America’s $13 Trillion Dollar Debt, And Lesson For Liberia
June 29, 2010
THE MOST DEBTOR NATIONS
1) United States $13,450,000,000,000 2) United Kingdom $9,000,000,000,000
3) Germany 5,328,000,000,000 4) France 5,021,000,000,000
7) Italy 2,328,000,000,000 9) Japan 2,132,000,000,000
14) Canada 833,000,000,000 17) Hong Kong 655,000,000,000
22) Russia 369,000,000,000 24) China 347,000,000,000
25) South Korea 336,600,000,000 28) Brazil 216,000,000,000
Source: CIA Fact Sheet.
But how does an economic system impact a country's revenue, and subsequently increase or decrease a country's debt? Financial experts indicate that an effective economic system assists a government to receive higher royalty income, while an ineffective economic system allows profiteers to pay minimal royalty income, thereby creating the necessity to get loan to make up the shortfalls in revenue. Logically, an increase in revenue enables a government to provide a series of services; so the struggle to seek an effective economic system to prevent a shortfall in revenue is common in every country, be it in the United States, Greece, Italy, Mexico or Liberia.
In fact many centuries before capitalism emerged in the 1500's and socialism emerged in 1917, feudalism, depending on minuscule revenue, used unpaid workers to perform public services such as the erection of monuments, building of roads, construction of academic centers and the capture of territories. Even though feudalism used slaves to serve elites, yet the efforts, to get more revenue through an economic system, were exhausting, and sometimes wars were fought. For instance, after a series of wars in 1642-1651, Britons executed King Charles I and sough employment for the unemployed; the French fought theirs in 1789 and executed Louis XVI in 1792; and in Italy, the Prime Minister of the Papal States was assassinated in 1848.
Certainly, every Liberian, with the exceptions of a few, will agree that it was because of an unfair economic system, which reduced government's intakes, that plunged Liberia into its own civil war. And as it was practiced in Liberia prior to 1980, profiteers such as Firestone, etc are paying minimal royalty income and taxes to the government by bribing and hiring Presidential advisers as consultants. Many regulatory laws were enacted, agencies established and expatriates hired to increase government revenue, but the revenue picture is not encouraging.
In fact, President Sirleaf herself has nullified a series of contracts.
Recently, a Civil Society Activist, Silas Saikor, at a Legislative hearing, told the hearing “that nearly all the forest management contracts signed by the government of Liberia with various companies were standing on shaky grounds.”
So can Liberia receive reasonable royalty income and become debt-free if President Sirleaf's advisers continue to also serve as consultants of profiteers as it happened in the past? Or can Liberia learn a lesson from the present American economic reform debate and design its own economic policy?
Now that we have read information from the Table of the Most Debtor Nation in the World, let us review the analysis of the two economic systems as presented by David Brooks, a member of the editorial staff of the New York Times.
But before we read Mr. Brooks’ analysis, let us define the two economic systems: Socialism-Government bureaucrats should manage major resources such as diamond, iron ore, timber, etc, or activities including, healthcare, education, security, roads, bridges, banking, shelter, etc that affect a significant segment of society. Capitalism: government bureaucrats are incompetent and corrupt, therefore capitalists should own and manage all economic activities including, but not limited to transportation, banking, natural resources, education, healthcare, etc.
Mr. David Brooks stated that the United States and its allies believe that with the erection of the Chinese Wall (i.e., efficient regulatory policies) businesses are capable of creating wealth and improving the living conditions of consumers. He also stated that China and Russia reject capitalism because it leads to chaos, bubbles, exploitations and crashes. Those with capital (money) usually bribe regulators, as Goldman Sacks, etc bribed agents at Rating Agencies on Wall Street, who in turn rated junk bonds to AAA. In the case of the Chinese Wall that was erected to prevent invading armies, and turned downright porous when money was given to the guards.
Interestingly, citing Ian Bremmer, an author of a book called “The End of the Free Market,” Mr. Brooks indicated that Socialists’ analysis of the capitalistic system, so far, has become a reality. Mr. Bremmer argued that Socialistic economic system produces wealth for the country. For example, 111,500 Chinese state-owned entities, including 150 steel, communications and finance companies generated $680 billions profits in 2003. (Chinese News).
In contrast, oil companies like Exxon Mobil, BP, and Royal Dutch Shell etc focus on maximamazing profits for their shareholders and awarding excessive bonuses for their chief executives. In fact, the U.S. Government Accounting Office (GAO) reported that from 1998 through 2005 66% of U.S. corporations and 67% of foreign corporations pay no tax to the Federal government. So while the Federal government receives minimal taxes, China benefited from the combined net profits of $680 billion dollars.
Added to the concept of increasing wealth in few hands, capitalists make unaffordable promises to politically powerful group, and unconsciously promote polarization, which immobilizes governments. Further, it seems that the capitalistic system can’t be reformed for one simple reason, profit motive. This is true because profiteers will always seek ways to circumvent any new regulations.
In the case of Liberia, the government received $25 million in 2009 from 71 entities according to Liberian Extractive Institute Transparency Initiatives. To understand how Liberia got minimal remittance, let us review the rental fees for the one million acres of land leased to the Liberian Firestone Rubber Plantation and the 2009 profit of the parent (Bridgestone) and loss for the subsidiary (Firestone), Instead of $25.00 to $75.00, the government received a mere $2.00 for an acre. As for receiving a share of the $4.3 billion dollar profits earned by Bridgestone and its affiliates including the subsidiary, the Liberian Firestone Rubber Plantation receive no income because the Liberian Rubber Plantation reported a loss in 2009. Did Bridgestone employ Wall Street accounting rule and funny tax law?
I have not seen the data that supports President Sirleaf's pledge to forgo aid or loan after ten years. More so, can Liberia, a copycat of capitalism, do better than the father (US) of capitalism? I surmise that President Sirleaf, just as her kinsmen President Tubman and President Tolbert, prefers to serve as a facilitator to ensure that profiteers get the highest profits from Liberia in exchange for the perpetuation of her presidency or protection and promotion of the dynasty of the elites.