Afghan update

The heart-breaking attack on Ukraine by Russian troops has distracted our attention from the tragic misrule (or failure to properly rule) of the Taliban in Afghanistan. An Afghan official I worked with over the last twenty years, who was able to leave Kabul on one of those final fights at the end of August 2021, sent me the following report on conditions in Kabul. I am not revealing his name for his safety and the safety of his family.

“The economy is getting worse day by day, businesses facing many problems, shopkeepers complain less sales, poor people hardly find one time meal, hunger is increasing, at DAB [the central bank], the payment system has been stopped, APS, FID and many other depts are paralyzed, they haven’t managed to print new banknotes, girls’ high school still closed, bomb blasts occurred in many mosques recently during Holy Month of Ramadan and only poor civilians killed, and many more problems.

God help people of Afghanistan.“

Indeed. Over the last twenty years Afghanistan gradually developed and strengthened its institutions of government. After toppling the elected government of Afghanistan, my hope, and the hope of the West, was that the Taliban would form an inclusive government that would build on that progress. It hasn’t happened. The new Taliban “government” has not even been able to solidify itself. If it fails, Afghanistan will suffer another (or continuing) civil war.  “Nation building in Afghanistan”

The former Canadian ambassador to Afghanistan, William Crosbie, commented that: “Hope is certainly receding that the TB will work towards a political settlement to make its military takeover a lasting peace. Our argument to those neighbouring countries and non-Western partners (e.g. China) has been that the TB regime is not sustainable as a Pashtun, TB clique relying on fear.  Quite apart from the economic devastation of a non-functioning government and private sector, the ethnic and tribal rivalries and other extremist groups will resort to the tactics that the TB used so effectively. And they will prove just as destructive.” 

God help the good people of Afghanistan.

The good and evil in us all

Listening to political dialog in the U.S. has become very painful and disheartening because there is no dialog. The Republicans and Democrats simply hurdle nasty insults at each other. They are enemies rather than fellow citizens with different views. Serious policy issues and challenges do not receive the serious debate they need. The atmosphere is ugly.

Russia’s unjustified and increasingly barbaric attacks on Ukraine is another example of the worst in mankind.  Following four weeks of Russian attacks on Mariupol, Bucha, and other cities the destruction of lives and property is clearly visible. While it may take a while to sort out the truth of who did what, “President Biden on Monday joined the chorus of world leaders who have said reports of mass killings in the Kyiv suburb of Bucha constituted a ‘war crime,’ vowing to hold Russian President Vladimir Putin ‘accountable’ for the apparent atrocities in Ukraine.” “Bucha Biden sanctions Russia Ukraine”  However, it is natural, and appropriate, that we honor the bravery of Ukrainians defending their homeland and despise the savagery of the Russians invading it.

These understandable reactions do not excuse our damaging loss of our ability to differentiate among people, judging each other individually. Removing Russian performers from western stages may seem a childish reaction–OK it is a childish reaction–but it reveals a dangerous predisposition of caveman behavior. What are we to make of the removal of compositions of Pyotr Ilyich Tchaikovsky from current orchestral programs? He has been dead for more than a hundred years. Or as tweeted by Edward Luttwak: “The U of Milano cancels Dostoevsky course; Poland cancels Mussorgsky, Shostakovich & Stravinsky…. Actual thought is needed.”

Not all Russians living in Russia disapprove of their country’s war in Ukraine (hearing only official Russian propaganda) but many do according to those now leaving Russia in fear or disgust. We are told that many of the young Russian soldiers sent into Ukraine didn’t know why they were there and are not happy fighting their Ukrainian cousins.

Seeing such behavior has been very disheartening.

But man left the caves with admirable instincts as well. Helping their fellow man in need contributed to their own survival as well. The incredible welcome of 4 million Ukrainians in Europe in one month is breathtakingly heartwarming. Though I am embarrassed that the admission of Afghan and other war refugees has not been as easy or welcoming. My friend Tom Palmer continues to help fleeing Ukrainians relocate to Poland as do many others. A recent J Street webinar interview of Naomi Steinberg from the Hebrew Immigrant Aid Society about their work assisting Ukrainian immigrants was equally heartwarming. She noted that in earlier days HIAS helped Jews flying from persecution. Today, she said: “We are helping refugees, not because theyare Jewish but because we are Jewish.”

The fear and loathing of “others” and the desire to help those in need are both impulses that helped cavemen survive. But we no longer live in caves and our survival and flourishing requires that we tame the first instinct and encourage the second one.

Econ 101:  How to help Afghans?

The world is rightly looking for ways to help Afghans without helping the Taliban (until or unless the Taliban forms a government the world is willing to recognize). Washington Post: “How to help Afghans without aiding Taliban”  In this Post article Anthony Faiola states that “The biggest problem isn’t a lack of food. Rather, it’s the disappearance of what had been the lifeblood of the Afghan economy — Western cash.” This mischaracterizes the problems of Afghans thus confusing our understanding. In this note I attempt to clarify the “cash” aspect of Afghanistan’s problems.

But first there is no escaping the fact that the cut back of foreign aid is reducing the income (and the goods that income buys) available to Afghans. Mention is often made of the approximately 10 billion US dollars of the Afghan government’s funds frozen in deposits abroad. These funds cannot be used until a new Afghan government is recognized with the authority to claim them. But these funds are not part of the lost revenue to the Afghan government. They are the wealth–the previous income saved–of the government (whoever that will turn out to be). The savings that we accumulate from our incomes for retirement or whatever is our wealth not our current income (though it can be drawn on to augment current income).

