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Both Medicine and Poison: The Paradox of Support to Afghanistan

Why, after almost two decades of massive international aid, are greater numbers of Afghans living in poverty than in the aftermath of the Taliban's fall? Why has the vision of Afghanistan laid out in the 2001 Bonn Agreement and 2004 Constitution of a multi-ethnic, fully representative, democratic government failed in practice?

One answer lies in the international support itself, the billions of dollars in foreign cash that has flowed into Afghanistan since 2001. This is not just Official Development Aid (ODA), but also the far larger sums spent by the foreign armies – on transport and supplies, guards, translators and other support staff and rent for bases.

Such money is classed by economists as ‘rent’ because, like the money received by landlords, it is not a reward for work or effort. States which depend on such income are known as ‘rentier states’. They are rarely democratic and are typically marked by poorly performing economies and inequality – poverty for most and extreme wealth for the elite.

The reason rent hampers democracy is that if a state can pay for salaries and services with foreign income, it has no need to tax its citizens – or answer to them. It also has little financial incentive to foster growth, or strengthen the legal infrastructure – rule of law, property rights – that support market economies and domestic production, and human rights.

The historic link between tax and demands for representation is well known. The opposite is also true; untaxed citizens rarely organize for their democratic rights. In rentier states, it makes more sense for the individual trying to get a job or a contract or changing government policy to find someone to lobby for them, rather than organizing with others in a similar position for change.

By contrast, the foreign countries or companies controlling the source of the 'rent' – the billions in funds – tend to have more influence over the government than citizens do.

These dynamics have dogged Afghanistan over the last two decades, from failed attempts to build institutions that can truly hold those in power to account, to the huge influence of foreign players over policy on everything from agriculture, the economy and counter-narcotics to war and peace. For many years, for example, the United States refused to countenance talks with the Taliban; now it is insisting on them.

The lack of an organized political opposition is also seen. The major politicians join, leave and re-join government. The elite as a group is unchanged; for those who fall out of favor now there is usually the possibility of return later. Rarely are there newcomers, unless they are the children – usually the sons – of those already with power.

The Afghan political and economic system, built on rent, is, unfortunately, immensely fragile. The National Unity Government did collect more customs revenues and taxes than Hamid Karzai’s administration did (although the really wealthy do not pay their way), but aid still funds three-quarters of the current government budget, according to World Bank figures. 

Aid and foreign military spending have also underpinned the economy. Growth in national income (Gross Domestic Product or GDP) and the rate of poverty have tracked the number of foreign troops deployed: growth rates have risen and poverty rates fallen when the number of soldiers surged. However, that ‘economic growth’ proved unsustainable because investment since 2001, reported the World Bank, has “focused around the aid-driven contract economy.” As ISAF gradually withdrew in the years up to 2014, more Afghans slid into poverty, until eventually the rate was worse than in 2003, with over a half of Afghans living in poverty and a third more on the brink.

At the same time, the capture of rent by the elite is absolutely evident, seen, for example, in money taken out of the country, and the purchase of luxury housing abroad.

The danger for Afghanistan now is that the foreign troops could be about to withdraw, and with them, international interest and aid. Since the United States’ February 29 agreement with the Taliban, four to five thousand American soldiers have left and five bases closed. The remaining 8,600 are due to leave in just under a year’s time (April 30, 2021), so long as the Taliban honor their rather vague anti-terrorism commitments.

President Donald Trump, with elections looming in November, reportedly wants to rush ahead with the withdrawal. “Bring our soldiers back home,” he recently tweeted. How necessary on-the-ground US and NATO military backing is for the Afghan National Security Forces (ANSF) in fighting the insurgency is debatable.

What is not at question is the dependence of the Afghan state and economy on foreign money.

Almost thirty years ago, in 1992 when Moscow was Kabul’s main supporter, it withdrew its funding. The government of Dr Najibullah collapsed and the state disintegrated, ushering in a fresh and bloody round of the civil war.

The current government is far more reliant on foreign sponsors than Dr Najib was: as Barnett Rubin has pointed out, he only received 26% of his budget from Russia, compared to the 75% today's Afghan state gets from abroad.

