The general expectation among Afghans after the fall of the Taliban was that the state, equipped with financial resources and technical assistance from the international community, would once again take the lead in the economic sphere. Instead, Kabul adopted a market economy. The move remains controversial in some quarters. This report, derived from interviews conducted in 2015 and 2010, takes stock of the competing ideologies in Afghanistan today with respect to the economy.

Summary

  • In 2001, Afghanistan shifted to a market economy, but the move remains controversial among its citizens, in part because of dissatisfaction with social conditions and because of an association with Western values.
  • The younger generation is somewhat more in favor of a market economy that rewards initiative and merit. At the same time, desire for the government to exert greater control is widespread.
  • The post-2001 government has been blamed for failing to create jobs and adequately enable the private sector. Some believe that this failure is an abdication of social responsibilities that reinforces Taliban propaganda about a corrupt state in thrall to foreigners.
  • Sectors such as telecommunications and higher education, however, have seen considerable growth and helped improve the lives of many Afghans. This success is attributed not only to substantial consumer demand but also to appropriate government policy.
  • Supporters and skeptics alike believe that support for the market economy was undermined by hasty implementation when the political, institutional, and legal environment was not ready for it. The privatization of state-owned enterprises was especially unpopular because many were sold to associates of high officials in a nontransparent way.
  • The ambivalence of government officials, which is due to a combination of ideology and self-interest, has delayed, suppressed, or hijacked implementation of liberalization policies.
  • Free trade is considered to have been harmful to Afghanistan because predatory neighbors and the lack of government protection are seen to have led to the destruction of the country’s few industries. Conspiracy theories abound, and some have merit.
  • Desire is quite strong among Afghans for self-reliance, especially in wheat and in electricity, which could be generated by the country’s water resources. A mix of nationalism and distrust informs the attitude toward exploitation of mineral resources.
  • There are indications that the more technocratic, reformist national unity government is attempting to improve the climate for private sector economic activity, but this is a long-term process that will require persistence, stability, and support from the international community.

About the Report

Based largely on interviews carried out in Kabul and Mazar-e Sharif in 2015 and 2010, this report assesses the market economy in Afghanistan today in light of the country’s history, culture, and ideology. Respondents included government officials, diplomats, international aid agency officials, traders, businessmen, business associations, shopkeepers, think tanks, academic institutions, and journalists. Funded by the United States Institute of Peace (USIP), the report is part of a broader examination of economics, peacebuilding, and competing ideologies.

About the Authors

Paul Fishstein is an independent consultant who first worked in Afghanistan in 1977. In addition to project implementation, he has conducted research on the economy, rural livelihoods, and aid and stabilization. From 2005 to 2008, he served as director of the Afghanistan Research and Evaluation Unit. Murtaza Edries Amiryar is an economist with a degree from Lawrence University as a Fulbright Scholar and specializes in private sector development, economic growth, and program management. He has led various national research projects in economic development, has spoken on entrepreneurship at TEDx Kabul, and is currently a Chevening Scholar in the UK.

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