President Sirleaf’s Annual Address to the Nation Revisited
By: Theodore T. Hodge
Ellen Johnson Sirleaf
After reading President Ellen Johnson Sirleaf’s annual address to the nation, I issued a scathing critique. I painstakingly pointed out the falsities of her claims, mainly on the subjects of Health and Education, two subjects to which she claims her administration attaches great priority. I challenged her on the grounds that she deliberately painted a rosy picture, giving the impression that conditions in the country are not that bad off under her able leadership. I proffered arguments to the contrary, and concluded that many of the false statements uttered by the president were done so for simple political expediency… to lie so blatantly is an unconscionable act, in my opinion.
For the sake of brevity, I was not able to comment on other subtopics of the speech. Here, I intend to examine and focus on the issue of natural resources and how this administration, just like the previous administrations before it, has failed to implement fruitful policies to benefit the nation. I will offer some advice…
This is what the president said: “Working with our sister Republic of Guinea, I will submit legislation to effectuate an infrastructure development agreement between the Government and West African Exploration (WAE) for the transshipment of iron ore from Guinea through Liberia. For several decades the Governments of Liberia and of Guinea have considered and explored modes of cooperation to facilitate the evacuation of iron ore from parts of Guinea near the Liberian border using infrastructure in Liberia. This is a milestone in regional integration opening the way for stronger cooperation between our two countries and broadening the opportunities for large scale investment.”
What is wrong with this picture painted by the president? Two clauses stand out: “… for the transshipment of iron ore from Guinea through Liberia…” and “…the evacuation of iron ore from parts of Guinea…” It is quite painful and mind-boggling that our president, generally referred to as an Ivy-League trained economist, proffers the transshipment and evacuation of natural resources as economic policy to lead to infrastructural development and large scale investment.
Nothing could be further from the truth. As a matter of fact, the opposite of the statement made above is true. Transshipment and evacuation of a country’s natural resources lead to stagnancy, poverty and under-development. Selling a country’s natural resources and exporting same abroad on a constant basis is a clear and proven recipe for under-development; to call it a viable economic policy is boneheaded, to say the least.
Before I offer some constructive alternatives based on the study of economic history around the world, let’s examine further what the president said: “Liberia has a historical primary enclave economy, highly dominated by iron ore, rubber and timber; which subjects it to vagaries in global conditions and prices. Over time, the structure has been changing, with the expansion of agriculture into more traditional tree crops such as coffee, cocoa and oil palm. Essentially, production of crops come from individual and small entity holders with limited capacity to produce on the scale that leads to industrialization. Recent effort by the Government sought to change this by promoting large scale oil palm, using the investment and the experience of Malaysia and Indonesia which have become emerging economic giants.”
That the nation Liberia is blessed with abundant (or perhaps sufficient) natural resources is an undebatable fact. History, however shows that our political and economic leaders, our national leaders --- although referring to the people who run our affairs as leaders is entirely misleading --- have put us on the wrong track of the path to development. Their policy, since 1926 and the coming of Firestone, has been to collect a few dollars from foreign investors and watch them whisk away our resources with amazing rapidity. Not only has the government allowed foreigners to benefit enormously by taking our raw products, refining them into finished products and reselling the products to us at exorbitant prices; they have had to use cheap labor sanctioned by the government. This kind of arrangement only benefits the foreign buyers while it demoralizes and disenfranchises the average Liberian, who gets poorer and poorer.
It is evidently true, as even the president herself has openly admitted above, that our natural resources, when sold on the world markets, are ‘subject to vagaries in global conditions and prices’. But how are the discrepancies to be corrected? How is it fair for the buyer to always determine the price of a given good? Surely, the seller is the victim in this sort of market imperfection and distortion.
It is quite understandable that past leaders were forced to adopt or accept such practices, but what is our excuse now for continuing to sell raw rubber, timber, cocoa, coffee, gold and diamond to foreign bidders without being able to analyze our economic condition with some degree of thoughtfulness? Why do we continue instead to just run things on automatic pilot controls as if doing things the same old way is a sacred obligation? Now, add to the mix the discovery of oil. We have no idea how much oil we are yet to potentially discover, yet our government is hastily signing papers to foreign bidders to whisk it all away, only to be resold to us as finished products marked up so high in price that the average Liberian will not be able to buy and use it.