Yet, repeatedly, when confronted with great danger to the nation, the major political players have focused on making appointments. In 2014, with the Taliban resurgent and the economy shrinking as ISAF withdrew, or today when its main international backer is cutting a deal with the insurgents, time has been spent deciding who gets jobs in the cabinet. Both of the political camps could argue they are trying to get the right people into position to get things done. From the outside, though, it looks like a sharing out of rent-seeking opportunities, while doing little to address the looming crises.

Dealing with the rentier state needs slow, painstaking reforms to ease the dependency on foreign income and root out corruption. Yet, many of those in government trying to, for example, ensure customs duties reach Kabul, or salaries and pensions are paid to real people and not ‘ghosts’, or that income from mines goes into the national coffers, speak privately about threats, including to their families, from those with vested interests. Swimming against the tide has been both exhausting and dangerous. Today, the time for reforms could be very short indeed.

It may be that intra-Afghan talks start and the Taliban leadership is serious about peace, rather than seeing negotiations as a means to remove their major enemy from the battlefield before they continue a fight for power. It may be that a good peace deal is forged and international support continues. This would leave all the problems associated with Afghanistan being a rentier state in place, but it would not be catastrophic.

But international interest could also disappear. Significantly, Trump recently broke the taboo of the last 20 years of American politics – that international jihadist violence poses a unique danger to the homeland. The coronavirus “attack,” he said, was “worse than Pearl Harbor … worse than the World Trade Center.”

Fear of al-Qaeda returning in strength to Afghan soil under a new Taliban government has kept the dollars flowing to Afghanistan for two decades.

A shift in US strategic thinking, that identified the biggest threat as coming from Russia, China or from disease, could see the cash dry up very abruptly. The consequences for the economy and the Republic would be grave indeed.

 

 

All are welcome to submit a fact-based piece to TOLOnews' Opinion page.

The views expressed in the opinion pieces are not endorsed or necessarily shared by TOLOnews.

Contributors are responsible for the accuracy of the information in an opinion piece, but if it is discovered that information is not factual, a correction will be added and noted.

Both Medicine and Poison: The Paradox of Support to Afghanistan

A rapid shift in US policy could mean a catastrophic end to intl support, but business as normal is also perilous, writes Kate Clark.

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Why, after almost two decades of massive international aid, are greater numbers of Afghans living in poverty than in the aftermath of the Taliban's fall? Why has the vision of Afghanistan laid out in the 2001 Bonn Agreement and 2004 Constitution of a multi-ethnic, fully representative, democratic government failed in practice?

One answer lies in the international support itself, the billions of dollars in foreign cash that has flowed into Afghanistan since 2001. This is not just Official Development Aid (ODA), but also the far larger sums spent by the foreign armies – on transport and supplies, guards, translators and other support staff and rent for bases.

Such money is classed by economists as ‘rent’ because, like the money received by landlords, it is not a reward for work or effort. States which depend on such income are known as ‘rentier states’. They are rarely democratic and are typically marked by poorly performing economies and inequality – poverty for most and extreme wealth for the elite.

The reason rent hampers democracy is that if a state can pay for salaries and services with foreign income, it has no need to tax its citizens – or answer to them. It also has little financial incentive to foster growth, or strengthen the legal infrastructure – rule of law, property rights – that support market economies and domestic production, and human rights.

The historic link between tax and demands for representation is well known. The opposite is also true; untaxed citizens rarely organize for their democratic rights. In rentier states, it makes more sense for the individual trying to get a job or a contract or changing government policy to find someone to lobby for them, rather than organizing with others in a similar position for change.

By contrast, the foreign countries or companies controlling the source of the 'rent' – the billions in funds – tend to have more influence over the government than citizens do.

These dynamics have dogged Afghanistan over the last two decades, from failed attempts to build institutions that can truly hold those in power to account, to the huge influence of foreign players over policy on everything from agriculture, the economy and counter-narcotics to war and peace. For many years, for example, the United States refused to countenance talks with the Taliban; now it is insisting on them.

The lack of an organized political opposition is also seen. The major politicians join, leave and re-join government. The elite as a group is unchanged; for those who fall out of favor now there is usually the possibility of return later. Rarely are there newcomers, unless they are the children – usually the sons – of those already with power.

