Armies and Police Are Being Privatized Around the World and Business Is Booming

Moneybox
A blog about business and economics.
Nov. 5 2013 11:39 AM

Armies and Police Are Being Privatized Around the World and Business Is Booming

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An American private security guard pushes back Iraqi demonstrators in Baghdad.

Photo by RAMZI HAIDAR/AFP/Getty Images

Matthew Yglesias is on vacation.

In a world where budgets are tight, and bottom lines daunting, it makes sense that governments around the world have to do more with less, or they just have to do less. Surprisingly, one part of the state apparatus that most countries seem happy to outsource is one of its most fundamental—security. At home, cash-strapped American cities, and even communities, are turning to private forces to protect public order. And a report out of the UN on Monday shows that the private security industry is experiencing a global economic boom that many of its customers would love—the shadowy industry is growing at 7.4 percent a year and is on target to balloon to a $244 billion global market by 2016.

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Unsurprisingly, the U.S. is the world’s biggest spender on private security, totaling $138 billion a year, thanks in large part to a spike in demand during the concurrent wars in Iraq and Afghanistan. According to the report, last year the Pentagon spent $44 billion on mercenaries in the two countries combined and in 2011 the U.S. spent $3 billion alone on a five-year deal for private protection for the U.S. embassy building in Baghdad. But, as the American military presence diminishes, much of the outsourced security work is transitioning to police work, with protection of oil company assets abroad also on the rise.

Outside of war zones, contractors have flocked to the perilous shipping routes off the Somali coast that are particularly high risk because of pirates. More than 140 private companies now patrol those waters. The ongoing shift towards private forces poses huge regulatory issues, particularly the registering and licensing of private contractors and the absence of internationally binging legal codes, according to the report. The UN itself is a major employer of private security firms and the report warned "there is a risk that, without proper standards and oversight, the outsourcing of security functions by the United Nations to private companies could have a negative effect on the image and effectiveness of the United Nations in the field."

Elliot Hannon is a writer in Washington, D.C. Follow him on Twitter.

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