Afghanistan, Land of Opportunity (pt II)

There's a certain mythology built about around conflict, as if the laws of physics or economics somehow don't apply.

Our image Afghanistan is of a soldier standing in front of a mud hut. That's not what's going on...Businesses are functioning, even thriving, in a very difficult environment.

We came across a number of medium-sized businesses that are finding opportunities.

Our perception going in was that physical insecurity would be the number one concern of business... But we found that Afghans were generally more concerned about the uncertainty in the business environment than they were about security.

Business feel very threatened by the Afghan government...One entrepreneur had this to say: "Insecurity is caused by the government and the Taliban. They are the same."

Afghanistan is donor drunk. In Kabul, people were gaming the system...We frequently found international organizations nominally "trying to help" actually distorting the system.

War should not be an excuse to resurrect failed policies, such as that centrally planned growth is necessary in a chaotic environment…

These snipets are from a talk that Jake Cusack and Erik Malmstrom (two a MPP/MBA candidates at the Kennedy School and HBS) gave as CSIS last Thursday, previewing their fabulous report on entrepreneurship and the prospects for real development in Afghanistan. The report is based on interviews that Cusack and Malmstrom conducted over the summer in Kabul, Herat, Balkh, Nagarhar, and Kandahar Provinces. (Thanks to Dane Stangler for bringing me along to this event, and H/T to the Kauffman Foundation for funding the study.) The full audio is here and is a must-listen for anyone interested in entrepreneurship and development. (When you're done, read Carl Shramm's excellent essay in Foreign Affairs that provides the context for this study.)

Back in January I wrote a post titled "Afghanistan, Land of Opportunity." Drawing heavily upon the success of Roshan, the first and still the leading Afghan mobile phone company (more on Roshan here, here, and here), I made the following argument:

Roshan is an example of the sort of "positive insurgency" driven by entrepreneurship, technology, and innovation that is the real driver of development. Want to "help"? Provide local entrepreneurs with skills development, mentoring, and other essential support (yes, funding as necessary). 

The report by Cusack and Malmstrom takes this line of argument to another level, documenting that entrepreneurship is, indeed, alive and well in Afghanistan and clearly explaining why support for entrepreneurship must be the cornerstone of any coherent and potentially effective security strategy in that country.

But here's another question: Why did it take two Masters students to get these basic facts straight, and organize them in a manner that they could influence the design and implementation of policy, when the blue-ribbon task force recently assembled by the Council of Foreign Relations failed almost entirely to grasp or articulate them? Why is it that our security thought-leaders have such a difficult time getting past their fixation with the hardware of development to understand the software--entrepreneurship and business innovation in particular?

Granted, the (war) stories we hear about Afghanistan and the (entrepreneurship) stories we don't hear are linked. Entrepreneurs don't get very far under conditions of totalitarian repression, and the founding of Roshan was made possible by the ouster of the Taliban. But, there is a big difference between the systematic repression that existed under the Taliban (which is historically very rare) and the sort of everyday cronyism, neglect, or even anarchy that is far more typical of poor and poorly governed places around the world. Indeed, today's Afghan government ranks among the most corrupt in the world. However, it is precisely the failure of government to provide basic services, combined with a lack of formal regulatory constraints, that can create tremendous opportunities for entrepreneurs.

To claim, as many in development and security circles do, that an honest, stable government is a prerequisite for economic vitality is akin to claiming that a healthy, bountiful garden is a prerequisite for rainfall. 

Just ain't so. 

Give TODAY to Care Foundation Pakistan

Mosharraf Zaidi (@mosharrafzaidi) has a great op-ed in The International News (Pakistan) that quite incisively corrects for the overstatements in my previous post:

Zaidi starts with the following observation:

Casual observers could easily conclude that first, under the Musharraf regime, and now under the democratic government of the PPP, Pakistan has been reduced to a rentier or beggar state (or both). The country is incapable of meetings its own needs and constantly needs to seek help with the bills. Of course, this kind of an observation would have to be made by people who are either deliberately ignoring the circumstances that have produced the current situation, or who are plain, outright ignorant. Three very large and very important shocks have rocked the Pakistani economic system in recent years-natural catastrophes, violent conflict, and global price shocks. While most countries can claim to have been victimized by one of these, and perhaps some can claim to have been victimized by two, there is hardly any country on the planet that has had to take on all three kinds of shocks at the same time. Perhaps most crushingly, these challenges have been thrust on Pakistan in a global environment where the narrative of Pakistan is of a country that is fully responsible for every problem that afflicts it (true but only partly), and therefore deserves, deserves to be left to solve those problems itself (not true at all).

He then notes that aid comes in many forms, from many sources:

The most important division we need to understand is the division between humanitarian assistance and development assistance. For most practitioners, this distinction holds limited value in a country like Pakistan, where so much of the recent assistance to Pakistan has been humanitarian, and where a lot of the “development” assistance, has been supplanted, or replaced by humanitarian programmes.

