On Some Of The Aspects Of The Current State Of The Liberian Economy: A Tentative Diagnostic And Assessment
In the last part of the 1970s, the late President William R. Tolbert, who had become increasingly aware of and concerned about the rapidly deteriorating conditions of the Liberian economy, commissioned a “Tax Force” under the chairmanship of the then Minister of Planning and Economic Affairs to make a comprehensive assessment of the many problems confronting the nation’s economy, members of the task force included experts from various professional, technical and academic backgrounds and areas.
Dr. Brahima D. Kaba, [email protected], Contributing Writer
The author of this paper represented one of the areas of the social sciences to help identify some of the sociological impacts of the deterioration of the terms of a change of our main export commodities such as iron ore, rubber, coffee, cocoa, etc., on the world market. These export products constituted then the backbone of our underdeveloped economy.
Dr. Togba Nah Tipoteh was one of the members of the expert panel on economic issues. It must be noted from the onset that the Liberian economy was then emerging from one of the fastest growths of the country’s history. This rapid economic growth, in turn, triggered a period of unprecedented social and political movements and changes in the society.
In effect, from the early 1960s to the middle part of the 1970s, our economy had experienced perhaps the second fastest growth rate in recent world history, second only to Japan. This phenomenal growth had even attracted the attention of a team of economists from a famous U.S University to conduct a study of – and write a book on – this peculiar moment of the Liberian economy. The book, titled “GROWTH WITHOUT DEVELOPMENT”, rapidly became a classic in the study of third world economies as they developed the tendencies of undergoing phenomenal growth which, due mainly to internal and external structural deficiencies, almost always failed to translate into real socio-economic and socio-political development for these countries and their peoples. Simply put, the huge revenues that Liberia derived from, among other things, her immense iron ore exports were not properly invested into her people and the establishment of the needed productive assets and factors of production such as agricultural, road, educational, and health infrastructure.
During the same period, while a relatively appropriate investment climate had been established by government to attract a large amount of needed foreign capital for the exploitation of our large untapped human and natural resources, the resulting amount of revenues accruing to the country’s coffers, albeit under some exploitative conditions, where largely diverted away from productive programs into unproductive projects such as erection of prestigious buildings and monuments and the holding of impressive conferences and meetings.
The Tolbert’s Task Force, at the end of the assessment exercise, concluded that by 1978/1979, the Liberian economy had fallen from a peak of nearly 9% growth rate per annum in the late 1960s and early 1970s to about a mere 1% growth rate in 1978. The Task Force further issued a warning prediction that, given the gross structural deficiencies in resources allocation and management coupled with, among other things, the significant decline in the prices of our export commodities on the world market, the economy was quite likely to experience a period of negative growth starting from 1978-1980 unless fundamental social, political and economic reforms were initiated to alleviate rapid socio-economic decline and avoid it’s attendant socio-political upheavals.
By 1978, however, the Liberian economy had grown to about a mighty USD 700 million National budget (2004 dollar). Liberians, then, enjoyed one of the highest per capita incomes in the whole of Africa and singularly were well ahead of West African countries, including Ivory Coast which, incidentally, a little later, experienced her own phenomenal “growth” without development syndrome, although under different conditions.
For instance, the gross monthly salary of an Associate Faculty at the University of Liberia which was USD 1,000.00 (1980 dollar) may be used to illustrate this high level of personal income for top players of the Liberian Civil Service Personnel in the early 1980s. Most senior government officials had monthly salaries in the same range. The above illustration however, contrasted with the average monthly wage of much less than USD 100 Dollars (1980s Dollar) for the vast majority of workers in the formal sector of the economy thereby indicating one of the main aspects of the deepening structural imbalances and inadequacies characteristic of the growth without development syndrome. Income distribution in Liberia was then, the least one can say, extremely skewed to the obvious advantage of the upper ladder of the socio- economic system thereby precluding any opportunity for the promotion of a vibrant and proactive indigenous middle class.
The expatriate merchant class, as it were, occupied the position of the indigenous middle class without playing its crucial role of catalyst and promoting social and political emancipation and enlightenment of the vast majority of fellow Liberians, some of the prerequisites of capitalist-oriented development.
Some of the socio-economic and socio-political impacts of the clash between a large mass of poor people and a minority privileged class were a series of uncontrollable social, economic and political convulsions which had now left the country with a fragile and broken economy and a fragmented social fabric mostly made of a traumatized population in a politically disenfranchised, ethnically divided, society.
The current state of the economy
Reliable statistics on the Liberian economy, under the current circumstances, are scanty; however in order to evaluate the magnitude of the monumental challenges facing the new Liberia under the leadership of President Ellen Johnson-Sirleaf, we are proposing to make a comparison of the conditions under which the economy operated in the late 1970s and those of today.
