SAMS Monograph Series Stability Economics The Economic Foundations of Security in Post-conflict Environments Monographs from the School of Advanced Military Studies General Editors Nathan W. Toronto and Dan G. Cox Combat Studies Institute Press US Army Combined Arms Center Fort Leavenworth, Kansas Meeting of the Minds (cover photo) US service members meet with a member of a local Kuchi tribe residing in Bawka district in Farah province, Afghanistan, June 12, 2010. The service members, assigned to the Provincial Reconstruction Team Farah, visited three villages in the district to gather information on the needs of the village residents and to promote the importance of seeking government assistance to help resolve those needs. US Air Force photo by Senior Airman Rylan K. Albright Stability Economics The Economic Foundations of Security in Post-conflict Environments General Editors Nathan W. Toronto and Dan G. Cox Combat Studies Institute Press Fort Leavenworth, Kansas Editor Carl W. Fischer 2012 Combat Studies Institute Press US Army Combined Arms Center Fort Leavenworth, Kansas Library of Congress Cataloging-in-Publication Data Stability economics : the economic foundations of security in post-conflict environments / edited by Nathan W. Toronto. p. cm. Includes bibliographic references and index. ISBN 978-0-9855879-5-6 (alk. paper) 1. National security--Economic aspects. 2. Internal security--Economic aspects. 3. Postwar reconstruction--Economic aspects. 4. United States--Military policy--Economic aspects. I. Toronto, Nathan W. II. Cox, Daniel G. HC79.D4.S72 2012 330--dc23 2012030456 Disclaimer: Opinions, conclusions, and recommendations expressed or implied within are solely those of the author, and do not represent the views of the US Army School of Advanced Military Studies, the US Army Command and General Staff College, the United States Army, the Department of Defense, or any other US government agency. Cleared for public release: distribution unlimited. First printing 2012 Combat Studies Institute Press publications cover a wide variety of military history topics. The views expressed in this CSI Press publication are those of the author(s) and not necessarily those of the Department of the Army or the Department of Defense. A full list of CSI Press publications available for downloading can be found at: http://usacac.army.mil/CAC2/CSI/index.asp The seal of the Combat Studies Institute authenticates this document as an official publication of the CSI. It is prohibited to use CSI’s official seal on any republication without the express written permission of the Director of CSI. ii Contents Introduction Dr. Nathan W. Toronto ................................................................................................1 Entrepreneurial Expeditionary Economics and the United States Military Right Task, Wrong Tool? Major Thomas J. Archer-Burton RHG/D - British Army ............................................7 Expeditionary Economics and Its Implications on the United States Army Major Marc E. Pelini - United States Army ..............................................................35 Expeditionary Economics in Turbulent Times Lieutenant Colonel James R. Connally – United States Army ..................................73 Comparing Models for the Restoration of Essential Services during Counterinsurgency Operations Major Anthony P. Barbina - United States Army ....................................................105 Shari’a Compliant Finance The Overlooked Element for Developing an Effective Financial System in Afghanistan Lieutenant Colonel Jan Willem Maas - Royal Netherlands Army ..........................189 Conclusion Dr. Dan G. Cox ........................................................................................................221 Bibliography ...................................................................................................................227 iii ------------------------------------------------------------------------------------------------------------------------------------ Introduction by Nathan W. Toronto In the years after invading Iraq and Afghanistan, the US military realized that it had a problem: How does a military force set the economic conditions for security success? This problem was certainly not novel—the military had confronted it before in such diverse locations as Grenada, Haiti, Bosnia, and Kosovo. The scale and complexity of the problem, however, were unlike anything military planners had confronted beforehand. This was especially the case in Iraq, where some commentators expected oil production to drive reconstruction.1 When the fragile state of Iraq’s infrastructure and a rapidly deteriorating security situation prevented this from happening, the problem became even more vexing: Should a military force focus on security first, or the economy? How can it do both? This is the challenge of Stability Economics. One answer to this problem in Iraq was the Commander’s Emergency Response Program (CERP) and using money as a weapon system.2 The notion was that commanders could target funding at projects that