Editor in Chief: Moh. Reza Huwaida Tuesday, August 4th, 2020

Free Market in Afghanistan, Is It Working?


Free Market in Afghanistan, Is It Working?

Free Market Economy is the buzzword in today's Afghanistan. The country's political leadership wholeheartedly embraced it although for many of them it was for the very first time that they heard of this strange term in their lives. Many of them have since familiarized themselves with this term and flaunt their still vague and incomplete understanding of the term to whoever asks them of the economic policies of the government of Afghanistan.

In interviews and public speeches, the same leaders and economic policy makers are seen repeating bazaar-e azaad (free market) countless times without possessing a proper and correct understanding of what it actually implies and whether this model of economic organization has brought success and prosperity in other countries who have implemented it. Still, very few among them would know of another term that captures the essence of what the free market economy is all about; this term is neo-liberal economics.

Now and after ten years of emergence of the new Afghanistan, one would wonder if it is not time for the government of Afghanistan's economic policy makers to do some introspection and see if the thing, which is so vaguely called "free market", has actually been effective in solving Afghanistan's problems. The reality is that Afghanistan's experience with free market economy and neo-liberal economics has so far been a near total failure.

According to economic pundits, free market in an underdeveloped country like Afghanistan is supposed to bring wonders and economic miracles. It is supposed to lead to rapid economic growth and creation of multitude of private industries and enterprises through private investment while the market's "invisible hand" would work to set the right prices and prevent waste of resources.

In Afghanistan, if we are to believe these economic pundits, by now and after ten years, there must have been industries set up, manufacturing units all over the country and private investment everywhere. According to them, by now per capita income in the country would have increased manifold and economic problems in the country were being solved one by one.

The fact is that the imposition of free market policies in Afghanistan after 2001 has done little in bringing economic development and reducing the widespread poverty. The result has been stagnation in the reduction of poverty and unemployment levels. An overwhelming majority of people in the country remain to be poor and destitute while jobs and employment opportunities have not increased in any considerable scale since 2001.

Imposing free market policies, which otherwise should have led to large-scale local and foreign private investment, has put the country into a kind of economic stagnation and stalemate in which the country continues to be dependent on 1. Foreign dollars poured into the country in the form of international assistance and aid, 2. Dollars obtained from illegal and illicit opium production and trade. These two sources continue to form the backbone of Afghanistan's current economy.

If the foreign dollars that keep coming into NGOs and government coffers stop and if the black proceeds from the opium trade are stopped, the next day nothing would be left of Afghanistan's economy. Moreover, the manufacturing and industries base of the country has neither been reconstructed nor new ones created. The bulk of the consumption goods are imported and the country is unable to stand back on its feet by producing locally.

Therefore, we clearly see that imposition of free trade and neo-liberal economics on Afghanistan has been a near total failure. What are the causes of this failure over the past ten years? Lack of security and stability in many parts of the country is one reason but it is not the only one. Even in many areas that have been relatively safe like the western and northern regions, growth and development have been limited.

The fact is that the government that is supposed to act as a regulator and supporter in a free market system has not been able to provide the required conducive business environment for Afghan businessmen and entrepreneurs to invest with peace of mind and certain that their investments will be safe both from armed groups and corrupt government bureaucrats. Corruption in the government has been the complaint of every businessman who wanted to invest in the country and create jobs and employment.

On the other hand, the government has been unable to provide and back up the prospective entrepreneurs with proper laws and regulations that can protect them and their investments and encourage more investment. The existing rules are not transparent, are obsolete and old, are complex and cumbersome and discourage businessmen and interested foreign investors and financiers from investing inside the country.

Karim Khalili, the second vice president, recently warned of an economic and business mafia that is appropriating very part of the economy. It is a reality and a consequence of government's inability to promote free market and provide a level and fair playing field for all actors to play by the rules.

In 2001 and after the "shock and awe" military campaign that sent the Taliban scurrying for their rabbit holes, as state and politics in Afghanistan underwent major transformation; so did the economic organization of the poor country. After every "shock and awe" military campaign in a third world country, there comes neo-liberal economics as the next phase after the country is liberated.

In Iraq in 2003 and after Saddam Hussein was removed by a similar military campaign of "shock and awe", Paul Bremer, appointed as the American head of the Coalition Provisional Authority in that country, went to Iraq with a mission that was one of the most important American goals in Iraq: "full privatization of public enterprises, full ownership rights by foreign firms of Iraqi businesses, full repatriation of foreign profits...the opening of Iraq's banks to foreign control, national treatment for foreign companies...elimination of nearly all trade barriers".

This is what is called neo-liberal economics: privatization of all state-owned businesses and enterprises, opening large enterprises for equity participation by foreign companies, opening the doors of the country to a deadly influx of foreign goods that washes away and destroys indigenous, domestic industries and etc. What is emerging is that free market and economic neo-liberalism cannot be the solution to Afghanistan's economic problems. We should think of other alternatives.

The author is the permanent writer of the Daily Outlook Afghanistan. He can be reached at outlook afghanistan@gmail.com

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