Afghanistan's Opium Poppy Economy

Originally posted December 2009

Richard Holbrooke, the US Special Representative for Afghanistan and Pakistan, recently described the US counternarcotics effort in Afghanistan as “the most wasteful and ineffective program I have seen in 40 years in and out of government.”^[1] Yet, during the period of 2005-2008, the United States allocated about $1.468 billion to counternarcotics activities, compared to a UK contribution of $1.545 billion. Holbrooke’s remark is therefore a fairly damning indictment of the US government’s effort — one with which it is difficult to disagree. How did the United States get it so wrong?

This essay focuses on the bigger issues and the awkward but persistent themes related to counternarcotics policy. It starts by laying out four issues that must be considered, before addressing the following questions: What drives the opium poppy economy? What have been the consequences of its trajectory? Finally, what room is there for an improvement in the policy response?

Four Issues

First, it is often argued that Afghanistan’s opium poppy economy is unprecedented. However, it is important to note that opium has a history, dating back to the promotion of its cultivation and the globalization of its trade by the British in India. In the 1960s and 1970s, opium cultivation shifted to Southeast Asia, a decade later to Turkey and Pakistan, and later to Afghanistan. Opium poppy is a footloose crop. If “success” is achieved in Afghanistan, history indicates that cultivation will move somewhere else. Under such a scenario, what would “success” in Afghanistan mean — that is to say, what would be its consequences?

Second and related, the opium market is driven by demand. To borrow from Mancur Olson, it is an “irrepressible market.” The demand is largely, although not exclusively, in the West. To what extent is the West accountable to Afghanistan for the factors that drive the opium market? Does it make sense to seek to regulate a market by addressing the supply, rather than the demand end? Moreover, there is also a legal market for opium, which is the source of morphine — still the most effective pain killer and grown in the United Kingdom and elsewhere for that purpose. One could question the consistency of seeking to destroy a crop deemed to have been grown for illicit purposes, while considering its cultivation by others to be licit.

Third, there are some distinct political and governance tensions related to the attempts to control opium cultivation. It could be argued that opium poppy is located at the intersection between an emergency requiring short-term measures and a development problem necessitating a considered long-term response. Thus, is the cultivation of opium poppy a symptom of a problem (the development problem) or a cause of it? Counternarcotics policy essentially has treated opium poppy as a cause and, therefore, as something to be eradicated; in fact 50% of the US effort so far has been devoted to eradication measures. But if, as some have argued, the cultivation of opium poppy is an outcome of state failure and therefore a symptom, then governance issues of decentralization, the participatory process, and individual rights — not least, the right to food security — might take precedence. Instead, there has been a centralized response that emphasizes control of opium and prioritizes the West’s public good.

Fourth, the opium economy tells us something about the state-building process in Afghanistan. Thus far, the narrative largely has been apocalyptic, emphasizing the opium economy’s effects on corruption and the building of a shadow state. But crises also can generate transformatory processes. More could have been done to help the Afghan government craft a response to opium poppy that would have enhanced its legitimacy and contributed to state building. Opium arguably has done more to reduce poverty, drive the rural economy, and, perhaps more controversially, support conflict resolution processes than anything else on offer. Could the opium economy not have been used more creatively to assist the state building effort?

What Has Driven the Opium Poppy Economy?

In general, it is clear that market demand drove the expansion of opium cultivation in Afghanistan from 2001 to 2006. There is nothing exceptional about the way the opium market works in comparison with any other commodity market, including in Afghanistan.^[2] But cultivation also has been driven by the need for welfare and food security, and conditions of risk and insecurity. In that sense, opium has been a low risk crop in a high risk environment. Price and profit does matter, and the opium economy traverses three conceptually distinct economies that in practice are seamless: a welfare or coping economy, a black economy where profit is the motive, and a war economy wherein, it can be argued, opium is a conflict commodity.

One needs to look more closely at the spatial patterns of cultivation in Afghanistan and be attentive to where it has spread, when and why, and where it has not been grown. The body of evidence^[3] indicates that several, often location-specific and dynamic factors are the key to understanding the spatial patterns of cultivation. They include underlying agro-ecological factors (water availability being crucial), combined with land scarcity and limited market access. Underlying determinants of social inequality, linked in many cases to social identity (ethnicity) and location (upstream or downstream in irrigation systems) also are relevant. In addition, drought, price shifts, food insecurity, and physical insecurity — confounded by the effects of counter-narcotics practice, threatened or actual — play a role in shifting cultivation.

