Business & Economics:
EXCERPTS FROM "THE POLITICAL ECONOMY OF WAR AND PEACE IN AFGHANISTAN"
Barnett Rubin: 3/14/00

Editor’s note: The full text of the paper, The Political Economy of War and Peace in Afghanistan, is to be published by the journal World Development. The homepage can be found at:

http://www.elsevier.com:80/inca/publications/store/3/8/6/

The 20-year old Afghan conflict has created an open war economy, affecting Afghanistan and surrounding areas. Not only has Afghanistan become the world’s largest opium producer and a center for arms dealing, but it supports a multi-billion dollar trade in goods smuggled from Dubai to Pakistan. This criminalized economy funds both the Taliban and their adversaries. It has transformed social relations and weakened states and legal economies throughout the region. Sustainable peace will require not just an end to fighting and a political agreement but a regional economic transformation that provides alternative forms of livelihood and promotes accountability.

…Wars create conditions for economic activity, though often of a predatory nature, and such economic returns to the use of violence may both provoke such wars and nourish interests that perpetuate them. A few actors profit, while most have no say in the development of their own society. Peacemaking requires not only political negotiations but transforming the war economy into a peace economy and creating institutions for accountability over economic and political decision making.

…The war economy of Afghanistan exemplifies this phenomenon. Devastated Afghanistan has become both the world’s leading producer of opium (75 percent of world production in 1999) and a transport and marketing corridor where armed groups protect a region-wide arbitraging center where profits are made off policy-induced price differentials. This economy developed in response to the demands of warlords for resources and of the Afghan people for survival in a country devastated by over 20 years of war. Over a million have died in a country whose population is now estimated at 26 million, and the proportion of disabled in the population may be the world’s highest. Afghanistan ranks at the bottom of all measures of human welfare, and illicit activities have become key elements of its people’s survival strategies.

…This illicit economy is not confined to Afghanistan. Through the development of an Afghan diaspora linked to neighboring societies, the opening of borders, and lack of customs enforcement in many areas, the Afghan war economy has generated a pattern of regional economic activity and associated social and political networks that compete with and undermine legal economies and states. This regional economy is in turn linked through the drug and arms trade to globalized crime. Transformation of this war economy is thus essential not only to Afghanistan but to neighboring regions and the world.

…Before the outbreak of war in Afghanistan in 1978, a gradually expanding, foreign-supported state coexisted with a rural sector based on subsistence agriculture and pastoralism. The Communist coup of April 1978, the Soviet invasion of December 1979, and the reaction to these by the US, Pakistan, Saudi Arabia, China, and others, destroyed this system. Both sides of the war depended on military technology and cash provided by foreign sponsors. The pipelines for arms and humanitarian aid supplied capital to build up regional smuggling networks.

…After the Soviet withdrawal in February 1989, both Soviet and Western aid decreased, and both ended with the dissolution of the USSR at the end of 1991. Regional powers (mainly Pakistan, but also Iran and Russia) stepped in, but local commanders and some returning refugees pursued new survival strategies in a context of highly fragmented power and no effective central state. Predation by commanders, opium cultivation by peasants, and smuggling to Pakistan and elsewhere constituted adaptations to this high-risk environment. The Taliban, a transnational movement benefiting from social capital created in madrasas (Islamic academies) in the Afghan-Pakistan border areas during 15 years of Afghan dispersion, managed by 1998 to consolidate control over nearly all the country’s roads, cities, airports, and customs posts, thereby drastically lowering the cost and risk of transport and consolidating Afghanistan’s position at the center of a regional war economy. …As the Taliban gained control, they implemented a transition from localized predatory warlordism to weak rentier state power based on a criminalized open economy. The opposition, which had formerly included Uzbek, Hazara, and Tajik leaders, shrank to a Tajik core, led by Ahmed Shah Massoud in his northeastern mountain bastion.

