Liberia Clings to Failed Strategy to Reduce Poverty

ECOWAS adopted its Vision 2020 in June, 2007, it is intended to replace an ECOWAS of States with an ECOWAS of Peoples. Or, as Sekou Toure might have put it, the Vision seeks to replace a “trade union of heads of state” with people centeredness. However, successful transformation critically depends on participatory dialogues among governments in a region where only geography and language are criteria for membership in inter-governmental organizations and in states with democratic governance deficits. Goals often are defined without reference to governing capacity or past performance. Vision 2020 seems an admission that ECOWAS must do a lot more before creating a customs union and embarking on integration, given that except for unaffordable air travel, demand for inter-state trade is reduced by check points. Relying on erroneous Bretton Woods Institutions’ (BWIs) not selfless advice and failing to industrialize, growth is reduced and inequality enhanced in this resource-rich sub-region. This paper uses Liberia’s Open Door Policy (ODP) as typical transformation strategy in the region, highlights its unwitting commitment to remain exporter of raw materials, and “least-developed.

Between 1822 and 2003, Grain Coast natives and repatriates transported there by a NGO fought nearly 90 “deadly conflicts” over land rights and trade issues. Under the highly centralized system of governance created by one fraudulent constitutional process and sustained by another, a de facto one party state retained state power when the “politics of pigmentation” ended in 1876, ruling uninterrupted for 103 years. Until 1964, Liberian citizens were differentiated by law and custom, with rights and privileges also differente4de. Absent popular sovereignty stymied Liberia’s pledge to (i) establish justice; (ii) ensure domestic peace and (iii) promote the general welfare, for national symbols are divisive and governance dysfunctional. Liberia’s Governance Commission’s draft “National Policy on Decentralization and Local Governance” mourns:

“…the highly centralized system of governance has impeded popular participation and local initiative, especially in the provision of public goods and services, and has contributed to the need for greater accountability and transparency in the management of public affairs and led to the gap in economic growth and development, equal access to social and economic opportunities and human wellbeing between Monrovia and most of the rest of Liberia.”

The Comprehensive Peace Accord (CPA) of 2003 presented an auspicious second chance to Liberia to redeem its pledge but its guarantors disavowed responsibility to ensure popular participation to improve governance, even though the CPA acknowledged poor governance as a cause of the conflict. The guarantors rejected suggestions to link timing “democratic elections” with prior reform of the dysfunctional governance structure–John Rawls’ “veil of ignorance”. The guarantors’ strategy negated Albert Einstein: “The thought that created the problem cannot be the thought to solve the problem”.

Inevitable in an unequal relationship, the International Contact Group on Liberia (ICGL) imposed exit before capacity to govern effectively and improve fiscal capacity, as Chand and Coffman demonstrate, were met. Elections were held with the discriminatory laws and illiberal civic values inhospitable to reform were in place. Since then, the political culture remains committed to division, patronage, impunity and corruption, denying voice and accountability. A European Commission funded National Conflict Mapping Project and other studies have warned that the conditions that led to a succession of deadly conflicts remain potent. The ODP stands out as a major reason for the dire situation; with it, return to conflict is inevitable.

The ODP’s longevity is explained by entrenched development strategy that makes foreign direct investments (FDI) by persons the apartheid clause of even Liberia’s current Constitution bar from citizenship: eligibility for citizenship is defined by skin color in the State that, with Ethiopia, sued Verwoerd’s South Africa before the International Court of Justice. The ODP underlies poor governance in Liberia and ensures high illiteracy and unemployment, and low fiscal capacity. It is a hindrance to industrialization by ensuring reliance on raw material export.

The Open Door Policy created Liberia’s love for all things foreign and discrimination against all things national. Presidents and senior politicians travel abroad at public expense to seek medical attention. With the civil service politicized and lacking capacity, in 2009 the Liberian government does not prepare its “Investor’s Guide”. Rather, it is prepared for the National Investment Commission by the Corporate Council on Africa and Arcelormital.

Liberia has a dual currency regime and opted for “observer status” in ECOWAS’ Second Monetary Zone, circumstances explained by low capacity and fiscal indiscipline. The uncritical acceptance of IMF proscription of De-dollarization, with scant prescription against inflation, confirms unhealthy reliance on external advice for public policy formulation. Besides, dual currency regime alleviates the need for fiscal discipline and policies toward regional integration.

