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Home Publications Blogs Beat the Press How Much Is $1 Trillion in Afghanistan?

How Much Is $1 Trillion in Afghanistan?

Tuesday, 15 June 2010 04:43

The media have been highlighting projections produced by the military that show that Afghanistan may have $1 trillion of mineral wealth. It would be helpful to put this figure in some context. The NYT helpfully described this sum as being equal to $38,482.76 for every person in Afghanistan.

It would be useful to note that this is a gross number, it does not subtract the cost of extracting the minerals nor does it consider that these resources would likely be extracted over many decades. If we assume that the cost of extracting the minerals (e.g. foreign produced equipment, foreign trained technicians, profits of foreignh companies and environmental damage  -- not counting domestic Afghan labor) is between 25 and 50 percent of the value of the minerals, then the money going to Afghanis would be between $500 billion and $750 billion.

If this money is earned over a 40-year period (Saudi Arabia has been producing oil for 80 years), then it comes to between $12.5 billion and $18.8 billion a year. Afghanistan's population is currently 29.1 million, but it is growing at the rate of 2.5 percent annually. Assuming the growth rate slows, Afghanistan's population will average about 40 million over this period. This means that the revenue from the minerals will average between $312.50 and $470 per person per year. This is still likely to have a substantial impact on Afghanistan's economy, since its current GDP per capita is just $800 on a purchasing power parity basis.

Comments (14)Add Comment
written by izzatzo, June 15, 2010 7:34
Yawn. Ayn Rand explained all this years ago. Saudi Arabia would still be a backwater third world country if not for good old fashion American technical know-how that allowed it to extract its own natural oil resource. Same applied to backward American Indians who refused to acknowledge property boundaries set up by European immigrants, which created the greatest Tragedy of the Commons ever known to mankind and set back economic advancement at least a hundred years.

Until socialist economists like Baker get straight the difference between complementary resources that are necessary to work together in free markets to extract natural resouces, versus substitution effects where a foreign extractor comes in and not only provides the extraction resources at huge expense, but takes over ownership of the extracted resources as well, countries like Afghanistan will end up like the sovereign territories of American Indians.

Complements are always superior to substitutes in this area of economics. For example, for every US soldier in Afghanistan, a complement of $1M in military support spending is required, and without that, the $1T in mineral wealth would never have been discovered in the first place.

Stupid liberals.
written by preneke, June 15, 2010 7:40
The obvious question is how much does the average Afghani make in a year. Going back to an earlier post which seems like an important way to consider everything. How much does a current Afghani make per dependent and how does the mineral wealth compare to that. It may demonstrate a prejudice on my part but it seems likely that the mineral wealth will be significant in that context.
And it practically goes
written by doorworker, June 15, 2010 8:50
without saying that there's every reason to expect that the 'resource curse' will apply here as elsewhere, meaning the booty will be anything but equitably allocated across the Afghan population.

Oh yeah, and it also goes without saying what to do with any comment starting with the words 'Ayn Rand explained all this years ago'...
written by skeptonomist, June 15, 2010 9:08
Who knew that there are minerals in Afghanistan? Just all the geologists in the world. Pentagon propagandists made a lucky hit in getting the NYT to swallow this "story".
written by Brett, June 15, 2010 9:51
Of course that doesn't take into account the fact that US probably has all the big mining companies lining up to come rape and pillage Afghanistan and take all those minerals for themselves. I bet Afghanistan gets very little of that money in the end. It will all be mined and extracted by the big boys like BHP Billiton and Rio Tinto and others and they will probably pay Afghans slave labor wages to do the dangerous mining and will bribe Karzai to keep quiet about any back door arrangements and not speak out about how Afghanistan is getting robbed while he himself is being personally enriched.
written by Brett, June 15, 2010 9:57
"For example, for every US soldier in Afghanistan, a complement of $1M in military support spending is required, and without that, the $1T in mineral wealth would never have been discovered in the first place. "