All this means that that the key indicator of counter-narcotic success that has been used — changes in opium poppy area^[4] — is deeply problematic. There has been a distinct tendency to muddle and confuse correlation of changing area with counternarcotics efforts. There also has been a tendency to assume causality, when the underlying changes in opium poppy area have little to do with counternarcotics efforts.

Counternarcotics policy largely has assumed profit maximization and individual choice in its behavioral change model. Yet, what is the role of choice when the determinants of poverty are individualized, are considered as an outcome of relations,^[5] and are linked to social position (individual and community) within interlocking structures of inequality,^[6] such as the patterns of cultivation in Balkh in northern Afghanistan clearly illustrate? There is a need to understand the behavior of households and individuals, and the choices that they have, given the social and contextual conditions in which they live. Counternarcotics policy must focus much more on changing the context within which households lead their lives — on poverty inequalities and gradients of poverty — rather than on individual household behavior.

What Have Been the Consequences of the Opium Poppy Trajectory?

This needs to be considered at multiple levels. First, there is no doubt that opium poppy has been the best “cash transfer;” that is, opium has done more to reduce income poverty and assure food security than anything else on offer. Despite efforts to paint the opium economy as debt inducing and impoverishing, the evidence does not support this.^[7] The growth of the opium economy has had important multiplier effects on the rural economy — creating access to land and employment both on and off farms. There is no other crop that could have done this. It could be argued that opium has arrested a historical trajectory; that is, it has kept people in the rural economy. Once opium cultivation is eliminated, migration out of a land-based economy will be inevitable for many who are either landless or whose land holdings are miniscule.

Opium certainly has been a lubricant for existing social structures — assisting conflict resolution processes^[8] and easing underlying social tensions between different ethnic and social groups.^[9] Undoubtedly, it has supported the rise of a “shadow state,” where the distinction between using official position for the public good and private gain merges. But one has to be careful to separate out the pre-existing patterns and structures of bureaucratic behavior which always have been distinctly patrimonial in Afghanistan (which some would refer to as “government by relationships”^[10]) from the direct consequences of the opium economy.

Much has been made of the link between opium and conflict, and particularly between opium and the insurgency in the south. It has been argued that opium and the Taliban are intrinsically related to each other.^[11] There is no question that revenue from opium tax or trading has contributed to the Taliban’s funds. However, opium’s overall contribution is certainly debatable;^[12] moreover, it is highly unlikely that if the insurgency were to lose opium as a source of funds, this would undermine its resource base. Opium has not been intrinsic to the insurgency, simply a resource that has been opportunistically used.

What have been the consequences where opium has declined? Recent field evidence from Badakhshan,^[13] where poppy has been grown for a century or more, points to a collapse in the rural economy, a decline in food security, and emigration to Iran or into employment in the army or police (which carries its own risks).

Policy Responses

Counternarcotics policy has been part of the problem — a tendency by key players, notably the United States, by virtue of its funding weight, to go it alone in a program that has achieved little. Contextual, engaged responses have simply not been on the agenda. There has been donor competition with alternative organizational structures making a mockery of policy coherence and coordination.^[14] The distortionary effects of the size of the US counternarcotics budget and its emphasis on eradication have undermined the government of Afghanistan’s counternarcotics strategy, which has placed greater emphasis on reducing the opium crop area as an outcome of other counternarcotics measures than on eradication as the means to bring about an end to the opium economy. The effect of US funding has been to locate the effort on eradication at the bottom of the opium poppy value chain where 90% of the actors are to be found. The effects have been poverty and conflict inducing, as poor people turn to the insurgents for support.

Much has been made of the provinces that have achieved poppy-free status, but this is likely to be highly fragile and many of the underlying drivers of the recent decline are likely to be durable, not least given the close link between the opium economy and provincial level political structures.

Where is there room to maneuver? More efforts could be made to link policy to government budgetary mechanisms, giving the Afghan government greater control and ownership of policy, with strings attached to funding of course. While some counter-narcotics action at the production end of the value chain may be necessary, it has to be consistent with good counterinsurgency practice. This would entail focusing on changing the context of insecurity, economic opportunity, and local governance, which dictates household choice. The worst effects of the opium trade undoubtedly need to be targeted, particularly its coercive power. All the reports indicate that Afghan government officials are among the worst offenders in this respect. But above all, there needs to be a greater effort to craft a strategy based on a much more open-minded, informed, and strategic engagement with the present conditions in Afghanistan and the opportunities that they offer.