Stephen E. Flynn
07/01/2005
The premise for our war on terror is that we can prevent future domestic attacks with overseas military campaigns. This year the Bush administration requested $500 billion to fund the Department of Defense and the wars in Iraq and Afghanistan. At the same time, Bush asked for just $600 million for grants to protect the nation’s 361 seaports, our national rail and metropolitan mass transit systems and our vast energy and chemical infrastructures. These vital sectors remain nearly as vulnerable today to attacks by terrorist organizations as the passenger aviation system was on 9/11.
The July 2002 National Homeland Security Strategy holds that the jobof the federal government is to provide for national defense and border security. When it comes to protecting critical infrastructure, however, “sufficient incentives exist in the private market to supply protection.”
Yet when it comes to domestic security, the private sector is incapacitated for
three primary reasons. First, government officials keep their intelligence cards
close to the vest. This leaves CEOs at a loss when it comes to sizing up the
threats they should try to address with finite company resources.Second, security investments could place a private sector company at a competitive disadvantage. Consider, for example, the dilemma of a CEO of a company that manages a container port terminal on finding that adding security measures will raise handling costs by $10 per container. The management of an adjacent terminal might skip the safeguards to offer its services at a lower price. A determined terrorist is likely to figure out where the security is weakest, but if he attacks, the entire seaport is likely to be affected; the security-conscious company would suffer the consequences along with its spendthrift neighbor.
Then there is the liability issue. Security always involves a decision about how much is enough. If a company’s efforts prove to be insufficient when an act of terror occurs, in the aftermath, the families of victims might accuse the company of having acknowledged the threat but electing to set its security bar too low. Without some kind of indemnity by the public sector for having made a good-faith effort, a company that voluntarily invests in extra security measures may end up only elevating its risk of lawsuits.
The only way to jumpstart the security agenda at home is to require an active federal partner to work with the private sector. Corporate leaders should insist on an institutional arrangement that gives them equal standing in receiving and assessing threat information and developing appropriate security protocols.
One innovative approach might be to organize a Federal Security Reserve System (FSRS) modeled roughly on the Federal Reserve, which was created in 1913 to lessen the risks of serious disruptions to financial markets. The Fed is organized around the notion that effective oversight of the financial sector requires drawing on the expertise of private representatives within that sector.
The security version of the Fed would have a national board of governors, 10
regional homeland security districts and 92 local branches called Metropolitan
Antiterrorism Committees. The objective of this system would be to identify
security protocols and monitor compliance, so that all of the companies that
make up the nation’s critical infrastructure would have to play by the same
rules.
The districts would be assigned support staffs comprised of both full-time,
public-sector employees and industry experts, nominated by the private sector
and taking a two-year leave of absence from their regular jobs. As in the
Federal Reserve, these private-sector appointments would be highly selective and
desirable opportunities for talented midlevel executives.
The FSRS would establish and oversee a mandatory program requiring owners and
operators of critical infrastructure to carry adequate levels of terrorism
insurance. The insurance would not simply reduce the reliance on public
resources, but also create incentives for the insurance industry to become a
partner in ensuring that the private sector does not neglect its security
responsibilities.
The Federal Reserve describes itself as a system that is “independent within the
government.” This means it must work within the overall objectives established
by Congress, but its decisions do not have to be ratified by the executive
branch. This level of independence is justified as both a check on executive
power and as a way to manage the risk that decisions directly affecting the
operation of the marketplace might become dangerously politicized. The case for
a similar approach to homeland security is compelling. In both instances, the
goal is to better align commercial interests with public interests—in the case
of security, to give Americans a real alternative to placing their fate in the
success of foreign military campaigns.
Art by Matt Mahurin.
Stephen E. Flynn is the Jeane Kirkpatrick Senior Fellow in National
Security Studies at the Council on Foreign Relations and author of
America the Vulnerable.