Topic: International Economics and Development

Afghanistan: Obama’s War

Last week, when President Obama made his trip to Bagram Air Base in Afghanistan, he claimed that “America’s war in Afghanistan will come to a responsible end.” This turned out to be the greatest applause line of his speech. With his assertion, Obama, in effect, declared himself the hero of the Afghan war – the one who put an end to that nightmare. But what Obama failed to mention was that it was his war, and that nothing but unattractive scenarios lie ahead for that war-torn state. Indeed, Afghanistan might just continue to hold down its ranking as the most violent country in the Global Peace Index.

This gloomy prognosis would not have surprised Thomas Jefferson. Yes, Jefferson’s words point to a fundamental truth, “Governments constantly choose between telling lies and fighting wars, with the end result always being the same. One will always lead to the other.”

Graciana del Castillo, one of the world’s leading experts on failed states, has just written a most edifying book on the Afghan war (Guilty Party: The International Community in Afghanistan. Xlibris, 2014). Del Castillo’s book allows us to finally understand just what a fiasco the Afghan war has been.

Why is Afghanistan, as Bob Woodward correctly termed it, Obama’s war? Del Castillo’s sharp pencil work shows that during the period 2002-2013, $650 billion have been appropriated for the Afghan war effort, and a whopping $487.5 billion of that (or 75%) took place after President Obama took office (see accompanying chart).

If one pulls apart that $650 billion price tag, a variety of interesting sleights-of-hand emerge. For example, about $70 billion was disbursed to what is euphemistically termed reconstruction. But, in reality, 60% of this $70 billion (or $42 billion) was actually spent on beefing up the Afghan National Security Forces. And not surprisingly, 75% of the $42 billion spent on national security forces was spent under President Obama’s watchful eye.

To put these outsized numbers into perspective, just consider that the total cost of the Afghan war from 2002-2013 amounts to $7089 per American taxpayer (based on the number of income tax returns). More revealing is the fact that the annual expenditure rate under the Bush administration was already $222 per taxpayer. Then, it exploded to an annual expenditure rate of $1329 per taxpayer under President Obama.

In addition to laying out the phenomenal spending magnitudes on President Obama’s watch, del Castillo demonstrates just how unsustainable all this Afghan spending is. For example, in 2013, the United States financed over $5 billion of the $6.5 billion needed to field the Afghan National Security Forces. This $5 billion of U.S. financing was roughly 10 times more than the Afghan government actually spent from its own revenue sources. In fact, the U.S. funding of Afghan forces was almost three times the total revenue collected by the Afghan government.

To put Afghanistan’s financing gap into perspective, the Afghan government estimates the total fiscal deficiency that they will face over the next decade would amount to a whopping $120 billion. Considering that a July 2013 Washington Post/ABC poll showed that only 28% of Americans say the war in Afghanistan has been worth the cost, it is unlikely that the U.S. would even contemplate continuing to finance the house of cards it has built at anything close to these estimates.

And if this isn’t bad enough, consider that the countryside has been forgotten and neglected during the war years. It is here where 75-80% of the population resides, and produces its livelihood. The rural population has done what is only natural – farm a cash crop. And, the most attractive cash crop in Afghanistan is poppies. Not surprisingly, the poppy plantations have greatly expanded, from 75 thousand hectares in 2002 (near the start of the war), to over 210 thousand in 2013, surpassing the previous peak of 190 thousand hectares in 2007. Just another small example of the collateral damage associated with war and misguided economic policies in Afghanistan.

Globalization Eradicates Poverty

The Malaysia Chronicle and The Economist recently reported on how globalization is improving the lives of Chinese villagers. Consider this example:

Taobao is an online retailer like Amazon. There are few qualifications to open an online store with Taobao. Chinese villagers, having little more than their cheap labor to offer, sell handicrafts on the website. The villagers get paid for their work and amass greater opportunities in return, while money and prosperity flow into their previously sleepy villages.

