Trying to Make Sense of Afghanistan

If you read the newspapers regularly, you’ll have noted that Afghanistan is in the news, again. I’d written two blog posts about Afghanistan last year, before the Covid madness started in right earnest.

Here’s the first of those, and here is the second. Here are other posts on EFE where Afghanistan has been mentioned.


Why are we talking about Afghanistan again? Because, well, plus ça change, plus c’est la même chose.

With the Resolute Support Mission (RSM) — a US-dominated support force — planning to complete the withdrawal process by September 11, another chapter in Afghanistan’s political journey is set to begin.

https://publicpolicy.substack.com/p/134-phir-bhi-dil-hai-hindustani-or

As always, read the whole thing, please. But the point that I take away, more than any other, is that the last twenty years has mostly been about the Taliban biding its time. And Afghans have been biding their time, in one way or another for a very long time now:

It has customs, and it has traditions, but it doesn’t have rules, and good luck trying to impose them. The British tried (thrice) as did the Russians and now the Americans, but Afghanistan has proven to be the better of all of them.

https://econforeverybody.com/2020/03/11/understanding-afghanistan-a-little-bit-better/

Splainer had a feature on this yesterday, and just in case you’re not subscribers, I’ll share here some of the links from their write-up about Afghanistan yesterday (and please do consider subscribing, it’s well worth the money!)

That last link, the paper from Carnegie, really is a very good read:

Lastly, John Lewis Gaddis’s warning about history—that it has a “habit of making bad prophets out of both those who make and those who chronicle it”—remains equally true in contemporary times. This paper is based on the premise that the United States will withdraw troops from Afghanistan at some point in the next two years and that the Taliban or parts of the movement, in some form or shape, will be politically represented in Kabul or, at the very least, be more involved than it is at present in Afghanistan’s democratic politics as the troop drawdown is completed. These are the foundational assumptions of our observations and analysis. Should they be wrong, we must be and are prepared to be called poor prophets.

https://carnegieindia.org/2020/06/02/dealing-with-taliban-india-s-strategy-in-afghanistan-after-u.s.-withdrawal-pub-81951

Pretty good propheteering, if you ask me.1

Also, a quote that I liked enough to record in my notes separately:

Assessing risks is a risky business

https://carnegieindia.org/2020/06/02/dealing-with-taliban-india-s-strategy-in-afghanistan-after-u.s.-withdrawal-pub-81951

But outside of all of those links, there is something else that I read today that I wanted to share with you today. This essay/article came out in the Times of India yesterday, and it is an absolute must read:

All such data help ask relevant questions, whose answers can mostly be found through the old-school forms of immersive reporting and fieldwork, neither of which happens much. There is no substitute for the insights one gains from spending time on the ground, talking to voters, to party workers, to local observers and journalists, listening to their woes and views.
This requires greater engagement than asking generic questions at tea stalls or speaking to party spokespersons. Ideally, data work and fieldwork should go hand in hand, as no ground investigation can provide the larger picture without the backing of empirical evidence. Instead of doing that, we move from one election to the next without paying attention to what happens between them.

https://timesofindia.indiatimes.com/blogs/toi-edit-page/how-to-read-indian-politics-without-immersive-ground-reporting-fieldwork-backed-by-large-data-sets-well-never-grasp-complexities/

Again, read the whole thing, but the reason I put this up here is because what Gilles Verniers is speaking about over here can also apply to Afghanistan. Replace the word “election” with “war”, and I argue that is mostly the same story.


Which brings me to my last link for the day:

In the tiny village of Pigish, inhabited by peaceful Shia Ismaili farmers, five busy water mills hum through the autumn harvest season. Just as in medieval Europe, each mill is taxed by the government, and each mill is family owned. Milling is a time-honored profession, passed down through bloodlines for decades, centuries. The farmers push their sacks of wheat to the mills in wheelbarrows. These barrows are often made of rough planks. The people of the Wakhan also construct their own mud-brick houses, hew their own poplar roof beams, stitch their own burlap donkey saddles, braid their own yak hair ropes, carve their own wooden shovels, and build their own stone aqueducts. These handmade surfaces of life make the Wakhan Corridor a pleasure to walk through. Lay your palms on the skin-polished grip of a willow ax handle: The body remembers.

https://www.nationalgeographic.org/projects/out-of-eden-walk/articles/2017-10-heart-wheel

It is one thing to read about the wars in Afghanistan, and the strategies, the geopolitics and all of that. But every now and then, it makes sense to also get a sense of the lives of the people of Afghanistan. Not just this article, please read the entire series of articles based on Afghanistan.