The bottom line:

The most important distinction for a country that is the size of Pakistan, and with the kinds of problems Pakistan faces, is who the aid is being given to. Aid can be provided to governments, or it can be provided to non-state actors-such as contractors, firms, and civil society groups. Government aid itself can be of several kinds, including budget support, and project aid.

Without understanding these distinctions, and knowing who is giving what, and to whom, the national conversation about international aid or foreign assistance is largely a rhetorical jousting session, not serious policy discourse.

All of which is to say that being a critic of official development assistance (as I am!) is not inconsistent with getting online to give today to Care Foundation Pakistan or other effective organization working to assist the millions of victims of Pakistan's recent floods.

Time for Security Experts to Pak It In

[See follow-up post here.]

I recently found this excellent video clip of the talk that Pakistan’s Foreign Minister Shah Mahmood Qureshi's gave at the Brookings Institution last month:



Oh, wait... Wrong video! Sorry about that. This video here is of President Obama trying to get his G-20 buddies to buy into US monetary policy (..."What the world needs now is...more cheap credit!")  Anyhow, read the transcript of the Brookings event and you'll get the idea.

I was reminded of PM Qureshi's talk this morning when I attended the release of Council of Foreign Relations Independent Task Force Report No. 65, "U.S. Strategy for Pakistan and Afghanistan." Scanning the text of the report and then scrutinizing the bios of task force members, I was not surprised to find that physicians and economists were in short supply. (It also appears that exactly one Pakistani & zero Afghans were on the Independent Task Force, but, hell, what do they know?)

Had physicians been present on the CFR task force they would have been able to identify drug-seeking and doctor-shopping behaviors evident in requests for escalated bilateral aid and military assistance commitments.

Had economists been present they would have been able to remind other task force members that no country in the world has ever developed successfully and sustainably as a consequence of military and official development assistance. Countries develop despite aid directed to national governments, not because of it.

Perhaps as a consequence of these absences, or otherwise due to reasoning-by-force-of-habit, the CFR has produced a report that completely misses the opportunity to fundamentally challenge the false premises of Af-Pak (or "Pak-Af") strategy, and, as a consequence, offers an implicit but nonetheless wholehearted endorsement of the ongoing co-dependency between Pakistan and the United States that...well, just might have something to do with that country's relatively disappointing pace of development and current security challenges. What's missing from the report is the one thing the the United States is best at, and the one thing that matters most to development in Pakistan as elsewhere: entrepreneurship and innovation.

Now, I know what you're thinking. Who is this moron? Was he hiding in some cave at George Mason University when 9/11 happened? Is he really suggesting that the Security Threat featured in the CFR report and at the center of the entire Af-Pak discussion is totally the invention of an aid-seeking client state (& the willing consumers of that narrative in the US)? Of course not! Pakistan is indeed a dangerous place. In the past three years as many as 5,000 people have died there in terrorist acts--large and small--including 18 just yesterday in a dramatic attack in Karachi just outside the Marriott where I stayed three weeks ago.

But let's get real here--5,000 fatalities is not even one-fifth the toll of Mexico's ongoing drug war, which is taking place less than an hour by black SUV from Disneyland. Pakistan--a country of 180 million people, covering an area twice the size of California--tends to rank below both Sri Lanka and India when it comes to terrorism incidence. Yet such a ranking--and a decades-long civil war--did not prevent Sri Lanka from making remarkable strides in its development--for example, achieving a plateauing of its population growth rates comparable to that achieved in China, but without a coercive "one-child" policy. And India...

As for the feasibility of entrepreneurial success in a country with a weak or a failed government--well, think about it, does a relative absence of regulatory hurdles and pockets to fill make it easier or harder for an entrepreneur to get started? Conditions for entrepreneurial entry into a market can quite easily be favorable even when conditions for established, large-scale business are not. If you're still not sure, read this story of the founding and dramatic growth of Roshan, the first and still the dominant mobile phone company in Afganistan; or watch this talk on entrepreneur-led development by the current head of Pakistan's planning commission; watch this video of Iqbal Quadir describing the role of entrepreneurship in development (start at 6:20); or browse through the Kauffman Foundation's growing set of resources on "expeditionary economics."

As for Al-Qaeda, what part of global terrorist network hasn't sunk in with the Af-Pak brain trust? Islamic Fundamentalist terrorism is a global phenomenon (Philippines anyone?) It's not going to be solved in the Swat Valley anymore than it is in Times Square. As I wrote three years ago:

In the long term, our counterterrorism policy should be more focused on addressing the profound shortcomings of the U.S. domestic response and recovery capability than on action in the Middle East. The countries most experienced in fighting terrorism (Israel, Spain and the United Kingdom, among others) learned long ago that resilience through well-developed response and recovery capabilities is a critical part of effective deterrence. The actions required to build such resilience are mostly taken at home, not abroad, and they involve deep collaboration between public and private actors. As Hurricane Katrina and its aftermath decisively demonstrated, many such actions have not yet been taken in the United States.