The Afghan political and economic system, built on rent, is, unfortunately, immensely fragile. The National Unity Government did collect more customs revenues and taxes than Hamid Karzai’s administration did (although the really wealthy do not pay their way), but aid still funds three-quarters of the current government budget, according to World Bank figures. 

Aid and foreign military spending have also underpinned the economy. Growth in national income (Gross Domestic Product or GDP) and the rate of poverty have tracked the number of foreign troops deployed: growth rates have risen and poverty rates fallen when the number of soldiers surged. However, that ‘economic growth’ proved unsustainable because investment since 2001, reported the World Bank, has “focused around the aid-driven contract economy.” As ISAF gradually withdrew in the years up to 2014, more Afghans slid into poverty, until eventually the rate was worse than in 2003, with over a half of Afghans living in poverty and a third more on the brink.

At the same time, the capture of rent by the elite is absolutely evident, seen, for example, in money taken out of the country, and the purchase of luxury housing abroad.

The danger for Afghanistan now is that the foreign troops could be about to withdraw, and with them, international interest and aid. Since the United States’ February 29 agreement with the Taliban, four to five thousand American soldiers have left and five bases closed. The remaining 8,600 are due to leave in just under a year’s time (April 30, 2021), so long as the Taliban honor their rather vague anti-terrorism commitments.

President Donald Trump, with elections looming in November, reportedly wants to rush ahead with the withdrawal. “Bring our soldiers back home,” he recently tweeted. How necessary on-the-ground US and NATO military backing is for the Afghan National Security Forces (ANSF) in fighting the insurgency is debatable.

What is not at question is the dependence of the Afghan state and economy on foreign money.

Almost thirty years ago, in 1992 when Moscow was Kabul’s main supporter, it withdrew its funding. The government of Dr Najibullah collapsed and the state disintegrated, ushering in a fresh and bloody round of the civil war.

The current government is far more reliant on foreign sponsors than Dr Najib was: as Barnett Rubin has pointed out, he only received 26% of his budget from Russia, compared to the 75% today's Afghan state gets from abroad.

Yet, repeatedly, when confronted with great danger to the nation, the major political players have focused on making appointments. In 2014, with the Taliban resurgent and the economy shrinking as ISAF withdrew, or today when its main international backer is cutting a deal with the insurgents, time has been spent deciding who gets jobs in the cabinet. Both of the political camps could argue they are trying to get the right people into position to get things done. From the outside, though, it looks like a sharing out of rent-seeking opportunities, while doing little to address the looming crises.

Dealing with the rentier state needs slow, painstaking reforms to ease the dependency on foreign income and root out corruption. Yet, many of those in government trying to, for example, ensure customs duties reach Kabul, or salaries and pensions are paid to real people and not ‘ghosts’, or that income from mines goes into the national coffers, speak privately about threats, including to their families, from those with vested interests. Swimming against the tide has been both exhausting and dangerous. Today, the time for reforms could be very short indeed.

It may be that intra-Afghan talks start and the Taliban leadership is serious about peace, rather than seeing negotiations as a means to remove their major enemy from the battlefield before they continue a fight for power. It may be that a good peace deal is forged and international support continues. This would leave all the problems associated with Afghanistan being a rentier state in place, but it would not be catastrophic.

But international interest could also disappear. Significantly, Trump recently broke the taboo of the last 20 years of American politics – that international jihadist violence poses a unique danger to the homeland. The coronavirus “attack,” he said, was “worse than Pearl Harbor … worse than the World Trade Center.”

Fear of al-Qaeda returning in strength to Afghan soil under a new Taliban government has kept the dollars flowing to Afghanistan for two decades.

A shift in US strategic thinking, that identified the biggest threat as coming from Russia, China or from disease, could see the cash dry up very abruptly. The consequences for the economy and the Republic would be grave indeed.

 

 

All are welcome to submit a fact-based piece to TOLOnews' Opinion page.

The views expressed in the opinion pieces are not endorsed or necessarily shared by TOLOnews.

Contributors are responsible for the accuracy of the information in an opinion piece, but if it is discovered that information is not factual, a correction will be added and noted.

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