In one of the most important developments since the war in Afghanistan began in late 2001, opium production has declined in the country. Over 20 of the country’s 34 provinces will be opium-free this year according to a report by the United Nations that has now been corroborated by Afghanistan’s counter-narcotics minister, General Khodaidad.

Among the provinces with remaining opium cultivation, the Taliban-dominated Helmand province ranks high, but even here it is being seen that the humble wheat crop has replaced poppy. Some newspapers that sent reporters to Helmand province, over the course of April and May this year, have independently verified this assertion. A European television program on the subject was among the most-forwarded news items on the Internet last week.

Interestingly, it is not the efforts of the Afghan government alone that have caused the reduction in opium production but something much more mundane, namely the increased price of wheat, that has pushed up production of the grain in many parts of the country. Therein lies a tale of so-called market manipulation that actually goes back to one of the central points about rural poverty alleviation in the region, namely the strength of economics.

Regular readers of this column will recall my frequent diatribes against the socialist-communist caucus of Asian politicians and media that tend to heap the blame of society’s ills on the vagaries of market forces. In their line of thinking, market forces intent on making a quick profit too often subvert the actions of farsighted and perspicacious socialist leaders. Ah the poor, misunderstood old souls, having to grapple with these selfish traders instead of quietly enjoying a cup of jasmine tea.

Well, here then is an example in the opposite direction, namely one of many governments trying and failing repeatedly to cut opium production in Afghanistan, only to step back and see market forces doing the job for it. The invisible hand of the markets has proved itself to be more powerful than all the carpet-bombing that the North Atlantic Treaty Organization (NATO) could think of to eradicate opium production in Afghanistan.

High food prices, a result of increased consumption in emerging Asian superpowers and other countries around the world, have helped to divert the energies of Afghan farmers from poppy to wheat. A ban on wheat exports by Pakistan this year only exacerbated the supply and price situation in Afghanistan, in turn prompting farmers to focus on increased wheat cultivation. That is exactly as it should be, when prices go up in the absence of any change in marginal input costs; production (ie supply) should increase.

It is as yet unclear to me how much the Taliban have been hurt by the increased wheat production in place of opium. At the very least though, they would need to have vastly different infrastructure in place to make the same kind of money by selling wheat as compared with opium from the provinces they control because wheat is more bulky. Secondly, because farmers can eat their own produce, they do not depend on the Taliban for money secured from delivering poppies cultivated, in effect changing the power dynamic for the warlords. Over the next few weeks and months, we will see how the changed economic dynamic of Afghanistan affects the recruitment and military success of the Taliban.

My guess is that the effect of reduced opium production will be quite heavy on the Taliban, seeing as it is their primary source of income. Religious war or not, the Taliban need to pay their soldiers princely sums of money (by local standards) to fight the war against NATO in the country. With their coffers depleted and their own expenses on fuel and food going up, it is likely that the Taliban would face greater pressure. In thinking about all the causes for their troubles, it is possible that the Taliban wouldn’t pay much attention to the price of wheat but it very much here that their problems started.

I have argued in these pages before that the anti-market operations of the European Union in defending and expanding its Common Agricultural Policy had the pernicious effect of pushing down food production in various parts of Africa and Asia. Over the past few years, as these countries started growing richer on increased trade, the resulting increase in food consumption could not be met with higher production thereby driving prices up sharply.

Even here, the actions of various socialist governments – for example Vietnam banning the export of rice earlier this year – only served to exacerbate the problem. Once the price of rice increased above a certain level, various farmers in the US and elsewhere switched their summer crops to rice from corn, ensuring that future supply would increase. This is how markets operate an almost seamless self-correcting mechanism that governments are simply ill-equipped to duplicate. Often enough, they produce the kind of jarring change that the Taliban are witnessing, the same one that other nasty regimes from North Korea to Myanmar are also facing.

From Taliban to tigers

The lessons of fighting the Taliban from the pits of commodity exchanges around the world though can be expanded to other aspects of development. A key debate across Asia focuses on how to preserve the varied fauna of the region from extinction. Perhaps the most iconic of these would be the tiger, which now faces extinction in the country of its most recent resurgence, India.

The main factor contributing to the tiger’s potential extinction is the rampant demand for its sexual organs (of the male) in Chinese medicine. One of the more significant failures of the Chinese government in recent years has been its inability to modernize the country’s knowledge base when it comes to ancient cures. Far from condemning the practice of using exotic animal parts for unproved medicinal remedies, the Chinese government instead has sought permission from wildlife bodies to slaughter its zoo population of tigers for the purpose.

The potential impact of a tiger’s sexual organs on one’s libido is almost surely mythical, which makes the extinction of the majestic animal a tragedy of farcical proportions. Here though is a simple market problem, namely that a dead tiger is worth more than a living one. That price disparity seems strange when you consider that tourists are more likely to spend a few thousand dollars on an Indian safari experience if there was a chance of actually seeing a tiger in the wild.

Why then have locals in these wildlife reserves not helped to preserve the tiger, instead of joining with the poachers? Simply put, it goes back to their lack of ownership in the well-being of tigers. Their meager wages as waiters and drum beaters proves insufficient, compared to the offer for killing a whole tiger for the poachers.

India can certainly learn much from the successful experience of tourism in various communities ranging from the Masai tribe in Kenya to the pristine havens of Southeast Asia. In all these cases, it is not the addition of hundreds of gun-toting rangers that has helped to preserve wildlife, but the economic well-being of the local population that ensures that the wildlife survives so that tourist dollars continue to flow.

It is not just in poor countries that such economic dynamics work. Australia and New Zealand depend on tourists to supplement agrarian incomes in many communities. As a result, they have spent enormous efforts in ensuring the well-being of natural wonders like the Great Barrier Reef and various whale species that dominate the waters around New Zealand. It is no accident that these two countries have taken up the cudgels against Asian poachers who use unsustainable fishing practices such as cyanide fishing that is common in the Indonesian archipelago but seldom seen in the waters around Australia, or indeed that they have helped set the pace in protests against Japanese whaling ships.

In the latter case, the use of diplomatic and cultural protests against the Japanese does mask the underlying economic conflict between high prices for whale meat in Tokyo and tourist tickets for whale watching off the northern coast of New Zealand. Therein lies a tale for resolving other environmental issues across the region.