There is one way forward for the sort of Af-Pak policy represented in the CFR report released today, and in other Af-Pak reviews released in recent months. That way is the way to the door--out of Pakistan, and out of Afghanistan. We'll get there by working as equals with Pakistanis and others in the region who share our values and are doing things that make a positive difference (e.g. 1, 2, 3, 4, 5...).

As aid and military contractors gradually and gracefully exit, they will make room for members of the Pakistani diaspora seeking to reconnect with their country; investors from Dubai; deal-makers from Guangzhou; and, who knows, maybe a few regular-old Americans looking to make some money in a place that is poised for take-off.

Questions? Ask your doctor.

How (Yesterday's) Heroes Impede (Today's) Progress

Paul Polak isn't just one of America's most remarkable "ascending market"* entrepreneurs--having founded and built International Development Enterprises (IDE), the treadle pump design and marketing organization that has brought improved livelihoods to more than 2 million smallholder farmers.

Paul also wins my vote--admittedly somewhat by default--as the country's leading development economist. (Sorry Jeff & Bill, but still more heat than light coming out of the ongoing Great Aid Debate. Not much of practical value emerging elsewhere in the academic literature on development, including RCT wave.) He recently authored a powerfully insightful post titled "The Birth and Death of Big Institutions." Here's how he starts:

The failure of development is closely tied to the ossification of big institutional structures.
The World Bank was born as a vehicle for reconstructing Europe after World War II, a task it carried out with amazing success. But when it morphed into a massive institution to address global poverty, it didn’t do so well. Schumacher launched a revolution in design with his admirable book, Small is Beautiful, but the appropriate technology institutions that emerged from it became ossified, failed to address market forces and died.

I'm about to walk over to the World Bank for the 2nd half of the Tech@State Civil Society 2.0 meeting. So I'll have an opportunity this afternoon to reflect on this specific observation. But the point Paul is making in this blog post is much bigger than the World Bank, and even much bigger than "development" as it is narrowly conceived.

What I understand Paul to be saying is that the core issue facing society is not more or less government control, or whether markets should have greater or lesser scope in the allocation of resources. What really drives societal change is the manner in which both political and economic incumbents establish and maintain advantage. That is the core point of Paul's blog post. It is why entrepreneurship matters.

Read this post twice, then reconsider your takeaways from developments of the last week, the last month, and the last year. Much about the change that surrounds us is not how it seems, or how it is sold. 

* Ascending markets are markets for the global majority--elsewhere sometimes referred to as "bottom of the pyramid" which is a term that does make any sense to me so I don't use it.

Why Democrats Lost and Republicans are Losers

Why Democrats lost:

For Democrats, the core challenge is not absence of principle but rather obsolescence of purpose. For at least three generations the Democratic Party has been, or at least has presented itself as, the party of countervailing power. Notwithstanding attempts at a course-change undertaken first by Bill Clinton and now by Barack Obama, the identity of the Democratic Party is still deeply tied to the tensions and triumphs that for decades characterized politics within the Iron Triangle: Big labor exists in opposition to large corporations, and government must be vigilant if it is to protect citizens and workers from abuses perpetrated by powerful private actors. In fact, big business and big labor are functional allies, and government isn’t protecting us from either one; rather, it is under pressure to prop both up without a justifiable economic rationale. This Democratic vision is to today’s reality what an AT&T rotary dial phone is to Gmail.

 Why Republicans are Losers:

Take the Republicans. Faced with a crisis of mammoth proportions, congressional Republicans closed ranks to reject a proposed economic stimulus package on the grounds that the bill contained, in the words of Senate Majority Leader Mitch McConnell, “unnecessary spending that doesn’t create jobs now.” This was a principled stand minus one critical element: principle. The travesty of “don’t-tax-but-spend-anyway” Republicans trying, once again, to portray themselves as advocates of fiscal discipline was actually exceeded in this case by the absurdity of their objecting to the composition of the largest economic stimulus program in history on the grounds that the money would not be spent quickly enough. At a time when we need thoughtful assessments attuned to the longer term, here were the Republicans complaining that policy was not short-term enough! Unable to make a credible case for either total inaction in the face of crisis or yet another round of broad-based tax cuts, congressional Republicans were effectively reduced to playing the role of arch Keynesians.

... from my 2009 essay with Zoltan Acs in The American Interest...

Will anti-immigration idiocy and empty blather about job-creation through budget cuts--the "NO everything" strategy absent any positive program of action--continue to be the order the day from the New Kings of the Hill? Or will Mitch & Co. see the light and decide that they are in Washington to do something other complain about people in Washington.

Will the genius trust that is still in place at the White House break free at last from the Ghost of Dems Past and craft a vision for the future that is really about creating the conditions for the "the risk-takers, the doers, the makers of things" to thrive?

Hold your breath America!
We'll first turn first BLUE
And then turn RED
If we keep it up this way
We'll all be ....