Foreign aid donors and consultants working in
Unfortunately many of these internationally accepted standards and practices do not work very well in
Sometimes when a consultant tells me that Afghans lack capacity, I try to imagine my interlocutor being forced to survive in Uruzgan province with two jaribs of land and a goat. I wonder if this person would be capable of transferring billions of dollars from undocumented workers in the
A brief examination of the people of actually existing
Instead, Afghans developed capacities that enabled them to survive and in some cases prosper under conditions of insecurity and high risk. In order to transfer money from migrant workers to their families, they developed extensions of the longstanding havala system. This system, which long took advantage of the movements of nomads and traders to transfer letters of credit between hinterlands and commercial hubs, has adapted to the age of telecommunications. Money can be transferred electronically from an account in
Among the legacies of decades of conflict in
Under the leadership of Minister of Finance Ashraf Ghani, the Afghan government rejected this argument and succeeded in changing the currency within a few months (see the account by Ghani and his collaborators in their chapter in this book). The exchange was completed without incident in early 2003. The International Security Assistance Force, then under the command of
How did they do it? The Afghan government used and developed the existing capacities of the society, rather than assuming that these old capacities either did not exist or had to be replaced with new, imported capacities. The Afghan government convened the havala dealers and worked out an exchange system with them, tapping into their tremendous knowledge of the functioning of money markets and monetary transfer systems in
Since international actors were unable or unwilling to assist with security, the finance minister requested the assistance of the minister of defense. At that time the Minister of Defense, Marshall Fahim, commanded the militias who had fought the Taliban, not a professional army. He and the Minister of Finance, Ashraf Ghani, were political opponents on many issues, including the issue of the future of the militias that had fought the Taliban. Nonetheless they were able to reach agreement on the currency exchange on the basis of national interest. The leaders of the militias in question are now members of parliament or government officials, and their militias have been largely demobilized. The currency has remained stable, and
Many of those demobilized have entered the opiate industry. This industry, whose yearly export value of over $3 billion is estimated to equal half of the licit GDP in value and to constitute the bulk of the cash economy, is also a major reason that the new currency has remained stable and that
After ignoring the opiate economy for several years during which the
Let’s look at the drug economy from a different angle, as a high-capacity adaptation to indescribable devastation. This suggests that, like the transition to a new currency, the transition to a new, licit economy should use the existing capacities developed over the past few decades. Entrepreneurs have established a multibillion dollar a year business in
Small industrial enterprises, dispersed in remote areas to avoid detection, transform this raw material into heroin, a high-value, low volume product, using state of the art technology. This technology requires the importation every year of thousands of tons of acetic anhydride, a substance not manufactured in
Such a criminal industry was the only possible large-scale economic activity in the past several decades, and a large portion of the Afghan population has participated in it. Thus a country that long largely relied on subsistence farming for food production has now developed a massive sector of commercial agriculture for the international market, with the associated financing, insurance, production, agricultural extension, marketing, and trading activities.
David Mansfield, who has spent over a decade of field research studying the opium industry in
Discussion of alternative livelihoods often is reduced to crops for farmers. But the opium economy creates more non-farm than farm income. Some of that income goes to traders who purchase opium in villages or in bazaars. Many of these traders also act as lenders and purchasers of futures contract.
These small and medium traffickers correspond to the hawala dealers in the currency exchange. They have the detailed knowledge of the credit and marketing needs of the farmers that any new rural economy would need in
For instance, they could be offered an amnesty in return for capitalizing new rural credit institutions. Each trader/lender will have the authority to make loans for a set of defined purposes for which the institution is established, including futures contract purchases of any licit agricultural good. In order to reduce risk, the government with the support of International Financial Institutions should establish some kind of loan guarantee or insurance scheme to encourage a higher volume of credit without exorbitant rates. The subsidy, guarantee, or insurance should assure that the cost of borrowing from this new institution will be significantly less than the cost of contracting debt through the salaam system or with opium as collateral.
The agricultural lenders would need technical advice, but they could certainly also supply technical advice, given their experience. In provinces where little or no opium is grown, there will still be traders or landlords who operate as lenders. Some of them could be recruited and new employees trained to create a credit and investment institution similar to what the opium economy has established elsewhere.
This is just a crude idea -- but let's develop some more. But I wonder if we have the capacity....