In recent years (prior to the Taliban take over) the Afghan government’s operating expenditures were 16 to 18% of Afghanistan’s GDP while its domestic revenue was 12 to 14% of GDP. The balance of its financing plus all development expenditures were from donors. The hope is that squeezing the Taliban “government” financially will add to the incentives for them to quickly form an inclusive government meeting international norms of human rights. Unfortunately, it is not possible to shut off the flow of funds to the government without also starving the Afghan people.

While the Ghani government has been replaced (temporarily) by Taliban leaders, the institutions (ministries and agencies) of government remain, but with new management. Of the government’s operating expenditures roughly 80% was for wages and salaries. Thus, the government could more or less finance its wage and salary expenses from its own domestic revenue without donor support. Indeed, all salaries have been and continue to be paid in the central bank (Da Afghanistan Bank — DAB) and presumably in the other government ministries as well, albeit with delays. However, the real value of these incomes is being reduced because of increased inflation (an indirect form of taxation). DAB and other government agencies have largely stopped providing economic and financial data since the Taliban take over.  IMF First-Review-Under-the-Under-the-Extended-Credit-Facility

None the less, freezing Afghanistan’s deposits abroad (DAB’s foreign exchange reserves held abroad) has created monetary problems within Afghanistan because of the inability to import the cash (dollar banknotes) on which the economy depends. Afghanistan remains a largely cash economy. Most payments are made in cash. Though inflation has been low in recent years (generally 2-4%), inflation in earlier decades was relatively high and thus Afghans held and transacted in US dollars quite extensively. Around 70% of bank deposits are in dollars. The availability of USD banknotes for local payments is thus very important. These were mostly supplied by the New York Federal Reserve Bank from the dollar deposits that DAB maintains there (and now frozen).

Prior to the Taliban takeover, the normal operation of DAB’s monetary policy consisted of receiving US dollars from the government (largely from donor grants) and depositing the equivalent value of Afghani in the government’s accounts. The government disbursed these Afghani to its employees in wage and salary payments (generally by electronic deposits to employee bank accounts). Without offset, the resulting creation and injection of these Afghani would be inflationary. DAB drains (buys back) this excess base money by auctioning some of the dollars it received from the government (sufficient to stabilize the dollar exchange rate) and capital notes of DAB. The government’s deposits of dollars with DAB took the form of credits to DAB’s dollar account with the New York Fed. From these deposits DAB pays the Federal Reserve to fly USD banknotes to Kabul as needed for DAB’s dollar auctions.

In mid-April 2021, when the U.S. announced its intention to withdraw the rest of its military personnel by September, an increased outflow of dollars by Afghans wanting to protect their wealth put the Afghani exchange rate under pressure. Acting DAB Governor Ajmal Ahmady (his appointment was never approved by Parliament) increased dollar auctions to stabilize the exchange rate. “Afghan central bank drained dollar stockpile before Kabul fell” As the amount of dollars in its vaults ran down, it used USD banknotes that it held on behalf of banks (approximately $700 million USD). The delivery of additional cash from New York expected in July never arrived and DAB’s balances at the New York Fed are now frozen until a new government is recognized so that no more dollar cash can be purchased from the Federal Reserve by DAB.

As an aside, I was surprised during a 2009 visit to Zimbabwe—as part of an IMF team following Zimbabwe’s dramatic hyperinflation during which it dollarized—to learn that there was an active private market in dollar banknotes supplying Zimbabwe from South Africa:  “Hyperinflation in Zimbabwe”

In the days just before and after the American evacuation in August 2021 public demands to withdraw dollar cash intensified but DAB had largely used up the dollars in its vaults (both its own and those held for banks). In response, on August 14 DAB imposed limits on the amounts that could be withdrawn each day. This fed public concern that their banks were running out of dollar banknotes and triggered runs on the banks. DAB was even running low on Afghani banknotes, which might have replaced dollars. Without access to its deposits abroad DAB is unable to purchase additional dollar cash nor pay for printing additional Afghani. For a largely cash and heavily dollarized economy this drying up of cash liquidity is very disruptive and the basis of the statement that people can’t buy the food that might be available.

In addition to the cash shortage, Afghans are also lining up to withdraw their deposits out of concern for a possible bank failure. Aid cut offs and civil strife have damaged many firms resulting in arrears on their bank loan payments. This threatens to push bank illiquidity into insolvency. Even if DAB had USD and AFN cash to lend or sell to banks with fully performing loans, DAB is currently unable to buy or lend against these illiquid bank assets. Moreover, the Office of Foreign Assets Control (OFAC) of the U.S. Treasury has sanctioned payments to many Afghan entities and activities blocking many payments to and from abroad by Afghan banks and uncertainly about the application of the sanctions regime has made banks overly cautious about executing payments for their customers.

UN and other aid organizations have experience in other countries with delivering wages and other payments to targeted recipiences (teachers, healthcare workers and potentially even government employees) without the funds passing through the government’s hands. This approach is needed and is being developed for use in Afghanistan. OFAC sanctions are being modestly relaxed and UN and other aid agencies have begun funding the importation of dollar cash for humanitarian assistance projects. The use of digital mobile phone payments, such as M-Paisa and HesabPay, should be promoted and exploitation to the extent possible.  “Use of mobile phone payments” The United States needs to and has been gradually relaxing its payment restrictions to make this possible.

