Today, Explained - The fastest economic collapse ever

Episode Date: December 9, 2021

That’s what the United Nations says is taking place in Afghanistan right now. Today’s show was produced by Will Reid, edited by Matt Collette, engineered by Efim Shapiro, fact-checked by Laura Bullard and hosted by Sean Rameswaram. Transcript at vox.com/todayexplained Support Today, Explained by making a financial contribution to Vox! bit.ly/givepodcasts Learn more about your ad choices. Visit podcastchoices.com/adchoices

Get groceries delivered across the GTA from Real Canadian Superstore with PC Express. Shop online for super prices and super savings. Try it today and get up to $75 in PC Optimum Points. Visit Superstore.ca to get started. Back in August, the world watched in horror as the United States pulled its last soldiers out of Afghanistan. The Taliban had taken over the country and things were looking bad. We all thought that as soon as the Taliban took over, it would be like an apocalypse, you know, like it would be Armageddon. Ali Latifi is an online correspondent for Al Jazeera English. would be like an apocalypse, you know, like it would be Armageddon.

Ali Latifi is an online correspondent for Al Jazeera English. Violence and blood and raping and pillaging on the streets. And, you know, on August 15th when the president fled and then when there was word that the Taliban were coming, that's what people were most afraid of. But that's not the crisis Afghanistan got. It got a different one altogether. Well, today, Afghanistan's economy is on the brink of collapse and what the UN calls a looming humanitarian crisis. So many offices have closed. So many businesses have closed.

The ones that remain open are cutting their staff and reducing the pay or just haven't been able to pay people for months and don't know when they can start repaying them. Signs of desperation can be seen in every corner of Afghanistan. It's at a point where even if you have money in the bank, getting it out is so difficult. Things have gotten worse since the Taliban came. What little we had went to zero.

Everybody is one meal away from being hungry. What happened to the economy in Afghanistan after the United States left and the Taliban took over? What all of this has shown is that the economy in Afghanistan was completely artificial and completely dependent on foreign aid. Because what happened was the day the Taliban took over on August 15th, the U.S. cut off access to $9.5 billion of assets, loans, and aid to the Afghan government, because now the Taliban are in power. And as soon as that money cut off, the banks put massive restrictions on withdrawals. You know, in the beginning, it was only up to $200 a week. Then it became $400 a week. And then Western Union and MoneyGram, sometimes like, if you are an Afghan abroad and you want to send money to your family or your friends in Afghanistan,

a lot of times these services will tell you, there's no money in the banks in Afghanistan. We can't take your money because they can't give it to them. I think the last time we spoke to you, you were living on top of a bank in Kabul. What did you see living on top of a bank in Kabul. What did you see living on top of a bank during this period? I would leave to go to work at like 8, 9 in the morning. Everybody would be lined up outside the bank. By the time I would come home at like 2, 3 in the afternoon,

everyone would be gone because the money was gone. There was one period where it took me four days to get money out of Western Union, where I had sent it to myself. It was a thousand dollars. Seven hundred of it was to distribute to poor people like as charity and three hundred was for myself. I lived on top of that bank. The guards knew me. It still took me four days to get it. So every morning I would line up and the guards in front of the bank would say, well, the money hasn't arrived yet from the central bank. It may arrive by nine o'clock. It may arrive by 12 o'clock. It may arrive by one o'clock. We don't know. You just have to wait here and see when it arrives. And then once it arrived, you know, there would be people from the day before and the day

before that waiting. So by two or three in the afternoon, the money was gone. And then so they would say, just come back tomorrow. In Afghanistan, if you don't have cash, you're poor. If you don't have cash, you can't buy food. In a cash-based society, when you don't have access to physical cash and you don't have a reliable income, you're done for. Why is there such a shortage on cash? Because cash in Afghanistan, it's not printed in Afghanistan, it's printed in Europe. Huh. It's an old thing that's been throughout the entire last 20 years. So I think it was their way of trying to limit corruption and also of saying,

oh, we want to make sure that someone doesn't print a bunch of money and hand it to the Taliban. So every quarter, you know, there would be several shipments of cash, both Afghanis and also foreign money, foreign currencies. Those all stopped. And now they can't print new cash. So that's become another issue as well. And what kind of effect is this happening on the rest of the economy? Is it just collapsing? Yeah. I mean, look at the inflation, right? Like, so the Avrani has dropped in value. Prices are going up, you know, like the basic, the cooking ingredients, the prices are going up. So again, it's one of those situations where, I mean, this may be a bad way to put it, but it's not just like the quote unquote usual suspects that will be starving. Fairly soon, it could be, you know, people. But $144 million really isn't that much money when you're talking about 30 million people. Tell me how desperate this

