Shadow Elite

I have come to this bold conclusion after spending the better part of three decades observing people as they employ teamwork, flexibility, and ingenuity to work around the rules, and studying the conditions that encourage them to do so. I did this first in Eastern Europe under communism and as countries in the region moved away from it. Then I charted the activities of archetypal players who flouted rules and authority to wield influence, this time on a global stage, and investigated the conditions that encourage them to do so in the wider world and especially in the United States.

I have written this book to explain the new breed of transnational players who, far from something as trivial as smoking marijuana, toy with official rules and not only get away with it, but often make decisions about policies that affect us all—in areas ranging from the economy and foreign affairs to government and society—while fashioning new rules of the game to benefit themselves.

In a twisted sort of way, examining eastern Europe up close—through its transformations away from communism over the last quarter century—has been excellent preparation for making sense of what is happening in the United States today. In communist Poland, the necessity of getting around the system bred absurdities, ranging from the employee who “lifts” a desk from a state-owned factory to sell for cash and then complains when a fellow worker “steals” it from him, to the employee at Communist Party headquarters who doubles as an underground publisher, printing his leaflets at headquarters. While the totalitarian nature of the state necessitated such strategies, America today seems increasingly to offer up absurdities of its own.

I have written this book to offer readers a lens through which to view what I identify in this book as a new system of power and influence, and to explain the players and networks that drive it in a rapidly transforming American and global environment. As an anthropologist, I’m trained to go behind the scenes, beyond what people say they are doing, and beyond government and bureaucratic organizational charts. But all of us must do so now because that is the only way to see that how the world is organized has changed, amid such developments as the breakdown of bureaucratic and professional authority and new information technologies. The new players and networks of power and influence do not restrict themselves to activities in any one arena. Rather, through their activities, they connect state with private, bureaucracy with market, political with economic, macro with micro, and global with national, all the while making public decisions—decisions backed by the power of the state. As influencers perform overlapping roles and networks of policy deciders snake through official and private organizations, creating a loop that is closed to democratic processes, we have to focus on them—their roles, activities, and sponsors—and how they maneuver these levels if we want to get to the bottom of power and influence.

That is why, as I realized over the course of this project, the frameworks and terms that we’ve long used to understand power and influence are no longer sufficient to explain what is happening. While it became clear early on that terms like “lobbyist” or “interest group” don’t suffice, naming this new breed of players and networks proved to be a challenge. Here I am grateful to two scholars in particular. “Flexian” grew out of a conversation with Lloyd “Jeff” Dumas, “flex net” from a conversation with Susan Wright. I am indebted to both. As well, terms like “conflict of interest” and “corruption” also proved inadequate to explore how agenda-wielding players actively structure, indeed create, their roles and involvements to serve their own agendas—at the expense of the government agencies, shareholders, or publics on whose behalf they supposedly work. These players not only flout authority, they institutionalize their subversion of it. Thus, I have also written this book so that people can see the trade-offs they inadvertently make as they tolerate, even approve of, this state of affairs and suffer from loss of democratic input, control, and accountability.

In my quest to explore how societies work—in contrast to how they are supposed to work—I have found common ground with people from many walks of life and professions, scholars from a variety of disciplines (not only anthropologists), journalists, government researchers, and investigators. Several sociologists were especially astute observers of the movers and shakers who positioned themselves at the nexus of state and private power amid the ruins of communism (sometimes in conjunction with global operators who descended on the region like carpetbaggers). These players, of course, were operating in an environment where new rules were being invented—and sometimes even inventing them themselves. In Poland I am grateful to the scholars who offered insights and opportunities for discussion, in particular Antoni Kamiński, Joanna Kurczewska, and Jacek Kurczewski. Alina Hussein of NIK, Poland’s equivalent of the U.S. Government Accountability Office, helped provide important trend-line data, in particular about appropriation of the state budget to private, unaccountable organizations through the 1990s and into this decade. Grzegorz Makowski and Barbara Pomorska pulled together supplemental materials on these trends, as well as on the Rywingate scandal that publicly illuminated under-the-table, yet pervasive means of influence. I thank them all.

