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Sunday, Nov 22, 2009
The outsourcing of crucial government functions to private individuals and companies is an alarming trend.
Aug 12, 2004 | A June 28 ruling by a federal court in Boston underscores the pitfalls in outsourcing the traditional functions of government to small, well-connected groups that are not fully accountable in serving the public interest. In a suit filed by the U.S. Justice Department nearly four years ago against Harvard and two men working for the university, Andrei Shleifer, a noted economics professor, and Jonathan Hay, a legal advisor, the Boston court ruled that they conspired during the 1990s to defraud the U.S. government while helping to run a nearly $400 million, U.S.-funded flagship project to reform Russia's economy. Hay and Shleifer were supposed to be providing impartial advice to the Russians, but while doing so they were also making personal investments with the benefit of insider knowledge. (A hearing on damages in the case is set for early September.)
This case exemplifies an alarming trend in governing that is sure to grow and that we ignore at our peril. The practices that led to the Boston ruling are not an aberration. In fact, a group that operates today in ways similar to the Harvard partners in Russia is receiving much attention. This is the small, tightknit group of neoconservatives whose strategizing and lobbying helped thrust the United States into the war in Iraq.
Both the Harvard and the neoconservative groups arose in the context of a globalizing world and an increase in the delegation of authority by states and international organizations to private actors and companies. They have flourished amid new governmental systems that provide great incentives to people who can juggle a multitude of official and unofficial roles. Both groups co-opted a government portfolio in a key foreign policy agenda. In fact, it is difficult to imagine that either America's economic reform policy toward Russia or the war in Iraq would have been carried out the way they were, or perhaps at all, had these two groups not been in the driver's seat. Yet, focusing only on individuals and their presumed misdeeds -- as has been the tendency with the Harvard story -- renders us more likely to repeat the pattern.
In the case of the neoconservatives, a durable core group of 10 or so people (drawn from the larger neoconservative ranks) that had long pressed for the overthrow of Saddam Hussein through government, think tank and advocacy organizations, got themselves appointed to key positions in and around the Bush administration. Members of that same group are now poised to benefit from the foreign policy and homeland security strategies they advocated. The like-size group of Harvard players who teamed up with Russians dubbed the "young reformers" by the West similarly profited in Russia. In the 1990s, during the heated years of Russian reform, the now-defunct Harvard Institute for International Development became a chief manager and major beneficiary of U.S. economic reform aid to Russia. On alleged grounds of "foreign policy" considerations, the Harvard Institute was granted exemptions to competitive bidding and given authority over other contractors, some of whom were its competitors. Thus, at the same time the Harvard principals were major recipients of U.S. economic aid, they were also the managers and implementers of that aid.
The effectiveness of such groups stems from a systematic mode of operating. A look at how such groups manage to penetrate key state and private entities in the service of their own goals reveals much about the potential of such groups to reshape American democracy. It signals how they can quietly change the rules of accountability as they find an organizational place in the overall system of governing and society. The modus operandi of each group is strikingly similar. Both have been marked by exclusivity and intraconnectedness and have been adept at circumventing standard governmental and democratic processes. The neoconservative core in particular has a history of bypassing standard government procedures, regulations and bodies (going back to the affair that became known as Iran-Contra); distrusting American intelligence agency findings; bending, if not breaking, regulations set by those agencies; and holding fuzzy national loyalties. The Harvard group for the most part operated in a dramatically different environment from that of the neoconservatives. In Russia, powerful informal groups worked in and around the crumbling command system of the formerly Communist state to acquire what was there for the taking, according to rules that the groups themselves often created.
