The economics of the Taliban takeover - Observer Research Foundation

Taliban 2.0 are working towards ensuring that they are not dependent on external sources of revenue

The speedy collapse of the Afghan security forces and the tactical offensive of the Taliban has been an intensely discussed issue amongst scholars and practitioners across the world. While the arguments generally boil down to the Taliban’s psychological warfare and the Afghan government’s incapability to defend the state, several of these assertions have missed out on an important aspect that facilitated the Taliban’s march to power ,i.e., the economics of the conflict. In fact, it wouldn’t be an exaggeration to suggest that it was the very basic economic concepts such as ‘incentives’, ‘public goods’ and ‘free riding’ that determined the victors and the losers in the Afghan battlefield.

Ensuring a free ride in Afghanistan: 

Contradictory to popular opinion, the cracks in the very foundation of the Afghan security forces could be traced back to the days when the United States (US) declared the ‘the War on Terror’ and initiated nation-building in Afghanistan. With this new mission, the NATO tried to westernise the Afghan institutions, training, weapons, vehicles, and counterinsurgency tactics. However, they met with little progress, since most locals were alien to these institutions and practices. Consequently, the US decided to deploy more of its troops, and employ local mass recruitment and training tactics, although these were mostly inefficient and irrational in nature (refer to Table 1). This led to further dependence on the West for leadership, funding, logistics, salaries, military operations, and air cover. Thus, over the span of 20 years, the US alone spent nearly a trillion dollars to fight against the Taliban and build the Afghan security forces.

The NATO tried to westernise the Afghan institutions, training, weapons, vehicles, and counterinsurgency tactics. However, they met with little progress, since most locals were alien to these institutions and practices.

Parallelly, the subsequent Afghan governments had also failed to sustain their economic growth. As a result, over 80 percent of the Afghanistan governments’ public expenditure was continued to be covered by international aid. A similar trend was seen with the Afghan security sector too. The government was largely dependent on the West’s logistics and funds and had a very meagre contribution to the states’ defence budget (refer to Table 1). For example, even in 2021, the government was able to contribute only US $600 million out of the allocated defence budget of US  $4.3 billion. Thus, indicating that the government was freeriding on western budgets and security guarantees.

Table 1. Military strength and expenditure in Afghanistan.

Year	Total number of foreign troops under the US leadership	Total number of Afghan Security Forces	Military Expenditure by the Afghan Government (in million US$)	Total Military aid under the US leadership (in billion US$)
2001	2,500	NA	NA	NA
2002	14,500	NA	NA	0.1
2003	18,100	6,000	NA	0.5
2004	24,400	57,000	181	0.8
2005	26,700	66,000	163	1.2
2006	38,300	85,700	165	1.8
2007	49,200	125,000	254	3.7
2008	61,500	147,900	221	6.5
2009	1,01,800	195,000	249	6.0
2010	1,35,000	266,000	266	4.8
2011	1,31,300	323,400	262	8.2
2012	1,05,900	327,000	196	7.0
2013	87,100	338,100	181	7.9
2014	44,500	332,100	221	4.9
2015	13,600	318,500	177	6.9
2016	12,900	322,600	175	2.7
2017	20,400	336,000	172	3.5
2018	21,600	323,000	188	4.1
2019	16,600	272,500	226	NA

Source: Brookings Afghanistan Index, SIPRI, USAID and OECD. 

Perception and distortion of a public good: 

But, even with this freeriding, the West deterred any credible competition to the Afghan government to take hold. This was further facilitated by the US and the Afghan government continuing to broker peace and power sharing with various ethnicities, warlords, and powerbrokers. Hence, the US and NATO’s military cover secured several local politicians, warlords, civilians, and troops from the Taliban. This means that the defence was inclusive and didn’t generally exclude or prevent the Afghans from consuming security (non-excludable).  Further, since the Afghan government was largely freeriding on the West, the resource pool was larger and one’s consumption of security didn’t reduce the availability of security for the fellow Afghans (non-rival). Thus, this evidently transformed the security and defence of Afghanistan into a public good.

Since the Afghan government was largely freeriding on the West, the resource pool was larger and one’s consumption of security didn’t reduce the availability of security for the fellow Afghans (non-rival).

But with the withdrawal of the US, the Taliban began to question the state’s monopoly over violence and authority. This became further evident with the surge in attacks by May 2021. Hence, the Afghan security forces that were largely freeriding on the West now took up the responsibility of being a net-security provider for Afghanistan and its civilians. Consequently, the forces aimed to defend and maintain troops throughout the country rather than some key areas. But, with all its logistical weaknesses, the forces were overstretched, weakened, and burdened against the Taliban.