would contribute to improvements in the economy and the security situation simultaneously. Beyond sparking an ongoing debate about CERP effectiveness,3 the evolution of money as a weapon system occurred under the shadow of a larger debate over whether the US military should prepare the future force for population-centric counterinsurgency operations or for large-unit combined arms maneuver operations.4 A force prepared for population-centric counterinsurgency would presumably also be better positioned to set the economic conditions for security success in a post-conflict environment. In very general terms, what one observer playfully called COINdinistas5 would favor the building of military doctrine and competencies to prepare the force to build economies in the future, the expectation being that facing such challenges are inevitable for the US military. Thus, the debate over how good the military should be at economic development influenced and was influenced by the debate over force structure and the character of future warfare. These debates arose in Afghanistan, as they did in Iraq, but at a later date. One important reason for this was the gap in resources that the US military dedicated to Iraq as opposed to Afghanistan. While the scale of US involvement in Iraq ballooned in 2006 and 2007, the problem of Stability Economics came into sharp focus. The force used some of the solutions learned in Iraq in Afghanistan, including CERP and using money as a weapon system, but the decidedly primitive nature of Afghan infrastructure placed limits on the transferability of such lessons. So, as the US military surged forces and resources to Afghanistan after the election of President Barack Obama and the winding down of operations in Iraq, military planners searched for solutions to new problems of Stability Economics. One solution to these new problems was expeditionary economics, sponsored by the Ewing Marion Kaufmann Foundation.6 Consistent with its mission to “help individuals attain economic independence by advancing educational achievement and entrepreneurial 1 success,”7 then-President and CEO Carl J. Schramm saw an opportunity to spur economic growth in the aftermath of military conflicts and natural disasters.8 In addition, he advocated the development of an economic development capability organic to the US military, akin to the School of Government that trained military commanders and staff officers for civil governance in post-World War II Germany and Japan.9 In May 2010, the Foundation held a conference at its Kansas City, Missouri, headquarters to spur a debate on these ideas. There were two follow-on conferences—held at the US Military Academy at West Point, New York, in February and May 2011—to further develop and convey these ideas. Then the momentum stalled. The Foundation published a few occasional papers,10 but after Schramm’s quiet and quite unexpected departure in January 2012 the Foundation decided to begin no more expeditionary economics initiatives, arguing that the idea, in the words of a person familiar with the situation, had “taken on a life of its own” and no longer needed support from the Foundation. Suspicion lurks, however, that the tongue was firmly in the cheek. At least one of the co-editors of this volume attended all three expeditionary economics conferences and had repeated interaction with individuals from the Foundation, both in person and over the phone. Rarely did the conversation move beyond whether the US military could—or should—be involved in economic development, much less reach the level of operational detail required to make expeditionary economics a military planning reality. In fact, at the first follow-on conference in February 2011, one of the editors of this volume asked when the conference would discuss such operational details, but was told that developing those details was the purpose of the second follow-on conference, in May 2011. Such operational specifics did not materialize then, either. Furthermore, repeated requests for the Foundation to comment on expeditionary economics-related work by operational planners at the US Army School of Advanced Military Studies (SAMS) went largely unrequited. Not only has the US military failed to develop an organic economic development capability—per Schramm’s objective—but the theory and knowledge to do so is still unavailable. By all reasonable accounts, then, the expeditionary economics movement had only limited success. This volume on Stability Economics begins to fill the gap that expeditionary economics did not: the operational details. What is the theoretical relationship between economics and security? What strategic, political, and environmental contexts do military planners need to consider in order to write economic development lines of effort into operations? At what point do economic development efforts pass from being necessary to achieve the security mission to being humanitarian aid mission creep? Stability Economics also puts the CERP effectiveness and force structure debates into their proper operational context. With respect to CERP effectiveness