The ODP discriminates against Liberian capital and frustrate the development of Liberian entrepreneurship because it was adopted to disenfranchise the mulatto merchants and planters who, in the 1860s, produced and processed sugar cane into molasses; planted liberica coffee; tapped wild rubber and then exported these produce to Europe in Liberian built, seagoing vessels. Focusing “mega FDI” ignores agriculture and ensures food insecurity. It sustains an unsuitable educational curriculum, for appointments are based on criteria other than competence.

Pursuant to the ODP, Firestone and other merchant capital continue to enjoy exemption from taxation in 2009. It unjustifiably grants “investment incentives” to gigantic foreign direct investment as it ignores agriculture and small, medium enterprises. Liberia qualifies for preferential access to major markets but has not made an AGOA export.

The ODP grew public disdain for every vocation except politics, zero-sum game in Liberia: you win and acquire wealth and influence; you lose and gain harassment, jail terms, vilification, becoming a virtual non-person. Loss has led to death or flight into exile.

The coming of Firestone first revealed the odious character of the Open Door Policy. Firestone’s domestic legal team included anyone who was anybody in the TWP, thus paying protection fees to individuals in the hierarchical political patronage system. Sponsors of FDI can, like their protectors, be exempt from the law.

The ODP created foreign-owned oases exploiting natural resources, virtually de-linked from the national economy. Senior government officials “play for pay” assisting concessions and the World Bank’s Doing Business in Liberia 2009 reports that “paying taxes” and “trading across borders” became more difficult in 2009. Protecting [national] investors is reported difficult, reflecting absent rule of law. Because of the ODP, Liberians remain “drawers of water and hewers of wood” in their economy, even as the elite dominate the services sector, peddling influence and selling protection. The result, groups of non-nationals dominate the economy. Middle Easterners and Asians control wholesale and retail trade; Europeans and Americans own and manage the enclaves. Persons ineligible to own land ironically are the landlords, even to the government.

The ODP discourages competition in the political arena. Excluding foreign investors from eligibility for citizenship, foreigners become beholden to political godfathers for protection. Investors pay economic rent for the protection, which rent finances patronage. By rewarding loyalty handsomely and harshly punishing any attempt to create independent wealth, government in the de facto single party state internalizes the prevalent illiberal civic values of intolerance, deference and order. The ODP socializes Liberians to conform. So the evolved political culture concentrates power, retains autocracy and empowers patronage to breed and sustain impunity, to obviate the rule of law.

Having established today’s governance architecture, the ODP underlies successive public finance management scandals, past and contemporary. The GOL is unwilling or incapable to expend the revenues it collects. For in a country with woefully inadequate basic infrastructure that virtually disappeared during some twenty five years, the GOL accumulated budget surpluses in the past two fiscal years.

As primary material export grew, public finances grew significantly but not the result of improvement in tax administration capacity. Corruption then led to diversion of payments to government remained a miniscule portion of profits that Concession Agreements allow them to repatriate freely. The increasing contributions to public finances accommodated the Open Door Policy in that collected “royalties” increased without the necessity of enhanced administrative capacity. Also, as the public financial resources grew, and with no law or institutional capacity for transparency, mismanagement of the enlarged resources also greased. Perhaps this assertion is understood in terms of extant politics.

The current and only public financial legislation is the IMF prescribed “2000 Tax Code” whose single purpose is revenue generation. Provisions of the 2000 Code violate the constitution in that it permits officers of the executive branch to waive taxes. Liberia has no Public Finance Management law similar to Ghana’s “Financial Administration Act 2003″ (Act 654). Liberia does not publish exposure drafts of laws and there is no public office that sells public documents.

Severely limiting the economic base and hence public finances as it grew corruption government’s resulting virtual assimilation policy constrained the educational system. The educational curriculum is designed to produce bureaucrats but neglects training of farmers, artisans and craftsmen. Education promotes rote memorization, for financing R&D is abhorred.

The more than thirty regular and forensic audits of government agencies have invariably concluded that public resources were abused and wasted. Corruption is, in the words of the Auditor General of Liberia, is more than three times what it was even in the admittedly corrupt NTGL. Corruption is rooted in the mutual reciprocity of the ODP that does not allow the development of regulatory capacity; it proscribes the adoption and implementation of domestic preference rules, as its political culture undermines data unavailability.

