The impact of the worldwide crisis of capitalism on Liberia

The 1995 FIFA Player of the year, George M. Weah, has been in power for just a year and a half; and Liberia, often referred to as the “oldest independent African nation”, is suffering from severe austerity. The yoke of capitalism—neo-colonialism, imperialism, corruption and exploitation—has become an overwhelming burden resting on the shoulders of the worker and peasant masses of Liberian society, to such an extent that the soccer legend’s short presidency seems more like a decade.

Underdevelopment and poverty

Liberia is potentially a rich country and yet it suffers from underdevelopment and is one of the poorest countries in the world. Like the entire continent of Africa, Liberia is endowed with plentiful natural mineral resources, and yet 50.9 percent of her 4.7 million population lives below the poverty line (IMF 2019 report). Before his coming to power in 2018 the country’s annual growth rate was 4.7 per cent in 2017, while today the country’s annual growth rate has declined drastically to 0.4 per cent, a record low since the end of the country’s 14 years of civil unrest in 2003. Besides, poor revenue generation has led to the highest budget shortfall so far since the coming into being of the country—112 million.

Liberia's population is made up of 16 indigenous ethnic groups, with 31 indigenous languages spoken in the country. The overwhelming majority adhere to one or other form of Christianity, with Muslims comprising around 12 percent of the population, largely concentrated in the Mandingo and Vai ethnic groups. This leaves open the possibility of playing the ethnic card and using “divide and rule” as a means of dividing the people. However, the economic and social situation is becoming burdensome for all the people.

The literacy rate is estimated at around 60 percent (64.8 percent for males and 56.8 percent for females) due to an inadequate number of schools and teachers. This explains ongoing student protests. Last Tuesday, 15th October, young high school students from around Monrovia took to the streets to demand their teachers be paid so they can go back to the classrooms. The government schools teachers are currently on a go-slow strike action due to salary delay. They haven't been paid four over four months.

Student protests erupted late in October of last year, forcing newly elected president Weah to abolish tuition fees for undergraduate students to hopefully stave off unrest / Image: fair use

The response of the police was to brutally clamp down on the high school students. In response to this, District 6 of the University Students Association (DUSA) in a press statement has condemned police brutality against protesting high school students and has called on the National Government to pay both Government School Teachers and Instructors and Professors of the University of Liberia.

But even for those fortunate enough to get through school and go on to university things are not good. Student protests erupted late in October of last year, forcing newly elected president Weah to abolish tuition fees for undergraduate students in the hope of calming the youth protest movement.

Severe economic crisis

All this is taking place in the context of a severe economic crisis afflicting the already impoverished country. Rice is a staple food in Liberia, but 90 percent is imported, leaving the country very vulnerable to food shortages. This explains also why a large percentage of children under the age of five are considered malnourished, while the overwhelming majority of the population has no access to adequate sanitation facilities, which explains why diseases such as tuberculosis, diarrheal diseases and malaria are widespread, and life expectancy is estimated to be as low as 57 years.

Things, however, have been getting worse. In recent years the country had signed multi-billion-dollar concession agreements for iron ore and palm oil with several multinational corporations, such as Anglo-Australian BHP Billiton, the world’s largest steel producer ArcelorMittal, and Sime Darby, the largest and biggest producer of palm oil in the country and several others. However, as a consequence of the current economic pell-mell, these concession companies have begun scaling down their operations. The prime example is the Firestone Tire and Rubber Company, which has operated the world's largest rubber plantation in Harbel, Margibi County, since the 1920s. In 2015 it had more than 8,000 workers, which made it the country's largest private employer.

A few months ago, Firestone began the process of laying off over 300 employees. Besides Firestone, Sime Darby, has laid off several of her oil palm plantation workers. Additionally, the petroleum sector is also suffering a similar fate. Petroleum giant Total began scaling down her operations earlier this year, closing some of her service centres in the rural parts of the country.

Sadly, most of these workers’ contracts are being prematurely terminated without them even receiving their severance benefits. They are, in most cases, short-changed by these concession companies and the relevant authorities from the angle of the government sit comfortably and watch their people being exploited and they do absolutely nothing about it and they often justify their inability to protect the citizenry from exploitation by hiding under the canopy of “encouraging” Foreign Direct Investment (FDI). It is a truism that in times like these—times of economic crisis and rampant corruption—it is the already poor, poverty-stricken and downcast masses of the people that usually bear the consequences.