COMPARATIVE OVERVIEW OF THE ECONOMY: 70/80’S VS 20’S
In the early 1970s and early 1980s, although structurally weak and unstable, the Liberian economy had a relatively strong foundation which was characterized by the following:
- A comparatively well trained, professional and competent civil service personnel,
- A rapidly modernizing and expanding educational and health delivery system,
- An impressive iron ore mining sector, although declining in output and value,
- A modern water treatment plant at White Plains capable of supplying safe drinking water to the city of Monrovia and its immediate surroundings,
- A corresponding expanding international trade and its attendant expanding diplomatic relations with more than 16 accredited and posted ambassadors in Monrovia, including the embassies of such major Powers as the USA, France, Germany, Japan, Italy, the Netherlands, Spain, etc. as well as most of the Ecowas countries and major North African nations such as Morocco and Egypt,
- A network of reliable and functioning hydroelectric and electricity generation plants with total capacity in excess of 50 megawatts with a modern power grid extending to over a 100 mile radius from Monrovia,
- A rapidly developing export crop and staple food agricultural sector with a strong support from international financial agencies such as the World Bank and the African Development Bank,
- A relatively expanding youth employment in both the formal and informal sectors.
It must be noted that the above important infrastructural facilities and economic conditions were operating within the context of a near absolute absence of a significant sociio-economic and socio-political institutional support such as an social-economic development plan. In other words, Liberia was building physical infrastructures without creating requisite social and political institutions such as a modern legal and judicial framework to support the rapid transformation that the society was witnessing.
In contrast the conditions of our economy by the time of our recent 2005 elections seem to have beenmay characterized by a weak foundation and structurally fragile. The main characteristics of the current conditions of the economy are as follows:
- A monthly Revenue intake of only about five (5) to six (6) million US Dollars (2004 dollars) as compared to the whooping almost (60) million US Dollars (2004 dollars) we used to collect as revenues in 1979 -1980,
- A nearly totally destroyed and practically disabled utilities (water, electricity, telecommunication, postal services, etc.) and transport infrastructures system,
- A dilapidated and highly dysfunctional educational, health and social welfare system,
- The total cessation of all forms of productive socio-economic activities and the destruction and mass looting of the physical assets of all major mining, timber and other industrial entities,
- A total collapse of all state and local socio-economic and socio-political institutions, including all the all-important judicial/legal institution leading to gross human right abuses and the flagrant denial of the freedom of speech, movement, and the press,
- The mass displacement of over 50% of our traditional sector farm laborers,
- The decline, to a significant level, of our cash crop production and export, (coffee, cocoa, palm oil, etc.),
- The Drastic reduction by at least 80% of the expatriate private sectors traders (mostly Lebanese and Indians) from an estimated number of about 20,000 (including family members) in 1979/1982 to a mere estimate of 2000 (mostly male headed households only),
- Above all, a massive brain drains of trained nationals who, mostly, consisted of the best educated and professionally experienced Liberians to distant lands for a protracted number of years providing for most of them to seek permanent settlement thereby depriving the country of their needed expertise and competency
It’s also worth mentioning that in the years 1979/1980, there were over 150 fully operational industrial establishments in Liberia including major industrial giants as Lamco in Yekepa, Vamply in Greenville, and Bong mines in Bong Town, etc., compared to less than a dozen small scale and relatively unproductive Industries today. The most important of these industries remains the ubiquitous Cemenco near the Freeport of Monrovia. Needless to say, therefore, that there are vast opportunities for important developments and innovations in the area of industrialization if an appropriate economic development roadmap is initiated and implemented by the new government.
Additionally, there were more than a dozen international airline companies operating in the country, including such big names as Pan American, Swissair, KLM, British Caledonian, Ghana Airways, Ethiopian Airways, Etc.
Above All, in spite of the lack of adequate institutional support for the economy that led to the conditions for structural imbalances, there was relative peace, although uneasy, at several levels, and a semblance of harmony among the various social groups of the country.
THE NEW CHALENGES OF LIBERIA
The huge differences between the conditions of our economy at the early onset of the civil crisis in the late 1970s and those of the beginning of this new dispensation in the mid- 2000’s should provide us with some measure of the magnitude of the challenges currently facing Liberians and their government.
Using only the differences in revenue intakes between 1979 and 2005 may give us an indication that the economy has declined almost by tenfold or that we are now collecting about 10 times less revenues than we were some 27 years ago. Such a measure may only show the tip of the iceberg given the fact that a near-total destruction of our institutional and physical infrastructures as well as our economic assets cannot be adequately measured in dollars terms.
Moreover, the sociological and psychological impacts of the several years of instability and civil wars resulting in some form of mass internal disability as well as collective social political and inability to conceive of – and accept – a culture of peace, tolerance and respect for one another and mutual understanding have set into motion a debilitating atmosphere of distrust and, in many cases, dishonesty between and among the various social and ethnic groups of the country.