food shortage situation is getting in rural areas and then also in urban areas at this point. In rural areas, it's extremely desperate because this is another year where people are facing a drought. And so you're seeing malnourished children. A nurse at a clinic in Herat, run by Doctors Without Borders, measures Farzana's arm. If the band goes red, she's severely malnourished. Farzana is nearly at the end of the scale, weighing six and a half pounds at eight months old. You know, you're seeing people that haven't eaten for days living in makeshift camps, you know,

leaving their districts and coming to the next closest major city. But then when they get there, there isn't services for them. There isn't, you know, literally food for them. There isn't money to bring that food in. Starvation will impact more than half of the country's population, says a new UN report. Food crisis like this doesn't happen very often. You even have, according to the analysis, we've done 9 million people who are on the doorstep of the most severe conditions. Because in the past, when these sorts of things happened, the UN or the World Food Program or even the government at the time, which would get some kind of foreign aid to do this, would come in and give people some food aid. It started to happen, but it's in smaller little

segments. It's not enough to meet the demand, the need. 93% of Afghans are food insecure. 93%. And the reality is, is that there's very little aid on the ground. And now, you know, you're going to have winter coming up. And winter in much of Afghanistan, it's very, very, very cold. The electricity starts to go out. You know, it's harder to travel in certain provinces because if you live even like 20 minutes outside a major city, you could be cut off by the rain and the snow and there's flooding and there's avalanches. So it's a major, major issue. would have been considered fairly okay, you know, fairly stable economically, are now possibly affected, you know.

Even if they're not necessarily starving, starving, buying food has become much more difficult for them. And part of the problem here is that Afghanistan does not produce a lot of its own food, right? Right. It doesn't produce a lot of its own food, right? Right. It doesn't produce a lot of its own food. It's imported. The agriculture sector, you know, the former government used to make claims about developments in agriculture and exports. But none of that really added up to very much. And there wasn't ever a wide scale national agricultural project. And now something like 20 million people

are on the verge of starvation in Afghanistan this winter. Is the Taliban equipped to save something like 20 million people who don't have money and don't have food? No, because the Taliban is not equipped to save the people because they don't have access to cash. They don't have very much experience in delivering aid. They have no experience in governance. They haven't shown that they can run a country

and provide services for a country. And this is a situation that was created by the corruption of the former republic and by the decisions of the outside world since the Taliban took over. So what comes next? That's up to the Taliban and the rest of the world. Support for Today Explained comes from Ramp. Ramp is the corporate card and spend management software designed to help you save time and put money back in your pocket. Ramp says they give finance teams unprecedented control and insight into company spend. With Ramp, you're able to issue cards to every employee with limits and restrictions

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to speak to an advisor free of charge. BetMGM operates pursuant to an operating agreement with iGaming Ontario. Okay, so Afghanistan's in bad shape, terrible shape, and it's coming just months after the United States left, which leads one to wonder, is this the fault of the United States? We asked Laurel Miller. She's with the International Crisis Group. The U.S. is responsible in considerable part for the current humanitarian crisis and unfolding economic collapse in Afghanistan, not because it's responsible for every problem in the world, but because U.S. decisions over a long period of time

contributed decisively to the situation that we're now seeing. First of all, it was decisions in the past to provide so much support to the last government of Afghanistan that it was utterly dependent on foreign aid. Then when that aid was cut off, it meant that the Afghan state rapidly began to collapse. So it's responsibility, certainly in the sense of causation of the situation. And I think some would argue it's moral responsibility, too, given that the United States had said at the time that it was pulling out of Afghanistan that it wasn't going to abandon the Afghan people.

We will continue to support the Afghan people. We will lead with our diplomacy, our international influence, and our humanitarian aid. We'll continue to push for regional diplomacy and engagement to prevent violence and instability. The public spending under the last government of Afghanistan, the one that had been propped up by the U.S. and that collapsed on August 15th, was about 75% supported by foreign donors. That meant that there were really no public services provided in Afghanistan, health, education, that were not dependent to some degree on foreign funding.

And on top of that, the central bank reserves of Afghanistan are actually managed by and held in the U.S. Federal Reserve. It was a sort of service that was provided to Afghanistan, something that the Fed has done for other governments too. And those assets have now been frozen by the United States. This means that there's just simply a lack of cash in the Afghan economy. The UN is now saying that this is the most rapid economic collapse and unfolding humanitarian disaster that they've ever witnessed. And you're saying you can trace this direct line from the dire shortage of actual hard cash, hard currency in Afghanistan to the United States and the Federal Reserve.

