An Economic Policy To Receive Correct Royalties From Our Security/Strategic Economic Assets

By J. Yanqui Zaza

The Perspective
Atlanta, Georgia
December 12, 2006


While we commend President Ellen Johnson Sirleaf for the anti-corruption action, which is not new, Liberia should reform the economic system to reduce white collar corruption (i.e., investors paying small amount of taxes and royalties from our natural resources). Firestone, LAMCO, Bong Mining Companies and others in Liberia have continued to remit unfair amount of royalties, thereby; reducing government’s funding to invest in social programs such as education, health, housing, safe-drinking water, etc to rural towns beyond Monrovia.

Similarly, prior efforts such as President William R. Tolbert Corruption Bureau, or the U.S. Television Program (“60 Minutes of CBS”) featuring President Tolbert as a corrupt President, or the execution of the 13 former government officials for corruption, the fourteen-year civil war, etc did not amend our economic system to reduce the exploitation of our security/strategic economic assets. Now, getting adequate taxes might even become difficult as more and more lobbyists of big business win political offices, since investors would gain additional influence.

Predictably, the protest to protect the interest of big business launched by some political parties and the party of the current Speaker of the House of Representative of the Republic of Liberia, Edwin Snowe (Charles Taylor-son-in-law) should not have come as a surprise (New Democrat, 11/24/06). Obviously members of those parties are friends of big business that have and continue to benefit from arrangements between companies and our country. Thus, it would be naïve for one to believe that the partisans were not merely protecting their constituents, and that they were not aware that the idea of renegotiating or amending agreements, contracts, etc is a sound economic principle. In fact following such a principle, the U.S. government has begun to renegotiate the 1990 Oil Deal to recover $7 billion dollars in royalties from Energy Companies. (Source: U.S. Interior Department 2006 Report).

But even if our government, headed by a puritanical leader, continues with the renegotiation, would our leaders be free of the influence of stakeholders/investors since they might have financed the elections, and might also give kickbacks to officials in exchange for reducing royalties? The influence of big business as protected by our economic system is impenetrable. President Sirleaf could win the war on economic injustice (i.e., not just issues of corruption involving pennies such as salary disparities or payroll padding), if Liberians change the economic policy. A changed of our economic policy that increases the country's influence in the management of our natural resources would also reduce the possibility of business partners/advocates from becoming double agents for big business and government.

Interestingly, America, the origin of Liberia’s economic system is also struggling to overhaul her economy. Thomas B. Edsall, who holds the Pulitzer Moore Chair at Columbia University, said the U.S. economic system is so imbalanced that lobbyists, instead of Congress, wrote the 2004 Tax Bill and inserted a $143 billion dollar tax break for big business. Trying to minimize the influence of big business, Louis Uchitelle (NY Times, 11/25/06) said, some U.S. Democrats (called the "Populists) are rushing to revamp the economic system. They have backed their action by arguing that the national income has flowed disproportionately into corporate coffers and the nation’s wealthiest households. And surprisingly, American billionaire Warren Buffett, the second richest person in the World with a reported $44 billion dollars, agrees with them, Ben Stein reported in the NY Times, 11/25/06.

Assumingly, analyzing America's economic system would be a good mirror that policy-make could use to understand why and how Liberia's economic system failed. More so, the exercise would disclose the flaws associated with this economic system even when it encompasses advocacy groups, promotes competition, and operates within a federal political arrangement. Many prominent citizens have argued that Liberia would prosper if it practices democracy, deregulates its economy, and elects officials including, judges, superintendents (i.e., governors), which are found within the United States. If the election of many officials or the establishments of advocacy groups and autonomous counties minimizes economic disparities, so why is America suffering from some of the same spoils as Liberia?

Until the 1950s, the U.S. government’s economic system (i.e. unlike Liberia’s) was a populist system, a mixture of both capitalism and socialism. While the government allowed businesses to undertake risky ventures, it regulated the market and invested in social programs, which helped in preventing politicians and investors from exploiting the weak and the helpless. For instance, by increasing the number housing units government removed one of the key factors (i.e., shortage of housing) investors use to increase the cost of housing. Many economists say U.S. residents are now paying 51% of their take-home pay for housing cost (U.S. Census Bureau, NY Times, 10/23/06) because of the shortage of houses. Housing cost is expensive in Liberia.

So by shifting from a mixed economic system to a deregulated system, the gap increased between the haves and have-nots. Worst, the promise that privatizing entities would reduce corruption and offer better services for cheaper prices did not materialize. Instead, few greedy investors made huge profits. For example, David Cay Johnson (NY Times, 10/23/06) said a utility entity bought for $900 million dollars was sold for $5.8 billion dollars in less than a year. Johnson concluded that there was no real value added, except that regulators allowed the new buyer to recoup their investment by overcharging poor customers.

Education, the industry that had helped to reduce corruption by increasing the number of skilled manpower, was under funded in America as well as in Liberia. With no government funding, private universities did not only reduce the number of college graduates by increasing tuition, but also reduced the number of graduates by admitting students with lower grades, who would eventually drop out. (NY Times, 12/3/06). Also, according to recent report, even President George Bushes’ Education Program (No Child Left Behind) did not improve students' learning.

Public records indicate that poor educational system does not only contribute to the number of low skilled manpower, but it also has helped to erode workers’ share of productivity. As in the case of Liberia, investors have stayed away because of low skilled manpower. Eduardo Porter, in an article entitled “After years of growth, what about workers’ shares?’ said America’s workers real wages fell 10%, while the compensation of their CEOs increased by 400% over thirty-years. In fact salaries of chief executives have leaped from $1 million per year to more than a billion a year. In 2005, for example, twenty-three U.S. chief executives made between $230 million to $1.5 billion dollars.

Studies indicate that America's allies (Canada, France, Germany, Great Britain, etc) with mixed economy have problems, but are not burden by the $1.4 billion dollar pension funds debt, $350 billion dollar annual interest expense, 450 billion dollar budget deficits, and expensive health care system. David Leonhardt, in an articled entitled “A Lesson From Europe on Health Care,” said because government provides universal health care in European countries, citizens pay a small amount for health care costs as compared to the astronomical cost U.S. citizens pay.

Liberia’s economic system, if let unchanged, would compel residents to pay more for housing, education, etc because chief executives would induce officials and pay minimal royalties and taxes. As evidenced by the shortcomings of the American economic system, the promotion of democracy, deregulation along with operating within a federal system cannot be a substitute for an effective economic system. Moreover, unlike America that invested in social programs before shifting to the current system, Liberia did not invest in social programs. Liberians welcome the war on penny corruption, but Liberia needs an economic system that increases the role of government in the management of our resources, subsequently, reducing the influence of profit-driven investors who usually use kickbacks to make super profits.

© 2006 by The Perspective

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