An indication of the backwardness of the economy is seen in the fact that at $0.54 per kWh, the cost of electricity in Liberia is one of the highest in the world. Total capacity has also seen a sharp decline since the 1990s.

Austerity being imposed

As a result of the underperformance of the Liberian economy, the government has resorted to austerity. To maintain economic stability, the government has implemented the following draconian measures:

Cuts in government expenditure—this policy will see public spending only on running the government. The 2018 fiscal year saw the government using over 80 percent of the budget on recurrent expenditure—gasoline/fuel, salaries, stationeries, etc., for government functionaries. This policy does not leave room for prioritisation of infrastructure development and the provision of basic social services, such as safe drinking water, electricity, education, healthcare, housing etc.

Salary harmonisation—under the salary harmonisation scheme, the government has sliced the salaries of civil servants. This policy was introduced in this fiscal year’s (2019) budget.

High tax regime—the government has increased taxes on goods and services. The economy of Liberia is an import-based economy, with nearly everything we use being imported into the country. With the imposition of high taxes on imported goods, come higher prices for those goods.

Weah's austerity measures have been met by the people with anger and staunch resentment / Image: fair use

The printing of new Liberian dollar banknotes—as a way of controlling the circulation of the Liberian dollar, the government wants to print new banknotes to replace the old ones. Government economic strategists believe that if new banknotes are printed, this will force businesspeople to take money from their homes—informal sector—and bring them to the banks—formal sector—thus curtailing the already rapidly depreciating Liberian dollar.

These measures were greeted by the people with anger and staunch resentment. Many believe that these austerity measures are only meant for the few among the upper echelons to maintain the deep size of their pockets and to keep the vast majority of the people in perpetual poverty, backwardness and destitution.

The cost of living has skyrocketed with a record high inflation of 28 per cent. The hike in school fees, coupled with low wages and in most cases no wages due to the high level of unemployment, have rendered many parents incapable of sending their children to school. Furthermore, there is also a hike in the prices of basic commodities, such as gasoline/fuel, rice (the county’s staple), communications, transportation, etc. To many, the government’s attempts to solve the current economic quagmire are seen as not sincere. With these austerity measures comes the reduction in the budget for major sectors, including Health, Education, Infrastructure, etc., to the dismay and distaste of the people, and an increase in the budgets of the offices of President, Speaker, Pro tempore and other high ranking government officials.

Student and academic staff protests

As a result of the cuts in the salaries and benefits of lecturers and professors, as well as delays in the payment of the same, the lecturers and professors downed their chalk/markers and went on a go-slow strike action in July of this year. This action saw normal academic activities halted for about two weeks at the state-run University of Liberia (UL).

A few days ago, on September 23, 2019, due to cuts in the budget from 16.3 million to 16 million for the nation’s premier institution of tertiary education, the University of Liberia (UL), militants of one of Africa’s oldest mass-based student Pan-Africanist-socialist revolutionary movements, the Vanguard Student Unification Party (SUP), and students of the University of Liberia (UL) steeped in history, besieged the capitol building in Monrovia and petitioned their lawmakers (MPs) to increase the University’s budget instead of cutting it. SUP argued that 16.3 million is not enough for the university to provide quality education. They further postulated that for the university to remit a minimum quality, it requires at least 29 million. Thus, 16.3 million is a slap in the face of modern quality education and a cut in the university’s budget will not be tolerated!

Workers and youth have been struggling over cuts to the education sector / Image: fair use

In another development, whilst militants of SUP and students of the state-run university were at the capitol building petitioning their lawmakers, over 6000 health workers—nurses and doctors—were on strike as a result of salary delays. The health workers reported that for over six months now they have not received their salaries. They also complain about the lack of supplies—drugs, important medical equipment, etc... The health sector is one of the major sectors of the country that is facing enormous difficulties. Daily scores of people die from curable diseases. The strike saw major government facilities locked down and health workers were seen in the streets with placards demanding the immediate payment of their salaries, while people needing medical attention were left unattended to.