The Taliban leadership needs to take urgent steps to establish a new inclusive government that can and will be recognized internationally thus unfreezing Afghanistan’s (and DAB’s) deposits abroad and eliminating its cash shortage and restoring development assistance. In the meantime, in addition to the urgent need for humanitarian assistance that bypasses the Taliban, the New York Federal Reserve, or any other doners, should consider a loan to DAB to finance immediate shipments of dollar banknotes to Kabul. Da Afghanistan Bank Law adequately protects the central bank from government interference in its conduct of monetary policy and bank supervision. As a condition for restoring USD currency shipments to DAB, the Federal Reserve (and the UN) should obtain an agreement from the Taliban government to fully respect that law and appoint qualified people to its Supreme Council and Executive Board.

Until Afghanistan has a proper government, and its economic development can resume, Afghans, many of whom are very poor to begin with, will suffer unnecessarily depressed incomes. The lack of cash is adding a further, tragic, and quite unnecessary disruption to the lives of a long-suffering people. This can be and should be fixed urgently. Any such assistance will somewhat reduce the financial pressure on the Taliban, but a total financial squeeze on the government will fall on the people of Afghanistan as well.

________________________________________ 

I worked in Afghanistan as a member of the IMF program and technical assistant teams from January 2002 until mid 2015. I am grateful to Syed Ishaq Alavi for his insights and comments on this article. Mr. Alavi was Advisor to the governor of DAB from 2010 to early 2013, Director General Monetary Policy Department of DAB from early 2013 to mid 2018, and advisor to the Executive Director of the International Monetary Fund for Afghanistan, Algeria, Ghana, Iran, Libya, Morocco, Pakistan, and Tunisia from June 2018 to August 2020. For the sake of their security, I am not naming those who helped me with this article who remain in Afghanistan.

Never Again

On this 20th anniversary of the 9/11 attack on America, many of us are saying “NEVER AGAIN”. What those saying it mean will determine the future of our country.

If “never again” means to you that we will never allow attacks on our homeland again, you are saying that out of your fear you chose safety over liberty. You support the authoritarian, repressive measures of the so-called Patriot Act and the related government intrusions in our privacy and liberties in the name of greater security. This is not the spirit of those Americans who continue to get into their cars to drive to work or wherever despite automobile accidents killing ten times more Americans every year as American soldiers who have died in Afghanistan in the past 20 years.

For me and thankfully for many other Americans, it means that we will never again surrender to the fear that blinded us to the tragic mistakes of American aggression in Afghanistan, Iraq, Libya, Somalia, Syria, and Uganda. Lawrence Wilkerson explains our self-destructive behavior in the following interview. COL Wilkerson was a senior official in the Bush administration when it launched the Iraq invasion. Now he calls it a mistake born of rage and fear. https://www.cnn.com/videos/tv/2021/09/10/amanpour-wilkerson-9-11.cnn

We have the most powerful military in the world. No military force could protect us at home (to the extent that our safety depends on military force) better. When it comes to its effectiveness in offensive attacks on other countries, its effectiveness is less clear and its effectiveness in efforts to rebuild the countries it has occupied…… well this fantastic three hour discussion reveals it as worse than zero https://www.youtube.com/watch?v=GkjsjBknWfo

We once revered and defended our liberty above all else and we were respected and envied around the world. We prospered. Over the last twenty years we have gradually, year by year, squandered our cherished traditions and our standing and respect in the world has declined as a result. Former President Trump signed an agreement with the Taliban promising to remove all American troops from Afghanistan by May 1 of this year. It was a bad agreement, but our departure was many years overdue. President Biden extended our stay for a few more months but has now honored Trump’s commitment. Why our military was unable to prepare properly for our withdrawal from Afghanistan with this two-year notice is a mystery we need to investigate.  

Never again should mean that we never again act out of fear. https://wcoats.blog/2021/09/05/nation-building-in-afghanistan-2/

Nation Building in Afghanistan

The lesson of Afghanistan is not that the US is washed up as a great power. The lesson is that the US is such a great power, militarily and economically, that it is continually tempted to try hopeless things that nobody else on earth – including China – would ever attempt.  David Frum

On July 8, 2021, President Biden said that: “the United States did what we went to do in Afghanistan: to get the terrorists who attacked us on 9/11 and to deliver justice to Osama Bin Laden, and to degrade the terrorist threat to keep Afghanistan from becoming a base from which attacks could be continued against the United States.  We achieved those objectives.  That’s why we went.
We did not go to Afghanistan to nation-build.” “Remarks by President Biden on the drawdown of U.S. forces in Afghanistan”

In fact, except for killing Osama Bin Laden, we had achieved those objectives before I arrived with an IMF team in January 2002 to contribute to building a more effective government. Finding and killing Bin Laden was delayed until May 2, 2011, because of the redirection of American efforts to the ill-advised and illegal war in Iraq. So why were American troops still occupying Afghanistan until August 30, 2021?

In an August 18, 2021, interview with George Stephanopoulos, President Biden explained what happened asking: “Then what happened? Began to morph into the notion that, instead of having a counterterrorism capability to have small forces there in — or in the region to be able to take on al-Qaeda if it tried to reconstitute, we decided to engage in nation-building. In nation-building. That never made any sense to me.”  “Biden’s claim that nation building Afghanistan never made any sense”

George W Bush opposed nation building in his 2000 presidential campaign. In his memoir, Decision Points, he states that “After 9/11, I changed my mind.” Already by April 2002, he stated that “We know that true peace will only be achieved when we give the Afghan people the means to achieve their own aspirations. Peace will be achieved by helping Afghanistan develop its own stable government.” He was right. However, as he noted: “Our government was not prepared for nation building.” He was right about that as well.  “Bush on nation building and Afghanistan”

The U.S. officials responsible for “nation building” in Afghanistan knew little about its history and culture. They foolishly imposed an alien Western style government dropped on a diverse people as if from a drone. The US military is an excellent machinery of war. The best in the world. However, it does not have the skills required for “nation building.” Our military couldn’t even recruit the right solders or provide the training they needed to fight on their own, much less build a proper military organization. “Afghanistan combat interpreter Baktash Ahadi: U.S. cultural illiteracy”  And attempting nation building at the point of a gun is bound to fail.

