America's Intelligence System: Part II –
Why It Has Failed

by Jim Grichar (aka Exx-Gman)

Part 1: Bloated and Ineffective

This is Part II of a three-part essay on America's intelligence system. This first part dealt with what it is and how it has failed. Part II deals with the specific reasons for its failure. Part III will describe how it is morphing into an instrument of a police state and, given that we are currently stuck with a protection racket government, how we should cut it down to size.

The best explanation for the failure of American intelligence can be found in Dr. Hans-Hermann Hoppe's Democracy: The God That Failed. To paraphrase Dr. Hoppe's analysis, the failure of a publicly owned government can be attributed to the fact that any such government, with a territorial monopoly power of protection over its citizens along with the power to tax them to pay for such protection – a protection racket – will, over time, provide ever-poorer protection at an ever-increasing cost to its citizens. This is definitely true for the U.S. government's provision of intelligence services, which is a part of the protection racket.

Let me illustrate the truth of Dr. Hoppe's logic by utilizing personal observations gained while serving for a short period as an economist (nearly 25 years ago) at the CIA. First of all, any bureaucracy is subject to mission creep – an expansion of activities beyond what is needed, and CIA was no exception. Mission creep in the CIA's analytical function occurred because the consumers of its reports and briefings did not have to pay for the product. At a zero price, anyone will always want to receive a report, regardless of how useful it really is in making a decision. Over the years, CIA's functions expanded to include servicing political appointees in many different departments and agencies with intelligence analyses on a wide variety of political, scientific, and economic topics, many only remotely related to protecting the U.S. from an attack. With the proliferation of security clearances in civilian departments as well as the military, CIA was able to expand further its audience for information and analysis. In part, this helped turn American intelligence into a tool of America's empire-building presidents. In addition, as the CIA is not on a self-funding basis as are numerous private information gathering and analysis firms, it cannot go bankrupt even if its information is useless. This enabled the bureaucracy to survive and later expand when political opportunity struck.

Politics, as any sane person would suspect, permeates the whole intelligence process, although insiders will generally deny this unless they happen to disagree with the politics of the president. First, politics dictates what is studied and what is written. After all, the customers for the intelligence product are political appointees at the deputy assistant secretary level and above, as well as the President and his national security staff. Within a broad set of guidelines, they dictate what issues are studied. If, by chance, some research is done that the White House or some political appointee does not like, it is generally ignored and not acted upon and the higher-ups in the intelligence community are given orders to reduce their reporting and analysis on that topic.

However, even the Congress is now given much of this material, so it can leak the information to embarrass the White House. It can also require testimony from senior career intelligence officials and ask them questions that could embarrass the president. Also, senior bureaucrats might leak the results of studies ignored by the White House to the press, hoping to influence or embarrass the White House into action, but this does not always work and is an extremely risky move for a career bureaucrat.

Finally, politicians will sometimes use the results of such studies in perverse ways. For instance, Jimmy Carter used a CIA analysis of the Soviet Union's oil production problems to foster support for his war on energy, which included the continuation of price controls on petroleum, petroleum products, and natural gas as well as establishing the Department of Energy. Ronald Reagan and his senior officials, desirous of a big defense buildup, ignored some CIA analyses, were rumored to have tried to influence the content of such analyses, and relied more heavily on analyses produced by the DIA to get their defense buildup plans approved by Congress. Bill Clinton, distrustful of the intelligence apparatus, downsized it somewhat but instead built up the FBI, which he could apparently more easily control and use for his political purposes, mainly in vilifying and harassing the political right wing. Thus, we had an FBI that spent its time looking for right-wing extremists in the United States while Osama bin Laden was conducting terrorist attacks and planning the 9/11 attack.

Personal Observations Of A Major Intelligence Failure

The CIA's largest failure was in not predicting the economic collapse of the former Soviet Union. And why was this? First of all, whether working for the military or civilians, how could one expect a bunch of bureaucrats to come out with a prediction – that the Soviet economy would eventually collapse because of prices controls and rationing – that would put them out of a job? As a corollary, what boss would let an analyst even publish a classified speculative article on the possibilities of a Soviet economic collapse? Such an analysis would have been attacked within the organization as well as by other analysts from such places as the State Department's Bureau of Intelligence and Research and the Defense Intelligence Agency (which would invariably make the USSR look like it was 100 feet tall so as to boost U.S. defense spending). And even more worrisome to the bureaucrats, what if the American public believed that the Soviet economy would collapse and then acted on it? The intelligence community would have been downsized, U.S. military expenditures would have plummeted, many defense contractors would have been taken off the dole, and the major rationale for a large central government would have been removed.

Finally, and this gets to the mind-set of the economists and political analysts within the CIA, the bureaucrats just did not think that the Soviet economy would collapse. Most actually believed that central planning would somehow work out in the end, providing the Soviet command economy with a miraculous way to spur growth sufficient to keep the masses marginally satisfied while allowing a bloated military to increase in size to counter a growing and bloated U.S. military. After all, central planning had worked from Lenin's time in a highly simplified economy, so why could it not be made to work in modern times, what with the advent of more powerful computers and improved management training?

Let me offer two specific bits of proof for this latter contention. While an economist at the CIA, I had a lengthy and heated verbal argument with one of my colleagues, a guy who was a Soviet economic analyst. He insisted that Leonid Brezhnev was going to send all of his industrial managers to get MBA's at America's best business schools. Once so equipped, my colleague contended that these commissars were going to go back and really improve the productivity of the Soviet economy. In my response to him, I questioned his sanity. After all, MBA training is based upon free market economics, with private property and freely set prices. With such a screwy politically-administered set of prices as the USSR had, how could anyone hope to improve efficiency, unless they went back to the Joe Stalin productivity program of blowing out peoples' brains until the survivors worked harder? Even with the Joe Stalin method, one could only hope for a brief pop up in efficiency, not a lasting and sustained up trend in productivity. Well, my colleague basically dismissed me as a bumpkin (I am originally from the Milwaukee area, and, unlike him, I did not get my business news from The New York Times). While admitting to being a Midwest bumpkin, I told him it was obvious he did not know basic economics. [Note: I make no personal claims regarding a prediction of the USSR's economic collapse, so cowed was I by the internal bureaucracy at that time that I failed to recognize the full implications of what I said to my colleague.]

The second bit of unclassified proof of this central planning will succeed mind set was the triennial publication of unclassified papers about the Soviet economy. These sets of studies were collected and published by the Library of Congress's Congressional Research Service. In alternating years, they included economic analyses of the Soviet Union's Eastern European satellites and of the Chinese economy. These publications included articles by authors from the CIA's economics group who followed the USSR, including the economist I mentioned above, as well as academics and businessmen. The same tone showed up in these articles, namely that while things were not going as well as possible, somehow central planning would work, possibly with the help of a few key Western technology imports, management improvements, and some bank loans from the West.

Well, we know that none of these central planning nostrums worked; in fact, they failed miserably, as any real economist would expect, and this central planning nonsense cost both the citizens of the former USSR – and Russia today – a load of lost lives and wasted resources. It ended up costing American taxpayers a fortune to fund a bloated military that was certainly not needed – at least in the size we had – to bring down our enemy without going to war.

Next: Part III – How It Is Morphing Into A Tool Of A Police State and How To Cut It Down To Size.

November 22, 2002

Jim Grichar (aka Exx-Gman) [send him mail] was an economist with the federal government. He writes to "un-spin" the federal government’s attempt to con the public, whether through its own public relations organs or via the usual stooges and dupes in the mainstream media.

Copyright © 2002 LewRockwell.com