And then the rest of the series, of course. Paul Salopek does truly remarkable work, and no matter how anybody phrases it, that would still be an understatement.

  1. I plan to restrict myself to one bad pun every week. Or try to, at any rate.[]

The Via Negativas of Public Policy

I learnt of the phrase by reading Taleb:

[I]n practice it is the negative that’s used by the pros, those selected by evolution: chess grandmasters usually win by not losing; people become rich by not going bust (particularly when others do); religions are mostly about interdicts; the learning of life is about what to avoid.

https://fs.blog/2014/01/a-wonderfully-simple-heuristic-to-recgonize-charlatans/

And it is wonderful advice of course, always worth keeping in mind: sometimes the best way to learn is by cutting out the bad parts, rather than trying to add in new good ones. There is merit to both, of course – cutting out the bad and adding in the good. But maybe cutting out the bad ideas first is a, er, good idea?

Losing fat before adding muscle is one way to think about it.1


And so also with public policy! Pranay Kotasthane, co-author of Anticipating the Unintended, has a lovely video out on this topic:

Definitely worth a watch, and while I am tempted to list out the eight, I won’t – for at the margin, some of you might be tempted to not watch the video 🙂

But I’ll militate against the spirit of this post, and add one of my own to the list that you’re about to learn: time.

I think a student of public policy ought to avoid short-termism. Fancy pants speak that simply means don’t just think about the short term benefits, but also worry about the long term consequences.

Unfortunately (public policy is hard!) policies have a way of sticking around for long after they’ve outlived their usefulness, but that’s a story for another day.

For the moment, please watch the video 🙂

  1. I’m good at spouting theory, not so good at the practice![]

A Well Played Century

Congratulations to Pranay Kotasthane and RSJ on a well deserved century over at Anticipating the Unanticipated. It is one of the best newsletters out there on matters related to public policy, and I would strongly encourage you to subscribe, in case you haven’t already.

And to borrow a metaphor from cricket commentary, they brought up their century in style, with a fascinating piece about the Bombay Prohibition Act of 1949:

The notorious Bombay Prohibition Act of 1949 was passed when Desai was the state’s Home Minister. To enforce the ban, the government created elaborate compliance machinery, misdirecting the limited policing capacity towards apprehending tipplers instead of protecting victims of other crimes. By the time this act was watered down in 1964, more than four lakh people had been convicted under Prohibition!

https://publicpolicy.substack.com/p/100-intoxicating-eardrops-

The paragraph I excerpted this from begins by saying that the BPA is rather well known, but I must have missed the memo. 4 lakh people – convicted for alcohol consumption. Because, of course, that was the most pressing issue facing a newly independent India: alcohol consumption. Pah.

Please, I implore you, read the entire post to understand how markets work when faced with arbitrary supply constraints in the face of palpable demand. (And a note to Pranay and RSJ: I’m dying a little, because for me, the perfect title for the post would have been Sharaabi Aankhein Gulaabi Chehra)

The post goes on to speak about another piece of genius policy regarding the “sale and holding” of gold, and the impact it had on status within Indian society. I often joke in classes on introductory economics about how Bollywood filmmakers needed unemployment benefits because “ismugglers” as a tribe began to dwindle post liberalization.

Or put another way, there’s a reason the title had to be “Once Upon A Time in Mumbai“.

The post also refers to another excellent blog worth following, written by Nitin Pai, and shows this graphic:

Source: http://acorn.nationalinterest.in/2014/01/29/what-causes-corruption-and-erosion-of-moral-values/

I’d only add one thing here – the second last level (“Unscrupulous and corrupt people become role models because they are successful”) is actually an even bigger problem, because interventions such as bans (and others, to boot: read the whole post) also stop honest people from being successful.

Put another way, Deewar is a great movie, but also a problematic one, because the audience’s Walter Mitty moments were related to Vijay, not Ravi.

There is much more in the 100th post, including a rant on education which I wholeheartedly agree with, but we’ll leave that for another day. Once again, congratulations to Pranay and RSJ, and here’s to the double century: cheers!

Inflation: Oh ’tis problematic. Or is it?

A student messaged last week, asking some questions about inflation and its measurement in India. In particular, they wanted to know about food and its impact on inflation right now.

