Liberia’s Development Conundrum

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Comment on Dr. Kollie’s Analysis

By Charles B. Allen, Jr.

Dr. Kollie’s comments are timely as we enter a post Covid environment. The way the world will operate is fundamentally different from how it is operating now.  Even before we had reached this point it would have been  obvious to all, but certainly those who were paying attention, that the policy prescriptions of the Bretton Woods institution were wrong and mostly followed the logic of  “do as I say, but not what I do.”  What  makes me to say  this? According to orthodox economic theory, there is no way the global economy should be experiencing negative interest rates.  But given the bubble economy foisted (not fostered) on the world by the major central banks with the approval of the Bretton Woods (controllers), we now have such a situation.  Quantitative easing or infusion of large amounts of money without regard to the fiscal balance has placed the world in a situation of Alice in Wonderland.  The Mad Hatter and Humpty Dumpty are having tea!! Poor Alice cannot understand what is taking place!!

We live in an economy where we export our major commodities without value addition and import most of our requirements. What inputs we import other than food are not for significant value addition (mainly clinker, steel rods etc.). Such an economy will be at a disadvantage in a trading system where the purchasing power is affected by the rate of inflation.  The combined effect of the first comment (i.e. export of primary commodities without beneficiation) and inadequate importation of sufficient input imports means that capital formation is constrained.  This constraint in capital formation affects the size and structure of any economy.

The modern Liberian economy began with rubber and ends with rubber. Our major concessions purchase rubber for their factories at an insignificant fraction of the international price.   Local  farmers   have  no  incentive  to  expand  and  re-plant  due  to  this. Further complicating our situation is the fact that although we have a budget that can only support a ground pea diet, we want to eat hamburgers (figuratively speaking).  Spending 60% of our meager resources on salaries means that our development budget from domestic resources are insignificant. Donors who contribute to our development ensure that their tax dollars are returned to their countries of origin, hence the various conditionalities.

Even the nature of our development financing leaves much to be desired. Although loans are one means of financing this, given the amount and type required (hard and soft infrastructure), a more balanced approach requires bond issues tied to the financing and development commitment of the nation.  Such a paradigm will force policy makers TO KEEP THEIR EYES ON THE BALL.

In summary, ours is not a mission impossible. While it is certainly not easy, we have first of all to properly analyze the issues and then determine our course of action; which is what China did to take its GREAT LEAP FORWARD.

How do we proceed???  The KEY word is BALANCE. Generating higher public revenue requires efficiencies in public management.  The government payroll cannot be a substitute for unemployment benefits.  Let the civil and public service become efficient. Rationalize the public sector and pay needed staff VALUE FOR MONEY.

Ministries/Agencies should have key performance indicators which, to be fair, should be based on funding that is made available.

The Legislature should approve a comprehensive national budget and development plan. The capital expenditure component has to be funded in advance over a multi-year preferably lockbox arrangement.  Aggressively GROW the private sector.  Divesting LEC, LIBTELCO, LWSC, etc., to private Liberian and other shareholders through the banks, keeping only a nominal government share. This will raise revenue for the public finances. Broaden the tax base… ALL these call for implementation capacity, .i.e. staff who can be paid value for money.

Even before all the above are done, AGRICULTURAL PRODUCTION AND VALUE ADDITION are our first steps.  Why, because they are the lowest hanging fruits and involve the MAJORITY of the population.

So let us begin to THINK and ACT our way out of our POVERTY, which is both MATERIAL and MENTAL.

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