And why did the Afghan soldiers that Americans trained for decades not fight to defend the existing government? “Afghan forces were demoralized by neglect, corruption and ethnic bias among their superiors. Often they went without pay and ammunition, and sometimes without rations….  ‘The why is corruption, the why is poor leadership,’ John Sopko, told The Washington Post in 2017, ‘If leadership is poor, the people below don’t care, and they wonder why they have to die.’” “Afghanistan U.S. troop withdrawal”

On Sunday August 15, 2021, Taliban forces walked into Kabul and took over the government without a shot.  “The Band of Brothers and Afghanistan”   But what did they take over or replace? And did 20 years of so-called nation building make any difference.  “Nation building” is often given a bad name because it has too often been associated with the imposition of a “government” by an occupying military force as with imperialism.  Afghanistan is a very different place than it was 20 years ago. Both the nation and its government and its institutions have changed considerably. We can hope that the Taliban has changed as well.

Governments consist of ruler/decision makers, and the institutions that administer whatever it is that the government does. A nation extends beyond its government to include civil society, and social and cultural norms. The Taliban have displaced Afghanistan’s President Ashraf Ghani, who fled to Uzbekistan then to the UAE rather than step aside for a transition period as had been agreed. Afghanistan’s Chief Executive Officer, Abdullah Abdullah, remained and with former President Karzai is discussing the composition of a new government with Taliban leaders.

“Taliban co-founder Mullah Abdul Ghani Baradar will lead a new Afghan government….  Haibatullah Akhundzada, the Taliban’s supreme religious leader, will focus on religious matters and governance within the framework of Islam.

“While the Taliban have spoken of their desire to form a consensus government, a source close to the Islamist militant movement said the interim government now being formed would consist solely of Taliban members. It would comprise 25 ministries, with a consultative council, or shura, of 12 Muslim scholars, the source added.

“Also being planned within six to eight months is a loya jirga, or grand assembly, bringing together elders and representatives across Afghan society to discuss a constitution and the structure of the future government, the source said.”  “Taliban co-founder Baradar will lead new Afghanistan govt”

Prior to the fall of Kabul, the government of Afghanistan consisted of the cabinet of ministers, provincial governors and the national assembly, with a democratically elected president serving as the head of state, head of government and commander-in-chief of the Afghan Armed Forces. It appears that the new government will retain the same administrative units. In addition to the central bank (DAB), which I advised, these would include functions such as Foreign Affairs, Internal Affairs, Finance, Economy, Agriculture, Energy and Water, Justice, Information and Culture, Education, Industry and Commerce, Transportation, Women’s Affairs, Public Health, Mines, and of course, National Defense. Though the U.S. did a poor job developing Afghanistan’s National Defense institutions, more experienced international agencies made considerable progress in developing more efficient and effective agencies in many other areas. Of at least equal importance, a generation of Afghan men and women have grown up expecting their place in the world to reflect their skills and accomplishments (merit) rather than who they knew.

I have written earlier about the dramatic progress in modernizing the central bank’s operations. It was achieved in the proper, traditional way of “nation” and institution building. We explained best practice for central banks derived from the experiences of established central bank and the approaches we thought would fit best with Afghanistan’s existing central bank and economy. But DAB’s management and staff made the decisions of what to embrace and how to move forward and we offered guidance on designing and implementing those decisions. “BearingPoint Afghans”

But one institution can’t develop independently of what is happening in the rest of the country. In particular, developing the rule of law is critical and difficult. An example was provided by DAB’s (the banking supervisor) confrontation with a corrupt President and Attorney General over the resolution of the insolvent and criminal Kabulbank in 2010-12. The founders and owners of Kabulbank (President Karzai’s brother Mahmood was the third largest shareholder) had rapidly grown this newly licensed local bank into the country’s largest depository and had lent almost all of its deposits to themselves. During the global financial crisis of 2008, many of Kabulbank’s owners’ investments failed and they were unable to repay their depositors. DAB’s banking supervisors were blamed for weak supervision and even arrested and jailed in disregard of the provisions of the central bank law. The scandal revealed considerable corruption, but the supervisory resolution of the bank somewhat strengthened (modestly) the rule of law in the process.  “Afghan President Ghani’s attack on corruption”    “The Kabul Bank Scandal”

Another huge set back to the impressive development of DAB resulted from President Ghani appointing an unqualified friend, Ajmal Ahmady, as Acting Governor of the central bank. He fired many of the best of the BearingPoint Afghans and brought in his own small group of cronies. Mr. Ahmady’s appointment was rejected by the Parliament, but he illegally remained in his post.  The Taliban (???) have now appointed Haji Mohammad Idris as the Acting Governor of the central bank. “Mr. Idris was head of the Tabliban‘s finance section, but he has no formal financial training or higher education.”  “Haji Mohammad Idris”

These examples are meant to illustrate the distinction between a government’s leaders and its administrators. Time will tell whether our “nation building” efforts with DAB survive the attacks on it from Afghanistan’s leaders (current and past). But as a result of the nation building efforts of many international bodies, Afghanistan is a very different and better place, and its young population has very different expectations, than twenty years ago. I hope that the Taliban leaders that have taken over the government are also very different than their repressive and brutal forebearers of twenty years ago.

