Austrian economics has finally reached that point where people who aren’t Austrian at all claim to be Austrians. A case in point is the fact that Erik Prince, founder of Blackwater (aka Xe Services, aka Academi) counts among his main influences Austrian economics and libertarianism. In a recent column at Forbes, the author writes:
Prince got his entrepreneurial insights from his father and the classroom. He had the wisdom to choose a college, Hillsdale, where the economics department recognizes that creative role of the entrepreneur. As he writes, “The thing that truly appealed to me about Hillsdale was its focus on libertarian, free-market economics.” It was there that, as an economics and political science minor, Prince learned the economics of the Austrian School which, in his words, “lionizes long-term laissez-faire policies without government intervention.” Hillsdale, like Grove City College, which also teaches Austrian economics, is one of the few colleges which does not accept government money.
Prince seems to be under the impression that he is some kind of market entrepreneur. In reality he is just a political entrepreneur. That is, his business model is based on getting the government to steal money from the taxpayers and then hand it over to his company. It’s ironic that Hillsdale College, which takes no government money, is mentioned, since Prince and Blackwater survive almost totally on government money.
Blackwater is a “security firm” that provides soldiers, firepower, surveillance, and a variety of other military services to governments. Among their biggest clients are the US military and the CIA, although Blackwater appears to work with local governments as well. Blackwater is privately owned, of course, but its revenues do not come through markets. They come from government institutions.
Whether or not Blackwater receives revenue is based on whether they can effectively lobby important people in the government to continue paying Blackwater for services. The money that goes to Blackwater, however, is not the money of the people Blackwater seeks to please. The money belongs to the taxpayers, who have no power to withdraw their financial support from Blackwater if a politician decides otherwise.
Thus, the relationship between the people who actually provide Blackwater’s revenue, and Blackwater itself is purely political, and has nothing at all to do with the sort of market entrepreneurship that Prince thinks he excels at.
Indeed, Prince is very confused. He has stated that ‘‘We are trying to do for the national security apparatus what FedEx did for the Postal Service.” Yet FedEx is not analogous to Blackwater at all. Private citizens voluntarily pay FedEx to deliver parcels, and have direct control over whether or not to engage in business with FedEx at all. Private citizens (i.e., taxpayers) have no control over whether or not their money goes to Blackwater. FedEx must please customers to survive in the marketplace. Blackwater merely lives off the sweat of the taxpayer.
Some may point out that Prince’s only option for clients are government organization since the government monopolizers military “services.” This isn’t true either. The government does of course permit private security firms to exist. The sorts of security those firms provide, however, are much less sophisticated and far less expensive than what the US government uses in its own military activities. Prince, however, deliberately chose to market products that he knew only well-heeled governments could afford. If he were a real market entrepreneur, he would have marketed services to private sector security and perhaps found ways to provide more sophisticated security products and services at a price large numbers of consumers could afford. Prince, however, looked to find out who had the most money, saw the the US Government is fat and happy on stolen loot, and then devised a way to get some of that loot for himself. Let’s not pretend this is anything like what true market entrepreneurs do.
A true innovator and entrepreneur in the field of security and defense is Cody Wilson, the inventor of the 3-D printable gun.