After Taliban Takeover, Disaster Capitalism Is the Next Stop for Afghanistan

Epidemics, disasters, coups, all have something in common historically — they lead to disaster capitalism.

Epidemics, disasters, wars, famine, coups, regimes of autocratic rulers, all have a historical similarity associated with them — they give rise to disaster capitalism. These acts of violence are almost always followed by an uptick in neoliberal economic practices, which further result in trade liberalisation, largescale privatisation of natural resources, eradication of welfare schemes and subsidies, and the eventual destruction of common goods.

The chaos that is currently ensuing in Afghanistan has been strategically backed by the likes of China and Russia, since the withdrawal of the United States left a power gap in the country. While Beijing’s interest in Kabul has been presumed as an action to manage threats — given the US’s presence in the area was seen as a political threat — its acts can be perceived as a way to manage its resource security in the region due to its commercial and economic interests in Afghanistan. China’s eventual goal is to mine out Afghanistan’s rich mineral resources; the war-torn country is sitting on deposits worth $1 trillion or more, including what may be the world’s biggest deposit of lithium reserves.

Afghanistan's Massive Rare Earth Resources

The country currently has a controlling stake in Cobalt mines in Democratic Republic of Congo, Niobium mines in Brazil, Platinum Group Metals in South Africa, and Lithium reserves in Australia, Chile, Bolivia and Argentina. Afghanistan remains the only elusive outsider in the world, which has large-scale rare earth resources and almost negligible Chinese presence. However, given the US’s exit from the region, the Taliban-controlled state may soon become part of China’s resource-feeder nations.

One of the primary reasons behind Kabul’s inability to extract its reserves are (besides an overhauling level of corruption) high royalties, taxes and increased levels of government intervention. Although, if history is any evidence, free-market capital movement takes control of the economy post chaos and eradicates any sign of government intervention. It strictly focuses on capitalistic market development. History is riddled with such testimonies.

The Exploits in Russia

When Boris Yeltsin took control of Russia through a coup following the dissolution of the USSR, he cajoled Parliament into giving him dictatorial control over the country for a year so that he could take radical steps to transform the economic state of the country. Financially supported by the Clinton administration, who gave him $2.5 billion in aid, and economists from the Milton Freidman school of thought, the Russian administration implemented measures such as large-scale budget cuts, removal of price control on basic food items, including bread, and even more and faster privatisations across the oil reserves sector.

Many of Russia’s top resource industries were sold off for 10 cents on the dollar; 40% of an oil company was sold off for $88 million (total sales in 2006 were $193 billion), Norilsk Nickel, one of the top nickel producers in the world, was sold off for $170 million, and Yukos, one of the world’s largest oil companies, was sold off for $309 million.

While the economic boom was initially seen as a stare-down for communist sympathisers, it soon became a capitalistic money grab as profits were taken offshore at a rate of $2 billion a month. Russia had no billionaires; by 2003, the number of Russian billionaires had risen to 17.

'Shock Therapy' in Bolivia

Bolivia entered the 1985 elections at a time when the inflation in the country was up to 14,000%. The government was advised by several high-ranking officials and academics in the west — one of whom was former Harvard Economist Jeffrey Sachs — that only a sudden ‘shock therapy’ and a string of deregulation efforts could help lift the economy out of a deep slump.

When Victor Paz Estenssoro was elected President that year, he went to do exactly the same — food subsidies were eliminated, all kinds of price controls were cancelled, and the price of oil was hiked by almost 300%. Further, government spending was cut significantly, state companies were downsized, and largescale imports started making their way into the country.

While the shock therapy decreased inflation, there were several serious repercussions of the reforms. Real wages dropped by 70 per cent and minimum wage never really recovered its value, per capita income had fallen to $789 from $845 in two years, and by 1987, Bolivian peasants were earning $140 a year, which was a fifth of the average income at the time.

Taliban May Resort to Market Forces, Too

Afghanistan, for years, has suffered the wrath of an extremely volatile state due to war, international external forces, terrorism, and a deeply dysfunctional governance set-up. With the Taliban and their dictatorial regime now officially in control, their gross lack of understanding of governance and economic principles will lead them to do what many dictators previously have done — resort to market forces to take control.

Pinochet in Chile, Paz in Bolivia, General Suharto in Indonesia and Boris Yeltsin in Russia all assumed control of their countries in the midst of turmoil, which made government intervention for reforms so tenuous that resorting to market forces seemed like the rational choice for them at the time.

While China in the world’s eyes may have assumed the role of that of a big brother for the officials in Kabul, its intentions, however, are likely to remain strictly commercial, strategic and economic in nature. What Milton Freidman and his students were for distraught economies in the 20th century, China may very well become that free-market pillar for Afghanistan and induce its own brand of ‘shock therapy’ in the country.

(The author works as a Research Associate with TERI [The Energy and Resources Institute] on policy issues surrounding political economy of climate change, energy governance, renewable energy and sustainability. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)