I am also grateful to the many experts and informants (far too many to name) who assisted me in recognizing drivers of transformation beyond Poland as I traveled to other parts of central Europe, Russia, and Ukraine after the fall of the Berlin Wall and into this century. I tracked a new generation of operators who seemed to have internalized the worst of the Wild East (even when they had never set foot there), such as financial wizards playing on the latest innovations. For providing opportunities to further explore and discuss these players and phenomena, I am indebted to British sociologist Paul Stubbs. Based in Croatia, he invited me to workshops he organized there in 2006 and 2007 that brought together dynamic local and international scholars and practitioners to explore changing systems of governing, power, and influence. These trips were learning opportunities of the best sort, and enabled me to give lectures and get feedback from those steeped in law, economics, and other fields.

The networks of interlocking players I charted at the nexus of state and private in eastern Europe, as well as those operating in and around global grey zones, are what led me to explore the networks and modus operandi of certain players in the United States. When, in the early part of this decade, prominent neoconservatives were regularly in the news, I began to look into the social networks and overlapping connections in government, ideological initiatives, foundations, think tanks, business, and family ties of a small set of neoconservatives who have been working together for as long as thirty years to put their ideology into action. I was struck by the similarity of the modus operandi of this “Neocon core”—a dozen or so interconnected players with Richard Perle as their linchpin—with many influential groups that had shaped government, politics, business, and society in transitional eastern Europe. In both contexts, players straddled official and private organizations, were remarkably successful in achieving their group goals even at the expense of the institutions they supposedly served, and skillfully skirted liabilities resulting from their activities.

I studied the activities of the Neocon core first by delving into the wealth of material published on them and then by interviewing people associated with them (including “defectors” from the group); frequenting meetings, lectures, and gatherings in which they participate; and, eventually, interviewing some of the key players themselves. In this exploration, I thank Steve Clemons for his excellent blog (thewashingtonnote.com) and steadfast support, as well as members of the “Garden Club.” I am especially indebted to Jim Lobe, a journalist who has long tracked and written about neoconservatives, read multiple drafts of my chapter on the subject, and loaned me a boxful of books and resources. Eli Lake may not agree with the conclusions I have come to, but I greatly appreciate his perspectives and willingness to engage in conversation. Although studying the Neocon core helped me to identify influencers and their workings in their American habitat, the book draws on examples from across the political spectrum.

Observing the achievements of players and networks led me, in turn, to explore the contexts in which they operate. Seeing firsthand the machinations at the nexus of state and private in eastern Europe, as state-owned resources were being privatized, led me to wonder what “privatization” in the United States is about, especially given America’s history of contracting out government services, and, increasingly, functions. Reams of GAO reports, inspectors general findings, and other government documents, as well as scholarly treatises, provided the background needed to grasp the import and extent of the changes under way. Countless hours were spent talking with experts, investigators, and participants in contracting out (in sectors ranging from military and homeland security to energy and education) and other aspects of U.S. governing, including the drain of brains, information, and authority away from government. For guidance on these issues, I am especially indebted to Richard Loeb and Richard Miller, as well as to Scott Amey of the Project On Government Oversight.

My subject is replete with theoretical issues. I am very fortunate to have had the generous help of Ted Lowi and Bob Jervis, both of whom read parts of the manuscript multiple times and provided detailed and supportive critiques. I am eternally grateful to both of them. I also thank Simon Reich, who illuminated crucial perspectives on American government and reviewed my work, and James Galbraith, who highlighted important economics perspectives.

I am grateful to Teresa Hartnett for stimulating my conceptualization of the project early on, and Stacy Lathrop, who did the same in the latter stages. Both reviewed and edited drafts and provided incisive suggestions. Other readers, including John Clarke, Des Dinan, Jeff Dumas, Carol Greenhouse, Jeanne Guillemin, Jessica Heineman-Pieper, Antoni Kamiński, Don Kash, Ted Kinnaman, Leonid Kosals, Wendy Larner, Charles Lewis, Michael Lind, Barry Lynn, William Odom, Steven Rosefielde, Dorothy Rosenberg, Louise Shelley, Irena Sumi, Susan Tolchin, Ty West, and Anne Williamson provided valuable feedback on the manuscript. Adam Pomorski, as usual, offered keen guidance throughout the project.

