May 16, 2016
Instability in Afghanistan continues to hinder private investment and complicates the implementation of financial reforms, the International Monetary Fund (IMF) said in a report on Friday. In other words, Afghan policies have failed to adhere to the West’s neoliberal orthodoxy. As the war-torn poverty-stricken country operates in survival mode, free market ideologues want to ensure Afghanistan does not abandon its commitment to democratic capitalism and its ability to serve the interests of multinational corporations.
The IMF promised to extend a new lifeline to Afghanistan in the form of “Extended Credit Facility” loans, which of course come with certain recommendations and conditions:
“While security challenges make it difficult to ignite private sector-led and inclusive growth… striving toward it should remain a target,” the IMF claims. “To that end, the [Afghan] government should aim at eliminating regulatory and administrative barriers for businesses.”
The IMF package is part and parcel of Washington’s misguided attempt to transform Afghanistan from a low-income rentier state to an advanced market-based economy. However, limited government, fiscal austerity and privatization do not seem like high priorities for the Afghan government at the moment, as the country deals with an intensifying civil/proxy war. The U.S. and IMF’s obsession with free markets speaks to a misunderstanding or willing disregard for the history and evolution of the Afghan state, a reality which many scholars have affirmed.
Political scientists Willemijn Verkoren and Bertine Kamphuis argue that U.S. state-building efforts are ill-suited to Afghanistan because market democracies are “the outcome of specific historical and geographical circumstances,” which “cannot be replicated easily.” The authors ironically note that Western countries themselves exploited mercantilist and state-led production strategies during their own historical development, but apparently that is not an option for countries like Afghanistan in today’s “neoliberal, globalized context.”
Instead of focusing on limited government, the authors recommend industrial policy, trade protectionism and state-led infrastructure projects – some of which have actually been proposed by Afghan officials. The scholars lament, however, that these ideas were met with scorn by international donors because they dared to deviate from the free market model.
Instead of overemphasizing free market orthodoxy, they claim, the international community could perhaps focus on investing in basic necessities like electricity, the lack of which has been a major constraint on economic activity. The scholars also contend that infrastructure projects would be ideal for Afghanistan to facilitate transport, bolster trade and create employment opportunities.
“A strong coalition between government and companies… may help to kick-start domestic economic development in Afghanistan,” Verkoren and Kamphuis blasphemize.
Professor Michael Schwartz also decries attempts to lay the foundation for outside investment through “occupation-initiated reconstruction, animated by military goals and neoliberal economic policy.” The neoliberal structural adjustment approach, he argues, is designed to attract private investment and impel socio-economic transformations, the result of which has been a “rippling disruption of family and community life.”
Schwartz specifically points to the dubious role played by the IMF and World Bank, “vectors of power and influence,” that force governments to privatize and lower trade barriers so multinational corporations can penetrate local economies.
State-building scholar Emrah Ozdemir lends testimony to the perils of IMF demands for reducing government regulations. In Afghanistan, he writes, the lack of regulatory mechanisms benefits international entrepreneurs and a wealthy minority at the expense of small and medium-sized enterprises, thereby widening the gap between rich and poor.
Some critics might object by claiming that the U.S. has invested hundreds of billions on security and state-building efforts that have been wasted by corrupt Afghan government officials and warlords. Yet, U.S. and other foreign contractors have reaped a windfall from the war and have been willing co-conspirators in the pillaging of reconstruction funds, most of which have yet to trickle down to the ostensive recipients: the people of Afghanistan.
In fact, near the end of last year the Pentagon still had more than 30,000 contractors inside Afghanistan and, according to Foreign Policy, President Obama’s decision to extend the U.S. presence will ensure “the gold rush sparked by the 2001 invasion continues for the next several years.”
U.S. military contractor DynCorp alone has earned more than $6 billion off the conflict, a corporation awash in corruption charges. The Dubai-based Supreme Group raked in roughly $6.8 billion, a firm that hired a senior American military official to head its U.S. branch in 2008. Seven years later, company executives pleaded guilty and agreed to pay nearly $400 million in fines for grossly overcharging for food and water. Talk about ungrateful.
So, while it may appear international benefactors are swooping in with loans and grants to save Afghanistan from financial collapse, they are actually tethering the country ever tighter to a neoliberal model of development. For, sadly, Western institutions like the IMF are more interested in making sure Afghanistan stays “open for business” than they are in serving the needs of the Afghan people.