Entrepreneurs in Uniform

It owns facilities that manufacture cement, steel, vehicles (passenger cars, subway cars, rail wagons and tractors), agrochemicals (especially fertilizers), and energy (petroleum retail). It has companies working in public construction (including desalination plants), mining, logistics, and retail. Its factories produce pharmaceuticals, processed foods, home appliances, kitchenware, computers and optical equipment. It reclaimed hundreds of thousands of acres of desert land and constructed bridges, hotels with lucrative special event venues, seaside resorts with luxury summerhouses, apartment complexes and lavish villas. It runs petrol stations, shipping firms, domestic-cleaning companies, and parking lots. It was allocated thousands of miles of land by the state to construct toll highways and collect usage fees.

To whom does this economic empire belong? The answer is the Egyptian army. This list of assets is taken from an interesting report published last year by the Carnegie Foundation. (The army’s ventures aren’t always prudent: in 2018, as the Financial Times reported, it opened a $1.18 billion cement factory that led to domestic overproduction, causing prices to collapse.)

Every country has an army, but in Egypt it is the army that has the country, as per Ayesha Siddiqa’s useful formula, elaborated in her pioneering study of Pakistan, Military Inc. (2007). By this, I’m not simply referring to a society controlled by its armed forces, which exists in various forms in countries from Nigeria to Brazil. Neither am I concerned at present with so-called ‘praetorian states’ – not to be confused with military regimes, for praetorianism can exist alongside an electoral system, its hallmark the number of ex-generals occupying public office as in Algeria and Israel, or in various African and Central American countries. Nor am I referring to the ‘military-industrial complex’ that exists in many Western states, from the USA and France to the UK, where the armed forces create substantial demand from buying weapons and technology, fulfilled by private industry, with connection between the two parties ensured by the ‘revolving door’, or in the more suggestive turn of phrase employed in France, through a pantouflage: the investiture of civilian ‘slippers’ to high-ranking officials who, once retired, enjoy the comforts of a boardroom seat.

Instead, I’m talking about those countries whose economy is dominated by the military, whose most powerful entrepreneurs are dressed in uniform. Where can these be found? The People’s Liberation Army played a significant role in the Chinese economy up until the 1990s, but after a series of anti-corruption trials, purges of high-ranking cadres and legal reforms the Chinese Communist Party regained control. In Russia, military influence is certainly expanding. According to a report by Transparency International, its army ‘is involved in many sectors of the economy, ranging from transportation to healthcare’ and has recently expanded into ‘the sale of surplus weapons, and insurance and marketing’. There however, the Soviet legacy of the Party’s supremacy over the armed forces – dating back to the Stalinist purges of Tukhachevsky’s Red Army in 1937 – remains significant.

With the notable exception of Thailand, the particular social arrangement where ‘Military, Inc.’ comes to dominate in fact tends to be found in Muslim countries: Egypt, Pakistan, Turkey, Iran (without considering Indonesia, which would require a historical digression). What is curious is that this military mercantilism has little to do with religious dispensation. In Egypt the army presents itself as a secular bulwark against Islamist militancy (recall Sisi’s massacre of Muslim Brotherhood members in 2013), whilst in Turkey it is indelibly marked by the laicist inheritance of Kemalism. In Iran the entrepreneurial army was a by-product of political Islam, whilst in Pakistan it was the military itself that oversaw an Islamist turn in the state under the dictatorship of Muhammad Zia ul-Haq (who ultimately executed the secularist Zulfiqar Ali Bhutto in 1979).

The case of Pakistan is the best documented, thanks in large part to Siddiqa’s research. Its military possesses 12% of the country’s arable land, much of it in the most fertile and productive areas of Punjab and Sindh. Business operations are conducted through five ‘charitable’ foundations: the Fauji Foundation (run by the Ministry of Defence), Army Welfare Trust (Pakistan Army), Shaheen Foundation (Air Force), Bahria Foundation (Navy), and the Pakistan Ordnance Factories Foundation (also Ministry of Defence). Together Fauji, Shaheeh and Bahria control more than 100 separate commercial entities, from fertilizer factories to bakeries, petrol stations, banks, cement plants, hosiery factories, milk dairies, golf courses, and, in recent years, TV channels. A recent article by Eliot Wilson notes that

The Fauji foundation operates a security force (allowing serving army personnel to double in their spare time as private security agents), an oil terminal and a phosphate joint venture with the Moroccan government. Elsewhere, the Army Welfare Trust runs one of the country’s largest lenders, Askari Commercial Bank, along with an airline, a travel agency and even a stud farm. Then there is the National Logistic Cell, Pakistan’s largest shipper and freight transporter (and the country’s largest corporation), which builds roads, constructs bridges and stores vast quantities of the country’s wheat reserves … In short, the military’s presence is all-pervasive. Bread is supplied by military-owned bakeries, fronted by civilians. Army-controlled banks take deposits and disburse loans. Up to one third of all heavy manufacturing and 7 per cent of private assets are reckoned to be in army hands.

