This nightmare world full of privatised armies

London is the unofficial world capital of a new industry that rakes in tens of billions of pounds a year. It was born in the 1990s and has seen stunning rates of growth ever since - but unlike its twin, e-commerce, it does not have its own shiny government minister. Not unless you count Geoff Hoon, that is.

This boom trade is the privatised military industry, and it is being supported by our own Ministry of Defence. Private firms with private armies are becoming key players across the world and, in poor countries, some are becoming bigger and more influential than states themselves.

One man has documented this. PW Singer, a fellow at the Brookings Institute in Washington DC, had never heard of Private Military Firms (PMFs) until he became involved in a UN-supported project in post-war Bosnia in 1996. He thought that the hire of private armies, open to the highest bidder, was as far removed from Western militaries as muskets and cavalry - but he swiftly discovered that he was very wrong.

"The entire military balance in the Balkans," Singer explains, "had become dependent on one small company based in Virginia, Military Professional Resources International." When the US military was confronted with ever-greater crises, it decided not to call up reserves. It chose instead to contract MPRI to look after the army's weapons and vehicles, build their bases and house thousands of Kosovar refugees - work normally carried out by troops. "I was intrigued," Singer has written, "by the massive disconnect, between the way we view the military world, and the way it actually is."

He decided to investigate the whole phenomenon, and his book, Corporate Warriors, exposes an industry that both governments and PMFs themselves would rather we didn't discuss. The most wretched countries in the world, from Colombia to Afghanistan, are now littered with PMFs taking life-and-death decisions. To give one example: several Western multinationals - including Dick Cheney's old employer Halliburton - use private armies so they can extract oil from Angola.

The US government itself spent $300bn between 1994 and 2002 on PMFs. Britain is going the same way. Reuters revealed in an unnoticed report in 2000 that a private firm based abroad is now training the Royal Navy in how to operate and maintain our nuclear submarines. The Government has even considered privatising future troop deployments to UN peacekeeping missions.

The Blairites I have talked to cannot understand why I am so jittery about this. "Look, you support foundation hospitals. You agree that it is the job of the government to enable healthcare - to pay for it out of public funds - but not actually to own every single bedpan and catheter in the land. Why is the Army any different?"

It is true that PMFs provide a neat solution to the military recruitment crisis. There are many demands upon the US army - they should be engaged in more peace-keeping operations in Liberia and the Congo, and that's just for starters - yet there are too few Americans (never mind Europeans) who want to put their lives at risk. So why not find willing soldiers on the open market?

Along that path, there are many landmines. It creates a series of ultra-rich firms who have a vested interest in creating and prolonging war for its own sake. Many of these PMFs employ men with dubious pasts: the old apartheid-defending white South African forces have been a mainstay of the industry. It will become even harder to swing public opinion behind humanitarian interventions if war profiteers and racist thugs are direct beneficiaries.

Even more importantly, governments are losing core in-house military capabilities. What if the corporation they now depend upon simply refuses orders and decides to do its own thing? Only a little more than a century ago, the East India Company ignored the explicit orders of the British government and attacked Portuguese garrisons in India to secure its own commercial interests. Is it so hard to imagine, a few decades from now, the likes of private-army-hiring Halliburton doing the same? Phillip Bobbit, a former advisor to presidents Nixon and Reagan, warns in his book The Shield of Achilles that this is a serious security risk.

If we are to return to a pre-modern world of private armies, then we should be aware of the risks. In the 14th century, private companies determined the fate of the Hundred Years War, and - during pauses in the fighting - would burn down towns that refused to pay for their protection. The French sovereign was powerless then to stop them, because his own forces were no match for theirs.

This is the risk we will face in 50 years if we allow private forces to outnumber public ones. We are handing over our ability to protect ourselves to corporations who rarely have impressive ethics. Look at the willingness of so many of our big high street chains to use slave labour in the developing world. Would you trust them with your freedom?

Yes, we are at a fairly early stage in the development of PMFs, and some of my worries may seem fantastical. But we must stop this descent now, before we wake up with a corporate military only to ask how we sleepwalked into a McDonald's-sponsored battlefield.

j.hari@independent.co.uk