These forms of social “illnesses” are far more difficult or near to impossible to evaluate in monetary terms than assessment of physical assets. In other words, the healing and/or rehabilitation of these wounds constitutes, perhaps, the greatest challenges for Liberians and their new leaders.
SOME SUGGESTIONS ON THE WAY FORWARD
While there are no ready-made and sure remedies for tackling the monumental challenges as enumerated above, one may suggest that the major recognition and awareness of their existence and magnitude constitutes, as a first step, a necessary and sufficient beginning in contemplating a social, political and economic reconstruction and a roadmap for, among other things, the following
- the Reconstruction of our devastated social, political, economic institutions and infrastructures,
- The rehabilitation of our minds, souls and spirit,
- A true reconciliation among our various social groups and between our nation in the international community,
- The establishment of an enabling investment climate to attract both local and foreign investme capital necessary for exploiting our vast potentials and creating much-needed employment for our youth,
The second step should consist in ensuring a strict adherence to the basic tenets of democratic good governance, namely, accountability, transparency and the rule of law. Thus, the practice of impunity, on any account, should be minimized to the greatest extent possible or, ideally, abolished all together.
The third step should prioritize the rapid securing and improvement in the minimum standard of living of the majority of the population by instituting some form of proactive income distribution policy whereby compensation and payment should be measured by – and based upon- actual production. In this way, a salary scale may be established to determine both the minimum and maximum wages. The ideal minimum wage may be measured by a breadbasket consisting of the value in monetary units of all the items necessary to provide a contextual optimum living standard for an average Liberian wage earner.
The maximum ideal wage while designed to provide incentives to attract highly trained professional workers, should be, under the present circumstances, limited so as to minimize gross economic and income disparities. It appears that, under normal circumstances where the country has optimized her productive potentials, the minimum wage in Liberia today should be between US$ 100.00 and US$ 150.00 us dollars per month and arrangement may be made to institute a by-monthly payment of such wage so as to increase monetary circulation and reduce the month-end hardship syndrome for most wage earners.
On the other hand, the maximum salary for public sector professionals and civil servants may be set, for the medium-term, at between 500 and 800 US dollars on a monthly basis only.
The fourth suggestion has to do with the provision of institutional incentives to help potential foreign investors and workers. In effect, it seems that the development factor which is best at fostering and maintaining social peace and harmony is the provision of an adequate level of employment to all employable individuals in society. Unemployment, in fact, tends to breed poverty which in turn encourages the emergence of violence and social crisis. As an example, such incentives may come in the following forms
- Streamline and reduce the process as well as the number of agencies involved in licensing and registering business businesses,
- Significantly reduce export license fees for all agricultural and fishery products and streamline the process as well as reduce the number of licenses required
- Institute a graduated “Land Reform” so as to accelerate the provision of employment opportunities to the many unemployed youth and former combatants,
- Modernize, codify and explain the judicial system throughout the entire nation so as to ensure the dispensation of transparent justice to all and help eliminate the practice of impunity so akin to undemocratic governance, Etc.,
- Adopt international standards in best business practices.
To conclude, the author wishes to use the analogy of the medical field and to propose that the Liberian society is seriously sick as a result of several wounds sustained during the protracted 27 years of civil crisis and wars. The crisis themselves resulted from gross mismanagement of an unprecedented economic growth which suffered a lack of appropriate social and political institutional framework to adequately addresse the needs and aspirations of recording and integrating a complex social and political system.
The specialists to properly diagnose and prescribe the cure for the ills of this society are, hopefully, the members of the country’s new leadership. They must prescribe and provide not only the appropriate doses of the needed “medicines”, but to demonstrate, above all, a responsible commitment to the task and proper compassion for comforting and bringing the “sick” to a healthy and enjoyable status. The “sick” must also demonstrate a disciplined readiness to accepting to swallow the bitter pills necessary to cure the illnesses. Seen under this perspective, it’s clear that the whole exercise is going to be far from being a garden party.
Institutional mechanisms such as the Truth and Reconciliation Commission, The Good Governance Commission, The Contract and Monopoly Commission as well as many of the Civil societies’ organizations, if properly utilized, should constitute a healthy start in the way of correcting the immense structural imbalances in a fragile society.
The concluding argument of this paper is that social, political and economic development, in most cases, can be achieved, when growth is accompanied by appropriate institutional reform and adaptation in order to bring structural balances between the different elements of the social, economic and political systems of a society.
With the current strong support of the International Community and the changing strong resolve of the new Liberian leadership as well as the apparent readiness of most Librarians to change their attitude toward democratic change, it appears that, while the road ahead will certainly be at times bumpy, Liberia is nonetheless well on her way to sustained recovery and eventual real development.