I am also indebted to a number of scholars for offering fora that enabled me to get feedback on papers I delivered, including: James Galbraith, for an American Economics Association panel on “The Abuse of Power” (2005) and a Communitarian Summit session on “Working Toward a Criminology of Economics” (2004); Carol Greenhouse and participants in 2005 workshops at Princeton University on “Ethnographies at the Limits of Neoliberalism”; participants in my panels at the 2006 Civil G-8 Conference in Moscow; Hugh Gusterson and Catherine Besteman (organizers) and Jeanne Guillemin (commentator) at a 2006 MIT workshop; Susan Wright and Cris Shore for the 2006 panel on “Policy Worlds” at the European Association for Social Anthropology meeting in Bristol, UK; Winifred Tate and participants in the 2007 workshop at Brown University on “Ethnographies of Foreign Policy”; Don Kalb and others at the Central European University in Budapest who organized my 2007 talks there; Jon Abbink, Sandra Evers, and Tijo Salverda for the Anthropology of Elites conference at Vrije Universiteit, Amsterdam, in 2007; Monique Nuijten of Wageningen University, the Netherlands, in 2008; and the organizers of sessions where I delivered papers on topics relating to this book at annual meetings of the American Anthropological Association, the American Political Science Association, and the American Economics Association.

For research assistance, I am grateful to Kanishka Balasuriya, Maya Ellis Brown, Joseph Sany, and especially to Emily Gallagher, Ben Katcher, Jeff Meyer, Faith Smith, Mandy Smithberger, and Sarah Willyard. I thank Karen Coats, Nan Dunne, and Caroline Taylor for editorial comments.

I am especially indebted to independent editor Sarah Flynn, who worked with me tirelessly to shape the book. Her unflagging commitment to the project, her enthusiasm for finding the best way to express my ideas, and her effectiveness as both sounding board and wordsmith have seen me through every draft of the manuscript, from its beginnings as a proposal. I am also grateful to Sarah for introducing me to my agent, Michael Carlisle. Michael “got” the book right away, and I am grateful to him not only for his confidence in me but also for his insights into the nature of the topic. Insights were also provided by Bill Frucht, who acquired the book for Basic Books, and Tim Sullivan, who saw it through to publication and provided keen suggestions that helped focus parts of the manuscript. I thank Irina Kuzes, a graphic artist, for her original creations, steadfast commitment to the project, and willingness to make changes as it developed.

The New America Foundation has generously provided me a research home and numerous resources that aided this project. For that and for research assistance and collegiality with a dynamic group of policy writers, analysts, and scholars, I am deeply indebted. My permanent base, the School of Public Policy at George Mason University, and my dean, Kingsley Haynes, have been extraordinarily supportive and generous, and for that I am grateful. I also thank the Ford Foundation, which funded some of my research related to the project.

Finally, I thank friends who both put me up (when on the road) and put up with the project, in particular Antonina Dachów, Ted Kinnaman, Aśka Mikoszewka, Terry Redding, and the Occasional University of Lewes. As always, I am especially and profoundly indebted to Adam and Basia Pomorscy for their generous and abiding help.

Many people provided input about the phenomenon that today’s shadow elite represents, the conditions that give rise to the new players and networks, and the implications of both for democracy, government, and society. But while this project might not have come to fruition without the generous assistance of so many, I alone am responsible for the final product.

JANINE R. WEDEL

Washington, D.C.

July 2009

CHAPTER ONE

Confidence Men and Their Flex Lives

WE LIVE IN A WORLD OF FLEXIBILITY. WE HAVE FLEX TIME, FLEX workers, flex spending, flex enrollment, flex cars, flex technology, flex perks, mind flex—even flex identities. “Flex” has become an integral part not only of how we live, but of how power and influence are wielded. While influencers flex their roles and representations, organizations, institutions, and states, too, must be flexible in ways they haven’t been before. The mover and shaker who serves at one and the same time as business consultant, think-tanker, TV pundit, and government adviser glides in and around the organizations that enlist his services. It is not just his time that is divided. His loyalties, too, are often flexible. Even the short-term consultant doing one project at a time cannot afford to owe too much allegiance to the company or government agency. Such individuals are in these organizations (some of the time anyway), but they are seldom of them.¹

