hands of Washington hawks on November 2 when he castigated Presidents Xi and Putin for non-appearance at the COP gathering. This, he declared, was a “big mistake” and contrasted with the fact that “we showed up” but “they didn’t show up… It is a gigantic issue and they just walked away. How do you do that and claim to have any leadership mantle?”

It is barely credible that the President of the United States would state that the Presidents of the world’s other most important countries are not effective leaders. The BBC’s record of his diatribe is disturbing, as it demonstrates a desire for confrontation rather than a genuine preparedness to calm things down. He said that “the fact that China is trying to assert, understandably, a new role in the world as a world leader — not showing up, come on.” He continued by declaring that Russia’s wilderness was burning while President Putin “stays mum” about the problem. He did not know, or deliberately ignored the fact that, as the BBC reported, “before Mr Biden’s speech Mr Putin virtually addressed a meeting on forest management at the COP26 summit on Tuesday, saying that Russia takes the ‘strongest and most vigorous measures to conserve’ woodlands.”

There was little surprise that as COP26 was drawing to a close, President Xi warned against a return to “Cold War-era” divisions when it was made known that he and President Biden would meet on November 15. He said plainly that “attempts to draw ideological lines or form small circles on geopolitical grounds are bound to fail,” and China’s Ambassador to the United States, Qin Gang, expanded on the subject at a function in Washington of the National Committee on U.S.-China Relations, saying that China “always bears in mind the fundamental interests of the people of both countries and the whole world, and handles China-U.S. relations from a strategic and long-term perspective”.

Most people are aware that China has a long-term view on its place in the world, and even President Biden, in his message to the gathering, declared that “from tackling the Covid-19 pandemic to addressing the existential threat of climate crisis, the relationship between the U.S. and China has global significance. Solving these challenges and seizing these opportunities will require the broader international community to come together as we each do our part to build a safe, peaceful and resilient future.” He did not, however, place any emphasis on bilateral negotiations, which was left to President Xi, who wrote that “China-U.S. relations are at a critical historical juncture. Both countries will gain from cooperation and lose from confrontation. Cooperation is the only right choice.”

President Xi’s desire that China should get together with the United States specifically to plan a joint way ahead for a peaceful future has not been echoed in Washington where, as reported by the Straits Times, “the White House deputy press secretary Karine Jean-Pierre stated that Washington and Beijing had ‘an agreement in principle’ to have a virtual summit before the end of the year.” Her explanation was that “this is part of our ongoing efforts to responsibly manage the competition between our countries,” while stressing that it was “not about seeking specific deliverables.” In other words, don’t let anybody get their hopes up that Mr Biden would pursue collaboration that will lead to improved bilateral relations. He might not go so far down into the insult sewer as to reiterate his previous public declaration that Mr Xi doesn’t have a “leadership mantle”, but it is unlikely there will be long-term substance.

It is not surprising that Mr Biden is reluctant to compromise, because the Pentagon and its associates have already notified the world they consider China to be menacing and that the United States should “meet the pacing challenge presented by the PRC’s increasingly capable military and its global ambitions”.

In its November 3 Report to Congress, the Pentagon details “Military and Security Developments Involving the People’s Republic of China” and presents the Pentagon’s case for continuing to expand the U.S. military and acquire even more staggeringly expensive weaponry. As the New York Times reported, the Chairman of the Joint Chiefs of Staff, General Mark Milley, said that China “is clearly challenging us regionally, and their aspiration is to challenge us globally… they have a China dream, and they want to challenge the so-called liberal rules-based order.” The Washington Post noted the Report’s concern about China’s global vision, in that it “already has established a military base in Djibouti, on the Horn of Africa. To support its goals, it wants to build more facilities overseas and is considering more than a dozen countries that include Cambodia, Pakistan and Angola. Such a network could interfere with U.S. military operations and support offensive operations against the United States.”

The Pentagon’s warning that China’s establishment of a military base in a foreign country constitutes a threat is absurd to the point of risibility, especially in the context of the U.S. military footprint which extends to “750 military base sites estimated in around 80+ foreign countries and colonies/territories.” Further, it is calculated that the U.S. spends more on its military than the combined defence budgets of eleven major countries : China, India, Russia, United Kingdom, Saudi Arabia, Germany, France, Japan, South Korea, Italy, and Australia.

