Kabubble: Kabul’s Looming Collapse

A recent article in Harper’s highlights the huge distortions in the economy of Afghanistan.

Mathieu Aikins wrote the piece about what he says is a bubble in Kabul.

The title is “Kabubble.”

Scenes of crass conspicuous consumption, alongside highly inflated prices for land and goods and services are unsustainable, he argues.

And, he says, a crash is inevitable, probably as soon as the majority of foreign forces leave Afghanistan in 2014.

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Marco Werman: A new article in Harper’s Magazine highlights some huge distortions in the economy of Kabul, Afghanistan. Scenes of crass conspicuous consumption, highly inflated prices for land and goods and unsustainable public services. A crash is inevitable, the article argues, probably as soon as the majority of foreign forces leave Afghanistan in 2014. Matthieu Aikins wrote the piece about Kabul’s economic bubble or as the title puts it, Kabubble.

Matthieu Aikins: There was a World Bank report last year called Afghanistan one of the most aid-dependent countries in the world, in history, really. So this is both military and development spending. Some of it is direct aid and some of it is just the inevitable billions that surge into an economy when you have hundreds of thousands of foreign troops and contractors deployed there.

Werman: So what happens when the international forces pull out as scheduled in 2014.

Aikins: Well, what the article tries to layout is that it’s almost like a law of gravity–what goes up, must go down. And the sort of structural impact of this amount of money withdrawing from the country is guaranteed to have somewhat drastic effects.

Werman: What I find really interesting in your Harper’s article is kind of where the money has gone to, and according to your report, there’s a clear hierarchy of wealth these days in Kabul. Who’s at the top and what are the levels below it?

Aikins: Well, let’s talk about the Afghans. You have the Afghan contractors, and politicians, and big businessmen who’ve had access to these million dollar contracts, right? They’re driving around in armored land cruisers with armed guards and they’re living in palatial so-called poppy palaces and tower

Werman: Poppy palaces because of allegedly those palaces have been built with opium proceeds?

Aikins: Right, the second largest source of the Afghan economy after international spending is the fact that it produces 90% of the world’s opium.

Werman: Who’s below that level?

Aikins: So below that level you have what is I guess in terms of the country as a whole, a very tiny group, but in a relative sense within Kabul, at least a sizable contingent of professionals, you know, who are making international salaries working for foreign NGOs or embassies. And they’re actually gonna be the ones who are gonna be the most drastically affected by this pullout because it’s just not a reality that a country like Afghanistan, which has a per capita GP of $103 a year, you’re gonna be able to find tons of jobs that pay $10,000 or $5,000 a month.

Werman: Now, you report that a lot of money is leaving the country. Tell us what you actually saw and were these legal or illegal transfers of money?

Aikins: Well, one of the figures that’s mentioned in the article that I’m not mistaken, four and a half billion dollars in cash left the country in one year. And this was

Werman: Recently or a while ago?

Aikins: Yeah, I believe it was, I believe it was 2010. And that’s legal money that was declared at the Kabul airport.

Werman: Is the Afghan airport doing anything to placate foreign donors who might be upset by this reality?

Aikins: Yeah, they’re, it’s always a balancing act. They are announcing various corruption bodies and always sort of talking about how they’re gonna change things, but the reality is that the situation is not gonna change until the money finally dries up.

Werman: Now there’s one place anyway in your report where a lot of money does stay in Kabul and that’s at glitzy wedding receptions. This is the way the Joneses in Kabul keep up with each other now?

Aikins: Yeah, Afghan culture isn’t a very public one. You know, most of their life takes place, at least the family life, takes place inside the home. They don’t go out to restaurants very often and there’s certainly no nightclubs or you know, it’s a conservative culture. But the one occasion for really letting it all hang out are these giant wedding parties, which are sort of an occasion to display your social status and wealth, right? So this is in tandem with the bubble economy really gotten out of control with people dropping tens of thousands if not hundreds of thousands of dollars on lavish wedding ceremonies and these glittering, neon-lit cavernous wedding halls which have sprung up all over the city like mushrooms.

Werman: Wow.

Aikins: And this is one of the images that I sort of juxtapose in the article, you know, the parable of the wedding hall and the factory, right? The factories are sitting abandoned because the you know, economic policies that have been pursued have allowed foreign countries to dump their goods in Afghanistan. There’s been no support for manufacturing. Labor prices, and land prices and costs are just so high because of the aid booms, so none of the factories can operate. But as proof of, perverse proof of Afghan industriousness, you do have these massive wedding halls that are of course, importing almost everything, even down to the cooking oil and you know, rice that they use. And will almost assuredly just vanish like mirages once the money finally dries up.

Werman: Matthieu Aikins reported the article Kabubble in the recent issue of Harper’s. Thanks very much for speaking with us, Matthieu.

Aikins: My pleasure, Marco.

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