Globalization is making Chinese villagers richer, contrary to critics who claim that globalization generates poverty.   Interconnected, free markets generate wealth and pull people out of poverty. This occurs as the connective technologies of globalization (like the Internet) increase competition. That benefits consumers who can buy more, increasingly inexpensive products to better their quality of life. That also creates innovation and employment, as is the case for Chinese villagers.

For more on the relationship between human progress and economic freedom, visit HumanProgress.org

Iran, Stable but Miserable

Since Hassan Rouhani assumed the presidency of the Islamic Republic of Iran in August of last year, the economic outlook for Iran has improved. When Rouhani took office, he promised three things: to curb the inflation which had become rampant under Mahmoud Ahmadinejad, to stabilize Iran’s currency (the Rial), and to start talks to potentially end the sanctions which have battered Iran since 2010. Rouhani has delivered on each of these promises. From this, one might assume that the Iranian economy, and the Iranian people, are headed towards better times.

Unfortunately, the Misery Index paints a different picture. The Misery Index is the sum of the inflation, interest, and unemployment rates, minus the annual percentage change in per capita GDP. It provides a clear picture of the economic conditions facing Iranians.

Why Measles Outbreak Is Newsworthy

A small measles outbreak recently made national news, yet another testament to our progress in eradicating disease. Measles is serious stuff. It leads to hacking cough, a spotty rash, and sometimes, death. The disease is so contagious that it will infect nine out of ten unvaccinated people exposed. The outbreak started when a Christian mission brought the disease back from the Philippines. The infected passed it along to several Americans who refused to get vaccinated or those too young to be vaccinated.

Contagious, deadly diseases like measles were once common, even among the wealthiest. For example, King Louis XIV of France lost his son, grandson, great-grandson, and brother to smallpox. Smallpox used to kill some 400,000 Europeans annually in the late 18th century, and in the 20th century alone, it claimed hundreds of millions of lives across the globe.

Now, these diseases are rare and cause far fewer deaths:

 

In this recent measles outbreak, only 68 people were infected. Despite the low number, that constitutes an 18-year high of measles infections in the United States. And that number may have been lower if doctors hadn’t misdiagnosed their patients, which occurred because the disease is so unusual nowadays. This is all good news. That such a small outbreak makes national news and constitutes an 18-year high is a testament to the human progress we have made in eradicating disease.

Will Hindu Nationalist Narendra Modi Be Prime Minister of All Indians?

For years India has disappointed expectations.  Tagged as the next great power preparing to challenge China and eventually America, India instead has lagged economically, stagnated politically, and battled religiously.

Now Narendra Modi’s Bharatiya Janata Party (BJP) has won a stunning political victory.  India’s future depends on Modi’s ability to transcend his sectarian roots and govern on behalf of all Indians.

Throughout the Cold War the Delhi government kept its people poor by mismanaging the economy.  Politics was dominated by the dynastic India National Congress Party.  Eventually the Congress Party began economic reforms and the BJP broke the Congress political monopoly.

India is a secular republic in which freedom of religion is formally protected.  However, legislation authorizes government interference in the name of preventing conduct “promoting enmity,” undermining “harmony,” and more.  Moreover, 7 of 28 states have passed anti-conversion laws, which target proselytizing.  Of particular concern is the government’s inability or unwillingness to combat religious violence and prosecute those responsible.

Much violence occurs between the two largest groups, Hindus and Muslims, but other religious minorities also are targeted.  In 2007 and 2008 in the state of Odisha (formerly known as Orissa) rioting Hindus murdered scores of Christians, forced thousands to flee, and destroyed many homes and churches.

Unfortunately, India’s presumptive prime minister, Narentra Modi, was implicated in one of the country’s worst episodes of sectarian violence.  In 2002 in the state of Gujarat, in which Modi served as chief minister, Hindu rioters killed more than 1200 people, mostly Muslims, and forced 150,000 people from their homes.  Critics charged Modi with both encouraging the violence and failing to stop it.  He defends his conduct, saying he only wishes he had handled the media better.

However, Modi has ridden a sectarian tide to power.  He graduated to the BJP from the Hindu nationalist group Rashtriya Swayamsevak Sangh (“National Volunteer Society”), which he joined young.  He denounced Muslims early in his career and received strong backing from the RSS.

