On Some Aspects Of The Current State Of The Liberian Economy:
A Tentative Diagnostic And Assessment*
By Brahima D. Kaba, Ph. D.
University of Maryland University College
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 exchange of our main export commodities such as
iron ore, rubber, coffee, cocoa, etc., on the world
markets. The deterioration of the terms of exchange
was characterized by a rapid decline in the prices
of our main exports (iron ore and rubber) and the
increase in the costs of our main imports such as
rice, petroleum products, and machineries. 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 growth periods of the country’s history. This rapid economic growth, in turn, had triggered a period of unprecedented social and political movements and changes in our society.
In effect, from the early 1960’s to the middle
part of the 1970’s, our economy had experienced
perhaps the second fastest growth rate in recent world
history, second only to Japan’s. This phenomenal
growth had even attracted the attention of a team
of economists from a famous US 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 post-colonial 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. Many post-colonial
economies have been characterized by an imbedded failure
to build and maintain strong social, economic and
political institutions that are capable to sustain
the development achieved by these economies.
Simply put the huge revenues that Liberia derived from, among other things, her immense iron ore and rubber exports were not “properly” invested into her people and the establishment of needed productive assets or factors of production such as agricultural, road, educational, and health infrastructures.
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, were largely diverted away from productive programs into unproductive projects such as the erection of prestigious buildings and monuments and the holdings 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 1960’s and early 1970’s 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 markets, the economy was quite likely to experience a period of negative growth starting from 1979/1980 unless fundamental social, political and economic reforms were initiated to alleviate rapid socio-economic decline and avoid its attendant socio-political upheavals
By 1979, 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 well ahead of West African countries,
including the 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’s dollar)
may be used to illustrate this high level of personal
income for top layers of the Liberian civil service
personnel in the early 1980’s. 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 100.00 (1980’s 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 pro-active 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 promoters of social and political emancipation and enlightenment, 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 have now left the country with a fragile and broken economy, and a fragmented social fabric mostly made of a traumatized population and a politically disenfranchised, ethnically divided, society.
THE CURRENT STATE OF THE ECONOMY
Reliable statistics on the Liberian economy, under 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 1970’s and those of today.
COMPARATIVE OVERVIEW OF THE ECONOMY
In the early 1970’s and early 1980’s,
although structurally weak and unstable, the Liberian
economy had a relatively strong foundation which was
characterized by the following:
1. A comparatively well trained, professional and competent civil service personnel;
2. A rapidly modernizing and expanding educational and health delivery system;
3. An impressive iron ore mining sector, although declining in output and value;
4. A modern water treatment plant at White Plains capable of supplying safe drinking water to the city of Monrovia and its immediate surroundings;
5. A nascent modern and regularly maintained road network extending to our different international borders with Sierra-Leone, Guinea and the Ivory Coast;
6. 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 as well as most of the ECOWAS’s countries and major North African nations such as Morocco and Egypt;
7. A network of reliable and functioning hydro-electric and electricity generation plants with total capacity in excess of 50 megawatts with a modern power grid extending to over a 50 mile radius from Monrovia;
8. 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;
9. A relatively expanding employment in both the formal and informal sectors.
It must be noted that the above important infrastructural facilities and economic conditions were operating within a context of a near absolute absence of a significant socio-economic and socio-political institutional support such as a socio-economic development plan. In other words, Liberia was building physical infrastructures without creating the requisite social and political institutions such as a modern legal and judicial framework to support the rapid transformation of the society.
In contrast, the conditions of our economy by the
time of our recent 2005 elections may be said as characterized
by a weak foundation and structurally fragile. The
main characteristics of the current conditions of
the economy are as follows:
1. A monthly revenue intake of only about five (5) to six (6) million US dollars (2004 dollars) as compared to the whopping almost sixty (60) million US dollars (2004 dollars) we used to collect as revenues in 1979/1980.