While the new government will no doubt leave many of the institutional structures in place that have been developed over the last two decades, from which they and the country have benefitted, the big question is what policies and rules they will establish under the name of Sharia law, especially with regard to the rights of women. The Taliban have their own internal factions that need to be sorted out and their earlier version of Sharia was an extremely harsh interpretation not shared by most Muslims. The Taliban has pledged to treat women and others fairly, within the dictates of Sharia Law. Other Muslims will need to convince the Taliban to moderate their earlier interpretations of what that means. The United States, the EU  “EU sets five conditions for future operational engagement with Taliban”, China, Russia, and the international organizations, have enormous financial and diplomatic leverage with which to encourage the Taliban government’s better behavior. They should be used vigorously to help build a better Afghanistan. Early signs are not encouraging, but these are early days. One Afghan friend changes locations every night in the hopes of not being found. Other friends are afraid to leave their homes at all.

The idea that we should refuse to cooperate with the new government and should oppose it at every turn from the outset is bone headed. Just ponder the alternatives for a second. Do not think that it is easy for me to sit here in my comfortable Bethesda home and urge us to give the Taliban a try. My days begin with heart wrenching pleas for help from Afghan friends and strangers. I challenge you to read the following account of dashed hopes without weeping: “After a university falls in Afghanistan a DC organization scrambles to keep students safe and still learning”   

Efforts to achieve a better Taliban government this time around may be a long shot, but the alternatives of a return to civil war and worse yet the return of American and NATO troops are not pretty either. The U.S. intention to cooperate with the new government in countering ISIS-K is encouraging, but, like anything else in life, not without risks.  “US may coordinate with Taliban to take on ISIS-K”  Nation building by everyone but the U.S. government over the last 20 years has not been a waste of time. Now is not the time to give it up.

Nation building is unlikely to be successful when coerced, i.e., when it is part of a military intervention. It does not follow that nation building–sharing best practice in the design and operation of institutions public and private–is an unworthy objective and undertaking.

BearingPoint Afghans

Sometime around 2004 or 2005, the US Agency for International Development (USAID) contracted BearingPoint (now part of Deloitte Consulting) to recruit and mentor approximately 80 young Afghan college graduates into Afghanistan’s central bank (DAB) and Finance Ministry. These young Afghans worked in DAB and the Finance Ministry for two years while being trained and mentored by BearingPoint experts. Following these two years they were offered regular jobs in these two institutions. While some moved on to higher paying jobs elsewhere most of them stayed with DAB and the MOF. Over the years that followed they rose within these institutions, and in DAB headed many of the departments including the position of Second Deputy Governor. Working with and watching the progress of these young Afghans was one of the most enjoyable and gratifying assignments in my career with the International Monetary Fund. They were smart, honest, and dedicated to improving life in their country (including their own). They were, and I hope still are, the hope for a better future for Afghanistan.

The elected Afghan government under which these BearingPoint Afghans worked has now been toppled by the Taliban, a group that harshly ruled Afghanistan from 1996 until displaced by an American-British invasion in November 2001.  Back in 1996: “Gaining control over most of the country, the Taliban impose their rule, forbidding most women from working, banning girls from education, and carrying out punishments including beatings, amputations and public executions. Only three countries officially recognize the Taliban regime: Pakistan, Saudi Arabia and the United Arab Emirates.”  “Afghanistan conflict timeline”

The Taliban in 1996 claimed to impose Sharia Law on Afghanistan. “Sharia” translates to ‘the way’ in Arabic and refers to a wide-ranging body of moral and ethical principles drawn from the Quran and from the sayings and practices of the Prophet Muhammad. The principles vary according to the interpretation of various scholars who established schools of thought followed by Muslims who use them to guide their day-to-day lives. Many Muslim-majority countries base their laws on their interpretation of the principles of Islamic law but, despite this, no two have identical laws.”  “Taliban and Sharia Law in Afghanistan”

The Taliban imposed a very severe version of Sharia that has not been embraced by very many Muslims. It was particularly restrictive on the activities and rights of women. Twenty years later Afghanistan is a different place, and the Taliban sounds like a different organization.

“KABUL, Afghanistan (AP) — The Taliban vowed Tuesday to respect women’s rights, forgive those who fought them and ensure Afghanistan does not become a haven for terrorists as part of a publicity blitz aimed at reassuring world powers and a fearful population.

“Following a lightning offensive across Afghanistan that saw many cities fall to the insurgents without a fight, the Taliban have sought to portray themselves as more moderate than when they imposed a strict form of Islamic rule in the late 1990s. But many Afghans remain skeptical — and thousands have raced to the airport, desperate to flee the country.

“Older generations remember the Taliban’s previous rule, when they largely confined women to their homes, banned television and music, and held public executions. A U.S.-led invasion drove them from power months after the 9/11 attacks, which al-Qaida had orchestrated from Afghanistan while being sheltered by the Taliban.”  “Afghanistan Taliban Kabul”

So, what should American policy be toward the forthcoming Taliban or Taliban lead government? What does the Taliban pledge to “respect women’s rights consistent with their version of Sharia Law actually mean? We should deploy every diplomatic tool possible to encourage/pressure the new government to live up to its promises. Former President Karzai, current CEO Abdullah Abdullah and others are currently in discussions with the Taliban leadership over terms for an inclusive government.

