Afghanistan Was a Ponzi Scheme Sold to the American Public

Co-written by Alan Richards

As the political fight over who lost Afghanistan gets bloodier, the latest round has shifted from lamentation over the probable return of al Qaeda to the disorderly exit from Kabul. Vivid images of chaotic activity at the airport underscore this concern. But, in fact, the withdrawal could never have been orderly, as critics unthinkingly imply. An orderly, carefully prepared exit was structurally impossible.

To understand the U.S. exit from Afghanistan, think of Bernie Madoff. It is helpful to see the U.S.-built Afghan state as a Ponzi scheme—it was all a house of cards, and, at some level, everyone knew it. Certainly, anyone who was familiar with the U.S. government’s own inspector general reports over the past 10 years would know.

For those unaware of the Madoff scandal, a Ponzi scheme is a series of lies, with little or no factual basis, that are sold to investors as brilliance. It depends on a continual infusion of funds from new investors; the new payments are initially used to pay the original investors. So long as more and more investors can be conned into providing their money, funds are found to pay previous investors, and the scam can continue. When it becomes hard to get continued funding, or when important investors begin to withdraw, others notice, become skeptical at first, then panic, and finally withdraw their money—and, as in a bank run, the rush for the exits ensues.

The U.S. Securities and Exchange Commission (SEC) notes that “Ponzi scheme organizers often use the latest innovation, technology, product or growth industry to entice investors and give their scheme the promise of high returns. Potential investors are often less skeptical of an investment opportunity when assessing something novel, new or ‘cutting-edge.’”

Read the full article in Foreign Policy.