Private Financing of the Military: A Local Political Economy Approach

Abstract

In developing countries that are democratizing after military rule, and undergoing liberalizing economic reforms that encourage a shrinking of the state, what missions are the armed forces performing, who funds those missions, who benefits from military services, and why? This article analyzes security provision by the armed forces for paying clients—especially private companies in extractive industries—in accordance with negotiations between clients and commanders of the local military units that directly provide the security. The analysis identifies two paths toward local military–client relations. First, weak state capacity may mean that government control of military finances brought by democratization and economic reform remains limited to the national level, promoting local military–client exchanges. Second, amid minimal government control of military finances, even in the capital city, demand from companies in the powerful extractive industries and from recently endowed subnational governments can encourage local military–client contracting.