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20 years after the Afghanistan invasion, a lesson in how not to spend development aid

However well intentioned U.S. aid was, it had the ironic effect of contributing to instability in Afghanistan's institutions and fueling corruption.
A Civil Affairs Battalion major measures an opening for a window in a school on April 2, 2002, near the Bagram Air Base in Afghanistan.
A Civil Affairs Battalion major measures an opening for a window in a school on April 2, 2002, near the Bagram Air Base in Afghanistan.Joe Raedle / Getty Images file

Over the course of the U.S. occupation of Afghanistan, which began with America’s invasion 20 years ago Thursday, the U.S. invested billions of dollars in major infrastructure projects — schools and hospitals, water and energy facilities and thousands of miles of roads. The United States also helped stand up a democratic government and then spent more than $88 billion training Afghani military and security forces in the hopes that they could secure the nation and enforce the rule of law.

The plan didn't work. Nor could it have.

Injecting large sums of cash into a country to remake it creates a huge incentive for desperate people to seek quick access to otherwise scarce money.

As the Taliban consolidates its hold over Afghanistan following the U.S. withdrawal, Americans are now left to reflect on why things went wrong — including the ways the country’s actions over the past two decades have destabilized Afghan society by hewing far too closely to a traditional international aid playbook.

However well intentioned the U.S. aid, it had the ironic effect of contributing to, rather than solving, the instability in Afghanistan's institutions and fueling, rather than rooting out, the corruption and misuse of funds that preceded the Taliban's return to power. The United States must learn the lessons of these mistakes so that it can better help war-torn nations recover in the future, as well as help hundreds of millions of people in low- and middle-income countries escape poverty today.

In our studies of development, we’ve seen that the instinct of many is to focus on building up infrastructure — like roads, bridges, institutions of government, the military and schools — and trying to stamp out corruption. This infrastructure-first theory may seem logical, but according to our research, it’s backward.

In our research, we define infrastructure as the most efficient mechanism through which a society stores or distributes value. By itself, infrastructure does not create much value. Rather, businesses that offer in-demand products and services to the local population, employ the local population and operate affordably within that community are what create value. They also create corresponding value chains that employ other individuals, which multiplies their positive impact in a community.

This is true for all common forms of infrastructure. Roads are the most efficient medium to distribute — or transport — vehicles, once those vehicles exist and there’s local demand for moving them from one location to another. Schools are the most efficient medium to distribute knowledge, once there’s demand for workers with knowledge and skills. Ports are the most efficient medium to store goods, once there is an ability and willingness to pay for those goods. In many countries, courts are the most efficient medium for meting out justice, once there is a thriving economy that benefits from the rule of law.

Moreover, the value of what a piece of infrastructure stores or distributes must justify its construction and maintenance, so when the value is too low — because there isn’t viable demand for those goods, for example — the infrastructure becomes unsustainable.

In Brazil, a multimillion-dollar cable-car project meant to transport residents to a favela in Rio de Janeiro hasn’t functioned since 2016 because there weren’t enough riders to justify its maintenance. According to The Economist, a $3.2 billion Mombasa-Nairobi Standard Gauge Railway in Kenya “will probably not make enough money to repay its debts” because there aren’t enough goods to transport.

In Afghanistan, there was too much infrastructure and too little value, as the recent report from the Special Investigator General for Afghanistan Reconstruction makes clear. Many U.S.-funded schools fell into disrepair after they were built and were empty. A $335-million power plant was operating at less than 1 percent capacity. Two hospitals that cost $18.5 million to build operated at costs higher than what the Afghanistan government could sustain. Ryan Crocker, former U.S. ambassador to Afghanistan, said, “The biggest lesson learned for me is, don’t do major infrastructure projects” in Afghanistan.

Making matters worse is that the focus on infrastructure first can fuel corruption rather than stem it. In the absence of viable economic activities that allow people to have a stake in making a living through transparent and legal means, injecting large sums of cash into a country to remake it creates a huge incentive for desperate people to seek quick access to otherwise scarce money.

What would have worked? Although no country is identical to any other, South Korea’s story is helpful. South Korea was once very poor, severely corrupt and ruled by an authoritarian government. Many economists said the country was trapped in poverty and was an economic basket case.

South Korea escaped poverty to become a rich country not by investing in infrastructure up front, but by investing in market-creating innovations— innovations that transform complicated and expensive products into products that are simple and affordable so many more people can afford them. The market-creating innovations in turn produced jobs and tax revenue, which governments then used to fund and sustain infrastructure.

A more effective development policy than pouring cash into infrastructure is funding investments in local businesses — whether new or existing — that can provide valuable products and services for the local population.

Samsung, LG, Hyundai and Kia are all examples of this market-creating approach, as they have served as engines of development for South Korea by making products more affordable to millions in the country and then globally. The 10 largest South Korean companies employ nearly 1 million Koreans and have cumulative annual revenues of almost $700 billion, which provides the tax revenue necessary for the government to sustainably develop the country’s infrastructure.

Over time, it’s also helped South Korea slowly start to root out corruption. Our research shows that corruption thrives when there’s scarcity. In poor countries, both employment and economic opportunity are scarce. As a result, many people resort to corruption to help them solve a problem.

There are in fact a few examples of investments in market-creating innovations in Afghanistan, such as Roshan, which was founded in 2003 as an Afghani telecommunications company. Today it has grown to serve over 6 million active subscribers and employ roughly 1,000 people in addition to the 30,000 jobs it has added indirectly to the Afghan economy through entities like retail stores.

Many more of these sorts of investments were needed, however. Rather than mandating that the U.S. Agency for International Development accept impossible goals for quickly building schools and hospitals, Washington should have focused far more than it did on investing in a portfolio of local businesses, either directly or through the Afghanistan government and on-the-ground funders.

As we reflect on the horrors unfolding in Afghanistan 20 years after America invaded, learning the right lessons from the shaky foundation on which the country was rebuilt is imperative to ending the predictable tragedies rooted in poverty that are playing out there every day, and in so many other places across the globe.