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Afghanistan Provides Yet Another Reason to Distrust GDP Figures

A broadly critical Congressional report on the nation-building efforts undertaken by American forces in Afghanistan was released today.  According to the Washington Post, the report casts doubt on the continuing viability of the country as it is today.

The hugely expensive U.S. attempt at nation-building in Afghanistan has had only limited success and may not survive an American withdrawal, according to the findings of a two-year congressional investigation to be released Wednesday.

I could have told them that.  But another interesting concept, mentioned before on this blog, is the curious disconnect between Keynesian metrics and economic realities.  Under traditional Keynesian theory, government spending is used to take up the slack from the private sector in a downturn.  This fiscal policy (or stimulus) helps nurse the economy back to health, and the simplest metric of its efficacy is the GDP figure.  The higher the GDP, the “better” the economy, or so my admittedly bare-bones explanation of the theory goes.

However, as previously mentioned, GDP does not equal wealth.  Similar corollaries would include the fact that creating more money does not make the country richer, and having more jobs does not make the country more productive.  Although there is a correlation between GDP and wealth under certain circumstances, the correlation is simply not a particularly useful tool in seeking to understand the ultimate effect of broad-reaching policies.

As it happens, Afghanistan provides the perfect example:

The report also warns that the Afghan economy could slide into a depression with the inevitable decline of the foreign military and development spending that now provides 97 percent of the country’s gross domestic product.

Consider a hypothetical economy twice the size of the United States’  (using GDP as a measurement) but with the same population.  In absence of any other information, you would assume that the standard of living in this fantasyland would be much higher than that of the United States’ right?  Now consider that this country is engaged in total war.  How would that affect your assumptions about standards of living?

And therein lies the problem with using traditional economic metrics as either evidence of a problem or as evidence of a cure.

When we think about the things that increase our standard of living – plentiful food, spacious housing, proper sanitation, clean water, books and arts, effective transportation – we see that none of them are things provided by military spending.  Therefore, roughly 97% of Afghanistan’s GDP has nothing to do with the standard of living enjoyed by Afghanis.

Worse than this, spending on military expeditions and vague “nation-building” missions (read: “getting the backwards tribes to act like good ‘mericans”) actually gets in the way of these things.  Can we expect widespread availability of food when the means of production are more likely to go to killing each other than to farming?  Can we expect decent housing when the means of production go to government buildings and not apartment buildings?

In this country, we are still plagued by the myth that World War II brought us out of the Great Depression, when in reality we never recovered until after the war was over.  Being conscripted to be cannon fodder in the South Pacific may have led to low unemployment numbers, but what does it say about the standard of living of Americans stuck in Guadalcanal?

In a vacuum, bringing an end to the military action in Afghanistan would drastically increase citizens’ standards of living by diverting military spending and state-building waste back to productive uses.   Of course, the consequences of withdrawal would not be nearly so simple in real life, due to massive corruption, blowback from the Taliban, and the problems endemic to being weaned off of an artificial dependency on foreign aid.

Then again, those problems are wholly synthetic.  They are both creations of the vast war machine now sucking up the country’s wealth, as well as impediments to rebuilding decent standards of living after the war machine that created them is gone.

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