The withdrawal of US forces from Afghanistan in September of 2021, after a twenty year presence, caused significant political turmoil in both countries. Much has been written about the financial corruption of the war on terror, including a powerful opinion article in the New York Times which highlighted the egregious errors made by the US in their two decades of war.
According to a Brown University's estimate of the war in Afghanistan, the total spending amounted to a surreal $300 Million per day, or a total of $2.26 Trillion over 20 years. It is worthwhile noting that this estimate does not take into account the additional cost of care for the casualties (military and civilians), estimated at about $0.8 Trillion.
The NYT piece submits that this war was actually "won" by defence contractors, both in the US and in Afghanistan, as they themselves profited from a significant portion of the funds rather than ensuring that the Afghan economy was rebuilt in a way that it could, upon departure of US forces, enable support for the country. It turns out that due to poor budget management large parts of aid funds, or war on terror funding, ended up as elite capture - a subject we have written and spoken much about. The result is a "fantasy economy that operated more like a casino or a Ponzi scheme, rather than a country."
The rational US taxpayer may ask herself, how could this have happened - so much money, for so long and for what purpose? A very relevant question as the world was left watching the Taliban regain control of the country within days after the US withdrawal.
We have previously discussed in detail how using blockchain can minimize both elite capture and terror funding, which are the by-products of poor budget management. The principles are simple. Blockchain is immutable, therefore all transactions are logged forever on the ledger, resulting in unprecedented traceability of fund transfer, hence the ultimate accountability. In addition, as it is decentralized, the platform equally is owned by all the parties involved and creates a joint source of truth, shared and approved by all of them.
In the particular case of rebuilding Afghanistan, the perfect solution would have been a blockchain platform project management solution that incorporates a central bank digital currency (CBDC), i.e. digital US dollar. This concept has also been discussed in our previous posts (intro, advantages and additional thoughts). Alternatively, the solution could be based on a USD-pegged stablecoin (see our post), which in many aspects would not matter much to Afghans.
It is clear that the implementation and deployment of such a project is beyond the scope of a single corporation. It requires the joint effort of technology providers, foreign aid organizations and other international organisations who would have sufficient political influence to lead this project. Is it certain, however, that technology is not the main obstacle in making this kind of a project happen.
We see the following topics as the key factors to examine the potential of such a project:
The designation of aid funds - By "designation" I wish to make a distinction between funds intended to be sent directly to individuals vs. funds intended to finance a public infrastructure project. Naturally, the former is simpler to deploy in any aspect you examine, whether technical (single type of transactions, minimal monitoring, etc.) or political (less likely to cause local government's resentment).
Level of digital adoption in the destination country - according to the Diffusion of Innovation Theory, technology adoption is categorized into five segments: innovators, early-adopters, early-majority, late-majority and laggards. Implementation of this type of blockchain-based project does not only mean deploying cutting-edge technology on the developers' end but also requires a high level of digital adoption from users. In this case it relies heavily on users adopting digital wallets on their mobile devices. In that aspect we would like to introduce the economic concept of leapfrogging. It suggests that radical innovation may allow a lagging agent to leap over the leading agent who takes incremental steps. Therefore, ironically, the lack of proper banking infrastructure along with the overall dire situation in the country could allow blockchain and mobile technology to create the perfect storm. So was the case with M-pesa in Africa over a decade ago. Perhaps so can be the case in Afghanistan and digital crypto wallets.
Support of local government - Last but not least, this is the most influential factor on the success of the financial aid project. Regardless of the funding purpose, the local government could make sure this type of project does not materialize. While it is easier to physically stop any initiative for a new infrastructure project, with aggressive enforcement it would be feasible to persecute individuals who receive the direct funding. It all boils down to whether the local government perceives this funding to be in its best interest or not.
The world leaders should be able to think far enough into the future to understand that unless funds are monitored and tracked, then those funds will enable the rise of terror and increase of misery. Now we have the technology that allows us to follow the money. To enable receipt upon designation of funds - be it aid funds or military contracting funds, and ensure that when a check is written - it is done so because it is necessary, and those who receive it are worthy. Perhaps it is time to shame our politicians into using this technology.