Over the course of the twentieth century, militaries in the developing world adopted roles as owners and managers of economic enterprises that constitute an important source of financial and institutional autonomy from the state and society. This article identifies several distinct types of military entrepreneurship and argues that their development depends on patterns of state capacity, military professionalization, and threat conditions facing the country. Case studies of Pakistan, El Salvador, and China test the argument, exploring both the origins of military business activities and their current condition. The study finds that military entrepreneurship is harmful to the achievement or maintenance of military professionalism and that it is quite durable because it adapts to prevailing market conditions and therefore can weather major shifts toward democracy and the market.
Charles Tilly , “ War Making and State Making as Organized Crime,” in Bringing the State Back In, ed. Peter B. Evans , Dietrich Rueschemeyer and Theda Skocpol ( Cambridge: Cambridge University Press , 1985), 169.
2.
“ Indonesian Military to Lose Business Empire,” Australian Associated Press , December 9, 2004.
3.
James Mulvenon , “ Soldiers of Fortune: The Rise and Fall of the Chinese Military-Business Complex, 1978-1999,” in BICC Paper #15 ( Bonn , Germany: Bonn International Center for Conversion , October 1999), 8 and 16.
4.
“ Thai Military-Controlled Media Business Scrutinized ,” Asian Economic News, May 31, 1999 .
5.
Selig S. Harrison , “ Why Musharraf Clings to Power ,” International Herald Tribune, May 10, 2002.
6.
Douglas Frantz , “ Military Bestrides Turkey's Path to the European Union ,” New York Times, January 14, 2001; see also Oyak's own Web site, http://www.oyak.com.tr/english.asp .
7.
J. `Kayode Fayemi , “ Soldiers in Business: Entrenched Military Interests and Nigeria's Political Economy ” ( paper presented at the International Conference on Soldiers in Business, Jakarta, Indonesia October 17-19, 2000), 6.
8.
Karl Vick , “ UN Group Urges Ban on Imports from Congo ,” Washington Post, November 24, 2001; and Jason Burke , “ Mugabe's Loggers to Ravage Rainforest ,” The Observer ( London ), August 26, 2001.
9.
Arnoldo Brenes and Kevin Casas , eds., Soldados como empresarios: los negocios de los militares en Centroamérica ( San José , Costa Rica: Fundación Arias para la Paz y el Progreso Humano , 1998).
10.
For instance, see comments by officials in “ US to Indonesia: Cut Military Business ,” Manila Times, May 31, 2002.
11.
On the privatized military sector, see Peter W. Singer , Corporate Warriors: The Rise of the Privatized Military Industry ( Ithaca, NY: Cornell University Press , 2004); and Deborah D. Avant , The Market for Force: The Consequences of Privatizing Security ( Cambridge, MA: Cambridge University Press , 2005). On the militarization of the private sector see Brenes and Casas, Soldados como empresarios; and a collection of papers from the conference on “Soldiers in Business ,” sponsored by the Bonn International Center for Conversion , which are published as Jörn Brömmelhörster and Wolf-Christian Paes , eds., Military as an Economic Actor: Soldiers in Business ( London: Palgrave Macmillan , 2003).
12.
Otto Hintze , “ Military Organization and the Organization of the State,” in The Historical Essays of Otto Hintze, ed. Felix Gilbert ( New York: Oxford University Press , 1975), 178-215; Hans Rosenberg , Bureaucracy, Aristocracy and Autocracy. The Prussian Experience, 1660-1815 ( Cambridge, MA: Harvard University Press , 1958); and Eric J. Hobsbawm , Nations and Nationalism since 1780 ( Cambridge: Cambridge University Press , 1990).
13.
Fareed Zakaria , From Wealth to Power: The Unusual Origins of America's World Role ( Princeton, NJ: Princeton University Press , 1998).
14.
Frederick M.Nunn, Yesterday's Soldiers: European Military Professionalism in South America, 1890-1940 ( Lincoln: University of Nebraska Press , 1983).
15.
Charles Tilly , Coercion, Capital and European States, AD 990-1992 ( Cambridge, MA: Blackwell , 1992), 199.
16.
Sven Steinmo, Kathleen Thelen , and Frank Longstreth , eds., Structuring Politics: Historical Institutionalism in Comparative Analysis ( Cambridge: Cambridge University Press , 1992).
17.
Alfred Stepan, The State and Society : Peru in Comparative Perspective ( Princeton, NJ: Princeton University Press , 1978), xii.
18.
Peter B. Evans , Embedded Autonomy: States and Industrial Transformation ( Princeton, NJ: Princeton University Press , 1995); and James C. Scott , Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed ( New Haven, CT: Yale University Press , 1999).
19.
Joel S. Migdal, Strong Societies and WeakStates ( Princeton, NJ: Princeton University Press , 1988), 4. State capacity (strength or weakness) varies depending on the policy domain in question, and states can conceivably be strong in one domain and weak in another. My focus is on the macro-level ability of states to shape society, for instance, through rules of political participation or economic and social policy. In this conception, states are either strong (the state shapes society) or weak (society shapes the state).
20.