The good news in Modi’s victory is that he was elected to reform the faltering economy, not stoke the fires of religious hatred.  Gujarat has prospered and the BJP is committed to relaxing India’s often stultifying government regulations.  The quickest way for the new government to discourage foreign investment would be to trigger more sectarian violence.

Relations with the U.S. will be a key issue.  The Bush administration formally acknowledged Delhi’s acquisition of nuclear weapons, improving bilateral ties.  Since then, however, relations have stagnated.

Modi’s election poses another challenge.  In 2005 the State Department refused to issue him a visa because of his presumed role in the Gujarat violence.

But the U.S. ambassador to India met with him in February.  President Barack Obama congratulated Modi after the latter’s victory and extended an invitation to visit America.  No doubt the visa ban will be quietly forgotten.

As I point out in my new Forbes online column:  “The responsibility to reconcile is not Washington’s alone.  Set to become perhaps the most powerful Indian prime minister since Indira Gandhi three decades ago, he should attempt to set foreign governments and, even more important, his own citizens at ease.”

After the election results were announced, he said that “The age of divisive politics has ended, from today onwards the politics of uniting people will begin.”  It was a good beginning, but he needs to clearly communicate that he will be prime minister of all and his government will not tolerate violence or discrimination against religious minorities.

Modi has a historic opportunity.  His government will be the first in years to enjoy a solid majority in the Lok Sabha, or lower house.  The people he will represent are both entrepreneurial and impatient, demanding the chance to better their lives.  The Indian people need more opportunity, not more dependency.

The choice soon will be up to Narendra Modi.  Much around the globe depends on what he decides.

A Drop in Mortality Is Stale News

The New York Times reported that a drop in mortality in Massachusetts not seen elsewhere can be attributed to its adoption of mandatory health care coverage:

The death rate in Massachusetts dropped significantly after it adopted mandatory health care coverage…offering evidence that the country’s first experiment with universal coverage…has saved lives… In contrast, the mortality rate in a group of counties similar to Massachusetts in other states was largely unchanged.

Implying causality based on this evidence is misleading in several ways as discussed here. In particular, I take fault with mentioning mortality reductions only in locations with mandatory health care coverage even though mortality has been dropping throughout the United States and the world since at least the 1960s. According to the World Bank, American males’ mortality rate has dropped by 3.6 percent between 2000 and 2007—a greater rate over a shorter time period than covered in this study. Over the same period, American females’ mortality rate has dropped by close to four percent.

The mortality rate is dropping, on average, throughout the United States, yet only Massachusetts adopted the mandatory health care law. Therefore, we may conclude that reductions in death rates happen for many reasons that do not restrict human freedom. One possible cause is new technologies that inform and enable proactive people to improve their health, ushered in through greater economic freedom. Check out Cato’s new website, HumanProgress.org, to see more positive changes to our health that are highly correlated with liberty.

Human Progress Story of the Day: Speaking Exchanges

Technology vastly enriches our lives—sometimes free of charge. Consider Google’s search engine. It’s an incredibly complex algorithm that informs users about any topic imaginable faster than the blink of an eye. And it’s free. And it’s just one of millions of helpful online services provided for free to internet users around the world. For instance, you can Skype for free—that is, video chat with anyone in the world at any time (assuming, of course, that you have internet access). You can email for free—send and receive instantaneous messages and media content from one location to any other location on earth. You can host your own personal webpage that allows you to interact with your friends and family—share photos, videos, stories, and event invitations—for free—on social media websites like Facebook.

Sometimes technological advances are not only useful, but also uplifting. For a group of seniors in the United States, a new, free application helps to cure loneliness. A school in Brazil matches American senior citizens with adolescent Brazilians. Brazilians want to learn English, while elderly people want company. Everyone wins. Here’s the outcome:

Moreover, the internet and, consequently, all of the free goodies it offers that improve our lives, is spreading throughout the world. As you can see from data taken from the website HumanProgress.org, a majority of Americans and an increasing number of individuals in developing countries have web access: