Flex players' closed networks, multiple roles and penetration of key institutions (which they structure to exclude other potential players) provide opportunities to advance their own goals and agendas -- be they ideological, political, financial or some mixture of all three. There is at least circumstantial evidence that the neoconservative cooperators have not only flouted the rules of government but in some instances actually altered them in ways that later facilitated their inside agendas. Much has been reported about the U.S. government's contracting out work to Halliburton and its subsidiaries. But what is not widely known is that, under Dick Cheney's watch as secretary of defense in the first Bush administration, a Halliburton subsidiary was paid $3.9 million to produce a classified report specifying how private companies -- like itself -- could help supply logistics for American forces in potential war zones, according to the Center for Public Integrity. After Bush I, of course, Cheney became CEO of Halliburton. A decade later, with Cheney no longer running Halliburton, that same subsidiary is now a premier recipient of contracts for precisely such work in Iraq.

What we know about the Harvard and neoconservative groups highlights the dangers of contracting out vital state functions to a small number of private actors without the benefit of independent information and proper oversight. Because the overarching goal of contractors is to make good money, not good policy, their private agendas can conflict with the public interest. The contractors involved in these cases are not subject to the same accountability and ethics regulations as government employees would be. Shleifer, for example, acknowledged making personal investments in Russia, denying in court a conflict of interest.

The problem will only get worse. A decade after the Harvard group was at its height, the outsourcing of government functions has accelerated, driven by the Bush administration's ideological preference for markets and, paradoxically, by the increase in demand for U.S. government services, namely, military, foreign aid and nation-building activities. Harvard's contracting coup was highly unusual at the time, to hear foreign-aid procurement officers tell it. But it pales in comparison with some of the noncompetitive awards, justified on national security grounds, that have been granted for work in Iraq, this time with billions, not millions, of dollars at play. Defense companies linked to members of the administration's inner circles, some of whom led the drumbeat to overthrow Saddam, have been the beneficiaries of some of these noncompetitive contracts.

With private contractors, it is not always easy, or even possible, to determine who speaks on behalf of the state or is responsible to it, as in the Harvard case. Officials at the Government Accountability Office (which among other tasks is charged with auditing how taxpayers' monies are being spent on homeland security and to "fight terrorism") tell me they are sometimes directed to contractors rather than government officials to obtain important information. The contractors not only implement policy but on occasion have also made crucial decisions that are overseen only by bureaucrats who are somehow connected to them. As has become all too clear with regard to the interrogator-contractors involved in the Iraqi prisoner abuse scandal, when roles are ambiguous and the chain of command diffuse accountability is elusive.

The presence of greed and conflict of interest in all of this is common enough. What is extraordinary is the ongoing, systematic encouragement of a culture in which individuals, wearing different hats, can engage in self-serving representational juggling with impunity.

Likewise, the ability of an old-boy network to exploit foreign economies is not news. But in the case of both Russia and Iraq, the old boys and their anointed partners, be they Russians or Iraqis, joined together to disastrous effect, damaging reform and nation-building efforts, and adding to the growing suspicion of America's motives among allies and foes alike. No amount of fines paid by Harvard or its principals can undo the damage they have caused to post-Cold War rapprochement. The activities of the Harvard group and their Russian partners contributed to the corruption of true reform and stunted the development of democratic institutions, while neglecting the creation of a legal and regulatory backbone for Russia's market economy. And whether Bush is reelected or not, we will not easily overcome the damage his administration has done through these practices to America's moral standing, always a key source of our influence around the world. It is crucial that the U.S. government and businesses take a hard look at the damage that is being done to the nation's interests by their growing reliance on private contractors to perform critical functions.

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