Afghanistan Analysts Network – English

Economy, Development, Environment

The Cost of Support to Afghanistan: New special report considers the causes of inequality, poverty and a failing democracy

Kate Clark 6 min

A new AAN special report looks at why the political vision of the 2002 Bonn Agreement and 2004 constitution with its promises of a representative democracy has failed to materialise. It finds answers in the huge levels of unearned foreign income that has flowed into Afghanistan since 2001, both aid and the money spent by foreign forces. This income has funded the government and been a major element of national income (GDP) for the last 18 years. Yet, as this report explores, it has sabotaged democracy and undermined the domestic economy. The report’s author, Kate Clark, here looks at why this topic is so important now, given the possibility that the income on which the Afghan state depends may dry up.

A young rubbish collector looks on from a landfill in Herat. While some Afghans have become spectacularly wealthy from the rentier state, most have seen enduring poverty. Photo: Aref Karimi AFP, 2012

When President Donald Trump said on 7 May that the Covid-19 “attack” was worse than the 9/11 attacks, he broke a taboo, and with it, the consensus that has held since 2001 that Islamist terrorism is the major threat to America. (1) That view has underlain US policy towards Afghanistan ever since, with its “fundamental objective of… preventing any further attacks on the United States by terrorists enjoying safe haven or support in Afghanistan.” Trump has also said this month that he wants to withdraw all US troops, possibly before November when he comes up for re-election. “We are acting as a police force,” he tweeted on 27 May, “not the fighting force that we are, in Afghanistan. After 19 years, it is time for them to police their own Country. Bring our soldiers back home but closely watch what is going on and strike with a thunder like never before, if necessary!”

There has been uncertainty about the intentions of Kabul’s major backer for many months, especially since the United States began talking to the Taleban and even more so after the two parties signed an agreement which promised at least the partial withdrawal of US troops. That deal rests on Taleban intentions being honest, that they want to negotiate and are not actually interested in manoeuvring to get their main enemy, the US military, off the battlefield and out of Afghanistan, leaving Kabul vulnerable to capture. It also rests on the honest intentions of the Kabul administration, which has, so far, not shown itself to be especially enthusiastic for the US ‘peace process’. Washington appears to have no Plan B if intra-Afghan talks do not begin, or if they fail to result in a negotiated end to the war.

It may transpire that talks prosper and a peace deal ensues. International aid and interest in Afghanistan may continue. The alternative is also possible, that in re-evaluating its national interests, Washington decides it is actually China, Russia, or coronavirus – or all three – that is the major threat. The possible re-establishment of al-Qaeda bases in Afghanistan, either on the back of a Taleban return to power or renewed civil war, could suddenly seem less vital to Washington, and the fate of Afghanistan of little importance. If that were the case, the political system and economy built up since the Taleban lost power in 2001 would suddenly appear very fragile indeed.

AAN’s new special report, published today, looks at that system and considers why it is so fragile. It examines how the colossal amounts of aid and spending by foreign armies deployed to Afghanistan have actually sabotaged the democratic vision outlined in the Bonn Agreement of 2002 and the 2004 constitution, and undermined the economy.

When unearned foreign income, known by economists as ‘rent’, becomes a large proportion of government revenues and national income (GDP) – more than about 40 per cent – the country is known as a ‘rentier state’. In Afghanistan’s case, the rent has been far higher than 40 per cent. The negative consequences for citizens are well-known and well-researched. Rent gives a government financial autonomy from its citizens. It does not need to tax them and, as Giacomo Luciani, one of the first to study the rentier state, has written, taxation is fundamental to citizens demanding representation:

It is a fact that whenever the state essentially relies on taxation the question of democracy becomes an unavoidable issue, and a strong current in favour of democracy inevitably arises.

The opposite is also the case: if a state is not democratic before rent accrues, democracy rarely fails to take root. A citizen out of work, or wanting better services, or to change government policy is best served not by joining others in a similar position to demand change, but by appealing to someone with better access to rent. In Afghanistan, that will typically be someone from the same clan, tribe or ethnicity, or other people with whom one has established close ties. Organised political opposition and citizens’ demands for representation and accountability tend to be feeble in rentier states. The foreign companies or states controlling the rent often have more clout than citizens do over their own governments. Given there is no need for domestic production to tax, rentier states also rarely develop the institutions which help a market economy to flourish, especially rule of law and property rights. All of these characteristics of a rentier state can be seen in Afghanistan.

I cannot say I foresaw all this in 2002 when, after witnessing the fall of the Taleban, aid started to pour into Afghanistan. However, I was deeply troubled by the scale of the assistance. (2) It was not just the sudden waste, duplication of effort, and the incompetence and ignorance of many of those newly arriving in Afghanistan to ‘rebuild’ it. Rather, my unease stemmed from the feeling that the ‘house’ was being built on sand. The foundations were the priority and that meant first having a secure and fair country. I felt this because Afghans’ main concern at the time was security, stemming largely from the arrival of commanders, armed by the US to topple the Taleban, in their areas. These men captured territory and state positions off the back of the intervention, becoming the new provincial and district governors, police chiefs and ministers. Most were familiar faces from the brutal civil war era.

I felt Afghans did not need help re-building their economy or services; they were capable of that themselves. Dealing with the power grab by the commanders was a different matter. However, international support to the new state and its new officials actually ensured that those to whom rent had first accrued stayed in power. The ‘commander class’, with their continuing access to foreign rents through their positions in government, would become the core of the new post-2001 elite. Others benefitting from the new rentier economy were ‘technocratic’ civilians, many of whom went from the aid sector into government.

Yet, looking back, it is clear that the high amounts of rent would have made the development of democracy unlikely, whoever had captured power in 2001, whether military or civilian, one person or, in Afghanistan’s case, many.

It is also evident that the huge levels of aid and military spending only undermined the economy and attempts at development. The rents strengthened the afghani, sucking in cheap imports and pricing exports out of the market. Apart from opiates, a sector which only illegality gives a comparative advantage to domestic production in Afghanistan has remained weak and uncompetitive. Imports still consistently far exceed exports: 7,407 million dollars’ worth of imports in 2018, compared to 825 million dollars in exports, with, the World Bank wrote, “aid flows almost entirely financing the widening trade deficit.”

There has been economic growth, but it was illusory and unsustainable because it was based on rent. Growth has tracked rent, rising when aid, and especially spending by foreign armies rose and falling when those income streams fell. Most Afghans have seen deepening poverty again, although those able to access the rent have become fabulously wealthy.

In 2020, along with the coronavirus, a confident Taleban and the threat of US withdrawal and a falling off of international aid and interest in Afghanistan, the major politicians came together not to deal with those issues, but to negotiate the sharing of power. The deal between President Ashraf Ghani and Dr Abdullah focussed on appointments. From a rentier state theory perspective, it looked like a deal to share rent-seeking opportunities. There has been no apparent sense of urgency among the elite that the rent, which sustains the Afghan state and their positions in it, could dry up.

Yet Afghanistan has its own recent, bloody example of what can happen. When Russia cut funding to the Najibullah government in 1992, the state collapsed and a new bitter round of civil war broke out. Afghanistan’s continuing dependence on rent is what makes the possibility that Trump could order a withdrawal of troops and cut in aid so perilous.

(1) Only sources not given in the report are provided here.

(2) I have described reporting on the 2002 Tokyo aid-pledging conference as the most difficult story I had ever covered, the point when I “finally understood how confined and smashed a writer can feel when trying to report contrary to the hegemonic discourse.”


2001 Aid commanders Economics Economy Government international aid International MIlitary Military ministry of finance political economy poverty rentier Taleban Taliban trade