Being in, but not of, an organization enables these players to pursue a “coincidence of interests,” that is, to interweave and perform overlapping roles that serve their own goals or those of their associates. Because these “nonstate” actors working for companies, quasi-governmental organizations, and nongovernmental organizations (NGOs) frequently do work that officials once did, they have privileged access to official information—information that they can deploy to their own ends. And they have more opportunities to use this information for purposes that are neither in the public interest nor easily detected, all the while controlling the message to keep their game going.²

Take, for instance, Barry R. McCaffrey, retired four-star army general, military analyst for the media, defense industry consultant, president of his own consulting firm, part-time professor, and expert, whose advice on the conduct of the post-9/11 U.S. wars was sought by the George W. Bush administration and Congress. Crucial to McCaffrey’s success in these roles was the special access afforded him by the Pentagon and associates still in the military. This included special trips to war zones arranged specifically for him, according to a November 2008 exposé in the New York Times. McCaffrey gleaned information from these trips that proved useful in other roles—and not only his part-time professorship at the U.S. Military Academy, which the Pentagon claimed is the umbrella under which his outsider’s perspective was sought.

At a time when the administration was trying to convince the American people of the efficacy of U.S. intervention in Iraq, the general appeared frequently as a commentator on the television news—nearly a thousand times on NBC and its affiliates. He was variously introduced as a Gulf War hero, a professor, and a decorated veteran, but not as an unofficial spokesperson for the Pentagon and its positions. He also was oft-quoted in the New York Times, the Wall Street Journal, and other leading newspapers. Further, in June 2007, according to the Times, he signed a consulting contract with one of many defense companies he had relationships with, which sought his services to win a lucrative government contract. Four days later, McCaffrey did the firm’s bidding by personally recommending to General David Petraeus, the commanding general in Iraq, that the company supply Iraq with armored vehicles, never mentioning his relationship to it. Nor did he reveal these ties when he appeared on CNBC that same week, during which he praised Petraeus, nor to Congress, where he not only lobbied to have the company supply Iraq with armored vehicles but directly criticized the company’s competitor.³

Using information and access to link institutions and to leverage influence is what General McCaffrey and other such players were expected to do by an administration seeking public support, media in need of high ratings, industry pursuing profits, and academia in search of superstars. But because only the individual player bridges all these institutions and venues—by, for instance, enlisting access and information available in one to open doors or enhance cachet in another—only he can connect all the dots. Such a game involves a complex, although subtle, system of incentives that must reinforce its players’ influential positions and access to knowledge and power. And the players must uphold their end of the bargain. When McCaffrey criticized the conduct of the war on the Today show, Secretary of Defense Donald Rumsfeld quickly cut off his invitations to Pentagon special briefings. Tellingly, McCaffrey went back on the air, reiterated the Pentagon’s line, and regained entry into those briefings.⁴

McCaffrey owes some of his access to a Pentagon public relations campaign that enrolled retired, high-status military personnel as “message force multipliers” in the media, according to an earlier piece in the Times. McCaffrey was among the most high-profile members of the campaign, during which, from 2002 to 2008, the Pentagon provided the seventy-five analysts access to military campaigns and initiatives through private briefings, talking points, and escorted tours. Following the exposé and congressional calls for an investigation, government auditors looked into whether the Pentagon effort “constituted an illegal campaign of propaganda directed at the American public,” as the Times put it. The Pentagon’s inspector general found that Pentagon funds were not used inappropriately and that the retired military officers didn’t profit unfairly from the arrangement. President Obama’s Pentagon later rescinded the inspector general’s report, but no new one was issued. Even when they are not whitewashed, such government audits are not designed to capture the reality of today’s influencers and the environment in which they operate—a reality that poses potentially much greater harm to a democratic society than a mere drain on taxpayer dollars. While millions of viewers, Congress, and General Petraeus were led to believe that McCaffrey was offering his expert, unbiased opinions, McCaffrey’s interlocking roles created incentives for him (and others of his profile) to be a less-than-impartial expert. The Times understatedly remarked, “It can be difficult for policy makers and the public to fully understand their interests.”⁵

Meanwhile, the official and private organizations in and out of which such movers and shakers glide either just go along to get along or are ill equipped to know what these actors are up to in the various venues in which they operate. In McCaffrey’s case, no institution, from the Pentagon to the defense contractor to NBC, had an incentive to be anything but complicit. Operators like the general have surpassed their hosts, speeding past the reach of effective monitoring by states, boards of directors, and shareholders, not to mention voters. And while the players sometimes cause raised eyebrows, they are highly effective in achieving their goals—and often benefit from wide acceptance. Much more than the influence peddlers of the past, these players forge a new system of power and influence—one that profoundly shapes governing and society.