Samuel Huntington , The Soldier and the State ( Cambridge, MA: The Belknap Press of Harvard University Press , 1957), 8-10.
21.
The closest empirical cases of this type seem to be post-Soviet states, such as Russia and especially the countries of Central Asia. However, despite patterns of parochial military behavior that have led to “spoils”-type enrichment, in these countries “state strength” is at best based on the charismatic leadership of individual power holders, rather than on the administrative capacity of state institutions, making these very imperfect cases for examination. I am grateful to Alex Cooley, Steven Crowley, Rajan Menon, and Brian Taylor for their insights leading to this evaluation.
22.
In this study, I test a typological theory, which offers generalizations that apply to specific types in a typology; a controlled comparison of cases, which demonstrate similar general characteristics but variation on the causal variables identified in the theory, is therefore appropriate. However, the case studies go beyond these general comparative parameters by tracing out the chain of events linking initial causes to ultimate outcomes, as the method of process tracing recommends. See Andrew Bennett and Alexander L. George , “ Developing and Using Typological Theories in Case Study Research ” (paper presented at the 38th annual convention of the International Studies Association, Toronto, Canada, March 18-22, 1997); and Alexander L. George and Timothy J. McKeown , “ Case Studies and Theories of Organizational Decision Making ,” in Advances in Information Processing in Organizations , vol. 2 (Greenwich, CT: JAI, 1985), 34-41.
23.
Robert K. Yin, Case StudyResearch: Design and Methods, 2nd ed. ( Thousand Oaks, CA: Sage , 1994), 40.
24.
Hamza Alavi , “ The State in Post-colonial Societies: Pakistan and Bangladesh ,” New Left Review74 (July-August 1972): 59-81 . See also Iftikhar Haider Malik , State and Civil Society in Pakistan: Politics of Authority, Ideology and Ethnicity ( New York: St. Martin's , 1997).
25.
Hasan Askari Rizvi , Military, State and Society in Pakistan ( New York: St. Martin's , 2000); and Stephen P. Cohen , The Pakistan Army ( New York: Oxford University Press , 1998).
26.
Cohen , The Pakistan Army , 61-62 , 73 .
27.
George Perkovich , India's Nuclear Bomb: The Impact on Global Proliferation ( Berkeley: University of California Press , 1999), 106-11.
28.
Sugata Bose and Ayesha Jalal, Modern South Asia : History, Culture, Political Economy ( London: Routledge , 1998 ), 233.
29.
Ayesha Siddiqa-Agha , “ Power, Perks, Prestige and Privileges: Military's Economic Activities in Pakistan ” (paper presented at the International Conference on Soldiers in Business, Jakarta, Indonesia, October, 17-19, 2000), 26.
30.
See ibid. for compiled lists of all the foundations' projects through 2001.
31.
“ Fauji Group Targets Companies on Sale ,” Daily News Pakistan, August 10, 2004. Fauji Group assets are valued at 100 billion Pakistani Rupees (calculated at an exchange rate of US$1 = Rs60).
32.
Net assets for 2004; http://www.askaribank.com.pk/. Calculated at an exchange rate of US$1 = Rs60.
33.
For instance, for several years the bank's chairman has been a senior army officer in active service, and five of eleven board members were retired military officers. See Askari's Web site, http://www.askaribank.com.pk/ (accessed October 25, 2005).
34.
See the Privatization Commission's Web site, http://www.privatization.gov.pk (accessed October 25, 2005).
35.
Interview with naval official in Siddiqa-Agha, “Power, Perks, Prestige and Privileges,” 24.
36.
Syed Asad Kaleem , “ FFCL Plans to Inject Rs3 billion in FFC-Jordan ,” The News, May 25, 2002.
37.
“ Frontier Works Organization Bags Rs4bn Road Project ,” The Dawn, January 31, 2002.
38.
“ Fauji Group Targets Companies for Sale ,” Daily Times Pakistan, August 10, 2004.
39.
Enrique Baloyra , “ Reactionary Despotism in Central America ,” Journal of Latin American Studies15, 2 (November 1983 ); and Jeffery M. Paige , Coffee and Power: Revolution and the Rise of Democracy in Central America- ( Cambridge, MA: Harvard University Press , 1997).
40.
Mariano Castro Morán , Función política del ejército salvadoreño en el presente siglo ( San Salvador, El Salvador: UCA Editores , 1989); and Philip J. Williams and Knut Walter , Militarization and Demilitarization in El Salvador's Transition to Democracy ( Pittsburgh, PA: University of Pittsburgh Press , 1997).
41.
Douglas Farah , “ Ties of Loyalty Help Salvadoran Military Avoid Full Ordered Purge ,” Washington Post, January 12, 1993.
42.
The main reforms—nationalization of the banking sector and establishment of a government monopoly on coffee exports—directly challenged traditional elite interests. On military resentment of elites, see Williams and Walter, Militarization and Demilitarization in El Salvador's Transition to Democracy, 124.
43.
The board of directors is headed by the chief of staff of the armed forces, along with four senior military officers and two civilians. See also the Fund's Web site, http://www.ipsfa.com.
44.