The overstretch meant that the security of one city or province excluded the security of other fellow Afghans and also deduced its availability for others. Therefore, making security excludable and rivalrous, and also reducing its status to a non-public good. In this context, leaders, troops, locals, and civilians who feared less security for themselves and their families developed low morale. Simultaneously, they were also reached out to by the Taliban and asked to surrender, coordinate, or desert for amnesties and security guarantees. This further made it easier for the Taliban with the prevalent economic grievances of the armed forces and their distrust and suspicion for political leadership, along with strong ethnic and tribal loyalties

Incentives for an impactful offensive: 

Thus, as the states’ security melted due to the loss of public good status and freeriding, the Taliban on the other hand were vitally incentivised to launch an offensive. Because for the Taliban, the priority was not only to establish an Islamic emirate but to also ensure its sustenance. And for this, the plan was to avoid extreme external dependence and achieve financial and military independence. Consequently, by the late 2000s, the Taliban had reformed its revenue and profit-generating tactics in its captured territories.

One outcome of this was an increase in the interest in mineral-rich regions for the Taliban. With production, trade and taxation of mines, the Taliban’s revenues from the sector increased from US $35 million in 2016 to over US $ 465 million in 2020. Further, taxes on drug cultivation, production, trafficking, and laboratories, contributed to over US $400 million for the Taliban. In fact, several complex taxation methods were introduced by the Taliban on fuels, electricity, construction materials, trade, border crossings, etc. Interestingly, the Taliban also collected taxes and protection money from the West-funded roads, schools, and hospitals. They also generated another tens of millions to the tune of US $100 million per year by taxing or extorting the trucks serving the NATO. The impact of these complex revenue generation tactics was so significant that the organisations’ annual income increased from US $400 million in 2011 to US $1.5 billion in 2020.

Several complex taxation methods were introduced by the Taliban on fuels, electricity, construction materials, trade, border crossings, etc.

But being dependent on these tactics also meant that the Taliban would have to face a loss of revenue generation as and when the West withdrew. In addition, the existence of strong warlords and disgruntled opposition also meant that the unpopular and weak Afghan government would have to face anarchy either sooner or later. Meaning that the Afghan governments’ power, resources, and revenues would be fiercely competed amongst several stakeholders. It, thus, made sense for the Taliban to have accelerated its offensives and capture as many provinces as possible.

Further, the weak Ghani government also acted as a rich source of revenue that could ensure the Taliban and its regimes’ sustenance. Despite its weaknesses and reliance on international aid, the Afghan governments’ revenue outnumbered the Taliban’s sources of revenue. For instance, while the Taliban earned US $100 million from the drug trade, the government earned nearly US $3 billion from the same. Similarly, with mineral reserves worth trillions of dollars, the government generated a revenue worth a billion dollars and the Taliban generated less than US $500 million USD. The Taliban, hence, found a broad window for generating revenue and sustaining the organisation and regime with these offensives.

Every successful Taliban offence was followed by looting weapons, treasuries, and military technologies.

What further kept the Taliban fighters’ morale high and offensive loaded was its incentive for looting. Every successful Taliban offence was followed by looting weapons, treasuries, and military technologies. On the one hand, this helped the Taliban be less dependent on other states, and on the other, it kept the fighters’ morale high as Pashtuns continue to take pride in possessing weapons and following Pashtu Wali. These incentives explain the Talibans’ enthusiasm to launch offensives and seize aircraft, helicopters, drones, machine guns, rifles, Humvees, strike force vehicles, military gear, and drones. Another factor that finally contributed to these affective offensives was that several of its fighters were let free to loot and pillage houses, government buildings and civilians. This led to an effective and enthusiastic offensive considering that a considerable number of Taliban’s recruits are poor and unprivileged.

It is, therefore, these economic concepts of ‘incentives’, ‘free riding’ and ‘public goods’ that finally contributed to the Taliban’s victory in Afghanistan. Although psychological warfare and the governments’ incapability played a major role, the importance of economic rationalism cannot be undermined. In any case, to either manipulate the state forces or to even boost the morale of the fighters, a key point revolves around individuals, institutions and organisations making rational decisions on what actions could benefit or harm them, and the case of Afghanistan is a stark reflection and reminder of the same.

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