This new breed of players is the product of an unprecedented confluence of four transformational developments that arose in the late twentieth and early twenty-first centuries: the redesign of governing, spawned by the rising tide of government outsourcing and deregulation under a “neoliberal” regime, and the rise of executive power; the end of the Cold War—of relations dominated by two competing alliances—which intensified the first development and created new, sparsely governed, arenas; the advent of evermore complex technologies, especially information and communication technologies; and the embrace of “truthiness,” which allows people to play with how they present themselves to the world, regardless of fact or track record. While it may be jarring to mention such seemingly disparate developments in the same breath—and to name “truthiness” as one of them—the changes unleashed by these developments interact as never before.

The proliferation of roles, and the ability of players to construct coincidences of interest by those who perform them, are the natural outcome of these developments. So, for example, increased authority delegated to private players (facilitated by privatization, the close of the Cold War, and new, complex technologies) has enabled them to become guardians of information once resting in the hands of state and international authorities. While supposedly working on behalf of those authorities, such players (working, say, as consultants for states or as special envoys or intermediaries between them) can guard information and use it for their own purposes, all the while eluding monitoring designed for the past order of states and international bodies. And they get away with it. Appearances of the moment have become all-important in today’s truthiness society, as comic Jon Stewart expressed in his quip: “You cannot, in today’s world, judge a book by its contents.”⁶ Today’s premier influencers deftly elude such judgment. Pursuing their coincidences of interest, they weave new institutional forms of power and influence, in which official and private power and influence are interdependent and even reinforce each other.

The phenomenon I explore in Shadow Elite is no less than a systemic change. A new system has been ushered in—one that undermines the principles that have long defined modern states, free markets, and democracy itself.

Naming the Animal

I call the new breed of influencers “flexians.” When such operators work together in longstanding groups, thus multiplying their influence, they are flex nets. Flexians and flex nets operate at one extreme of a continuum in crafting their coincidences of interests.

Performing overlapping roles can be—and often is—not only benign, but can serve the interests of all the organizations involved, as well as the public’s. Yet in an international arena that “multiplies the possibilities for double strategies of smugglers . . . and brokers . . . there are many potential uncertainties and mistranslations surrounding individual positions,” as two political-legal scholars point out. Take, for instance, the individual who acts “as a political scientist in one context . . . and a lawyer in another; a spokesperson for nationalistic values in one context, a booster of the international rule of law in another.” This peripatetic political scientist/lawyer is not necessarily engaged in a “double strategy.” But his activities on behalf of one organization can be at odds with those on behalf of another—even to the point of undermining the goals of either, or both. Flexians take these coincidences of interest to the nth degree. When an individual serves in interdependent roles, and is in the public eye promoting policy prescriptions, and when fundamental questions lack straight answers—Who is he? Who funds him? For whom does he work? Where, ultimately, does his allegiance lie?—we have likely encountered a flexian.⁷

To get a sense of flex activity as we could watch it becoming acceptable, let’s take a look at Gerhard Schroeder, the Social Democratic chancellor of Germany from 1998 till 2005. While he did not flog a cause as do true flexians, he exhibited certain flex features and almost crossed the boundary into flexian-hood. In September 2005, before losing his bid for reelection, Schroeder signed a pact on behalf of his government with Gazprom, the Russian energy giant that commands a quarter of the world’s natural gas reserves and represents a murky mix of state and private power. The agreement was to construct a Baltic Sea pipeline to run directly from Russia to Germany and supply gas to Germany and other western European nations. That December, after the election, he accepted a position as the head of Gazprom’s shareholders’ committee, a post roughly equivalent to board chairman. As the Washington Post editorialized, through his actions, Schroeder “catapulted himself into a different league.”⁸