President Sirleaf/World Bank: Can Big Business Reduce Unemployment And Make Big Profits?


By J. Yanqui Zaza      

The Perspective
Atlanta, Georgia
October 2, 2013



Unemployment, the second man-made cancer to corruption, has many ways of showing its ugly effects. For example, in Zorzor, Lofa County, Liberia, it did not only prevent breadwinners from putting food on the table, but it also forces recipients of Western Union controlled number and government checks holders to travel far away to get cash, according to participants at a Committee Meeting. At that Zorzor District Meeting held in Liberia in January, 2013, during my visit, participants stated that a branch of Ecobank, one of the established banks in Lofa County, has closed its doors, due largely to the unemployed residents' inability to purchase goods and services. 

Now, it is not only the no-more-breadwinner, Western Union controlled number recipient, and Ecobank that are affected by unemployment, but the government is also affected. Government takes in less revenue when the rate of unemployment is high. This is because lower economic activity generates lower government revenue. In fact, to make up the shortfall in its revenue projection, the Liberian government began to sell "Treasury Bill's to raise cash on May 3, 2013. 

Lower economic activities precipitated by less demand for goods and services, due largely to the high rate of unemployment, is not limited to Liberia. In the United States of America, for example, businesses are closing doors because of decreaing in demands for good and services, municipalities; including Detroit, Michigan and San Francisco, California, are cutting pension benefits, etc. However, to President Sirleaf’s credit, unemployment was very high before her ascendancy to the presidency. In fact it was because of the concern of the two vices (corruption and unemployment) that voters, during the last two elections accepted the view that someone like President Sirleaf with international business experience, including experience with the World Bank, would be a better choice to fight unemployment and corruption.

Did her credentials, billions of dollars from our international partners, and cozy relationships with Firestone, Mittal Steel, etc., help her to win the war declared on unemployment? Not really. Her critics state that President 's war on unemployment mirrors her war on corruption. After seven years, the twin-man-made cancers (corruption and unemployment) are knocking at Liberia's fragile stability. If I may ask, did President Sirleaf’s economic philosophy; small government, tax holiday, privatization, etc. Contribute to the high rate of unemployment?

She holds firm her economic view. In fact, She reiterated the idea of small government, etc. when the former French President Nicholas Sarkozy invited her to a conference called "New World, New Capitalism" held in Paris January 2009. The organizers' call for more regulation and government's role in the economy as response to the 2008 financial crisis did differ with President Sirleaf's view.

Well, President Sirleaf's view is either a copycat of the economic view of big business or she still holds the view of Liberia's elites. Liberian elites have and continue to use economic and political marginalization of the majority not only to siphon the wealth of the country to a few privileged individuals, but also to sustain the elites' military victories won against the haves-not during the earlier history of Liberia: (1) Settlers war with the Grebo and Kru in 1856, (Presidency of Benson); (2) Uprisings of inland and coastal tribes in 1864, (Presidency of Benson); (3) War in Cape Palmas in 1876-78, (Presidency of Payne-II), etc. 

Even, if she did not institute anti-people policies, President Sirleaf's economic policy has and continues to increase the rate of unemployment, while at the same time shifting more dividends to the privileged few. For example, at the time her government dismissed $100 per month employees in order to reduce bloated payroll, the government did not only abate real estate taxes, but simultaneously made rental payments that accrued during the civil war. In short, twice, she gave money to the elites, but took away the meager wages of the haves-not. 

The idea to reduce bloated payroll is good, but not when investors are firing employees. Rather, the government should have maintained the bloated payroll since LAMCO, Bong Mines, etc. were closed, and Firestone was operating below normal capacity. Economists recommend that when private employers increase unemployment, government should increase employment directly (investment in constructions) or indirectly (interest rate manipulation, food stamp, housing allowance, Medicare, etc.). In the case of Liberia that lacks the kind of economic measures such as monetary policy or physical policy, the only alternative was for the government to, at least, maintain those employed. 

 A good employment policy has to go beyond government agencies. And yes, experts at the World Bank and the International Monetary Fund have prescribed their policy that goes beyond government employees. They state that government's regulation, taxation or financing social programs, undermines investment, and subsequently increase unemployment. Investors are willing to spend their money if governments provide friendly or accommodative environment such as tax holiday, less regulations, transfer of profits without penalty and minimal government role in the management of natural resources, they argue. 

It is true that investors need employment in order to produce (manufacturer), sell (salesperson) and collect on accounts (accounts manager). Equally so, investors, will always increase unemployment or cut wages to make profits. Additionally, big business dismisses employees or cuts wages when it merges, consolidates, relocates or liquidates. Why is wages or employment always on the table for cutting? This is because wages makes about more than 60% of the total cost of operations. For example, on the US Federal Form 1120, the form businesses file for tax purposes, twelve of the twenty-seven lines related to a company’s expenditures are directly or indirectly related to wages (e.g. wages, employee-benefits, pensions).

Would the rate of unemployment be high if the Liberian government had encouraged plank production from our trees, iron ore being melted into steel, diamond being cut, gold being cleaned, rice being produced, etc.?  Not so. And better yet, such an economic policy does not have to require the nationalization of Liberia’s resources. Rather, it would encourage investors to add values to the resources before exported.

Big business and its allies (local as well as external) will always propagate the idea that deregulation and limited government role create an environment for hiring more employees. Experiences from the last seven years show that investors searching for more profits will always reduce employment, even if government awards the sweetest concessionary deals. In short, the solution to the chronic problem of unemployment is preventing profiteers from taking over a complete control of a country’s resources.

J. Yanqui Zaza

© 2013 by The Perspective
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