Well, outsourcing is always and everywhere a good idea, and Vivek Kaul had already answered the question at great length:

What this means is that, despite the end consumers of food paying a higher price, the farmers are largely not benefitting from this rise in food prices, given that they sell their produce at the wholesale level.
This difference can be because of a few reasons.

a) A collapse in supply chains has led to what is being sold at the wholesale level not reaching the consumers at the retail level, thus, leading to higher prices for the consumer.

b) This could also mean those running the supply chains hoarding stuff, in order to increase their profit.

Having said that, the former reason makes more sense given that stuff like vegetables, egg, fish and meat, etc., cannot really be hoarded. Also, hoarding stuff like pulses, needs a specialized storage environment which India largely lacks.

https://vivekkaul.com/2020/10/13/10-things-you-need-to-know-about-indias-high-inflation/

The entire article is worth reading (and so is subscribing to Vivek’s blog, so please do so!). And if you think 2020 isn’t depressing enough already, do read this article, also written by him. A short excerpt follows:

To conclude, the Indian economy will contract during the second half of the financial year. There is a slim chance of growth being flat for the period January to March 2021. Inflation, even though it might come down a little, is likely to remain high due to the spread of the covid pandemic. Hence, India will see conflation through 2020-21.

https://vivekkaul.com/2020/09/15/conflation-contraction-inflation-is-here-and-it-will-stay-this-year/

From a reading-the-tea-leaves perspective, it would seem the RBI actually isn’t that worried about inflation right now (and rightly so!). Here’s an excerpt from an excellent newsletter, Anticipating the Unanticipated that makes this point:

But the RBI wants to signal it is willing to live with inflation running above ‘comfortable’ level in the coming days. The MPC report last week claimed almost 80 per cent of the increase in inflation beyond the 4 per cent target can be attributed to supply chain disruptions and increase in fuel prices. This it believes is a short-term phenomenon and inflation will be in the 5 per cent range next year. This is underlined to give comfort to bond investors to buy government securities without the fear of a near-term interest rate hike to contain inflation. Further, the other step announced by RBI in extending the HTM (hold-to-maturity) limits by another year to March 2022 is to protect any bondholder from the volatility of prices and booking losses on account of it. The overall RBI signal is it doesn’t want the worry of rising inflation and a consequent rate increase to come in the way of growth. It’s focus now is on improving the transmission of rate cuts to the borrowers to stimulate growth.

https://publicpolicy.substack.com/p/77-the-inflation-conundrum-

… and here is Anantha Nageswaran making the same point, but by utilizing a different analysis:

This exercise generates the hypothesis that there is little or no intersection of the household inflation expectations formation and the monetary policy regime. Two, high inflation expectations peaked in September 2014. Similarly, the current high inflation expectations should peak as supply disruptions ease. So, in my view, RBI is betting correctly that the rate of inflation would ease and project policy on hold for the next few quarters. Three, inflation generation process should matter only to the extent that it affects medium-term output and employment generation. For now, other indicators suggest that it is not as disruptive as it was in 2011-13. Therefore, there is no need to turn it into a fetish. The new MPC and the central bank have done well and done good. They should be pleased.

https://thegoldstandardsite.wordpress.com/2020/10/14/the-inexplicable-16-inflation-rate/

And for the data nerds among you, here is the Inflation Expectations Survey of Households by the RBI (do keep in mind the point Ananta Nageswaran makes about trimmed means in his article). Note that currently at least, not too many people seem to be too worried about persistently high food inflation.

Side note: Jason Furman’s podcast with Tyler Cowen contained this interesting snippet:

FURMAN: GDP could be more meaningful if we measured it better. The inflation rate gets harder and harder to measure over time. So I think the one that probably has deteriorated in meaningfulness is the measure of inflation. Number one, we don’t measure it well, and number two, it’s low enough that it’s hard to get that excited about it.

COWEN: Is that a quality-of-goods problem? Or how we do chaining over time? Where are we going wrong in measuring inflation?

FURMAN: Just more and more of the economy is in areas that are harder to measure the quality of, healthcare being the most notorious.

https://medium.com/conversations-with-tyler/jason-furman-tyler-cowen-economics-b3e6d73dfd0f

I’ve said it before, and I’ll say it again: macro is hard.

Finally, here are past EFE articles on inflation.

What Next in Afghanistan? A Podcast This Sunday

As you know, Sundays are usually for videos. But I was unable to find a video that was as informative and thought provoking as this podcast about the recent deal.

 

Click here to listen to Anand Arni, Pranay Kotasthane and Aditya discuss what’s next in Afghanistan.

Afghanistan Today

After Poland and Germany, let’s pick an Asian country to understand better for the month of March. And given the recent deal that has been signed, about which more below, let’s begin with Afghanistan.

