Conflicting Wheat-Opium Trade-offs

By Fester:

In early April, I was riffing on the idea that the high prices of scarce wheat in comparison to the stagnant prices for abundant opium offered a plausible economic wedge issue for counter-insurgent exploitation in Afghanistan:

The incentive for profit seeking Afghan farmers is to change their production profile from the black market poppy to white-market wheat.  Some of this is due to the price increase in wheat due to shortages, and part of this is the global heroin glut as production has boomed over the past couple of years.  Since a wheat farmer (all else being equal) does not need to fear eradication efforts, the need for Taliban protection decreases massively, as well as Taliban smuggling profits (who wants a black market loaf of bread....). 

The increased white market cash flows to farmers are coming out of local urban markets which may be a bit of a problem as Afghani cities are not that productive and do not produce large surpluses to pay for rural goods. So while rural landowners and steadholders will benefit, the relative prices of living in the cities have gotten a whole lot higher to provide this rural benefit. I do not know enough about Afghan city population composition to intelligently speculate how the Pashtun/non-Pashtun splits are in the cities, BUT on the economics, providing bread subidies as part of a counter-insurgency effort to urban populations could probably mitigate most of the impact of higher local and global wheat prices while tying people closer to the government.

Kip at Abu Muqawana disagrees with this analysis as they outline their take on the food crisis and how it impacts Afghanistan and counter-insurgency efforts:

The global food crisis is perhaps the least reported big event of the year. It stands to kill far more people than the cyclone in Myanmar or the earthquake in China. First it will kill through starvation, and then through the conflict over resources that it spawns. At a conference of experts that Kip observed on Afghanistan several weeks ago, all agreed that rising food prices were the single thing capable of throwing the country into utter and perhaps unrecoverable chaos. The same might be true of nuclear-armed Pakistan as well, not to mention several dozen other weak or failing states....

In Afghanistan, rising [food] prices may result in further entrenching the opium economy as the sure way to provide the cash needed to import grains. This would be bad news for the counterinsurgency effort, which needs to weed the populace and the government off of the proceeds of opium if we are to have a shot at winning....

I agree with Kip that high costs of food and food scarcity is a massive threat of legitimacy of governments in weak and poor states.  However I am grappling with the implied economic dynamics within the Afghanistan example.  One of the big comparative advantages the United States has in a counterinsurgency effort is that we print our own hard currency (albiet a weakened one) and can pass out big blocks of fresh fifty and one hundred dollar bills.  The Taliban and Pashtun insurgent/guerilla bands can not do that.  They actually need to participate in a market to gain cash.  Why not pass out food stamps or cash bread subsidies?