Yeah, I mean, I'm not blaming the Federal Reserve. They were just providing a service and a function. These are ultimately policy and political decisions that are being made in Washington. But yes, I mean, there are other factors too. There is the fact that Afghanistan has suffered repeated droughts in recent years. And so the agricultural sector, which is key in Afghanistan, still a largely agricultural country, is greatly under stress. And that has contributed to hunger. There's the fact that the Taliban is not a competent government. So they share responsibility, too. Yes, you can draw a direct line from the decisions of the United States government, as well as other donors, to the extreme distress that the Afghan population is now in.

So what can the United States and other countries who support Afghanistan do to save this country from the most precipitous humanitarian disaster the United Nations has ever seen. That doesn't maybe involve just handing over billions and billions of dollars, I imagine, to the Taliban. Yes. There are some things that can be done short term. One is provide just straight out humanitarian relief. The U.S. is providing a lot of humanitarian aid, but more is needed and the U.N. has appealed for even more. So it's crucial that the U.N. requests be fully met. But it's not enough. Emergency relief does not ensure that public services continue to function, does not prevent the collapse of a state. For that, there needs years now a trust fund of money supplied by the U.S. and other foreign donors

that was used to support the operations of the public sector, predominantly for paying salaries of civil servants. There is a pot of $1.5 billion that still remains in this trust fund that could be dispersed if the U.S. and other donors, but principally the U.S., agrees to loosen up the constraints on restarting some of that assistance. Also, the sanctions that the U.S. has in place on the Taliban, but now de facto on the entire state and economy of Afghanistan, could be loosened up somewhat. I don't mean relieving sanctions on individual Taliban figures who are listed as terrorists by the United States. I do mean though providing exemptions to these sanctions to allow

ordinary economic activity to resume in Afghanistan. So we've got humanitarian aid, we've got funding the public sector through organizations like the World Bank, we've got loosening up some sanctions. It sounds like in all these cases, the U.S. is going to be involved with Afghanistan long after it pulled out troops? Well, we could choose not to be. I mean, the U.S. could choose to turn its back on Afghanistan, as it did in the 1990s after the Soviets withdrew from Afghanistan. I mean, remember that the United States had pumped a lot of money into fighting the war against the Soviet occupation of Afghanistan. Yeah, propping up Osama bin Laden even. Propping up Osama bin Laden, dealing with some of the characters who are now in government in Afghanistan and who were fighting the United States over the last 20 years. After the Soviet withdrawal and the victory of the Mujahideen forces,

the United States decided it was done with Afghanistan until later. It wasn't done with Afghanistan and came back in force. So, you know, let it fail is an option, technically speaking. I don't think it's an option that serves U.S. interests to have a failed state in Afghanistan and to abandon the U.S. has, you know, let it fail. We've got other priorities elsewhere is an option. I think that would be very short-sighted. And I think history shows that that would be very short-sighted. I'm glad you brought up the history because it's important to remember here that this was a country that was poor before the United States showed up. It was poor while the United States was there, and it's still poor now the United States has left. That's right.

I mean, Afghanistan, when the United States invaded in 2001, was one of the poorest countries in the world. No real government institutions to speak of. It's a country that has for, you know, hundreds of years been dependent on external resources in one way or another. And during the last 20 years, there were a number of advances that were made as a direct result of U.S. and other international support. There were real advances that were achieved, even though at the end of 20 years, it was still one of the poorer countries in the world. And as we've seen now, because of this rapid collapse, a very fragile state. But there were advances that were made. These are things that

take multi-generations to really move forward. No matter how much money you pour into a country over the course of 20 years, you're not going to move it from A to Z in terms of economic development. I guess the question I wonder about is, is Afghanistan ever not going to be in a precarious position? I mean, look, I, you know, no one is advocating, and I'm not advocating turning back on the level of aid that was provided to the last government of Afghanistan. And no one is advocating reinforcing the country's aid dependence. But what we saw happen after the Taliban takeover in mid-August was an extremely abrupt and enormous shock to the Afghan economy. And no government can, and no state, and no population can and no state and no population can weather that kind of abrupt economic shock

without public services and public welfare just tipping over a cliff. And so what I am advocating is more of a glide path. Afghanistan is going to be under under the Taliban, a more impoverished country than it was in recent years, most likely. And the government and the population will need to adapt. But that's different than just leaving them to try to weather this really enormous shock that has been suffered. Before that, you heard from Ali Latifi, online correspondent for Al Jazeera English. Our show today was produced by Will Reed, fact-checked by Laura Bullard, edited by Matthew Collette, and engineered by Afim Shapiro. I'm Sean Ramos for him. It's Today Explained. Thank you. Bye.