This Gift Horse has some Cavities

Looking into a gold mine - by CavinIncredibly, the news that Afghanistan, previously thought to be entirely worthless, boasts massive and incredibly valuable mineral wealth has been greeted with catcalls and cold water by seemingly everyone.  The consensus opinion holds that Obama and the Pentagon have planted the story to distract from what a terrible mess the war in Afghanistan has become.  Moreover, this story actually should be understood as bad news, since it will encourage US to stay there.  This analysis massively underestimates the gravity of an economically prosperous Afghanistan, tossing out the baby but keeping the bathwater.

 The biggest industry in Afghanistan today is terrorism.  Technically it's opium, but the value of exported opium is dwarfed by the Western money that flows into Afghanistan to deal with terrorism.  The US spends five times the total GDP of the country fighting there.  Hell, pledged donations since 2002 are four times the size of the Afghan economy.  All of the roughly similar countries in the region boast double the per capita GDP despite having economies centered around remittances from exported service labor.  There are a host of historical and political reasons why Afghanistan is by far the worst country in one of the generally poorest parts of the world, but this truth is inescapable: nothing is going to make the Afghan economy worse.  

Modeled Behavior lays out how Dutch Disease, where exported resource production makes local products too expensive for natives, works:

One mechanism by which resource wealth translates to negative economic outcomes is the so-called “spending effect”. This is where a large increase in resource export revenues causes a large increase in demand which drives up the price of non-tradeable goods relative to tradeable goods because the prices of the latter are determined on the world market. This effect can also work via currency appreciation, which further hurts the competitive position of local non-resource tradeables.

Over 78% of Afghans work in agriculture, which is to say either subsistence farming or drugs.  Four fifths of the population doesn't have an economy in other words.  They have the lowest concrete production in the world, so building houses can't get more expensive because they already can't build anything.  The average Afghan can't read and doesn't know anyone with wage employment besides members of the Taliban or the Afghan government.

Without developing its mineral wealth, the likeliest path for Afghanistan is the West loses its patience, washes it's hands and maybe in after a decade or three of civil war they can try to become Yemin.  With the incentive of making lots money, however, then lots of people will try to build the infrastructure necessary to begin mining those minerals.  That means roads, electricity and jobs even if there is corruption, exploitation and instability.  All caveats apply, mineral development is decades away even in the best case scenario and if Afghanistan remains one of the most violent places on Earth, then maybe it won't be worth it to ever get the minerals out.  It should not even need to be said that US military should not stay in Afghanistan because of mineral deposits. But at the very least, a reasonably feasible way to massively improve the lives of Afghans now exists and economic growth often takes care of everything else.  Afghanistan is a huge pain in everyone's ass and it's economy was based on continuing to be a pain in the ass.  Now there is an alternative.  That's a reason to celebrate, caveats be damned.