It is not surprising that William Hartung and Mandy Smithberger wrote in TomDispatch on November 9 that “The arms industry’s lobbying efforts are especially insidious. In an average year, it employs around 700 lobbyists, more than one for every member of Congress… A 2018 investigation by the Project On Government Oversight found that, in the prior decade, 380 high-ranking Pentagon officials and military officers had become lobbyists, board members, executives, or consultants for weapons contractors within two years of leaving their government jobs.” And of even more concern for the workings of democracy it is sinister, in the words of Dan Auble, that “defence companies spend millions every year lobbying politicians and donating to their campaigns. In the past two decades, their extensive network of lobbyists and donors have directed $285 million in campaign contributions and $2.5 billion in lobbying spending to influence defence policy.”

Good luck to Mr Biden. Let us hope that he will sacrifice popularity for peace and that he will bear in mind the words of his illustrious predecessor President Eisenhower, sixty years ago, that “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.” Indeed it has risen. But the world would benefit enormously if Joe Biden terminated its ascent by coming to terms with China and Russia.

Why you should care about the Military-Industrial-Media Complex • Helen Johnson

Source: Miscellany News

n January 17, 1961, the 34th President of the United States, Dwight D. Eisenhower, delivered the final public speech of his presidency. At that time, only five other presidents had delivered farewell addresses upon leaving office. Emblematic of the many contradictions that characterized his life and presidency, Eisenhower—the only general to be elected president during the 20th century, having served as Supreme Commander of the Allied Expeditionary Force in Europe during World War II—left a legacy warning the nation about the implications of increasing power of the very establishment in which he served:

“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination 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.”

Although the term “military-industrial complex” (MIC) was almost certainly invented by one of his speechwriters, Eisenhower is credited with its coining. The MIC has become a phrase used to describe the complex web of connections tying together the military, the Pentagon, politicians, defense contractors, and other corporations that profit from, have stakes in, or contribute to war, or any combination thereof. However, most usages include the overlap between private military contractors and the federal government, and highlight colossal military budgets, the influence the defense industry exerts over public policy and the massive profits (for some) that are reaped from war.

The attention given to a possible “military-industrial complex” rose and fell throughout the latter half of the 20th century, declining from the late 1980s through the beginning of the 2000s. However, the War on Terror sparked by the Sept. 11 attacks and the prolonged wars in Iraq and Afghanistan have renewed interest in the MIC. New factors, such as the importance of oil for national security and surveillance technology, have dramatically altered the landscape and scope of what may be considered part of the MIC since Eisenhower’s speech.

The MIC intersects with many other systems and structures. In fact, in the drafts of Eisenhower’s speech, both the terms “military-industrial-congressional complex” and “military-industrial-scientific complex” were considered. But in recent decades there has grown another connection, with one of the institutions that we, as a democratic society, hold most dear, and which Eisenhower himself identified as the one most critical to “security and liberty prospering together”: the free media.

The potential for those who hold power within the military-industrial complex to use the media to influence public opinion, either intentionally or indirectly, is extraordinary. I do not wish to paint a conspiracy of top officials and CEOs plotting a complex propaganda scheme. I also do not want to imply that reporters are directed behind closed doors to paint the MIC in a certain light. Rather, I hope to illuminate how the concentration of power within the corporate media and the MIC, along with the intersections of these industries, can influence the messaging we receive on a daily basis. This can have devastating implications for democracy.

The modern day MIC has grown into a monster of vast proportions beyond what even Eisenhower would have envisioned. Not only does today’s MIC involve the military, weapons makers and Congress, but it also includes countless government officials, the oil industry, service companies and contractors, surveillance and technology companies and think tanks that have managed to imbed their imperialist agendas into White House administrations (William D. Hartung, “Prophets of War: Lockheed Martin and the Making of the Military-Industrial Complex,” 2011). An understanding of the enormous breadth and reach of today’s MIC is essential for appreciating the countless ways in which it intersects with modern-day corporate media.

There has also been a huge consolidation of power within the media over the last several decades. In 1983 there were 50 dominant media corporations, while today only five conglomerates (AT&T, Comcast, Disney, News Corp and ViacomCBS) own about 90 percent of United States media (Ben Bagdikian, “The New Media Monopoly,” 2004). Merger after merger has consolidated the media industry into giant corporations that each have the power to reach millions, even billions, of people in the United States and around the world. These media giants have unprecedented monetary and political power, which, compounded with the fact that they control the vast majority of the news and political messaging we receive, gives them the ability to lobby and influence the government to slash regulations, grant antitrust approvals and pass laws that benefit their corporate interests. And, because they intersect with other million- and billion-dollar industries, they have the power to manufacture favorable opinion amongst the public for the mutual benefit of themselves and their partner industries (Martin A. Lee and Norman Solomon, “Unreliable Sources: A Guide to Detecting Bias in News Media,” 1990).

