Though the 20-year-long war in Afghanistan is being considered a failure for the American government, for its defence contractors, the war was a resounding success.
For instance, if you bought $10,000 worth of stocks evenly divided among America’s top five defence contractors on September 18, 2001, and then reinvested all the dividends, it would now be worth $97,295.
This return is far greater than what was available in the overall stock market during the same period, Jon Schwarz writes for The Intercept.
In comparison, $10,000 invested in an S&P 500 index fund on September 18, 2001, would now be worth $61,613, meaning defence stocks outperformed the US stock market by 58% during the war in Afghanistan, Schwarz adds.
And since the top five biggest defence contractors — Boeing, Raytheon, Lockheed Martin, Northrop Grumman, and General Dynamics — are part of the S&P 500, the remaining firms had lower returns than the overall S&P returns.
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To understand how this would have looked for a direct benefactor, we can look at the US Secretary of Defence Lloyd Austin.
Austin may have received as much as $1.7 million when he divested his shares in Raytheon, of which he was a director in the four years between retiring from the army and assuming his current post, according to Bloomberg.
The dependence on contractors cost America a lot of money in the war.
The Pentagon has spent $107.9 billion on contracted services in Afghanistan since 2002, a Bloomberg Government analysis shows.
At its height in 2011 there were almost 120,000 US contractors in Afghanistan, compared to just 100,000 US troops. But after troop numbers started to fall in 2013, that figure also fell rapidly.
There were nearly 7,800 DOD contractors in Afghanistan, according to the Pentagon quarterly contractor census report in July.
These contractors were tasked with supporting the military with everything from lodging, laundry, and food to transportation, equipment maintenance, and fuel.
In a report published on August 16, the Special Inspector General for Afghanistan Reconstruction said that because much contract work in Afghanistan went unsupervised, it left the government open to waste, fraud and abuse that typically showed up as new, contractor-built facilities [that] had to be repaired or completely rebuilt.
A $2 trillion war
The entire 20-year-long war effort cost the US $2.26 trillion in Afghanistan, according to the Costs of War Project at Brown University.
Of this, the biggest chunk of nearly $1 trillion was consumed by the Overseas Contingency Operations budget for the Department of Defence.
The second biggest line item of $530 billion is the estimated interest payments on the money the US government borrowed to fund the war.
By 2050, the cost of interest alone on the Afghan war debt could reach $6.5 trillion.
The US government also spent $145 billion in trying to rebuild Afghanistan, but much of that money went to private contractors and NGOs the US government tasked with implementing programs and projects to build Afghanistan’s security forces, improve governance, aid economic and social development and combat illicit drugs.
The most critical failure of those reconstruction efforts, however, was the $88.3 billion spent training and equipping the Afghan army from May 2002 to March this year.
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Within weeks of US withdrawal, the 300,000-strong force laid down arms in the face of the Taliban’s advance.
And all that money spent did not help the Afghan economy either.
Last year, the then president Ashraf Ghani said 90% of the population was living on less than $2 a day.
The country's economy grew 9.4% between 2003 and 2012, driven by a booming aid-supported services sector and farming output. But between 2015 and 2020, economic activity slowed to about 2.5% per year.
Covid-19, a drought, low remittances, declining trade, and growing instability in the country led the International Monetary Fund (IMF) to revise down its growth forecast in June this year to 2.7% from a previous 4% estimate.
Furthermore, inflation in the country has increased and was forecast to reach 5.8% by the end of 2021.