Chronicles Afghanistan's history, noting that during most of its existence, Afghanistan has relied on external financing to run the state and make public investments. A key lesson from Afghanistan's 20th-century experience is that overly ambitious and rushed efforts to modernize have triggered sharp domestic reactions that set back development, sometimes for decades. Afghanistan now faces the planned drawdown of foreign combat forces, and aid flows are expected to decline from 2012 onward. The key economic question for Afghanistan's transition is whether large reductions in aid to other conflict-affected countries have adversely affected their economies, particularly in the short term. Evidence suggests that the impact of large aid reductions on economic growth has been less dramatic than might be expected, but other countries' experience and Afghanistan's own history demonstrate that abrupt cutoffs or sharp reductions in aid can be highly destabilizing from a fiscal, political, and security perspective, even if the direct economic effects are more modest.