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This is odd. While it's true that the intelligence community leaves a lot to be desired (Clinton emasculated it), this would amount to giving corporations government power.
Total privatization would not work but Rubin's argument has merit.
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NASA could also use more competition--not from Chinese, Russian, or European space agencies, but by American companies.
The CIA as it is presently composed is more of an internal danger to the US than a help.
Our intelligence services are not a place for private enterprise.
The limitations of mercenaries are manifold, as has been exhibited in Iraq. While organizations like Blackwater and Kellogg, Brown & Root have performed sometimes in a noble and exemplary manner, they just do not have the breadth of a governmental army or intelligence service.
Let us say that a civilian intelligence gathering corporation is given a mission parallel to that of the CIA. Not only would both organizations be "stepping on each other's toes", but they would compromise investigations, be far more likely to trigger counter-espionage activities by their targets, and even actively target each other out of suspicion. This already happens a lot between 'friendly' intelligence services of different countries.
This is not to say that private armies and intelligence services will remain this way. For example, the British crown, Elizabeth, has billions of dollars that she could use to create a serious private army, perhaps in brigade (5000-7500) strength, stationed on a Caribbean island. They would exist as a last defense against some force menacing a Britain whose national military had been castrated by a foreign government in Brussels.
Other examples of corporate armies and intelligence services would be in the oil industry, to protect assets around the world from terrorism, and maybe eventually from nationalization by "el Supremo" megalomaniacs like Chavez.
These might not be limited to a single corporation, or even industry, but might instead be an asset available to a "horizontal" collective of businesses. Already some such services exist, such as rescuing kidnapped executives. No reason not to formalize it.
For far too long international corporations have tried to remain under the defensive umbrella of this country or that; eventually, however, they are going to have to look out for themselves.
national security is not privatizable, even in the libertarian model it is the preserve of a minimalist state.