Economic Nationalism And Liberia – A Reply To Sam Jackson

 

This article is a contribution to debates triggered by Mr. Sam Jackson’s conversation on the Henry Costa Show regarding Economic Nationalism. Mr. Jackson essentially argued that multinationals in Liberia should be nationalized and this would address growing inequality and spur economic growth. This is not a full assessment of the successes, failures, dangers, and downfalls of Economic Nationalism. But what one cannot deny is that in its current phase of development, post-war Liberia is not ready to embrace Economic Nationalism. The challenges to Economic Nationalism in Liberia are:  

• Talent Scarcity: Is the society equipped with the requisite skilled labor to manage the takeover of multinationals in question? For example, if it is in the mining industry, where are the local mining engineers, geologists, mechanical engineers, electrical engineers, drillers, railroad conductors, etc?

• Technological Backwardness: Does the economy have the required infrastructure, equipment, resources, procedures and techniques needed to administer such a takeover? Outsourcing technical management has been proposed by Mr. Jackson. Does he know the full financial cost of such a decision? Is the country able to afford same, especially considering the issues raised regarding accessing capital to take these multinationals over?

• Transparency: Does Liberia have the legal and other judicial safeguards to prevent the transfer of assets and management from resulting in a mere turnover of the multinationals to the existing wealthy and politically-connected classes, thus entrenching poverty and inequality further? 

• Timing: With all the ongoing transitions, is the country ready? Is the timing of the decision right? The international community that has propped up the economy is at the verge of exiting, and 2017 elections are nearing with the country about to take over its own security. What risk manager or lender will be willing to give a government at this juncture money to invest in our mines or oil fields considering the constraints mentioned above?

Given these realities, Economic Nationalism will not achieve its desired objective of increasing investment efficiency. It will not reinvigorate growth, especially the distributive justice effects. Instead, it would impose serious social economic problems on the post-war society. Lessons drawn from South Africa, where its Black Economic Empowerment (BEE) program is anchored on Economic Nationalism principles show that the BEE is unable to address the mounting economic imbalances in that society. In South Africa, where BEE was introduced to rectify the legacies of apartheid, keen observers say it has failed miserably 10 years later. Poverty, unemployment, housing, inequality and poor quality of basic services have become acute. This reform proposal offers a long road to poverty reduction.

Further complicating matters is that economic nationalism aims to make the targeted economy representative of the demographic make-up of the country. Recall that the political economy of the pre-war era was dominated by a few wealthy, politically connected elites and skewed to their interests, and this culture has not changed much. Decades of oligarchic practices during and after the war have systematically deprived large segments of the society of the possibility of independent economic existence, with severely (geographically and socially) limited business opportunity among a few locals. In a society such as Liberia, which is unsuccessfully seeking to fend off endemic corruption and cronyism, Economic Nationalism could strike a blow against the creation of a local entrepreneurial class made of ordinary citizens by creating a small class of idle but wealthy crony capitalists (ruling party members or allies of the existing economic oligarchy). It essentially has the potential to drive the illicit enrichment agenda of those in close proximity to political powers.
Likewise, the Liberian State-Owned Enterprise (SOE) sector has had a record of poor management and dependence on public subsidy to function, and it has historically being grossly mismanaged. These SOEs have been widely regarded as ‘cumbersome, overstaffed, and inefficient.’ Furthermore, most responsible nations have moved away from the pursuit of a “developmental state” to boldly pro-market policies to foster inflows of foreign capital, job creation, and growth. Promoting national ownership and control of the “commanding heights” of the economy in the mining, oil exploration, and energy industries faces specific constraints as noted above.  

Liberia needs economic policies to overcome historical injustices and provide basis for strong political stability. Government needs continued emphasis on sound economic management and strengthening political governance. Economic Nationalism is not a panacea. Proponents should be aware that Economic Nationalism has the potential to frighten away investment. Therefore, we should not create economic opportunities for Liberians and at the same time destroy the economy itself. To create an instant local capitalist class in the post-war era with all its attendant demands will be difficult because, with only a few exceptions, aspirant Liberian capitalists lack capital.

The focus on Economic Nationalism is misguided. In part, it owes to the false equation of indigenous entrepreneurship with closing inequality. There is little evidence of that link. Liberia requires an economy that can sustainably meet the needs of all its citizens. This will only be possible, if our economy builds on the full potential of persons and communities across the length and breadth of the country. To keep the country rising, government needs to get actively involved in developing the requisite skills of its citizens, particularly the youth to support the development of an industrial base.
Mr. Jackson is right that Liberia is a highly polarized society, characterized by chronic social problems and vast inequalities. The moment presents opportunity to change existing economic policy prescriptions and practices. But we must do so responsibly, mindful that any time there are conditions of extreme inequality, a crisis of state legitimacy looms. Therefore, radical articulation of populist ideals to vastly illiterate and vulnerable populations can ignite discontent and induce deep-seated anger, unrest, and even instability leading to a crisis of governability.