August 5th, 2009

## Solving the poverty problem in Afghanistan by handing out money

Afghanistan has never been rich. After thirty years of invasion, war, and religious totalitarianism, it is now one of the poorest countries in the world. The insurgency and various kinds of organized thuggery and warlordism (and some counter-insurgency actions) help keep the place poor; poverty (and counter-insurgency actions, plus poppy crop eradication) encourage people to join the insurgency or various bandit/warlord outfits.

US expenditure budget for Afghanistan this year is to be \$65 billion; I’m not sure how much NATO and other countries add to that. The US budget alone is more than 5 times the Afghan GDP of \$12.5B (\$400 per capita).

Solving the security problem is hard, especially given the very limited capacity and very dubious integrity of the Afghan security forces. But solving the poverty problem might be easier.

Consider the following program:

1. Partition the map of Afghanistan into areas of roughly 500 residents (50-150 households). Given that the Afghan population is 32 million, some of it urban, and that there are said to be 40,000 villages, that must be roughly the size of the typical village.

2. Designate an individual or local council in each village (or urban equivalent) as a point of contact. With a population of 32 million, that would be potentially 64,000 points of contact. If 3/4 of the population lives in areas not controlled by warlords or the Taliban, that means something like 50,000 actual points of contact. You can more or less tell which areas are secure by whether some individual or group wants to stand up as the recipient of the money.

3. Deliver (in cash in the countryside, by direct deposit in the cities) \$20 per capita (roughly \$10,000 per area) to each point of contact. Nominally, that would be for for some mix of local public goods and public services and redistribution to the household level. Actually, much of it would be misappropriated; how finicky to be about that is a design question, and whether it’s possible to get feedback from residents (e.g., by cell phone) to put a limit on the level of peculation is a social-networking question.

Assume that 3/4 of Afghanistan is “secure” enough so that someone could be designated as a point of contact without getting killed. 24 million people at \$20 per month is roughly \$500 million per month, or \$6 billion per year. Chickenfeed.

Operationally, that means making 48,000 cash deliveries per month. Say you’d want to have 4-soldier teams to make the deliveries, and that a team could make 2 deliveries per day, 24 days per month. That’s 1000 teams, or 4,000 soldiers. Doesn’t sound operationally infeasible.

Suddenly every “secure” area is, in rural Afghan terms, reasonably prosperous. (Kabul is a much more expensive place to live.) In a country with a GDP per capita of \$400 and a hugely unequal income distribution, \$240 per person per year, which is what you’d be handing out, is probably greater than the medium household income.

And now every Afghan — and especially the 50,000 or so influentials handing out the cash and the additional 15,000 who would be doing so if their areas were designated as “secure” — has one strong reason to want the Taliban to go away.

On the one hand, this sounds like a crazy think-tank scenario. On the other, I can’t see any obviouls reason why it couldn’t work, and the downside seems reasonably modest.