The alternative of nonrecognition, once there is a government to recognize, is to encourage and even support civil war. Or, God forbid, to send our troops back (there is not much chance that our NATO allies would be conned a second time into join us there again). And how did that work out for us last time? Our over used weapon of economic sanctions harms the public we should be trying to help. Our inhuman sanctions on Cuba and Venezuela are imposing horrible pain on the their citizens with little impact on their governments. “Evidence-costs and benefits of economic sanctions”

In a recent Washington Post oped Nikki Haley argued that we should not recognize the Taliban government no matter what. “Nikki Haley-America must not recognize Taliban” I respected Ms. Haley when she was Governor of South Carolina but I eventually got over her when she embarrassed us while Ambassador to the UN. “The future of Israel and Palestine” Her unqualified attack on the Taliban firmly ties her to those who were responsible for our Afghan disaster in the first place. The new Afghan government may turn out to be as bad as the previous Taliban government, but we should do everything possible to prevent that.

The U.S. has suspended currency shipments purchased by Afghanistan’s central bank. Afghan assets (foreign exchange reserves, etc.) deposited abroad have been frozen including “its” access to reserves at the IMF. These may appear to be rejections of a new government, but they are not. There is no new government yet and those holding Afghan assets must keep them safe until their new owners are clearly and properly identified. The situation is much like the bank in which you have deposited money, freezing your deposits when you die until the new lawful owner is determined. There is an unavoidable, awkward period of uncertainty. It is not too late to reverse our mistake in closing our Embassy and running out while at the same time accusing the Afghan Army of behaving the same way.

It is also not true that nothing was accomplished these past 20 years. Our military leaders may have failed in their task of building a reliable Afghan Army, but many others, myself included, did not waste our time by helping Afghans build better institutions (see the story of the BearingPoint Afghans I started this article with above). See the discussion of this issue by Jonathan Rauch: “The  Afghanistan war was a partial success”

No one knows what the Afghan government will look like or which way it will go, but we all (except for the war mongers) have an interest in promoting its success, especially the hopeful, new generation of Afghans. “Can US work with Taliban”    “What do Taliban’s really want?”

And we must resist the siren calls of those who think that we can and should impose our vision and institutions on the rest of the world. We must keep our Army home to defend our homeland rather than messing with other people’s business. Our defense industries have profited enough.

The Band of Brothers and Afghanistan

Sunday night Ito and I finished the tenth and final episode of the WWII story of Easy Company of the 101 airborne division of the U.S. Army–The Band of Brothers. It is a moving and masterful depiction of the horrors of war, and its impact on those (often) brave men who fight them.  How, I asked myself, can good people do such terrible things to each other?  And why?  Who benefits (that is too obvious to answer explicitly)?

I woke up that morning to the fact that the government in Afghanistan that I had been working with for the past 20 years had been replaced by the Taliban who intends to form a new government. Fingers are being pointed all over the place in the search for fault. I am afraid that this American question is of little interest to my Afghan friends. Those who have not already left the country are holed up in their homes afraid to go to work. Their question is what the new Taliban regime will look like.

Our objective now should be to join with all other nations to exert diplomatic pressure on the new government (which potentially will have the cooperation of at least former President Hamid Karzai, CEO Abdullah Abdullah, and Islamic Party leader Gulbuddin Hekmatyar) to adhere to UN standards of humanitarian treatment of its citizens and to help them administer an efficient and honest government. America’s leadership in this regard will be critical for Afghanistan’s future.

But who should we blame for, and what lessons should we learn from, Afghans fleeing the country by climbing onto the outside of planes leaving the Kabul Airport (something I have done many times but more comfortably seated)? Working backward, President Trump gave our military leaders a May 1 deadline for leaving. It rather looks like they ignored him (tempting but not appropriate).

The speed with which the Taliban took over the country with barely a shot fired surprised most of us. We had dinner at the home of Edward and Dalya Luttwak Saturday. During the conversation I passed on the statement by an Afghan friend emailed to me that afternoon that the Taliban could take Kabul by the next day or week.  We all thought that would be impossible, thinking it might be as fast as a few months. In fact, they peaceably took over the city the next day (Sunday Aug 15).  In fact, our Embassy and Military leaders should not have been surprised. My work in Afghanistan with its central bank did not require that I be thoroughly versed on Afghan history and customs, but that is not true for our foreign policy establishment working in and on Afghanistan.

Rather than arm, train, and support Afghan fighters in regions they cared about, we pulled together a national Army with the incentive of money. In addition, the broader Afghan public did not strongly support its corrupt government and could fairly easily change sides. “Afghanistan military collapse-Taliban”  Moreover, waring tribes and political groups such as the Taliban have a long tradition of negotiating peaceful surrenders when the outcome seems clear.  “Afghanistan history-Taliban collapse”

The initial blame for our failure to “build” a strong government in Afghanistan falls on George W Bush who gave in to the Cheney/Rumsfeld fantasies of American Imperialism, and abandoned the original and sensible approach of American support of the Northern Alliance war against the Taliban. “Its plan was for small teams of CIA officers, along with Green Berets and U.S. air power, to assist the indigenous Afghan resistance—the Northern Alliance.” “Afghanistan withdrawal-CIA-bin Laden-al Qaeda-Bush-Biden-Northern Alliance” Instead we took over and occupied the country.

