Opinion |

How America Spent $145 Billion and Left Afghanistan as Poor as Ever

The economic fiasco is no less troubling than the military one. But as Israel and South Korea show, aid isn’t doomed to be a lost cause

David Rosenberg
David Rosenberg
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U.S. military convoy entering the Salang Tunnel, where a substation for the PTEC was planned
U.S. military convoy entering the Salang Tunnel, where a substation for the PTEC was plannedCredit: Spc. Michael Vanpool
David Rosenberg
David Rosenberg

One of the many development projects America is leaving behind unfinished as it flees Afghanistan is something called the Power Transmission Expansion and Connectivity project.

With a mere $862 million budget, the PTEC was just a fraction of the $145 billion that the United States lavished on the country over close to 20 years. But the project says a lot about how fantastic sums of money were invested in Afghanistan by the U.S. and its partners for an extended period with almost nothing to show for it. Afghanistan wasn’t just a military fiasco but an economic debacle, too.

The idea behind the PTEC was perfectly reasonable, on paper. When the project got underway, less than a third of Afghans had access to electricity. PTEC would expand and improve the country’s transmission system. It would train the staff at the country’s DABS electrical monopoly how to operate and maintain the grid, and eventually serve to attract private sector investment.

Except, that eight years after the project was launched in 2011, the U.S. Special Inspector General for Afghanistan Reconstruction found the whole thing to be a costly fiasco. Work was taking so long that the expiry date for much of the funds allocated for it had expired. No one had bothered to ensure that DABS could run the grid once it was completed or make sure Afghanistan would be generating enough power to justify having all this transmission capacity.

It turned out the U.S. contractor was performing many of DABS’ functions because the latter didn’t have the skills and capabilities. But DABS’ CEO apparently had at least one skill, which was to engage in unspecified “serious corruption,” the Special Inspector said in a 2019 report.

It was too late to do anything about the $317 million in money already awarded. But the rest of the budget was taken from the Afghans’ control and allocated by the Americans themselves thereafter.

In any case, PTEC wasn’t due to be completed until the end of 2023. Now it may never be completed at all. Does aid always end up being a boondoggle?

Israel’s critics often point to how much U.S. aid it has received over the years (no less than $248 billion since the end of World War II). That’s $100 billion more than Afghanistan got over the years. The U.S. spent heavily in a lot of other places, too – Egypt has received $145.5 billion, South Vietnam got a total of $129 billion during the Vietnam War years, Iraq has been given $86.3 billion and South Korea got $84.8 billion till 1986.

Pervasive poverty despite ten years of aid: Beggar by the Hazrat-e Ali shrine in Mazar-i Sharif in November 2011.Credit: AFP

And some of those hundreds of billions did prove to be a good investment.

True, in most cases America could have shoveled all those dollars into a furnace for all the results it achieved. By results, I mean, that the aid helped the recipient country reach a point where it could defend itself, govern effectively and build a thriving economy.

By that measure, of those six top aid recipients, two succeeded. One, of course, is South Korea, which arose from the devastation of the Korean War to become one of the world’s wealthiest economies and eventually a democracy, even though the threat from North Korea remains. U.S. troops are still stationed there, but Seoul covers their cost.

The other aid success story is Israel, which also overcame immense odds to build a thriving, high-tech economy. If our achievement doesn’t quite match South Korea’s, it’s because we’re still taking aid money from the U.S.

Before this was Western Europe. The U.S. effort to revive the shattered continent after World War II was so successful that “Marshall Plan” has become a cliché used by politicians and statesmen who want to spend big to accomplish something.

But as big and ambitious as the real Marshall Plan was in its day, it was overtaken in terms of the billions poured into Afghanistan a long time ago, even after adjusting for inflation.

Sowing a barren land

Yet more often than not, however, assistance fails, and fails big time. The question is why.

The usual answer is that foreign aid programs are poorly designed and end up enriching the contractors more than the recipients. Corrupt locals make things worse. That was certainly the takeaway from the Special Inspector’s investigation of the PTEC.

But the problem goes deeper than that and strikes at the very foundation of aid programs.

Afghanistan’s economy wasn’t fertile ground waiting to be sown with billions of dollars and cash and technical assistance. If that wasn’t evident when the first Americans arrived in 2003, it should have been long before they left in a hurry in 2021.

Labourers offload crates of grapes from Afghanistan at the Friendship Gate crossing point, in the Pakistan-Afghanistan border town of ChamanCredit: SAEED ALI ACHAKZAI/REUTERS

Even today, after all the investment of money and manpower, Afghanistan is one of the poorest and most undeveloped countries in the world. It has virtually no private sector, and 44 percent of its labor force works in low-productivity agriculture. The only thing the economy exports (apart from illegal opium) is grapes and other fresh fruit. 

What has kept Afghanistan afloat over the years was the tide of foreign aid. At its peak, when foreign assistance was flowing generously and equal to as much as 100 percent of GDP, Afghanistan’s economy grew by an impressive 9.4 percent a year; when the money grew relatively tight in recent years, growth slowed to 2.5 percent, and GDP per capita actually shrank

All that aid and assistance was ineffective in building an economy for the long term, but in the short term it percolated through the economy. The Afghans who weren’t subsistence farmers got jobs working in foreign-funded projects and spent their incomes on apartments and in malls in Kabul as did all those foreign workers resident in the capital. Corrupt local officials no doubt sent a lot of their ill-gotten gains abroad, but they also spent a lot at home, too.

What the locals didn’t do with all the cash and advice pouring into their country was build businesses, exploit opportunities and rethink how their society could function differently to create a modern economy. To this day, Afghanistan’s fairly substantial mineral resources have yet to be exploited, except by some illegal mining.

Compare Afghanistan's socioeconomic history to South Korea’s and Israel’s. Certainly, a lack of money and assistance wasn’t the country’s problem. Even corruption, as China has demonstrated, isn’t necessarily an insurmountable barrier to economic growth. Nor is security instability, as Israel and South Korea have proven.

The problem in Afghanistan isn't about corruption, it's about the ability of people to have a modern economy delivered to them lock, stock and barrel.

Following the Taliban takeover, the aid spigot is turning off, and the outlook for Afghanistan’s economy looks bleak. But not quite as bleak as all that. The Taliban itself has a thriving business of drug trafficking and opium production, extortion, kidnapping for ransom and illegal mining that the UN thinks brings in as much as $1.6 billion annually.

The real victims of the new Taliban economy are the small minority of Afghans who lived off the country’s aid economy. For the rest of the country, it will be more of the poverty and underdevelopment they have always known.

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