Samuel Cohn: Global Social Trends

Khaki capitalism refers to armed forces that also own substantial enterprises. Cambodia is a classic example of khaki capitalism. The Cambodian army has official ownership of extremely large real estate holdings, a TV channel and a radio station. Individual officers own hotels, golf courses, hospitals, and mining companies. Furthermore, military officers sit on the board of both domestic companies and local subsidiaries of international companies – generally in sinecure positions. Often this is the result of an implicit quid pro quo in which the military provided protection to the company or removed local residents from lands the company wished to occupy.

The term “khaki capitalism” generally applies to Southeast Asia, where it characterizes the military of nearly every nation in the region. However, military capitalists play a significant role in other nations of the Global South. Turkey, Egypt and Pakistan are particularly well known for their enterprises owned and controlled by the military. There is khaki capitalism, but to a much lesser degree, in some nations of Latin America.

There are multiple roads to khaki capitalism. How Southeast Asia got its venal military was not at all the same as the origin story for the khaki nations in the Middle East. However, the Southeast Asian story is an informative one. Paul Chambers and Napisa Waitoolkiat have written a wonderful book on the subject: Khaki Capital: Political Economy of the Military in Southeast Asia. 2017. (Copenhagen, Nordic Institute of Asian Studies.) Their book features guest authors who are experts on various countries in the region contributing their own analyses of economically-oriented armed forces. However, the gems of the collection are Chambers and Waitoolkiat’s own chapters on Cambodia and Thailand. If you put those chapters together, you get a general model of khaki-capital-formation that can probably apply with modifications to a great number of places.

1. Southeast Asian armed forces were perpetually underpaid. Soldiers fighting in wars for traditional Southeast Asian monarchs were not given enough money to survive on. They had to forage to obtain enough food to live on. It is not uncommon for armies to have to forage in enemy lands; however, in Southeast Asia, the armies were often operating on their own territory. This usually meant that their own citizens were the ones being raided by local soldiers for food and supplies. This created a long-term precedent for armies having the right to extract whatever they wanted from the people of their own country with the armies’ best interest rather than the citizens’ best interest being the top priority.

2. Southeast Asian armed forces fought on sparsely settled frontiers.  Unlike in Europe, where wars were fought on densely settled plains and around cities, Southeast Asian wars were fought in sparsely settled mountainous jungles. These areas were generally stateless and ungoverned. When an army moved in, it could typically overwhelm the population and take whatever it wanted.

3. Frontier locations were ideal for smuggling. Mountainous forests are ideal for clandestine activities of any kind. Smuggling was exceptionally lucrative. Smuggling was particularly important because the army was not paid enough to finance its own legitimate military operations. In World War II, and later in the anti-Communist wars of the 1940’s, 1950’s and 1960’s, armies financed their operations with opium and heroin smuggling. These businesses did not disappear in peacetime.

4. Arms smuggling was also lucrative – and this included selling weaponry to the enemy. Post WWII Southeast Asian armies typically sold arms to combatants on the other side of the border. This could become a doubly lucrative arrangement. Local armies typically received military aid from the United States or other Western nations to combat Communist insurgencies. As long as the war continued, local armies would continue to receive aid. Selling arms to the Communists or to regional warlords increased the duration and intensity of the war. This would give the United States further motivation to continue providing military aid. This represented an economic bonanza for local armed forces. The U.S. would provide huge amounts of military funding – funding which could either be skimmed off the top or spent on legitimate armed force expenses. The insurgents would pay generously for their supply of arms. With both sides, paying the generals, military leadership had little economic incentive to end any of their wars. Rebellions went on and on while the top brass continued to be paid by both sides.

5. Such cross-frontier dealing leads to military enterprises on the other side of national borders. Thailand currently bans logging on its own territory. The Thai military works with allies in Laos and Myanmar so that it can make money from forestry operations on their side of the border.