and money as a weapon system, Stability Economics recognizes that setting the economic conditions for security success entails more than targeting money effectively; it also entails a thorough appreciation of the social, political, and geographic conditions of the fight in which a military unit is engaged. In fact, armed with a robust theory of how economies grow in turbulent post-conflict environments, commanders could recognize that there are times when it is actually better to not spend money. By broadening the theoretical aperture, 2 Stability Economics gives commanders and planners the perspective they need set the economic conditions for security success. It is about more than spending money. It is about understanding the unique characteristics of post-conflict economies. The proper operational context for the force structure debate—should the force prepare for counterinsurgency or major combat or something in between?—is as a political condition for the conduct of Stability Economics. Individual military planners rarely, if ever, have the luxury of determining the structure of the force that will conduct the military operations they plan. They may influence this structure, but only in an indirect, diffuse way, through contributions to professional military discussions or in such forums as the Quadrennial Defense Review. More often than not, military planners take the force structure given in the context of the forces available and the political end states desired. For example, determining whether the force should include a 20,000-man advisor corps seems ancillary to setting the economic conditions for security success. Better to have a clear idea of how a commander might use any force to achieve economically-relevant goals. This is the gap that this volume on Stability Economics begins to fill. We present herein five SAMS monographs, as an effort to understand Stability Economics from the perspective of theory, history, and practice. The first two monographs review the theory related to Stability Economics. The first, “Entrepreneurial Expeditionary Economics and the United States Military: Right Task, Wrong Tool?” by Major Thomas Archer-Burton (United Kingdom Land Forces), provides a critical review of expeditionary economics. The second monograph, “Expeditionary Economics and Its Implications for the United States Army,” by Major Marc Pelini (United States Army), is more receptive to concepts in expeditionary economics, although it also offers a wider review of theory related to economics in war zones and highlights the need to develop some sort of Stability Economics capacity. The third monograph, “Expeditionary Economics in Turbulent Times,” by Lieutenant James Connally (United States Army), presents a historical case of a government applying Stability Economics principles: the Peruvian government combating Shining Path guerrillas. In doing so, it also emphasizes the importance of understanding the political and social context of an economy; some principles of Stability Economics may exhibit stability over time and space, but rarely are these principles truly immutable. The final two monographs begin to delve into the operational details of Stability Economics. The fourth monograph, “Comparing Models for the Restoration of Essential Services during Counterinsurgency Operations,” by Major Anthony Barbina (United States Army), examines the dominant model for restoring essential services—sewer, water, electrical, academics, trash (SWEAT)—against experience in Iraq and Afghanistan, and concludes that a more flexible Factor-Precedence Model provides a more robust framework for restoring essential services. The fifth and final monograph, “Shari’a Compliant Finance: The Overlooked Element for Developing an Effective Financial System in Afghanistan,” by Lieutenant Colonel Jan Willem Maas (Kingdom of the Netherlands Army), evaluates an alternative financial system model for Afghanistan, questioning as it does the appropriateness of Western modes of finance. While these final two monographs hardly cover the gamut of what doctrine on Stability Economics could entail, establishing a financial system and restoring essential services figure to be two critical pieces of the 3 puzzle. Furthermore, they contribute practical, operational details to add to the history and theory of Stability Economics. Military commanders and staffs will need to understand the theory, history, and practice of Stability Economics because they will undoubtedly confront this simple: How does a military force set the economic conditions for security success? In an increasingly globalized world economy, this is especially the case for the US military, since the United States has global interests and global reach. Furthermore, this question will likely obtain in a wide variety of different conflicts, from small advise and assist operations as in Uganda and the Philippines to larger-scale operations as in Iraq or Afghanistan. The scale and scope of the question may be different, but the need to understand the unique characteristics of economics in a combat zone will be the same. 4