With knowledge of the contemporary MIC and corporate media, the connections between the two become hard to ignore. Through outright corporate ownership, interlocking directorates (when the same individual sits on more than one corporate board), revolving doors (the circulation of the same people working for the government, military contractors, and media corporations), embedded journalism (when reporters live and travel with troops during military conflict) and over-reliance on “official” (i.e. military, government and Pentagon) sources, the corporate media is undeniably linked in complex but powerful ways to the MIC. Beginning with the collaboration between Hollywood and the military made possible by the Committee on Public Information, which was founded by President Woodrow Wilson in 1917, the links between the media and the MIC have only become stronger, more frequent and more financially lucrative over time (Haidee Wasson and Lee Grieveson, “Cinema’s Military Industrial Complex,” 2018). This has resulted in a mainstream media that does not provide a check on government use of military power, but rather influences our perception of war and manufactures support for the military apparatus that is the MIC.

The intersection of the MIC with the media has had disastrous consequences. Corporate media manufactures pro-military opinion among the public, contributes to climates of mass hysteria in the periods leading up to military involvement, suppresses information relevant to military involvement, provides a sanitized coverage of war, fails to investigate, criticize or thoroughly debate issues of military involvement, too easily bends to pressure from government and military officials and even sometimes spreads outright lies and false information regarding matters of war (Dougles Kellner, “Media Spectacle and the Crisis of Democracy: Terrorism, War and Election Battles,” 2005; Normon Solomon, “War Made Easy,” 2005; Dougles Kellner, “Media Spectacle and the Crisis of Democracy,” 2002). This has resulted in an American citizenry that is ill-informed, uneducated and misled in matters regarding war and military involvement, rendering it incapable of holding its government to account when it comes to matters of military involvement.

In the United States, we consider the free press to be a hallmark of our liberty. However, the massive concentration of media power from hundreds of media firms to the big five today means that just a handful of people have the power to influence the messaging that affects millions of people throughout the nation. Not only have the media conglomerates consolidated, but they are linked in direct and indirect ways to the various arms of the MIC. Thus, they have ceased to be the unbiased news outlets we believe them to be in matters regarding war. Eisenhower’s hope that “an alert and knowledgeable citizenry” would be able to check the growing power of the military-industrial complex has not only not been realized, but is in greater danger than ever before.

The unprecedented consolidation of the modern media industry has severe consequences • Helen Johnson

Source: Miscellany News

When President Dwight D. Eisenhower coined the term “military-industrial complex” in his Farewell Address to the nation on Jan. 17, 1961, he did more than warn against the “acquisition of unwarranted influence” and the “disastrous rise of misplaced power.” In fact, he alluded to how we might avoid such a dangerous threat: “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.”

Eisenhower was right to emphasize the importance of an “alert and knowledgeable citizenry.” Without this key aspect of democracy, the people are unable to hold their government accountable or influence its decision-making—including, and perhaps especially, decision-making regarding war. In the United States, our free press is entrusted with keeping us “alert and knowledgeable.” The freedom of the press is a pillar of our democracy.

The First Amendment is meant to serve as a check against government control over the marketplace of ideas and dissemination of information. The American press prides itself on being independent and unbiased, which is meant to ensure that the public gets fairly neutral reporting and a truthful account of the news regardless of who may be involved. Justice Brennan summarizes this notion in the majority opinion of New York Times Company v. Sullivan: “[D]ebate on public issues should be uninhibited, robust, and wide-open, and [this] may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials.” The concept of free media is intrinsically tied to democracy. The United States was founded on the principle of government by consent of the governed; a free press that keeps the citizenry informed of the happenings in government is what allows the “governed” to give their consent and make informed decisions when voting for elected officials.

For debate on public issues to be uninhibited and the marketplace of political ideas to be free, the logical conclusion is the more the better—more newspapers, more television stations, more editors, more writers and more independent, local media owners. This ensures that as many people’s voices as possible are heard, and that those in charge of media outlets are more likely to be locally based and familiar with their areas and communities. However, the consolidation of media conglomerates over recent history has moved us in the opposite direction.

In 1983 there were 50 dominant media corporations. Today there are five. These five conglomerates own about 90 percent of the media in the United States, including newspapers, magazines, book publishers, motion picture studios and radio and television stations. As of 2020, the five media giants are AT&T (Time Warner, CNN, HBO), Comcast (NBC Universal, Telemundo, Universal Pictures), Disney (ABC, ESPN, Pixar, Marvel Studios), News Corp (Fox News, Wall Street Journal, New York Post) and ViacomCBS (CBS, Paramount Pictures).

