In Chapter 3, we consider property rights in Afghanistan from the formation of the Afghan state in 1747 through 1901, when Abdur Rahman, one of Afghanistan’s most ruthless kings, died. The Afghan state during its first century was fragmented and marred by frequent political conflict. Nonetheless, its political arrangement, which we call a de facto federation because it dispersed political power in practice but not formally, provided a political foundation for the emergence of land-use rights and vibrant trading routes. The situation was not unlike England’s de facto federation that enabled the rise of markets after the Glorious Revolution, one in which the fragmentation of political power at the national level and the rise of towns contributed to a political environment in which institutions were allowed to change in response citizens’ needs. Unlike in England, where wealth-creating economic institutions strengthened over time, these productive institutional developments in Afghanistan were reversed at the conclusion of the nineteenth century as Abdur Rahman began to consolidate political power. Our theory can explain why: because coercive and administrative capacity occurred alongside the dismantling of political constraints, consolidation of political power resulted in the destruction of private property rights and trading routes.

In 1878, Russia challenged British interests in Afghanistan by sending a mission to Kabul, which the Afghan Amir, Sher Ali Khan, appeared to have welcomed. In defence of his forward policy, the British Viceroy in India, Lord Lytton, sent his own emissary. When he was denied entry, the British issued an ultimatum which the Amir rejected. The British invaded in order to secure regime change. Afghan forces included both traditional irregular militias and regulars trained with British weapons by former Indian NCOs. They enjoyed superior numbers, local knowledge, mobility, and some enterprising commanders. British superiority in weapons, discipline, and training was marked. They also adopted khaki uniforms which replaced the traditional scarlet, which frustrated the Afghan use of the long-range jezail. These advantages enabled the defeat of Afghan forces under the new Amir, Ayub Khan, at the Battle of Ahmed Khel (19 April 1880). British and Indian forces were insufficient in numbers, however, to control much of the country. A defeat at Maiwand led to a renewed British commitment and General Sir Frederick Roberts’ successful 300-mile march brought decisive victory at Kandahar. The Amir was replaced with a more compliant leader, and the British withdrew.