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18 April 2007

Nation states as market distortions

The ever thought provoking Shlok Vaidya has presented a fascinating corollary to the growing body of maxims regarding the re-emergence of the non-state soldier, in which he argues that “the nation-state is distorting the market” for private military companies.

The nation-state system is widely considered to be an aberration (in historical terms), and the erosion of its monopoly on violence has long been recognized within the national security debate. However, the debate has thus far pre-supposed that this monopoly was an intrinsic right, rather than a brief period in which the unique convergence of technology, ideology, and geo-politics encouraged an unnatural centralization (and a set of related beliefs among those capable of providing services of violence which sustained that centralization.)

Perhaps the most interesting aspect of the private military industry is that it has demonstrated the alternative to the monopoly, not only to the nation-state sponsors which have typically employed their services in major theatres, but to the actual consumer of those services. Shloky innovatively recognizes the difference, and claims the current customer is actually the “tax-paying citizen”. This poses the potential the emergence of other future customers of these services. Certainly, we have seen the dynamic of multiple customers for professional, military grade violence emerge in the illicit markets. Its official, legitimized counterpart has not yet caught up – not least of which due to the delay in recognizing the potential for such services by customers at the sub-state level.

For whatever flaws they might have, most PMCs would be far preferable to the other service provider options available to those customers – especially if traditional solutions have been provided by entities such as the professional mercenaries of third world nation-state governments, whose only marketable aspect to date has been their receipt of the so-called international community’s approval. In this light, Greystone and similar peacekeeping / stability and support operations oriented firms represent not just a viable option, but a better overall investment. Given the removal of other distortions, and the cognitive biases of the consumers, there is a sizable market opportunity waiting to be seized. And fortune favors the bold.

We have been most fascinated by the development of the kinetic capabilities, financial structures, and command & planning staff that allow for such a market to exist. The most striking feature of the current PMC system is the ability to constitute significant forces from what are essentially virtual arsenals when the right conditions of finance, sponsor, and mission align.

A similar dynamic has been observed in the privatization of intelligence. Most entities currently exist to serve nation-state needs that either cannot be filled by government staff, or that can be more flexibly, more cheaply, and more effectively met through the use of contract services. However, key homeland security and foreign area intelligence accounts have significant implications for other consumers, and outside of the comparatively much smaller market space for travel and “security”-type intelligence services, these consumers have not traditionally been well served. Again, the entities best positioned to serve these markets are likely to be those outside of the nation-state system – particularly for issues that are inherently transnational in nature.

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