Many of the mergers that allowed for the consolidation within the media industry happened after winning antitrust approval from the Justice Department. An extreme lack of regulation regarding media companies has resulted in the media giants managing to secure major holdings in all forms of media, including newspapers, radio and television stations and movie studios. In his book “The New Media Monopoly,” Ben Bagdikian writes that “[t]his gives each of the five corporations and their leaders more communications power than was exercised by any despot or dictatorship in history.” The benefits of consolidation for company owners and shareholders are clear: the fewer the owners, the larger each one’s share of the billion-dollar media industry. Additionally, the larger the media giants grow, the more impossible it is for smaller, independent outlets to stay afloat.

The consolidation of media power extends beyond just mergers and monopolies. The big media giants oftentimes have interlocking directorates—which is when the same people serve on the board of directors of more than one company. According to a study by Aaron Moore in the Columbia Journalism Review in 2003, News Corporation, Disney, Viacom and Time Warner had 45 interlocking directors. The dominant five media conglomerates in 2004 had a total of 141 joint ventures. Although there is no recent compilation of data for the interlocking directorates of the big five media conglomerates today, Moore’s study is indicative of a constant pattern within the industry.

No analysis of the concentration of media power and the corporations that control today’s messaging would be complete without a close look at big tech and the internet. The huge tech companies of today have produced another form of power concentration and broadened the reach of major media conglomerates. Because of the internet, today’s news media reaches more Americans than ever before, while being controlled by the smallest number of owners in history.

The rise of the internet has also led to the tech giants accumulating an obscene amount of power over which media we consume. Unlike the conglomerates like AT&T, Comcast, Disney, etc. (and the news outlets they control), tech companies don’t produce the content we see—they control what we view. The market power of platforms like Google and Facebook is obscene: Facebook and Google combined account for over 70 percent of users directed to the websites of major news publishers. On its own this may seem trivial, but the rise of fake news, intense polarization and increased acceptance of conspiracy theories imply otherwise. The power held by huge tech giants only serves to magnify the impact that media conglomerates have over messaging.

The implications of the extreme consolidation of media power are extensive. First, the largest source of political money comes from corporations, and the media conglomerates are some of the largest corporations in the world. In the Forbes 2020 ranking of the world’s largest public companies, AT&T came in 11th, Comcast 27th, and Disney 36th. ViacomCBS and News Corp trailed the top three, at 472nd and 1737th, respectively. The tech companies are also at the top of the list. Alphabet (Google’s parent company) comes in 13th in the world and Facebook sits at a comfortable 39th. The market values of these companies range from $5.8 to $919 billion.

These billions upon billions equal more influence in political discourse and elections. Money determines the winning issues and candidates in American politics, so the larger the corporation, the stronger the influence. But no other industry is as directly linked to voting patterns as the media industry. Their product is the messaging that dictates the issues and candidates that dominate the national arena.

What this means is that not only do the media giants contribute money to campaigns, they also cover them. They report, record, narrate, document and broadcast them. Consequently, the political power of media conglomerates grows exponentially with their size and wealth; the larger the corporation, the greater its political influence through both monetary power and messaging. The greater the political power of the media giants, the more easily they lobby and influence the government to slash regulations, grant antitrust approvals and pass laws that increase their corporate domination.

One such law is the 1996 Telecommunications Act. The Telecommunications Act amended the Communications Act of 1934 and was the first major overhaul of telecommunications law in over 60 years. According to the Federal Communications Commission (FCC), the goal of the law was to “[l]et anyone enter any communications business––to let any communications business compete in any market against any other.” In effect, the legislation deregulated the broadcasting and telecommunications markets. The media giants benefited immensely from the Telecommunications Act and lobbied extensively for its passage—which is why it should come as no surprise that major news outlets completely failed to cover the legislation.

Concentrated media power not only affects which issues take the spotlight in the news, but their power in the entire realm of politics. Political parties and elected officials are keenly aware of the almost-absolute control of media giants in the news. Big money in other industries already holds gross power over elected officials due to campaign financing—add to that the fear of unfavorable news coverage, and it is no surprise that bills like the Telecommunications Act are passed easily.

The consequences of concentrated political influence among the media conglomerates is more far-reaching still. Media giants have the power to not only shape public debate, ensure the passage of favorable legislation and bend elected officials to their will, but also to bolster entire ideologies. One must look no further than Fox News. The American cable news television channel was spawned by Australian-American Rupert Murdoch, i.e. media mogul and creator of the empire that includes News Corp and Fox Corporation.