Liberia’s Poverty Reduction Strategy (PRS) rests on the Open Door Policy. It restores exploitation of natural resources in enclaves, exported as primary commodities, phenomenal growth that had resulted in Growth without Development. The PRS posits strengthening governance and the rule of law as a major objective but half way into its term, Liberia’s first post-conflict government has yet to demonstrably initiate reforming governance. The tenure of elected officials is longer than in most ECOWAS member states. The settler constitution and laws repugnant to it remain valid, and Liberia has yet to demonstrably and effectively tackle the three major challenges impeding improved governance. Excessive presidential power remains non-delineated. Decentralization is disavowed and the legislature and judiciary not yet empowered.

The ODP’s response to capacity deficit reduction is importation of Diaspora cronies to compensate them with disregard for job titles and responsibility. Reliance on World Bank and IMF not unselfish, inappropriate advice continues. Absent rule of law stymies Liberia’s attractiveness as an investment destination, neglecting establishment of functioning standard organization.

Three years after the first post-conflict elections, Liberia still prepares a single year budget as it acknowledges the need to adopt the Medium-Term Expenditure Framework. The budget process remains non-participatory with Liberia missing most international benchmarks for public finance management. Donors fund international NGOs, a virtual parallel government whose programs remain uncoordinated and not harmonized with public strategies. Expenditures on these programs are much larger than those by the Government, but are unreported.

In the mid-1960s, Robert Clower et al concluded that Liberia’s ODP had led to growth without development. Their conclusion is explained by William Baumol and his colleagues in Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity: the FDI Liberia attracts is not industrial but merchant capital. Merchant capital inevitably leads to growth without development. Kosack and Tobin conclude similarly.

Excepting the Portuguese, Macmillan’s wind of change blew European colonizers out of West Africa without a fight, thanks primarily to the mosquito and other natural inhospitality. Despite the withdrawal, neo-colonialism strengthened its grip on West Africa. The incestuous relationship between the elites who succeeded the colonizers and the industrialized countries achieved colonizers’ policy objective. Elite rulers were handsomely rewarded through aid to which West Africa became addicted. BWI advice, inappropriate and provided pursuant to “one size fits all” by hosts of well funded planners sustained dependency. Not only have the ever changing prescriptions been inappropriate, the consistently distort the history of free trade and its role in pernicious globalization. West Africa imbibes distorted history of globalization, but recruitment of ex-BWI staffers continue ignoring unequal treaties and what Chang describes as “kicking the ladder away”.

Liberia and ECOWAS are prevented by rules imposed by the unholy trinity–the World Bank, IMF and the WTO, retain primary materials its major export, failing to adopt nationalistic policies. Liberia, a peculiar country, has a lot in common with the rest of Africa.

GOL purchases foreign debt but, unconcerned about domestic opinion, has said nothing about redeeming national savings bonds citizens purchased during the Samuel Doe regime.

References

Baumol, William J., Robert Litan and Carl J. Schramm (2007), Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity. New Haven and London: Yale University Press.

Chand, Satish and Ruth Coffman, “How Soon Can Donors Exit from Post-Conflict Countries?” www.centerforglobaldevelopment.

Chang, Ha-Joon (2007), Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. London: Bloomsbury Press.

Clower, Robert W. Clower et al. (1966), Growth without Development: An Economic Survey of Liberia. (Evanston: Northwestern University Press)

Goldberg, Jeffrey (1995), “A war without purpose in a country without Identity”. The New York Times, January 22, 1995, pp.36-39.

International Crisis Group, “Liberia: Resurrecting the Justice System”, Africa Report #102, 6 April 2006.

Cossack, Stephen and Jennifer Tobin (2006), “Funding Self-Sustaining Development: The role of aid, FDI and Government in Economic Success”, International Organization 60, Winter, pp. 205-243

Levitt, Jeremy I. The Evolution of Deadly Conflict in Liberia: From “Paternaltarianism” to State Collapse. Durham, North Carolina: Carolina Academic Press.

Liberia Governance Commission (2009), “National Policy on Decentralization and Local Governance (draft).”

Yoder, John C. (2003), Popular Political Culture, Civil Society, and State Crisis in Liberia. Lewiston, New York: The Edwin Mellen Press.

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