Benjamin C. Schwarz , American Counterinsurgency Doctrine and El Salvador: The Frustration of Reform and the Illusions of Nation Building ( Santa Monica, CA: RAND , 1991), 19-20.
45.
John Millman , “ El Salvador's Army: A Force unto Itself ,” New York Times Magazine, December 10, 1989.
46.
For example, in 1994 the average loan made to an officer of the general staff was US$1,650, a significant amount compared with average annual retirement benefits of US$2,525. Brenes and Casas, Soldados como empresarios, 148-49, 151.
47.
Quoted in Williams and Walter, Militarization and Demilitarization in El Salvador's Transition to Democracy, 139 and 147.
48.
Schwarz, American Counterinsurgency Doctrine and El Salvador, 28-29.
49.
Millman , “ El Salvador's Army .” The licenses were not revoked until 2001, when—ironically—the company was found to lack fishing boats. Elder Gómez , “ Cancelan licencias a companías sín barcos ,” El Diario de Hoy, March 29, 2001.
50.
Brenes and Casas , Soldados como empresarios , 162.
51.
Mulvenon , “Soldiers of Fortune,” 6.
52.
Ellis Joffe , Party and Army: Professionalism and Political Control in the Chinese Officer Corps, 1949-1964 ( Cambridge, MA: Harvard University Press , 1965); and Jonathan Adelman , The Revolutionary Armies: The Historical Development of the Soviet and Chinese People's Liberation Armies ( Westport, CT: Greenwood , 1980).
53.
Paul H. B. Goodwin , “The PLA Faces the Twenty-First Century,” in China's Military Faces the Future, ed. David L. Shambaugh and James R. Lilley ( Washington, DC: American Enterprise Institute , 1999), esp. 42-43.
54.
Deng Xiaoping , “ Streamline the Army to Increase Its Combat Effectiveness ,” Deng Xiaoping Wenxuan, March 12, 1980, quoted in Mulvenon, “ Soldiers of Fortune ,” 6 .
55.
Quotations are from “TheProvisionalInstructionsconcerningtheArmy'sEngagementinProduction,BusinessandForeignTrade,” issued in May 1985, cited in Tai Ming Cheung , “The Rise and Fall of the Chinese Military Business Complex ” (paper presented at the International Conference on Soldiers in Business, Jakarta, Indonesia, October 17-19, 2000), 4.
56.
Discussion of the 1980 to mid-1990s period is based on Mulvenon , “ Soldiers of Fortune”; Cheung, “The Rise and Fall of the Chinese Military Business Complex ”; and Thomas J. Bickford , “ The Chinese Military and Its Business Operations: The PLA as Entrepreneur ,” Asian Survey34, 5 (1994): 460-74 .
57.
Official Chinese figures reflect only ten thousand, while official U.S. figures hover at thirty thousand enterprises. Sinologists and analysts like Cheung and Mulvenon generally place the figure in the middle at about twenty thousand.
58.
Mulvenon , “Soldiers of Fortune,” 8.
59.
Cheung , “The Rise and Fall of the Chinese Military Business Complex,” 6-7.
60.
For a range of estimates, see Bates Gill, “Chinese Defense Procurement Spending: Determining Intentions and Capabilities,” in Shambaugh and Lilley, China's Military Faces the Future, 204. The figure of US$3 billion is reflected in Cheung's data.
61.
Mulvenon , “Soldiers of Fortune,” 10.
62.
Ibid., 11-12 .
63.
Dexter Roberts and Mark L. Clifford , “ China's Army Under Fire ,” Business Week (international), August 10, 1998.
64.
Andrew Scobell , “Going Out of Business: Divesting the Commercial Interests of Asia's Socialist Soldiers,” in East-West Center Occasional Paper ( Honolulu, HI: East-West Center , January 2000), 7-12. 65. Cheung , “The Rise and Fall of the Chinese Military Business Complex,” 28; and Mulvenon , “Soldiers of Fortune,” 22.
65.
Scobell noted this trend, alongside other complicating factors—that civilian control remains poorly institutionalized and that despite increased professionalization the People's Liberation Army remains substantially politicized. Andrew Scobell , “ China's Evolving Civil-Military Relations: Creeping Guojiahua ,” Armed Forces & Society31, 2 (2005): 227-44 .
66.
For instance, Mora argued that military entrepreneurship in Cuba avoided the egregious dysfunctions that came to worry Chinese officials, because the civilian leadership in Cuba attentively regulated the initiation of military business activities during the 1990s. Mora highlighted unique features of the Cuban experience—such as the continued centrality of the revolutionary leadership (i.e., Fidel Castro) and the control it has exerted over the Cuban military since the revolution—yet these may not be applicable in other entrepreneurship scenarios for once-strictly communist regimes. Frank O. Mora , “ A Comparative Study of Civil-Military Relations in Cuba and China: The Effects of Bingshang ,” Armed Forces & Society28, 2 (2002): 185-209 .
67.
“Indonesian Military to Lose Business Empire.” On the problems of introducing the reforms in Indonesia, see Lisa Misol's “Too High a Price: The Human Rights Cost of the Indonesian Military's Economic Activities” in Human Rights Watch Report, June 2006.
