Beauty and the Beast

Skincential Sciences is a small company and something of a curiosity: a significant portion of its capital comes from In-Q-Tel, the investment fund of the Central Intelligence Agency.

The advertisement for Skincential’s face cream, Clearista, is quite conventional: photos of pretty millennials of diverse skin color set alongside photos of the lab science that assures customers that their skin is in the best of hands. The CIA’s interest? As Lee Fang explains in an article for theintercept.com (“CIA’s Venture Capital Arm Is Funding Skin Care Products that Collect DNA,” April 8, 2016), Clearista has a patented technology that removes a thin layer of skin, scooping up biomarkers as it goes, that can then be used for identification purposes.

The CIA is not the beast of this post’s title. Crony capitalism is. Clearista is an instance of business leaders with a fondness for oligarchy using political influence to gain special access to the public purse and/or the government’s regulatory machinery. Cashing in their political influence—whether through family connections, the revolving door between the state’s administrative agencies and “going in-house” at private companies, or the quid pro quo of donations to political parties—these “capitalists” skirt the rough and tumble of the market to further cement their economic advantage.

The Wall Street Journal, too, has reported on In-Q-Tel as a recent example of America’s ongoing problem with oligarchy. Damian Paletta (“CIA Venture Fund Operates in Shadows,” August 31, 2016) writes that In-Q-Tel’s board of directors typically includes members who are also investors in various technology start-ups. Lo and behold! These directors often funnel money from In-Q-Tel to start-ups where they have stock. In-Q-Tel’s interest bolsters the stock and the stock rises once again when companies use the CIA’s funding to attract more investment capital. Therewith directors serving on the board of In-Q-Tel get richer.

Paletta of the Journal ponders whether the crony capitalism can be justified in this case: the Silicon Valley players are both directors at In-Q-Tel and holders of stock precisely because they have their ears to the ground in the rapidly shifting landscape of tech start-ups. National security gains, in the sense that these directors know which start-ups are likely to deliver important innovations to the CIA. Some might think the security gained from the technologies is well worth the insider maneuvering and log-rolling.

Perhaps this misses the mark, though. Crony capitalism is itself a national security threat. There are external enemies but a country can corrupt from within. A reasonable person might fear that whatever the vulnerability of America to hostiles abroad, that threat pales in comparison to the oligarchy at home quietly but relentlessly undermining the very idea of the republic.

Indeed, one might think the priority crystal clear. Since technological innovation tends itself to open new theaters of war— air, submarine, computing, and drone technology all did so—it is easy to misstate what In-Q-Tel is actually doing. It is not making the country more secure but it is contributing to advances in weaponry, broadly understood. Technology cannot make us safer. We’ve learnt painfully that supposedly “medieval” fighters of the so-called “Islamic State” are adept users of cutting-edge technology (see Sam Schechner and Benoit Faucon, “ISIS Operatives Learn Tricks of Spycraft,” Wall Street Journal, September 12, 2016). But challenging crony ownership can, for such a challenge goes to the heart of the culture that makes use of technology.

Crony capitalism mauls self-government. Oligarchic corruption warps a republic’s institutions, infecting the culture it leeches energy away from the thing that does give us an edge in security: an intelligent, innovative, and self-directing soldiery.

Adam Ferguson (1723-1816) makes the point. Ferguson was military chaplain to the famed Scottish regiment, the Black Watch, and unlike other thinkers of the Scottish Enlightenment had a high regard for the military character of the Scottish Highlanders. Thinkers like Adam Smith and David Hume did not share this background; they were Scottish Lowlanders and happy supporters of the Scottish union with commercial England and its House of Hanover (Queen Elizabeth II’s royal house). Ferguson was not opposed to a Hanoverian Scotland but in his classic work, An Essay on the History of Civil Society (1767), he claimed that knightly virtue is essential even to modern, commercial nations. Ferguson worried that commerce mixed with oligarchy would prove hostile to soldiery.

He argues that a commercial republic is bound to decline when it gives voice to republican ideals but de facto courtly privilege is emergent within. Between a monarchy and a commercial republic, Ferguson is somewhat neutral; what he does not find healthy is one masquerading as the other.

Ferguson is fond of monarchies because courtly privilege, or the explicit recognition of a relatively closed nobility, means that dignity does not straightforwardly map onto financial worth. Manners, learning, art, and military glory are typically thought more important than money in monarchies and thus oftentimes the blue-blooded families of the establishment are not wealthy. (Winston Churchill would be a prime example.) Republics are also admirable, he finds, because family history is irrelevant and talent can surge forward and challenge for high office and wealth in an open contest for prominence.

Monarchy limited by Parliament is a blend of the two and can work well. However, this blend must be institutionally explicit. What is poison is a formal republic where people are all too aware that advancement stems not from “respectable talents” in open competition, but from knowing those who, in Ferguson’s words, are able to cut a figure “by their buildings, their dress, their equipage, and the train of their followers.” A commercial republic declines where

the subject is tempted to look for equality, but where he finds only independence in its place; and where he learns, from a spirit of equality, to hate the very distinctions to which, on account of their real importance, he pays a remarkable deference.

When a lie sits at the heart of a republic, it’s terrible for the morale of the military. With oligarchy taking precedence, republican institutions erode and so does a republic’s signature traits: banding together to exhibit talents that carry weight with the public; the stress on sustained and consistent action; and the running of risks for the common good. Oligarchy tainting the culture, a “republic” comes to sneer at civic-mindedness, character, and sacrifice as simple-minded foolishness. Coddled, aloof, untested, and risk-averse, oligarchy rejects what the Ancients taught the West: “The game of human life went upon a high stake, and was played with a proportional zeal,” in Ferguson’s words.

Crony capitalism is the opposite of a game played with high stakes and it points away from civilizational confidence. Where oligarchy is tolerated in a republic, knightly ideals must wither. Ferguson summarizes knighthood as “ferocity with gentleness, and the love of blood with the sentiments of tenderness and pity.” The knight is willing to go abroad to aid the weak and oppressed, exhibits a “refined courtesy,” even with regard to enemies, cherishes honor, and is indifferent to plunder and spoils.

Crony capitalism is the reverse.

We can hardly expect a mannered and agile-minded soldiery where a commercial republic abandons the business ideal of intelligent, innovative, and self-directing individuals in open contest with others. In-Q-Tel needs to reassess its business model unless it means to endanger us all.