6. Military road building increased the value of land. The cleaning out of supposedly rebel-held areas provided opportunities for officers to seize that newly improved land.  The wars of the middle and late twentieth century were fought in inaccessible jungles. Military logistics required building roads out to the frontier to facilitate bringing in large forces and modern weaponry. Once these roads were built, the areas nearby became prime prospects for economic development. Most of Southeast Asia is fertile, so export agriculture was an obvious possibility. Mountainous regions could support coffee. It is no accident that after the Vietnam War, Vietnam became the world’s largest producer of robusta coffee. The mountains where the war was fought immediately became prime territory for coffee plantations. Areas with mineral deposits became prime prospects for mining. Roads near rivers facilitated hydroelectric projects, since heavy industrial equipment could now reach remote river narrows where dams could be constructed.

Such projects could all be impeded if the local population refused to evacuate the territories under consideration. Anti-insurgency warfare provided a convenient solution to the problem. Local populations could be militarily defined as insurgents. They could be attacked, dispersed and if necessary, killed. This was “justified” by the general existence of bona fide resistance movements in these areas. The populations of these regions were often ethnic minorities. As such, whether or not these groups contained actual insurgents, there would be little sympathy for their interests in governments run by ethnic majorities.

Armies cleaned out populations, seized control of the land for “security reasons”, and ownership passed either to the armed forces themselves or to generals or their families. Deals could then be done with either foreign or domestic investors. Typically, in the agribusiness, mining or energy projects that would follow, the generals involved would sit on the boards of directors of the new companies.

7. The army’s ability to do this is facilitated by its role in determining control of the national government. Armies in Southeast Asia can and do seize power militarily. They can also swing otherwise democratic elections by suppressing the votes of opposition parties. As a result, politicians have to take the military’s interests very seriously in the execution of domestic policy. In Thailand, there are multiple occasions where governments that have cut or limited the military budget have been overthrown in coups. The current power enjoyed by the King of Thailand is based on a historic alliance between the King and the military on the one hand, and civilian politicians on other hand. The purpose of that alliance is to maximize the share of national revenue that is controlled by the two factions. This leads to, the Thai government having monopolies on rice export, the timber trade, and domestic production and sales of gunny sacks, liquor and tobacco. The military is an active player in all of these.

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I think the Chambers-Waitoolkiat model is first rate. It raises an interesting question, though: Why didn’t the American military become khaki capitalists? Here are some possible answers.

1.America has generally paid its armed forces better than did Southeast Asian rulers.                                          

2. American armies did fight some frontier wars – generally with American Indians. However, they were not in isolated situations where the army was left alone to exploit indigenous people. The American frontiers were being flooded with Anglo settlers, who were often fighting the Indians on their own account. They would request army assistance from the state or federal government.

The army was sympathetic to white settlers. Furthermore, neither state nor federal government would have tolerated random abuses of white settlers. In any competition for Western lands, settlers got first dibs.

In contrast, the Southeast Asian states were despotisms. So long as the military was indispensable in helping dictators or elected leaders maintain control, army officers could do as they pleased. Generals were free to seize whatever assets suited them. Generals did not have that option in the United States. Both solidarity among whites and the legitimate rights of settlers as voting citizens prevented self-aggrandizement among military officers on the Western frontier.

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The Southeast Asian scenario is not the only method by which khaki capitalism can be institutionalized. I have little doubt that the Turkish, post-Soviet Union Russian and Pakistani stories are all different.

It is not necessarily the case that khaki capitalists do a bad job of producing economic development. Thailand has enjoyed impressive rates of economic growth. It has an excellent health care system and a non-trivial record of reducing poverty. Turkey has long been a successful developer which suffers from unfair comparisons with Europe and Greece.

However, khaki capitalism is bad for democracy and human rights. Generals who would be economically worse off if voters got the policies they wanted, will try to keep voters from getting those preferred policies and may kill opposition politicians and protesters who threaten military interests.

Khaki capitalism does not threaten GDP. It can threaten quality of life.

Americans don’t have to worry about this problem coming to Washington D.C. soon. However, it is an issue in the politics of many nations in the Global South. When uprisings break out in faraway countries, it may be wise to ask whether popular unhappiness with venal military officers has anything to do with it