Pretty much every news article about this find states clearly that the Soviet Union knew about Afghanistan's vast mineral wealth a long time ago. They discovered it during their occupation of the country in the 80s. So the announcement of this vast area of untapped mineral resources is suspicious at best - it came during a particularly bad time in the Afghanistan war when nothing seems to be going right and Obama's escalation isn't making any difference (big surprise there - didn't see that one coming!). It was a calculated leak of a fine piece of propaganda - "Oh yea! Afghanistan was worth it! The trillion we spent there in blood and treasure will pay for itself!" The headline for the article in the NYT should have been "US attempts to justify failed 9 year occupation by reminding everyone that Afghanistan has a lot of minerals to be harvested"
As Brett was saying
written by diesel, June 15, 2010 11:18
"and will bribe Karzai to keep quiet about any back door arrangements and not speak out about how Afghanistan is getting robbed while he himself is being personally enriched" until there is a popular revolt against his tyrannical rule, led by a professor or leading intellectual, who will be assassinated which will create such a surge of anger that Karzai, now pleading colon cancer, will flee the country and be denied amnesty in every civilized nation in the world except the United States where he will be admitted to the most exclusive hospital for the most expensive treatment and retire to live out the remainder of his life down in Palm Beach right next door to Rush Limbaugh, with whom he will be seen jovially strolling the links, cigar in hand, sharing an "El Presidente" moment.
written by Joseph Kennedy, June 15, 2010 11:36
You guys (& gals) are such skeptics. How did you ever acquire this wisdom?
written by Julian, June 15, 2010 11:59
Media stories like this always get to me. Has mineral wealth ever, in the history of Man, been shared out equally to all members of whatever geographical area it exists in? The media has tried to treat this "find" as a boon for the Afghans, but any student of history knows what will really happen. The "Great Powers" will bicker over who gets to have the extraction contracts, each of which will take a significant chunk of whatever profit there is to be had from these finds, then they'll bicker over who gets to build the roads and rails to remove the wealth, which will cut even further into what stays in Afghanistan. Securing these finds will be used as justification for foreigners remaining to fight in Afghanistan and, of course, those doing the fighting will try to claim the future value of said finds as payment for said fighting, leading to costly legal battles whichever way those claims turn out.

Then, after all of that, the rich and mighty in Afghanistan, not the people and not the "State", which is really nothing more there than a wealth-extraction system for the Karzai faction, will take the lion's share of the profits not grabbed up by foreign corps. The actual people of Afghanistan will have their current livelihoods, dismal as they may be, destroyed, the skills needed for them forgotten by decades of mining jobs, their valleys filled, their mountains flattened and all for 1/100th of what a U.S. miner made in the 1950s and 60s.
written by Julian, June 15, 2010 12:06
izzatzo: Yup, that's what got the Amerinds; A refusal to understand property law. If only they'd had lawyers! Your grasp of history is just uncanny. Exactly what I would expect from a student of that wonderfully rational, unbiased, and well-educated scholar, Ayn Rand.
written by PeonInChief, June 15, 2010 12:19
In addition to "see, this dumb war was really worth it," these minerals are in remote areas with terrain and climate that might be described as "difficult." Someday these minerals might be worth the trouble, but not for a very long time.
written by Matt, June 15, 2010 12:24
Look on the bright side all, the price on the streets for heroin will probably go up putting it out of reach of most. Of course the poor poppy farmers will have to move onto something else after they get pushed off their property. Can you smoke lithium? Well maybe we can bring them here to New York and put them in our crowded and broke prisons, I think the Rockefeller drug laws have such a provision.

Izzatzo thank you for revealing that politics and the people who follow it have no sense of humor.
Norway did manage to equitably distribute oil wealth
written by Ryan Toso, June 15, 2010 12:28
But I can't think of other examples. Surely a corrupt central asian puppet regime invites the worst possible outcome.

I think Dean is missing the forest through the trees, here; the possibility that the Afghan people will benefit from this wealth under current political conditions is zero.

Complete agreement with the posters here.
Answer to Joe
written by diesel, June 15, 2010 2:19
"How did you ever acquire this wisdom?"

By keeping our eyes and ears open and never drinking grape KoolAid offered to us by someone wearing a suit.

And, once again, Izzatzo is so ironic his yin has displaced his yang (or vice versa). That's whats confusing some people.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.