Saturday, September 12, 2015

Corruption and a Lousy Economy Is Killing Afghanistan

Kabul - Hey buddy, can you spare a dime?
    We here in America are used to the concept of the "squeezed middle." In Afghanistan, there is very little middle class to squeeze.  Most people are poor, unemployment is rife and it's made worse by corruption that was baked into the system during the Karzai regime.
     The numbers here are pretty bleak.  Some estimates (from the World Bank) are that unemployment runs at just over 8%.  But most estimates (from the CIA) put the true unemployment rate at 35%, and youth unemployment is up around 60%
    Those are Great Depression level numbers.  It's hard to imagine that these kinds of things can happen to an economy, but then we can consider Greece, where the numbers are only slightly better, and we realize it can truly happen anywhere.
       But Afghanistan is worse, because of the corruption and nepotism that is endemic to the system.  These are having a knock-on effect that threaten to derail the entire government.
    This is how it works.
    Most of the country works in agriculture. Having a mass of unemployed farmers won't usually derail the country; in this arid, mountainous country where only about 6% of the land is able to be cultivated, some unemployment is expected.  But right now it's a huge number.
    But the real problem comes when you also inject corruption into a system that fails to work properly.
    The government is struggling to provide projects that will improve people's lives and help them work more productively.  Build roads, clean canals, dig wells.  But there aren't many projects, because only a tiny percentage of the money Afghanistan receives from donors for its projects is ever spent; basically about 18%-25% of it. The Afghans have the money but cannot spend it because the financial system is enormously, ridiculously complicated.  We, the foreigners, foisted this system on the Afghans but it is literally too cumbersome to manage.
    In the ministries in Kabul and in the provinces there are too few people who can understand and make it work.  So the basic problem is that there is a limited number of the right people.  They need to be smart, educated and hard-working; and undaunted by a flood of paperwork.
    Luckily, Afghans are generally hard-working and patriotic. The universities are good; with graduates that perform better than many US local colleges. Say you are a college graduate.  You live in Kandahar and you are trying to get a job with the government.
    So when a smart, hardworking Afghan graduates from college he finds that the government that sorely lacks talent... does not offer him a job.
    He sits around, applies to jobs and does not get a single one.
    The problem is that in order to get a job you need to know someone.  Or be part of a tribe that is powerful in that area. Or have ready access to thousands of dollars to buy your way into a government position. (A $6,000 bribe is enough to get a mid-level job. That $6,000 buys you a job that pays you $300 a month).
    So on one hand you have a government that is tied in knots for lack of expertise and hard workers. One the other you have applicants who would be of great benefit. And never the twain shall meet.
    Instead nepotism gets the relations of high government officials into those posts that open up.  These relations tend not to be college educated, nor hard-working. They go to the embassy in Washington DC, or the ministry buildings in Kabul or the provinces and do very little.
    This wouldn't matter if Afghanistan had a vibrant economy where the private sector could take up the slack when the government underperforms.  But it doesn't.  
    One reason unemployment is so high is because economic growth has dropped off a cliff; it went from 12% growth a year in 2012 to 3.5% growth this year.  Meanwhile the population grows more than 2% every year; in other words the economy is barely growing enough to give jobs to all the newcomers.  
    Worse, the average annual income is $400 a year.  So there is not much money washing around the system, and if a family gets into trouble it is little use to ask for help from Uncle Abdullah, who's rich.  He isn't.  
    What usually happens to families who run out of money is they run up bills at the local store, which responds by jacking up prices. Items bought on credit cost 50% more than cash items. A farmer will often owe his shopkeeper about $1,500 at the end of the year just for the fuel he uses to run pumps that irrigate his fields.  If he grows wheat, $1,500 is about what that wheat is worth, so he is losing money if you consider his labor, seed and so on.
    What to do about all this?  Entire reports have been written on how to stamp out corruption from the system.  President Ghani, in power for a year, has tried to some extent.  He appointed a few clean provincial governors, who are generally sidelined by the local powerbrokers. Almost nothing improves.  The government has announced a few more projects.  But is it enough to affect many villages?  
    Meanwhile, ISIL is paying $500 a month to people willing to sign up to their extremist vision.  
    In Afghanistan, everything is connected.  Security, the economy and society.  When one thing perks up, it can help the other pillars of the nation.  But not much is perking right now, nor does it look likely to for the foreseeable future.