As always, begin with the basics. The gift that is Wikipedia, on Afghanistan:

“Afghanistan is a unitary presidential Islamic republic. The country has high levels of terrorism, poverty, child malnutrition, and corruption. It is a member of the United Nations, the Organisation of Islamic Cooperation, the Group of 77, the Economic Cooperation Organization, and the Non-Aligned Movement. Afghanistan’s economy is the world’s 96th largest, with a gross domestic product (GDP) of $72.9 billion by purchasing power parity; the country fares much worse in terms of per-capita GDP (PPP), ranking 169th out of 186 countries as of 2018.”

And from the same article…

The country has three rail links: one, a 75-kilometer (47 mi) line from Mazar-i-Sharif to the Uzbekistan border; a 10-kilometer (6.2 mi) long line from Toraghundi to the Turkmenistan border (where it continues as part of Turkmen Railways); and a short link from Aqina across the Turkmen border to Kerki, which is planned to be extended further across Afghanistan. These lines are used for freight only and there is no passenger service.

Now, as opposed to how I structured the essays on Poland and Germany, I intent to begin with the now and work my way backwards. This is primarily because of what Afghanistan is in the news for:

The joint declaration is a symbolic commitment to the Afghanistan government that the US is not abandoning it. The Taliban have got what they wanted: troops withdrawal, removal of sanctions, release of prisoners. This has also strengthened Pakistan, Taliban’s benefactor, and the Pakistan Army and the ISI’s influence appears to be on the rise. It has made it unambiguous that it wants an Islamic regime.

The Afghan government has been completely sidelined during the talks between the US and Taliban. The future for the people of Afghanistan is uncertain, and will depend on how Taliban honours its commitments and whether it goes back to the mediaeval practices of its 1996-2001 regime.

Doesn’t bode well for India, obviously, but doesn’t bode well for the United States of America either, says Pranay Kotasthane.

And the New York Times says a complete withdrawal of troops, even over the period currently specified, may not be a great idea. Ongoing support is, according to that newspaper, necessary:

More important than troops, potentially, is the willingness of the international community to continue to finance the Afghan government after a peace deal.

“The real key to whether Afghanistan avoids falling into an even longer civil war is the degree to which the United States and NATO are willing to fund and train the Afghan security forces over the long term,” Mr. Stavridis said. “When Vietnam collapsed and the helicopters were lifting off the roof of the U.S. Embassy, it was the result of funding being stopped.”

But it’s not just military funding! Afghanistan needs a lot of the world’s support in the years to come. Water, for example, will be a contentious issue in the years to come, and that’s putting it mildly.

Afghanistan doesn’t face a water shortage – it’s unable to get water to where it’s needed. The nation loses about two thirds of its water to Iran, Pakistan, Turkmenistan, and other neighbors because doesn’t harness its rivers. The government estimates that more than $2 billion is needed to rehabilitate the country’s most important irrigation systems.

And water, of course, is just one of many issues. Health, education, reforming agriculture, roads – it’s an endless list, and it will need all kinds of ongoing and sustained help.

So, amid all of this, what should India be doing?

Meanwhile, India’s interests in Afghanistan haven’t changed. India hopes to build up Afghanistan’s state capacity so that Pakistan’s desires of extending control can be thwarted. Given this core interest in a changed political situation, what’s needed in the long-term in the security domain is to build the strength of the Afghan National Defense and Security Forces (ANDSF). Without a strong ANDSF — which comprises the army, police, air force, and special security forces — peace and stability in Afghanistan will remain elusive. India’s aim should be to help the Islamic Republic of Afghanistan and ANDSF claim monopoly over the legitimate use of physical force.

But, the article presciently warns us of the same what/how problem we first encountered in studying the Indian budget:

In short, the budget might itself not be the biggest issue. The US has pumped nearly $3.6bn on average every year for the last 19 years solely on reconstruction of the ANDSF, a support that is likely to continue even if the US withdraws its soldiers. The bigger problems are insufficient processes to plan and execute budgets resulting in unused funds and lack of infrastructure leading to pay shortfalls.

Now, to unpack all of this, we need to study the following: the Soviet invasion and its aftermath, American involvement in the region, the rise of the Taliban, leading up to Operation Enduring Freedom, 2002. That’s next Wednesday!

India: Links for 9th December, 2019

Five rather eclectic links from a variety of issues pertaining to India. Also, my apologies about the delay in posting today! I’m traveling a fair bit, and there may be some delay in posts this week.