Rather than work with and build from Afghanistan’s traditional tribal structures, we imposed an alien, centralized government that was not understood and was generally resented outside of Kabul. Rather than elevating village chiefs to govern provinces, for example, Kabul sent strangers to oversee areas they knew nothing about. Our ignorance and arrogance were mind boggling, but sadly typical. And our military—the best in the world for waging wars— is incompetent at nation building, which should be the job of others. We couldn’t even build an Afghan Army in 20 years. “How America failed Afghanistan”  

Those who are most loudly criticizing Biden’s troop withdrawal are those most responsible for creating this mess to begin with.   “Afghanistan disaster started with withdrawals most ardent critics”  See my account of my work with the central bank in Kabul:  “My travels to Afghanistan”

All Volunteer Military

In May 1967, The New Guard magazine published an article by Milton Friedman on “The Case for a Voluntary Army.”  It was a compelling case and was adopted when the U.S. suspended its military draft in January 1972. But was it correct? “45 years later Nixon-Gates commission”

In the 1960s, the drafting of 18 year old’s to fight in Vietnam was avoided by those able to go to college. This was rightly challenged as discriminatory against the poor and college deferments were replaced with a lottery system that started in 1970, which picked the birthdates at random that would then be first in line to be drafted each year. I was granted the last of the college deferments.  “Draft lottery (1969)”

While a student of Friedman’s at the University of Chicago from 1965-70, I joined with several other libertarian classmates to form the Council for a Volunteer Military to promote Friedman’s call for an end to the draft. The Directors of the Council were: James Powell, National Director; Henry Regnery, Treasurer; myself, Executive Secretary; Danny Boggs, national Filed Secretary; and David Levy, Publications Editor. Our sponsors were: Yale Brozen, Bruce K. Chapman, Richard C. Cornuelle, James Farmer, David Franke, Milton Friedman, Sanford Gottlieb, Eugene Groves, Karl Hess, and Norman Thomas: an impressively diverse group.

In 1969 President Richard Nixon establish the Gates Commission to advise him on established an all-volunteer military and appointed Friedman to the commission.  Based on the Commission’s recommendations, President Nixon signed a law in 1971 that ended the draft in January 1973.

A Rand Corporation report on the All-Volunteer Force (AVF) by Bernard D. Rostker stated that: “Although the country had conscripted its armed forces for only 35 of its 228 years — nearly all in the 20th century — the American people were generally willing to accept this practice when service was perceived as universal. However, in the 1960s, that acceptance began to erode. There were five major reasons:

  • Demographics. The size of the eligible population of young men reaching draft age each year was so large and the needs of the military so small in comparison that, in practice, the draft was no longer universal.
  • Cost. Obtaining enough volunteers was possible at acceptable budget levels.
  • Moral and economic rationale. Conservatives and libertarians argued that the state had no right to impose military service on young men without their consent. Liberals asserted that the draft placed unfair burdens on the underprivileged members of society, who were less likely to get deferments.
  • Opposition to the war in Vietnam. The growing unpopularity of the Vietnam war meant the country was ripe for a change to a volunteer force.
  • The U.S. Army’s desire for change. The Army had lost confidence in the draft as discipline problems among draftees mounted in Vietnam.”

At the time Crawford H. Greenewalt, another member of the Commission, wrote to Gates that “while there is a reasonable possibility that a peacetime armed force could be entirely voluntary, I am certain that an armed force involved in a major conflict could not be voluntary.”

“Rand research briefs”

The AVF matched or exceeding the high expectations for it. The professionalism of our Army improved. We fought 13 wars with our volunteer force: Lebanon (1982-4), Grenada (1983), Panama (1089-90), Gulf War (Iraq, Kuwait, Saudi Arabia and Israel 1990-91), Somalia (1992-5), Bosnian War (1992-95), Haiti (1994-5), Kosovo War (1998-99), Afghanistan War (2001-21), Iraq War (2003-11, 2014-2020), Somali Civil War (2007-21), Libya intervention (2011, 2015-20), and Syria (2014-present). Each was limited enough not to exhaust the supply of volunteers needed.

But a different criticism of our all-volunteer force was raised that gave me pause. Our costly and futile war in Vietnam from 1955-75 was finally ended (without admitting the defeat it surely was) in response to the growing protests in the U.S.  No such protests were raised for our imperial adventures since then. Some observers began to point their fingers at the absence of a draft and thus a military/industrial complex better sheltered from public criticism. When we campaigned for the end of the draft and an all-volunteer military, we assumed that we needed to maintain an Army for our defense. Instead, our military was deployed all over the planet (800 bases around the world) with sufficient restraint (generally) to avoid strong public push back.  “National defense”  If the average middle class family’s children were not being drafted to fight unnecessary wars in far off places, they were not as likely to complain about the billions of their taxpayer’s money being pumped into the military/industrial complex.  This was an unanticipated side effect of ending the draft that we had not anticipated.

Both former President Trump and President Biden expressed their intentions to end our forever wars and, at least in the case of Biden, to strengthen our capacity to deal with the world with diplomacy. We should wish him well. And we should urge Congress to reinstate the Weinberger Doctrine, which limited the use of U.S. forces to when vital U.S. interests were at stake, and only as a last resort. “A Biden doctrine starts to take shape”

You can read my experiences in Iraq in my book: “My travels to Baghdad” and my experiences in Afghanistan in my book: “My travels to Afghanistan”.

