The Economic Costs of the Afghanistan Conflict

At the end of February 2020, the United States and the Taliban leadership signed a conditional peace deal, after a year of touch-and-go negotiations, to bring about a favorable de-escalation of hostilities and the eventual withdrawal of all U.S. troops from Afghanistan. Whether or not this actually represents the first step toward a true end to U.S. involvement in the country, it presents a useful moment to look back at the 18-plus years since the initial invasion and to ask what there is to show for it. Anyone making an honest assessment of the war would be hard-pressed to salvage fruitful results from the conflict. Meanwhile, the costs that the nation has paid in blood and treasure glaringly illustrate the true devastation that Washington’s nearly two decade long chapter of hubris in the ‘Graveyard of Empires’ has inflicted upon American society.

To appraise the outcome of the U.S. involvement in Afghanistan since 2001, the war needs to be examined in its economic context, specifically through the lens of opportunity cost. Frédéric Bastiat famously developed this concept in the mid-19th century with his work What is Seen and What is Unseen. Half a century later, the theory of ‘alternative cost’ or ‘opportunity cost’ entered the economic lexicon from Friedrich von Wieser. From the current perspective, we can only see where the chips have in fact fallen. What remains unseen is how the economic conditions would be different under alternative circumstances. How then can we comprehend the magnitude of the consequences of directing a considerable amount of national resources toward the purpose of the U.S. mission in Afghanistan?

Tom Woods Jr. highlights the work of Seymour Melman, professor of industrial engineering at Columbia University, who echoed, from a left-leaning perspective, the conclusions of many Austrians and libertarians on the consequences of a bloated military state on a national economy. Among his many insights through the Vietnam years and the 1980s, Melman brought into question the widely used metrics of national output, Gross Domestic Product (GDP), and Gross National Product (GNP) as inaccurate representations of the material consequences resulting from different forms of production. He made a qualitative distinction between what he called productive growth vs. parasitic growth. Productive growth refers to goods and services that either add to economic standard of living or can be used for further production. Parasitic growth refers to goods and services that do not have such utility, representing an eroding force on the overall wealth of society. With military production, the state uses both material as well as human resources in the form of able-bodied young service members and highly skilled technical workers for research and development and production.

On top of the distinction between productive and parasitic growth, Melman takes the draining effect of parasitic growth further by drawing attention to the snowball effect that occurs in which its full cost to a society exceeds the money value of the materials, man hours, and machinery used up for military purposes. Neutralizing the potential compounding productive growth of production in line with consumer preferences further robs society of the additional benefit that would have accrued in the absence of such parasitic growth.

Expand this logic to the greater U.S. economy and the ramifications of a nearly two decade long protracted war on the other side of the globe begin to sink in. A Brown University study on the costs of the post-9/11 wars through fiscal year 2019 determined the cumulative appropriations for Defense Department and State Department/USAID spending in Afghanistan for the conflict and for development projects to be around $975 billion since the beginning of U.S. involvement. Other estimates put the cost well over the one trillion dollar threshold with the ‘reconstruction’ projects alone costing more than the entire Marshall Plan aid to Europe after World War II. This anchors our understanding of the financial costs of military manufacturing, research and development, and the associated implementation with bureaucracy and troops.

Consider then the human cost of troop deployment. According to a BBC report summarizing the U.S. mission in Afghanistan, the U.S. has suffered around 2,300 dead and 20,660 wounded during the duration of the conflict. The most recent accounting of troop levels at the end of 2019 had the U.S. keeping 13,000 troops with almost just as many contractors at 11,000 personnel. During the surge in the first term of Barack Obama, levels reached highs of over 100,000 at a time. Troop deployment overseas has the effect of displacing those servicemen and women from the domestic economic sphere. In this position, they do not engage in civilian-side labor, consumption, investment, and entrepreneurship as they would if not for their military roles. The public has seen thousands of soldiers sent to Afghanistan year after year, most coming home to their families eventually, many coming home with injuries and trauma, and some coming home in flag-draped coffins. The ripple effects of returning service members—those who survived and those who did not—in terms of suicide, post-traumatic stress, and family anguish, escape calculation. The potential impact that these young men and women may have had if they had not deployed in a military capacity to Afghanistan remains unseen. The same principle may be applied to all those employed in research and development and manufacturing related to military production in the form of weapons, apparel, equipment, food, medical supplies, technologies, etc. as well as in bureaucratic roles in the U.S. government related to the conduct of military operations and development projects in Afghanistan.

In a time when political candidates in the U.S. bring health care, university tuition, minimum wages, and other civil welfare mechanisms to the center stage of their campaign platforms, it would be remiss to overlook the hefty gash in the national economy left from slicing billions of dollars out of it, year after year to use in Afghanistan. With Melman’s distinction between productive and parasitic growth, we may speculate about what society would look like had it not been for the state allocating this much national wealth to tasks in Afghanistan and to the many other American commitments around the world. We may wonder: ‘How much would medicine have cost?’ ‘Would more people have pursued higher education or rather not?’ ‘What wages would an entry level have job yielded?’ ‘Would homes have been more affordable or less?’ What is seen is that health care and medicine prices remain high, that tuitions plunge young people into debt, that some households require multiple low earning jobs to stay afloat, and that more and more people are seen homeless in major cities. The outcome of an alternate reality where $975 billion and hundreds of thousands of young men and women were not deployed in Afghanistan, but instead freed up for productive utility at home would likely be staggering, but unfortunately remains unseen.

All of this only takes the ongoing U.S. involvement in Afghanistan as an example to illustrate the concept of opportunity cost and to use the lens of productive and parasitic growth to examine the military economy of the U.S. The other side of the equation of course concerns the costs borne by other countries involved in this particular conflict area, chiefly, Afghanistan and Pakistan as well as countries of comparatively peripheral commitments. The economic distortions that U.S. efforts in Afghanistan have caused through cash injections, development projects, civilian casualties, and allied entanglement since 2001 can spawn volumes of further works. Despite the recent deal, it would be prudent to remain skeptical that the U.S., the Taliban, and the Afghan government will proceed in a predictable fashion moving forward. The result of the deal remains to be seen and may not be as rosy as advertised.

The approach presented here can be expanded to include the various other conflicts that the U.S. has been engaged in since 9/11 or even before. It can also shine a light on the economic policies of other countries, how they might benefit or impair the wealth and living standard of citizens. It can emphasize the seen consequences of parasitic growth and help us imagine the unseen.