"The Afghanis are born traders. This is the capital of laissez faire in a Marxist-Leninist state," one astonished diplomat said. "Where else can you find bearded Pathans walking around in American high school band uniforms?"

There is also an open money market, called Shazada, where the mostly Hindu and Sikh traders will change any kind of currency and accept checks from hometown banks in California or Tuscany, Soviet Georgia or American Georgia--all without asking for a driver's license and a "major credit card."

Shazada also trades in rumor and information. It is often said here that "A rumor in Shazada market will always come true." Like the bazaaris of Tehran, who played an important role in the Islamic revolution in that country, the money-changers of Shazada have their finger to the pulse of their beleaguered country.

Word Travels Fast

The American reporter discovered the efficiency and accuracy of the market's grapevine one afternoon. A money-changer whom he had met once before sidled up to him in the multi-tiered open market two days after the reporter had returned from Herat, 400 miles away, on a government-sponsored and supervised trip.

"I know you went to Herat," the money-changer said. "But you should know that before you went into town, more than 1,000 soldiers swept the bazaar. Otherwise you would not have been able to go. And they didn't show the part of town that had been destroyed."

The market of Herat had indeed been busy but subdued on the day that the reporter was taken there. And the authorities had refused to take the reporter to one part of the city, near a large Shia Muslim area, claiming the road there was mined.

Kabul remains a beautiful and wild city. Many of its hillsides are planted with the famous Kabuli grapevines and fruit trees, producing dried fruit and nuts that are legendary throughout Asia. The air is clean and crisp. The city lights sparkle like the stars above the magnificent mountain ranges of the Hindu Kush.

But it is also a deeply troubled place. Since the war began 7 1/2 years ago, its population has jumped from 500,000 to more than 2 million.

Since it is one of the few relatively safe places left in the country, people have flocked here for protection. So much of the countryside has been devastated by the war that Afghanistan has folded its population into this city-state-- Kabulistan , the natives call it. With more than 4 million Afghans living as refugees in Pakistan and Iran, and up to 1 million killed in the war, Kabul's current population may amount to one-third of Afghanistan's remaining people.

Soviet armor and artillery, the so-called "rings of steel" defense, are positioned in concentric circles around the city and its immediate suburbs. Trips to other cities by road take days and are very dangerous.

So Kabul has become a fortress town, connected to the rest of the world by infrequent commercial airline flights and to the Soviet Union by the military air umbilical cord. Diplomats have counted more than 50 Soviet military cargo flights in one day. Kabul has become like blockaded Berlin during the 1948 airlift.

Some here who loved the old Kabul and its playful, irreverent ways, fear that this city will never smile again.

"History is contradicting itself in Kabul," said one longtime European resident, who expresses heartbreak over the changes. "The city that never gave up is now giving up. We are in the advanced colonial stage."