PS. Some how I forgot that I had written on this before with a somewhat different proposal: https://wcoats.blog/2015/01/23/the-all-volunteer-military-unintended-consequences-and-a-modest-proposal/

My travels to Afghanistan

Afghanistan: Rebuilding the Central Bank after 9/11 — My Travels to Kabul

By Warren Coats

Kindle and paperback versions available at:  “Afghanistan-Rebuilding the Central Bank after 9/11”

Watching the collapse of the twin Trade Towers in New York on September 11, 2001 on the TV in my hotel room in Bratislava, I never imagined that I would be in Kabul several months later and spend 212 days there spread over 19 trips from January 2002 to December 2013 to help modernize Afghanistan’s central bank–Da Afghanistan Bank (DAB). I learned more than I taught and share the highlights in this book. I became friends with many wonderful Afghan people, and bonded with my IMF team members. DAB was almost completely rebuilt. Watching its eager young staff mature into effective managers was a joy. Whether it will last in Afghanistan’s uncertain political and cultural environment is an open question.

I learned as much as I could about Islam and its internal struggle to denounce Islamism (radical Islamic fundamentalism). I share details of the collapse of Kabulbank, Afghanistan’s largest bank, and the corruption surrounding it and its resolution. The IMF’s presence and work in Afghanistan was not without tragedy. The IMF’s resident representative, in whose guest facilities we stayed, was killed in a terrorist attack. And I learned much about walls.

Previous Books

One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina

by Warren Coats (2007)   Hard cover: One Currency for Bosnia

Zimbabwe: Challenges and Policy Options after Hyperinflation

by Warren L. Coats (Author), Geneviève Verdier (Author)  Format: Kindle Edition

Zimbabwe-Challenges and Policy Options after Hyperinflation-ebook

Money and Monetary Policy in Less Developed Countries: A Survey of Issues and Evidence

by Warren L. Coats (Author, Editor), Deena R. Khatkhate (Author, Editor)  Format: Kindle Edition

Money and Monetary Policy in LDCs-ebook

Nation Building in Afghanistan

Ambassador Crocker rightly calls the American role in “rebuilding” Afghanistan, “complicated.”  “I-served-in-Afghanistan-no-its-not-another-Vietnam”  I first met Ambassador Crocker in January 2002 when he was servicing as America’s chargé d’affaires to Afghanistan. We met in the American Embassy that had just been reopened after a decade or so of abandonment.  A decade’s worth of dust still covered the embassy floor several inches deep. Its newly returning employees were sleeping in cots along the hallways.

Following al-Qaeda’ 9/11 attacks in the U.S., I supported NATO’s UN sanctioned attack on Afghanistan’s Taliban regime as a necessary measure to deprive al-Qaeda of its sanctuary there. I wept when we abandoned that objective unfinished in order to pursue another war in Iraq, which I strongly opposed. The Washington Post just published Defense Department documents evaluating America’s 18-year war in Afghanistan and finding it a costly failure. https://www.washingtonpost.com/graphics/2019/investigations/afghanistan-papers/afghanistan-war-nation-building/

“Former defense secretary Jim Mattis defended American efforts to rebuild Afghanistan as part of the 18-year-old U.S. war there, saying Friday that ‘we had to try to do something in nation-building, as much as some people condemn it, and we probably weren’t that good at it.’  Speaking to journalists at The Washington Post, he cited an increase in the number of Afghan women who are educated, the development of Afghan diplomats and the inoculation of civilians against disease.

“Mattis, who oversaw the war as the four-star head of U.S. Central Command from 2010 to 2013, said violence in Afghanistan is ‘so heartbreaking that it can blind you to the progress,’ and he acknowledged that the United States made a strategic mistake by not paying enough attention to the country as the administration of George W. Bush launched the war in Iraq in 2003.  ‘That we didn’t do things right, I mean, I’m an example of it,’ Mattis said, recalling that as a one-star general, he was pulled out of Afghanistan in the spring of 2002, promoted and told to prepare for war in Iraq.

“’I was dumbfounded,’ he said. ‘But we took our eye off of there.’” “Mattis-Afghanistan-papers-we-probably-werent-that-good-nation-building”

But should we have remained as military occupiers and then as peace guarantors for another 18 years and counting?  I have spent a lot of time in Afghanistan over those 18 years, most intensively as a member of the IMF team addressing the Kabul Bank scandal from 2010-14 (22 visits after that first one in January, 2002).   “The Kabulbank Scandal–Part I” Cayman Financial Review, January 2015  “The Kabulbank Scandal–Part-II” Cayman Financial Review, April 2015  “The Kabulbank scandal–Part-III” Cayman Financial Review, July 2015

I have worked with many wonderful, mainly young, patriotic Afghans and have grown to care a great deal about their conditions and their future. We (the U.S., IMF, World Bank, EU) have a lot to teach them about the institutions of capitalism and they have been very eager to learn. However, the United States has rarely been very good at “building” modern nations that it conquered militarily.  Our Generals and Ambassadors, who rotate in and out every two to three years, rarely understand the cultures and histories they are trying to deal with.  With our military on the ground it is too easy to attempt to impose our institutions on societies unfamiliar with them without more patiently growing more modern institutions from what is in place that are thus better adapted to their traditions and thus more likely to function successfully.

Nation building at the point of a gun has not and is unlikely ever to work for us or for them. https://wcoats.blog/2009/11/16/afghan-national-army/https://wcoats.blog/2012/10/23/our-unsupportable-empire/.

My hope for the future of Afghanistan rests with its young, dedicated and increasingly well-educated young people. Our advice can be valuable, especially if filtered and adapted by Afghans themselves. After centuries of relative isolation, the modern world of the Internet, offers them the knowledge of the world. We need to get our troops and our billions of corrupting dollars out of their way.