2. A nearly totally destroyed and disabled utilities (water, electricity, telecommunication, postal services etc.) and transport infrastructures;
3. A dilapidated and highly dysfunctional educational and health and social welfare system;
4. The total cessation of all meaningful productive socio-economic activities and the destruction and mass looting of the physical assets of all major mining, timbering and other industrial and agricultural entities;
5. A total collapse of all state and local socio-economic and socio-political institutions, including 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;
6. The mass displacement of over 50% of our traditional sector farm laborers;
7. The decline to an insignificant level of our cash crop production and export (coffee, cocoa, palm oil, etc.);
8. The drastic reduction by at least 80% of the expatriate private sector’s traders (mostly Lebanese and Indians) from an estimated number of about 20,000 (including family members) in 1979/1980 to a mere estimate of 2,000 (mostly male headed households only);
9. Above all, a massive brain drain which, mostly, took away the best educated, trained and professionally experienced Liberians to distant lands for a protracted number of years providing for the permanent settlement of many such Liberians thereby depriving the country of their needed expertise and competency.
It is also worth mentioning that in the years 1979/1980, there were over 150 fully operational industrial establishments in Liberia including such major industrial giants as Lamco in Yekepa, Vamply in Greenville, and Bong Mines in Bong Town 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 free port of Monrovia. Needless to say, therefore, that there are vast opportunities for improvement and innovation in the area of re-industrialization.
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 creating the conditions for structural imbalances, there was relative peace and harmony among the various social groups of the country.
THE NEW CHALLENGES FOR LIBERIA
The huge differences between the conditions of our
economy at the early onset of the civil crisis in
the late 1970’s and those at 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 10 folds or that we are now collecting 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 the near total destruction of our physical infrastructures and economic assets cannot be adequately measured in dollars terms.
Moreover, the sociological and psychological impacts of the several years of wars resulting in some form of mass internal disability as well as collective socio-political 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 the assessment of physical assets. In other words, the healing and/or rehabilitation of these wounds constitute, 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 such monumental challenges as enumerated
above, one may suggest that the mere recognition and
awareness of their existence and magnitude constitute,
as a first step, a necessary and sufficient beginning
in contemplating a possible road map for, among other
things, the following:
1. The establishment of an enabling investment climate providing adequate institutional incentives to help potential foreign investors and workers in the exploration and exploitation of our immense resources. Such enabling climate will encourage the creation of much needed employment for our youth and the demobilized former fighters. As an example, such incentives may come in the following forms:
a) Streamline and reduce the process as well as the number of agencies involved in licensing and registering businesses;
b) Significantly reduce export license fees for all agricultural and fishery products and streamline the process as well as reduce the number of licenses required;
c) Institute a graduated land reform so as to accelerate the provision of employment opportunities to the many unemployed youth and former combatants;
d) Modernize, codify and expand the judicial system throughout the entire nation so as to insure the dispensation of transparent justice to all and help eliminate the practice of impunity so akin to undemocratic governance, etc.
e) Adopt international standards in business practices.
2. The reconstruction of our devastated physical infrastructures (power, water, roads etc.) and socio-political institutions;
3. The rehabilitation of our minds, souls and spirit;
4. The reconciliation among our various social groups and between our nation and the international community.
The second step should consist in ensuring the 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 altogether.
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 policies whereby compensation and payment should be measured by- and based upon- actual production. In this way, a wage scale may be established to determine both the minimum and maximum wages. The ideal minimum wage may be measured by a “bread basket” consisting of the value, in monetary units, of all the items necessary to provide an optimum living standard to an average wage earner.
The maximum ideal wage while designed to provide incentive to attract highly trained and 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 100 and 150 US dollars per month and arrangement may be made to institute a by-monthly payment of such a 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.
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 the several wounds sustained during the protracted 20 some years of civil crises and wars. The crises themselves resulted from gross mismanagement of an unprecedented economic growth which suffered a lack of appropriate social and political institutional framework to adequately address the needs and aspiration of a growing and integrating 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 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 is 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 Contracts and Monopoly Commission as well as many of the civil society’s organizations, if properly utilized, should constitute a healthy start in the way of correcting the immense structural imbalances in our fragile society.
The concluding argument of this paper is that economic development, in most cases, can be achieved, when growth is accompanied by appropriate institutional reforms and adaptation in order to bring structural balances between the different elements of the social, economic and political systems of society.
With the current strong support of the international community and the changing strong resolve of our new leadership as well as the apparent readiness of most Liberians 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.