…Today’s war economy in Afghanistan consists of the transit trade, the drug trade, the gem trade, and service industries stimulated by the growth of the former three. The projected oil and gas pipelines have been stymied by the continuing war and the conflict between the U.S. and the Taliban over Usama Bin Laden. Foreign exchange earned by these exports finances Afghanistan’s imports of arms as well as food and other necessities. The Taliban control the transit trade, which seems to be the largest of these sectors. … The Taliban derived at least $75 million in 1997 from taxing Afghanistan-Pakistan transit trade. While this is a significant income in the context of Afghanistan, it is far less than the amount of Pakistani duties that would be owed on these goods, so that the more indirect contraband route is still profitable.

…While opium growing and trading involves economic risk, neither the Taliban nor their opponents treat these as criminal activities, and there is consequently neither a high-risk premium nor violent competition for markets. The opium trade in Afghanistan is by and large peaceful and competitive. It is difficult to estimate how much revenue the Taliban derive from this trade. … Rough calculations indicate that the Taliban raise less revenue from opium trade than the transit trade. Northeast Afghanistan, controlled by Massoud, produces only three percent of Afghanistan’s opium today, though there are also heroin refineries in the area, whose product is smuggled north through Tajikistan. Besides the aid he receives, mainly from Iran, Massoud’s main income comes from the gem trade. His native valley, Panjsher, produces lapis lazuli… as well as some of the world’s highest quality emeralds. Since the beginning of the war Massoud taxed trade in these gems; his aides estimate that…the trade now brings in $40-60 million per year.

…The Afghan war economy has spread internationally through a variety of social networks. The Taliban themselves are a transnational movement led by Afghans but organizationally present in both Afghanistan and Pakistan through Deobandi madrasas and parties. Besides Usama bin Ladin, who still has followers in Saudi Arabia, the Taliban host members of radical Islamist groups from Pakistan, Egypt, Uzbekistan, Algeria, and many other countries. The religious and political networks are supported by the trans-border economic networks described above that link traders to the Taliban. These in turn have close relations with the local administration in Pakistan, where the goods are sold in smugglers’ markets. [Such] networks made Afghanistan the second largest trading partner of the United Arab Emirates, … reflecting the purchase of duty-free goods in Dubai by Afghan and Pakistani traders shipping them onward for smuggling into Pakistan. The drug and arms trade have brought international organized crime into the region. Though over 97 percent of the opium is grown in Taliban-controlled southern and eastern Afghanistan, increasing portions of it are smuggled northward in cooperation with the Russian mafia. Russian organized crime groups have sold arms to Massoud and reportedly purchased heroin from traders on all sides.

…Peace in Afghanistan would involve ending a civil war, regulating the competition among regional powers, and reconstructing a state, society, and economy. The Taliban’s establishment of relative stability in most of the country would in other circumstances favor peace. …However, … their formal if inconsistently enforced bans on female education and employment, as well as their harboring of Usama bin Ladin, have made them the target of condemnation and sanctions. These priorities may well wrongly estimate what poses the greater threat: Usama bin Ladin, or a well-armed country of 26 million with no education or legitimate livelihoods for its young. Starting a serious international planning process conditional on a cessation of hostilities and observance of minimal humanitarian and human rights principles (the right of both sexes to available education and health care) might affect the current dynamic of conflict. Aid for reconstruction of Afghanistan should be decided upon and disbursed in such a way as to build reciprocity between state and society and make the former more accountable to the latter. For instance, programs aimed at replacing opium poppies would also have to find alternative sources for financing state activities.

…The current dysfunctional regional political and economic relationships would also have to be changed. Pakistan’s policies toward Afghanistan arguably threaten Pakistan itself. The tough reality, however, is that Pakistan’s policy on Afghanistan is mainly motivated by its quest for parity with India, and if that relationship continues to deteriorate, change in Pakistan’s Afghanistan policy, and hence successful internal reform, is unlikely. International institutions should work with the regional powers toward something approximating a customs union that would both make legitimate trade more attractive and reduce incentives to smuggling. Most important is working with Afghans to change the image and role of the state, seen largely as a distant and indifferent if not hostile power.

Editor’s Note: Barnett R. Rubin is the director for the Center for Preventative Action at the Council for Foreign Relations. He is a co-author of "Calming the Ferghana Valley: Development and Dialogue In the Heart of Central Asia," published in 1999 by the Council on Foreign Relations and The Century Foudnation.