My basic takeaway from Timur Kuran’s 2011 The Long Divergence is that Mideast countries that have interpreted Islamic economic stricture the most broadly have performed the best economically, while strict adherence to things like bans on interest hold back prosperity.
The Taliban is getting a harsh lesson in the limits to Islamic economics as it deals with international air service from Kabul, now that they’ve returned from the role of rebel force to that of managing institutions of governance. Price controls lead to scarcity.
- Pakistan International Airlines has been the only international carrier offering regular air service from Kabul since the Taliban takeover
- Operating in Kabul is challenging. It’s also risky. They’re facing heavy insurance surcharges.
- Flight prices have risen in some case more than 10x compared to levels when the previous government was in power and the U.S. military provided stability.
- The Taliban has ordered the airline to lower its prices by 90% or more, back to earlier levels.
- In response, the airline is pulling its scheduled Kabul service.
“Our flights frequently faced undue delays because of the unprofessional attitude of the Kabul aviation authorities,” Abdullah Hafeez Khan, the PIA spokesman told the AFP news agency. …A source at the airline told AFP that Taliban officials were often “derogatory” and on one occasion “physically manhandled” a staff member.
…The Afghan transport ministry said in a statement that prices on the route should “be adjusted to correspond with the conditions of a ticket before the victory of the Islamic Emirate” or the flights would be stopped. It urged passengers and others to report any violations.
The early Taliban experience should also be viewed as a sharp rebuke to the politics of populism. They want to deliver wins to their median constituency even as they struggle to maintain regular access to electric power, but their ability to do this is bounded by the reality that scarcity and pricing aren’t mere cabals by powerful interests against the people, but reflect the economic reality imposed by risk and uncertainty created by the Taliban themselves.
Quite simply there’s a risk premium to a foreign airline serving Kabul, and any airline has to be compensated for that. They need to offer air service that fills up a plane at high enough prices to both cost higher costs and deliver above-average returns, or else the airline is better off deploying their planes elsewhere. Raising the cost on airlines, or limiting the revenue they achieve, means less air service.
Put another way, when you’re losing arguably the worst airline in the world that is state-backed by a political regime that’s been largely supportive of your revolution you’re doing something wrong.
(HT: Live and Let’s Fly)