Afghan Economic Growth Key to Victory

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Now that the Senate has confirmed Gen. David Petraeus as the new military commander in Afghanistan, hopes have been raised in the Obama administration and around the world that the United States can chart a newly successful counterinsurgency strategy. Unfortunately, this improvement in the military dimension of our campaign has little effect on the civilian side of things.

Efforts to build a functioning Afghan government and bolster its legitimacy have largely stalled-the civilian "surge" that was meant to accompany the president's troop surge has fallen short of expectations. After Gen. Stanley McChrystal touted the export of a "government in a box" to the Marja district, it later turned out that the box was mostly empty. Surveys indicate that, in some parts of the country, corruption is perceived as a greater problem than security.

Most notable, however, is the failure to establish or even instigate a path of economic development that will be sustainable after international assistance ends. Economic growth is absolutely critical to the long-term stability of Afghanistan (or any country) and is just as important as a functioning government. With the change in military leadership, President Obama should grab the opportunity to alter the economic strategy.

In particular, the president should "turn the map around," as the Marines say. A recent report to the United Nations Security Council opined that, regarding aid projects in Afghanistan, "it is time that we direct our attention to the impact of our collective activities on the lives of ordinary Afghans." (This, after nearly a decade of foreign aid!) But, while the International Security Assistance Force (ISAF) focuses on combating militant insurgents, civilian officials must promote economic insurgents-entrepreneurs.

Entrepreneurs such as Fatima, whose carpentry business in Kabul has enjoyed tremendous success, employing 77 people with rapid revenue growth. With the assistance of the Business Council for Peace, which works with entrepreneurs in post-conflict countries, it is estimated that Fatima's 77 employees in turn support 623 family members.

For any economy to grow, for living standards to rise, new businesses must be created. Those local businesses must be allowed to experiment with different ways of solving local problems. Each of these firms can be seen as a type of "insurgent"-starting, experimenting, and growing. Not all will succeed; the U.S. Agency for International Development (USAID) has suggested that, in some cases, new business creation should be discouraged because some entrepreneurs might fail. Progress, however, only comes about through trial and error.

Instead of helping local entrepreneurs, the present civilian aid effort often appears to be a rehash of the "big push" theory of international development that reigned in the 1950s and 1960s. Currently, USAID spends $300 million per month in Afghanistan, an astonishing amount of money that not only floods local markets with cheap labor and surplus crops but also might be setting Afghans up for economic stagnation. Much of the money is spent on cash-for-work projects that employ people merely for short-term tasks. On one level, this helps prevent some locals from accepting Taliban money to plant roadside bombs but, on another level, it apparently does little to set in place economic development that can continue after the United States stops sending money.

The general idea, as described by USAID and other American civilian officials, is to attempt to inject a "short-term jolt" of money and employment that will ignite self-sustaining growth. This is exactly what drove foreign aid 50 years ago: pour a boatload of cash into a poor country and it will inevitably lead to an economic "takeoff." There is little, if any, historical evidence that this strategy has ever worked.

In fact, the cash-for-work strategy, while helping to achieve short-term gains, may be undermining corresponding efforts to improve government legitimacy. International assistance is basically creating a welfare state ahead of any underlying economy to support it. We are trying to run economic history precisely backwards, putting in place a large administrative state to stimulate growth, when such a state usually results from economic growth. Additionally, the flood of money distorts any incipient financial markets that may develop around indigenous businesses.

Time is running short for military and civilian strategies to turn the tide in Afghanistan. President Obama has now reinforced the American commitment to improving security and defeating insurgents. His next move should be the appointment of a new civilian leader who will reorient strategy around one unifying idea: economic growth through local entrepreneurs. The future of Afghanistan depends on it.

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