Tuesday, September 16, 2014
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The Economics of Peace in Afghanistan

KABUL – Suicide bombings, assassinations of top Afghan leaders, brutal attacks on Charikar and other places close to Kabul, Afghanistan’s capital, and a rapid increase in civilian deaths from drone attacks are jeopardizing the withdrawal of American and NATO forces from the country. So pervasive has the violence become that Ahmed Rashid, the renowned expert on the Taliban, has concluded that speeding up the peace process through dialogue with the insurgents is the only option.

The economics of what an Afghanistan at peace would look like must be a critical part of any negotiations. But what, precisely, does the economics of peace entail, and why is it so important?

One main objective should be to transform Afghanistan’s vast underground economy, which has thrived, despite the large number of NATO forces, by creating profitable opportunities for Taliban and other groups involved in the fighting. To reintegrate these fighters into the productive economy will require a change in policies, including a rapid reactivation of rural development schemes and the promotion of local entrepreneurship, public works, and other legal activities.

In particular, the United States, together with other donors and NATO troop contributors, should heed “Ten Commandments” during and after the negotiations.

First, apply the dictum of T.E. Lawrence (Lawrence of Arabia) that it is better to let “them” do it than it is to try to “do it better” for them. Thus, let national negotiators, local leaders, and communities determine what their economic needs and priorities are, and let insurgents determine their preferred venue for reintegration. Unless the participants are empowered and take ownership, programs will not be sustainable, resources will go to waste, and peace will not endure.

Second, ensure integration – rather than merely coordination – of economic factors into the political and security agenda. This would entail using reintegration and other economic programs as a carrot to support the negotiations, and would also support peace and stability in the long run.

Third, support a peace agreement designed in accordance with the country’s financial and technical capacity to implement it. This requires reasonable projections for domestic tax revenue and aid, as well as the right mix of foreign expertise to support the process. Avoid overly optimistic projections that lead to unworkable plans and unreasonable expectations, which the government will not be able to fulfill, as happened in Guatemala, for example, when its civil war ended.

Fourth, channel aid through the central government budget, or through local authorities, so that officials can acquire legitimacy by providing services and infrastructure, and provide subsidies and price-support programs to replace poppies with licit crops such as cotton, which was produced in the past.

Fifth, ensure that such aid moves quickly from short-run humanitarian purposes – to save lives and feed those giving up war – to reconstruction activities aimed at creating investment, productivity growth, and the sustainable employment that will enable people to live dignified lives. What needs to be avoided is a failure – such as occurred in Haiti following its devastating earthquake – to move from the first stage to the second.

Sixth, establish well-planned and synchronized programs for demobilization, disarmament, and reintegration, which are sine qua non for making the transition from war to peace irreversible. In doing so, remember that the “vagueness versus specificity” dilemma also applies to economic issues. Too much specificity on some variables and too much vagueness with regard to others required a renegotiation of the arms-for-land agreement in El Salvador to make it implementable.

Seventh, establish different programs for higher-level commanders, providing more orientation, training, credit, and technical assistance. The United Nations acknowledged better results from the “Plan 600” in El Salvador than from programs for lower-ranking combatants, which lacked such support.

Eighth, increase support for NGOs with successful records in creating entrepreneurs in rural development, in carpet weaving, jewelry design, or any other activity that Afghans want to develop. Active policies to promote new start-ups and local companies’ expansion through credit, training, and technical support are imperative.

Ninth, establish economic reconstruction zones to jump-start sustainable economic activity, create jobs and export earnings, improve aid effectiveness and accountability, and avoid aid dependency. The zones could combine integrated rural development for domestic consumption and labor-intensive manufacturing and agro-businesses for export. The US and other countries should open their markets to goods produced in these zones.

Finally, ensure that the political or peace objective prevails at all times, even if it delays economic stability and development. This often means accepting that optimal and best-practice economic policies are not attainable – or, indeed, even desirable. The independence of the central bank and the “no overdraft” rule for budget financing will almost certainly prove too restrictive to carry out critical peace-supporting activities in Afghanistan.

In settling the Afghan war, the government and donors should seek to eschew the pattern of unkept promises that has bedeviled reconstruction of the country in the past. Only then will Afghanistan be able to break out of its decades-long vicious circle of violence, insecurity, corruption, unemployment, drug trafficking, and aid dependency.

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