Our president mentioned Malaysia and Indonesia as “emerging economic giants”. True. But has the president and her economic staff ever bothered to explore the secrets behind these countries’ economic boom? To anyone who has bothered to do any research on these emerging economic giants, including Japan, South Korea and Singapore among others, their economic policies and the secrets to their economic successes are an open secret. I’ll give you a hint: It does not amount to simply selling your raw natural resources and buying finished imported goods.
Two excellent books are in circulation now for all to read and understand this question of how developing countries can propel and transform themselves from marginalization to economic prosperity. The first is “How Rich Countries Got Rich and Why Poor Countries Stay Poor”. The author is Erik S. Reinert, a Norwegian. Dr. Reinert is an award-winning economist, winner of the European Association for Evolutionary Political Economy. The second book is titled: “Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity.” Its author is Ha-Joon Chang, a brilliant South Korean economic historian and an award-winning author as well.
Dr. Reinert writes: “Between raw materials and the finished product lies a multiplier: an industrial process demanding and creating knowledge, mechanization, technology, division of labor, increasing returns and --- above all --- employment for the masses of underemployed and unemployed that always characterize poor countries…”
He writes further: “In the 1700s, it was a rule of thumb developed for economic policy in bilateral trade, a rule that rapidly spread throughout Europe. When a country exported raw materials and imported industrial goods, this was considered bad trade. When the same country imported raw materials and exported industrial goods, this was considered good trade.”
In its April 2011 edition, the magazine NewAfrican dedicated its cover story to this very topic and reviewed these two books. Under the heading, “Cracking the Code: Unlocking Africa’s Secret to Wealth”, Osei Boateng writes: “…wealthy nations have a tendency to force upon nations theories they themselves never have followed and probably never will. Throughout the two books, the two authors go to extra lengths to provide incontrovertible evidence showing that today’s rich countries got rich because for decades, often for centuries, their ruling elites set up, subsidized, and protected dynamic industries and services, as national policy. They did not leave anything to chance or wait for God to do it for them as Africa tends to do these days.”
We are seemingly doing everything to keep our people marginalized and economically subservient. We are doing the exact opposite of what sound economic policy demands: We are exporting all our raw materials and importing finished goods at intolerable prices and the president is wondering why our economy is stagnant, or even regressive, why our so-called economic partners thrive at our expense. Should the picture not be clear to someone who comes with so much purported academic credentials and an impressive track record from the corporate world?
There is an economic principle referred to as Emulation; the theme runs vividly in these two books. For the layman’s terms, emulation is described thus: “to try to equal or excel; imitate with effort to equal or surpass; it also means to rival with some degree of success…”
There is also an alternative economic principle known as ‘comparative advantage’. The principle is thus defined: …”Comparative advantage occurs when a country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries.”
The essence of the two books is that Europe and America used one economic principle (emulation) and imposed another (the concept of comparative advantage) on developing countries, mainly African and Latin American countries. But here is the interesting point of observation, emerging Asian economies such as Japan first, followed by others like South Korea, Singapore, Malaysia, as well China, decided to play the game differently.
A toolbox of Economic Emulation and Development based on the two books was produced by the magazine NewAfrican and partially reproduced here with all courtesy and attribution:
We are told, after a thorough reading of history, that “For several years, England’s economic policy was based on a simple rule: import of raw materials and export of industrial products.” Evidence is also replete that Britain remained a highly protectionist country until the mid-19th century; they used the idea of emulation… “Bringing their productive structures into those areas where technological change was being focused. In this way, they created rents (a return above ‘normal’ income) that spread to capitalists in the form of higher profits, to labor in the form of higher wages, and to governments in the form of higher taxes…”
Now, Britain and its capitalist fellow heroes, including the United States, and their so-called international or “global” organizations, such as the World Bank, the International Monetary Fund (IMF) and the World Trade Organization (WTO), apply the phenomenon of “Kicking away the ladder”, as described by Friedrich List who said: “It is a common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he climbed up, in order to deprive others of the means of climbing up after him.”
I bring this to a conclusion by quoting one of our authors, Dr. Chang, who said:
“If you want to understand the causes of American and European prosperity, study the policies of those who created it, not the advice of their forgetful successors.” Other countries that not too long ago were considered backward and undeveloped have learned this lesson only too well, and so should we. Selling our natural resources is not a viable policy that leads to economic development and prosperity.