  1. Surjit Bhalla and Karan Bhasin present the other side of the story when it comes to the release (or lack of it) of the NSO consumption survey.
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  2. The Scroll sheds light on a little known issue today: austerity in marriages in India in the years gone past – enforced by the government!
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  3. Anupam Mannur and Pranay Kotasthane make the important, but not well known point that Bangalore needs more firms (and more people!) not less.
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  4. Via Mostly Economics, a lovely write-up about the fish traders of Madras.
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  5. 18000 birds died in Rajasthan recently. Here’s why.

EC101: Links for 28th November, 2019

  1. “The zeroth step, of course, is being open to the process of unlearning. We come with our own biases, shaped by our varied experiences and perceptions. But our experience or knowledge is not always indicative of the macroreality. An unrelenting hold on what we have already learnt is the equivalent of the sunk cost fallacy in economics.”
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    Pranay Kotasthane has a new newsletter out, and it is worth subscribing to. Stay humble and curious is the gist of his zeroth lesson, and the other points are equally important. Go read, and in my opinion, subscribe.
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  2. “China is still a one-party state, but it owes much of its current prosperity to an increase in liberty. Since Mao died, his former subjects have won greater freedom to grow the crops they choose, to set up businesses and keep the profits, to own property, and to move around the country. The freedom to move, though far from absolute, has been transformational. Under Mao, peasants were banned from leaving their home area and, if they somehow made it to a city, they were barred from buying food, notes Bradley Gardner in “China’s Great Migration”. Now, there are more rural migrants in China than there are cross-border migrants in the world.”
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    The rest of this article from the Economist is about migration to the cities – and I find myself in complete agreement – many, many more people in India need to live in her cities. But also see this!
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  3. “Mazzucato traced the provenance of every technology that made the iPhone. The HTTP protocol, of course, had been developed by British scientist Tim Berners-Lee and implemented on the computers at CERN, in Geneva. The internet began as a network of computers called Arpanet, funded by the US Department of Defense (DoD) in the 60s to solve the problem of satellite communication. The DoD was also behind the development of GPS during the 70s, initially to determine the location of military equipment. The hard disk drive, microprocessors, memory chips and LCD display had also been funded by the DoD. Siri was the outcome of a Stanford Research Institute project to develop a virtual assistant for military staff, commissioned by the Defense Advanced Research Projects Agency (DARPA). The touchscreen was the result of graduate research at the University of Delaware, funded by the National Science Foundation and the CIA.”
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    Mariana Mazzucato, about whom more people should know, on the role of the government in today’s economy.
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  4. “Back in the early 1970s, Xerox had figured out a strategy to block competitors in the photocopying business. It took out lots of patents, more than 1,000 of them, on every aspect of the photocopy machine. As old patents expired, new ones kicked in at a rate of several hundred new patents each year. Some of the patents were actually used by Xerox in producing the photocopy machine; some were not. There was no serious complaint about the validity of any individual patent. But taken as a whole, Xerox seemed to be using the patent system to lock up its monopoly position in perpetuity. Under antitrust pressure from the Federal Trade Commission, Xerox in 1975 signed a consent decree which, along with a number of other steps, required licensing its 1,700 photocopier patents to other firms.”
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    Timothy Taylor adds grist to the anti-patent mill.
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    “Thinking about how to facilitate a faster and broader dispersion of knowledge and productivity gains seems like a potentially important part of explaining the current economic picture and suggesting a policy agenda.”
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    That’s the concluding part of the blog post. Just sayin’!
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  5. Every time I begin to think I kind of understand macroeconomics

India: Links for 13th August, 2019

Five links about India from the past couple of weeks:

  1. Nitin Pai explains why the banana thingie was a mere storm in a teacup.
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  2. A rather uninspiring review of the GST impementation, by reading the CAG review of the… well, GST implementation.
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  3. Vivek Kaul in the Livemint analyzes credit growth in the economy, and asks who exactly is borrowing. To me, this article raises more questions than answers.
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  4. “At the Centre, the privatisation of state enterprises during the Vajpayee era is an aberration which validates the norm. The government is the largest business house and owns 339 enterprises in 2019. Leave alone the disinvestment of Air India or 23 other enterprises. In 2018, the ownership of private carrier Jet Airways is parked on the balance sheet of public sector banks. The debate is not just about government ownership but about political management. ”
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    To me, a deeply depressing issue is the fact that no government in India, bar none, has taken divestment seriously, with the notable exception of the Vajpayee government. It’s been more of the same before, and more of the same after. Deep sigh.
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  5. Is democracy an end in and of itself, or is it the means to an end?