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What Our Spies Can Learn From Toyota

Luis Garicano and Richard A. Posner

Until recently, the United States had become complacent about terrorism. The general view was that al Qaeda was on the run and Islamic terrorism was a receding threat. We now know better.

A string of attacks by Islamic terrorists—an officer murdering his fellow soldiers at a U.S. army base, a passenger's attempted bombing on a Detroit-bound airplane, and a double agent's suicide bombing a CIA base in Afghanistan—reveals the continuing and growing danger of Islamic terrorism. Hostility to the U.S. appears to be increasing among Muslim populations, and, with it, the number of potential terrorists. It is alarming that none of the three attackers—an American, a Nigerian and a Jordanian—was from one of the traditional hotbeds of terrorism.

CarIn the case of the first two attacks, information that should have alerted the security services to the danger of an attack was in their hands but was not acted on. And this despite the restructuring of the national intelligence system after the 9/11 attacks. These failures are only the latest evidence that the post-9/11 reforms have not been a success.

Real reform of complex institutions is always hard, but it is possible. Consider a storied, historic, indeed iconic American institution that had developed an internal structure so convoluted that information did not flow through it—fiefdoms abounded, and duplication and delays were the rule. After many failed efforts at reform, only the threat and actuality of bankruptcy forced this institution to slim down, streamline and focus.

We are referring, of course, to the U.S. auto industry. The domestic automakers' organizational structures were notoriously complex and top-heavy. While Toyota had been selling the same car worldwide, Ford had insisted that American consumers would not buy the cars successfully produced by Ford for sale in Europe. As a result, every stage of production from R&D to actual manufacturing was duplicated in the two markets.

When General Motors dealers in Florida tried to stop GM from promoting its SUVs in the state's 70-degree Christmas season with ads bragging about the vehicles' performance in snow, they found no way to get their message across. GM had 325,000 employees, yet was run as a matrix with overlapping functional and geographic management structures. As Rick Wagoner, its ousted CEO, had confessed: "People really have trouble because they want to know who's in charge," he said, "and the answer is going to be, increasingly: It depends."

The national intelligence apparatus of the U.S. has fewer employees than GM had in its prime, yet it consists officially of 16 separate agencies, and unofficially of more than 20. Each of these agencies is protected by strong political and bureaucratic constituencies, so that after each intelligence failure everything continues pretty much the same and usually with the same people in charge.

Five and a half years after the report of the 9/11 Commission identified the cascade of intelligence failures that allowed the 9/11 attackers to achieve total surprise, the problems it highlighted persist: We learn of multiple, separate and unshared terrorist lists; of multiple agencies (State Department, CIA and the National Counterterrorism Center) unable to combine the tips they receive; of arbitrary rules, such as requiring proof of "reasonable suspicion," rather than mere suspicion, to deny a visa to a foreigner; and of terrorists released from American custody to become leaders of al Qaeda abroad. There is the sense that nobody is in charge.

The government's response to the attempted airline bombing—the most recent failure—has been to blame every agency that had some information that if pooled would have alerted the airport authorities to the menace of Abdulmutallab. To blame all is to blame none.

We have an unwieldy multiplicity of agencies that operate largely independently. Dysfunctional bureaucratic incentives decree that an attack involving a repetition of a known terrorist procedure is the most damaging politically, so shoes are scanned because a shoe was used in an attempted airplane bombing. Now underwear will be scanned as well. The government seems always to be playing catch-up to the terrorists.

We can fix this. As with the auto industry, the moment of crisis is the right moment to tackle in-depth reform of the intelligence services. One possibility that deserves serious consideration would be a consolidation of most existing agencies into four primary agencies: a foreign intelligence agency, a military intelligence agency, a domestic intelligence agency, and a technical data collection agency (satellite mapping, electronic interception, etc.).

This structure would mimic the United Kingdom's MI6 (the Secret Intelligence Service), Defence Intelligence Agency, MI5 (the Security Service), and GCHQ (General Communications Headquarters). In a streamlined system, the Director of National Intelligence would be a coordinator, rather than combining the role of a coordinator with that of the president's senior substantive intelligence officer. (As if the CEO of Boeing also designed the companies planes).

The members of our intelligence community will protest that simplifying the structure of the intelligence community is impossible—echoing the protests of auto workers, until bankruptcy forced their hand. The national intelligence system is similarly bankrupt: More than eight years after the 9/11 attacks, there is no excuse for such egregious failures. The time to act is now.

This article first appeared in The Wall Street Journal|

Luis Garicano is a professor of management and economics at the London School of Economics. Mr. Posner, a federal circuit judge and a senior lecturer at the University of Chicago Law School.

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