Fox News was launched on Oct. 7, 1996, as a conservative news network and is now the dominant cable news network in the United States. At the end of 2019, it averaged 2.5 million primetime viewers and was the top-rated network in all of cable for the fourth year in a row. According to a study published in The Quarterly Journal of Economics, there was a significant effect of the introduction of Fox News on the vote share in Presidential elections between 1996 and 2000, and Republicans gained 0.4 to 0.7 percentage points in the towns that broadcast Fox News. Fox News exemplifies the dramatic effect the news media has on the electorate and what happens when one media mogul with a political agenda builds an empire that becomes one of the largest media corporations in the world.

With the consolidation of media power, the pool of people that control the vast majority of the industry is ever shrinking. The smaller the pool that controls the news media, the narrower the information reported. Not only is the news oftentimes duplicative and always bound to the outlet’s parent corporation, but the media giants’ cartel-like relationships mean that the differences in reporting between each conglomerate are minor as well. These narrowed choices will themselves be biased by corporate interests. As noted, the political power held by the dominant media firms is readily used to make conditions more favorable for their growth and profit; likewise, they use their messaging power to enhance the social and economic values that are favorable to the corporate world.

Additionally, media giants are not only global corporations themselves, but are invested in other million- and billion-dollar industries. They are not stand-alone companies with isolated interests. Media conglomerates make money off of advertising, which holds influence over reporting and broadcasting. Beyond even this, however, the media giants have physical and financial ties to other industries. Interlocking directorates, revolving doors of personnel and financial stakes and holdings connect the corporate media to the state, the Pentagon, defense and arms manufacturers and the oil industry. Our free press, which assures “government by consent of the governed,” is in bed with the captains of industry and profiteers of war.

Petrodollar System


Many of us are familiar with the idea that the dollar is the global reserve currency. This means that when other countries conduct trade, goods are often priced and paid in US dollars, even when the US is not involved in the transaction.

This gives the US tremendous power both globally and at home. Internationally, having the global reserve currency gives us immense policy influence—for example, financial sanctions. When we impose sanctions on Iran, we can basically cut them off from the global banking system entirely by cutting off their ability to use the dollar and the SWIFT system in international trade. By essentially being able to ban them from using the dollar, they are cut off from the global economy, which is overwhelmingly priced in dollars.

But why is the dollar the global reserve currency? Well – one huge reason is because of oil. Oil is priced globally in dollars. If Russia wants to buy oil from Saudi Arabia, they do it in dollars. Why though?

In the mid-1970s, the US agreed to provide military protection to Saudi Arabia in exchange for the global pricing of oil in dollars. This is the backbone for the dollar’s international strength and provides a global demand for dollars that no other country or region can compete with.

Understanding this is where things start to get complicated and morally grey. In exchange for the power we receive in return – oil priced in dollars globally – we are protecting the regime of a country with longstanding problems and human rights abuses ( Furthermore, we are also supporting the global oil trade.

In a way, the US is reliant on oil. We need other countries to keep demanding oil because, without that, $USD would not be as needed globally, and we would lose significant international power.

It is almost hypocritical for our leaders to talk about green energy in the US when not only are we protecting the Saudi oil trade, but we need it to continue, to enforce the global dollar hegemony that has been present since the end of WWII. Hypocritical isn’t really the right word though, since most politicians don’t understand the dynamic at play here any more than the average person does.

Can we just stop protecting Saudi oil? It’s not so simple.

The global soft power we would lose is considerable. Sanctions against Iran don’t do nearly as much if they can just buy whatever they want in Russian rubles instead of dollars.

And it’s not just international either. Global demand for dollars sucks USD out of the country, which is good since we print a ton of new dollars. If global demand for USD falls, yet we keep increasing the money supply, those dollars will stay in the country, and price inflation would likely rise. If you want more deficit spending, more social programs, more stimulus, etc., you need global demand for the dollar to stay high. This is why the US can create much more new money than, for example, Nicaragua can.

To summarize – it’s complicated. We’re protecting a corrupt Saudi oil regime and we’re protecting the global use of oil itself. We need countries to keep buying oil priced in dollars to maintain the dollar’s dominance, even though it’s at odds with the green future that we want. And if we stop that protection, it causes a ton of other problems for the US.

While the dollar may not be ‘backed’ by anything, the backbone of its strength is oil.

If you have time, check out this piece by Lyn Alden It’s like a 45-minute read, so you might want to break it into chunks.