The Graveyard of Fiscal Budgets

By Mo Fakhro

The term Graveyard of Empires has been used by historians to describe Afghanistan.  It is argued that the country defeated the British, then the Soviets, and then the US through a combination of harsh terrain, cold winters, and clan loyalties.  Some may argue that the people of the country are simply wired differently and have some mystical ability to defeat goliaths.  Historians look at the people, the terrain, the psychology, and the ideology.  What is often overlooked, though, is simple economics.  What all conquerors of Afghanistan have found is not that it cannot be conquered, but that once it is conquered, it is a loss-making enterprise.  In other words, they have come to the same conclusion that many entrepreneurs come to when they start a new business and discover over a period of years that it is losing money and must be closed down.  I would argue that this is the main reason why Afghanistan is difficult to conquer.  It has very little to do with the people or the religion or the terrain or anything mystical or intangible.  It is just simple algebra.  Basic math.  What is the point of ruling a country if doing so will lose you money.  What is the point of holding onto a business that loses money.  There is no point in doing that, and that is the point.

The British Empire ruled over large swaths of the world during its colonial period.  This began with what was perhaps not the most creatively named territory of Newfoundland in 1583 (which today is a part of Canada) and ended one might say when the British handed Hong Kong back to China in 1997.  The British conquests of South Asia and North America were quite profitable.  The North American territory had so much potential that many chose to settle it.  When the British left what became the United States, it was not because they were forced to leave by the Native Americans but because the initial settlers had felt the prize was too great to be shared with their brethren back home.  It was the greed of capitalism that was the primary driving force, and that perhaps shaped the ideology of the country that would become the torch bearer of individualism.  Viewed from the lens of economics, the British therefore did not leave the United States per se, but rather allowed for the inevitable process of sybiosys to occur. It was the British settlers who decided to break off from the British Empire for personal gain.  In other words, the British left the United States very early in the colonial era not because it was unprofitable and not because they were defeated by the Native Americans, but because the settlers realized how profitable the land was and wanted to keep the spoils for themselves. 

If one were to exclude the US example therefore from the sample, it is quite telling that the British Empire left Afghanistan as early as 1919.  It left India in 1947 and the Gulf states in the early 1970s.  The problem with conquering Afghanistan, I would argue, is not that it is not conquerable.  All of the empires were able to conquer the territory.  The problem was that once it was conquered, there was no way to make money from the conquest.  The country lacked the jewels of India, the oil of the Gulf, or the grain of the United States.  In effect, the spoils of war were a large number of rocks in the middle of nowhere.  In fact, it is worth asking the question: Why on earth would any colonialist want to conquer Afghanistan? It would be like wanting to conquer Antarctica or Mars for that matter.  What financial gain could possibly come from that?

It was an unintended consequence of the fight against Soviet communism during the war of 1979 to 1988 in Afghanistan, that created an extreme aberration of a religion to achieve political and military objectives.  This was used to eradicate the communist threat in Afghanistan and to perhaps prevent its spread further to Pakistan and the Middle East.  There is a famous historical Arabic poet named Al Mutanabi.  One of his quotes is that “You should not go hunting with a lion, because eventually, the lion will run out of prey, and then he will make you his prey”.  I believe the lion is too heroic an animal to be compared to an Islamic terrorist.  A more appropriate term would be monster, in my view.  However, the meaning is the same.  The CIA, in coordination with the ISI in Pakistan and the governments of the Arab and Islamic World, had inadvertently gone hunting the Soviets with a band of monsters at their side, and those same monsters had come back to attack them once they had no prey left. 

The 9/11 terrorist attacks were a stain on anyone who had vouched for Islamic fundamentalism as a force against communism.  The attacks were a barbaric act of extreme violence.  They ruptured the lives of millions of people who were directly or indirectly impacted by the attacks.  The primary sufferers were the victims and their families.  Many more suffered around the world in ways that they may never fully recover from.  The goodwill between Muslim countries and the United States suffered what seemed at the time to be irreparable damage.  In particular, the countries of the Arabian Gulf, had built significant bonds with the United States at the country and individual level through cultural exchange, education, tourism, and business.  Most individuals in the Arabian Gulf felt deeply indebted to the US for saving Kuwait and the GCC from Saddam Hussein.  At the individual level, millions of people (your author included) had spent their lives building bridges between East and West through deep friendships and relationships developed over years of interaction in academia and business.  They found their worlds ruptured irreparably by a despicable act of extreme violence.  It is quite telling of the cowardice of Osama Bin Laden and his band of thugs, that they chose Afghanistan as their hiding place.  It takes a true coward to find a great hiding place.  They could have chosen other places to hide, but they chose Afghanistan.

Ultimately, the United States came to the same conclusion that the Soviet Union had come to before it, and that the British Empire had come to before it, too.  It is the same conclusion that millions of entrepreneurs and investors will have come to during their lives.  They all realized, sooner or later, that there is no point in holding on to a lossmaking asset.  It’s okay for one year, maybe five.  Beyond that, what’s the point? The only conceivable reason why the US stayed for twenty years is that it got stuck in a concept that we business people know well.  It is the concept of sunk costs.  It is money that has already been lost and will never come back.  Do you keep going hoping against hope that it will come back or do you pull the plug? You do not cut the cord and delay, delay, delay, because you are too embarrassed to drop your tools and head for the door, and so you wait for your successor to bite the bullet.  It is not then that no country in the world can conquer Afghanistan.  Afghanistan was in fact conquered by the British, the Soviets, and the Americans.  It is just that no politician can make a case to maintain a budget deficit indefinitely to own a collection of rocks in the middle of nowhere.