Foundations play an equally prominent role in Iran, where the Revolutionary Guards manage around a third of the economy, from energy to infrastructure, finance to the automotive industry. These include the Mostazafan Foundation of Islamic Revolution, jointly controlled with the government. Its largest subsidiary, the Agricultural and Food Industries Organization, owns more than 115 companies. The holding company Khatam al-Anbia (Seal of the Prophets), meanwhile, controls more than 812 registered companies, and has been responsible for a vast array of construction projects in the country, including, according to a recent RAND report, ‘dams; water diversion systems; highways; buildings; heavy-duty structures; offshore construction; water supply systems; and water, gas, and oil main pipelines.’ To this we should add university and military research centres, construction of a new line of Tehran’s metro system as well as a high-speed rail link between Tehran and Isfahan. Since 2009, Khatam al-Anbia has also controlled the leading shipbuilder in the country, the Marine Industrial Company (SADRA), and the shipyards at Bushehr, which specialise in the construction of freighters and oil tankers.

This is all without considering the black market. The Revolutionary Guards control a large part of the contraband that enters Iran, bypassing Western sanctions which, paradoxically, have actually increased their wealth, influence and popularity. The last presidential elections can be read as the revenge of the Guards against a wing of the clergy that had sought to reduce their influence. Not only were the charitable foundations asked to pay taxes during Rohani’s presidency, but the police conducted a series of high-profile arrests of prominent figures in the organisation, accused of corruption and unlawful enrichment. Woe betide any reformist clerics.

Perhaps the most interesting case of all is Turkey, where for two decades Erdoğan has sought to rein in the army. The positive consensus during the first years of the Justice and Development Party’s (AKP) time in government was in part due to the relief many felt at the thought of finally being rid of the yoke of the generals, who have been the principal tyrannical political actors since the foundation of the Republic in 1923. The violent repression that followed the opaque coup of 2016 provoked less hostility than was predicted precisely because those disproportionately targeted were army officials.

And yet the Turkish military’s economic empire remains intact. How so? The pillar of this empire is the army’s pension fund, OYAK, which, as Metin Gurcan writes in Al-Monitor:

all officers and non-commissioned officers of the Turkish military are obliged to join. About 10% of the monthly salaries of 250,000 OYAK members are automatically deducted as contributions to the fund, generating a monthly cash flow of around $35 million…OYAK is a major player with multibillion-dollar investments in sectors such as iron, steel and cement manufacturing, car making, construction, mining, energy, finance, chemicals, logistics services and seaport management. In some fields it has even grown into a dominant force. OYAK enterprises contribute 25% of Turkey’s industrial steel production and control 20% of the car-making industry in the country. Standing out among them are the iron and steel factories in Eregli and Iskenderun and the Renault OYAK plants in Bursa. The fund’s cement plants also make a significant contribution to the national economy. More than 32,000 people are employed in OYAK’s 60 companies, which operate in 21 countries.

A question arises: why hasn’t Erdoğan succeeded in dismantling this bastion of military hegemony in Turkey? Because being the able politician that he is, Erdoğan has proceeded obliquely, by encircling and infiltrating. He has bolstered the assets of the police, often at the expense of the army, and through various measures greatly weakened a pillar of the army’s economic power – its land holdings. The armed forces historically possessed large swathes of territory, often in areas primed for property speculation, such as military bases on the outskirts of the big cities. Construction and property speculation have been the two (now very much sputtering) motors of the ‘Turkish economic miracle’; it can’t have displeased the AKP that this growth occurred at the expense of the military estate. Following the attempted coup, Erdoğan then appointed himself a member and president of the board of TSKGV (Foundation for the Strengthening of the Turkish Armed Forces), which controls the production of armaments and military research.

But the truth is that given Erdoğan’s military adventures in Kurdistan, Syria, Libya and Azerbaijan, he needs the army more than ever, and so can’t risk undermining its loyalty. This is so even before acknowledging that in the current economic climate he cannot possibly afford to go after OYAK, which would be akin to killing the goose that lays the golden eggs.

This brief survey of ‘Military, Inc.’ however leaves a basic issue unresolved in three of the four countries in question (Iran is a case apart). How does the entrepreneurial army coexist not only within the religious climate that characterises these states, but also with neoliberal orthodoxy? It was easier for the army to present itself as an engine of development when privatisation wasn’t in vogue. But now? Curiously, the three armies in question have in fact benefitted from the neoliberal wave, as they and their foundations have bought up industries abandoned by the state in the name of liberalisation. OYAK, for instance, acquired the steel-producing giant Erdemir for $2.77 billion in 2005.

What this demonstrates is that for neoliberalism, privatisation serves a purely rhetorical function, ready to be disavowed if no longer convenient. Neoliberalism and the military have a long and intimate history (think only of its origins on a national scale with Pinochet’s military coup and the regime he established as per instruction from Friedman and Hayek). The hand of the market is invisible but what Adam Smith failed to tell us – and the Chicago School revealed – is that it also comes armed with an assault rifle.

Translated by Francesco Anselmetti.

Read on: Cihan Tuğal, ‘Turkey at the Crossroads’, NLR 127.