Under this kakistocratic ^[1] regime of ex-footballer George M. Weah, the economy of Liberia is on a slippery slope and is rapidly sliding into the abyss. All the austerity measures are futile in solving the problems that the country’s economy is engulfed in. With inflation at 28 per cent, “salary harmonisation” only serves to further cut the people’s purchasing power. In an economy that is predominantly import based, printing new banknotes is inconsequential to strengthening the local currency and the imposition of high taxes on imported goods is economically damaging. It is a sad fact the things are not going to get better anytime soon—economists and financial experts are projecting that this downward trend is going to continue until at least 2024.

Thus, while the working masses suffer, the so-called experts and supporters of the ruling party are celebrating the general cuts in salaries and benefits of government officials, doctors, nurses, teachers and civil servants as a serious policy intervention that will mobilise funds to invest in a social safety net. According to The Liberian Observer, “there will be 6 percent reduction in salaries of all employees of the Judiciary as well as State-Owned Enterprises (SOEs), and proceeds realised shall be deposited in the Consolidated Accounts for subsequent appropriations by the Legislature.” (October 2, 2019)

Ballooning debt

Here they are trying to fool the people, as funding for social programs in education, healthcare, electricity, etc. have also been slashed significantly as reflected in the draft 2019/2020 national budget?

According toTrading Economics, “External Debt in Liberia increased to 711.50 USD Million in the third quarter of 2018 from 676.40 USD Million in the second quarter of 2018. External Debt in Liberia averaged 538.37 USD Million from 2009 until 2018, reaching an all-time high of 1681.92 USD Million in the third quarter of 2009 and a record low of 222.80 USD Million in the fourth quarter of 2010.”

source: tradingeconomics.com

As the above chart shows clearly, debt has been ballooning and therefore any savings in spending will not be dedicated to the urgent investments needed but will be simply devoured by the repayments on the debt.

Therefore, be not deceived! Our country is facing a serious financial crisis. So long as the wealth of the country remains in the hands of the few, our economy cannot generate the annual revenue of 500million the government is referring to. The government’s current revenue potential now is little over 450million, while its projected expenditure for the fiscal year is about 530million. One can see that the deficit and Keynesian deficit financing methods have all been exhausted and cannot be extended much beyond their limits.

Liberia’s credit rating is low due to its high debt level. Thus, it lacks access to the international financial markets. Suffice this to mean that Liberia lacks the credibility to borrow from private financial institutions to finance its budget deficit. One doubts whether the financial institutions would take such risks even if the interest rate were increased. As we have seen, the government was recently harbouring the thought of printing 35billion LD to finance the deficit but it was warned by the IMF and the World Bank not to attempt doing so due to the disastrous effects this would have on the Liberian economy which is already burning in flames from the fire and fury of inflation.

This is the background to the present brutal austerity which obviously hurts the poor and further plunges the country into the abyss. The cash-strapped government is compelled to implement deep cuts in the current budget to reduce the deficit and run a so-called “realistic budget” in line with the country’s revenue potential. In fact, with the current economic condition, it is very doubtful as to whether the government will be able to generate even 350million from tax and non-tax revenue sources at the end of the fiscal period.

The fact that the lawmakers, who have for years increased their salaries and benefits, were forced to agree recently to a 31 per cent cut should alert all and sundry that they have no option, as the Liberian economy is haemorrhaging at the speed of light. That said, we should note that this cut would provide an overall saving for the state of US$3 million, a lot and very little at the same time. Compared to the overall debt it is a mere drop in the ocean.

We should not forget that the lawmakers did not willingly elect to reduce their benefits. The IMF implicitly told them that the effects of the capitalist crisis is the push factor and that they cannot, for now, be paid fat salaries and benefits to protect private ownership of the means of production and the free market economy. Thus, the painful acceptance – for them – of the 31 per cent cut.

Government policies will fail

In spite of this, it is an illusion to think that the cuts or wage harmonisation scheme imposed on civil servants is a preconceived policy intervention meant to mobilise funds and increase public sector investment in infrastructure, agriculture, etc. Those who understand the reality but continue to push this line are out to delude the masses and this will come back to haunt them.

We want to see the economist that will tell us, amidst rising inflation, that the government cuts to the wages of civil servants, doctors, nurses and teachers are being carried out to increase financing for public sector investment. In the former colonial countries, this is compellingly done by an imperialist capitalist government during a capitalist financial crisis which deprives the government of needed revenue to fund its budget.

Hence, the need for an adjustment. And that adjustment affects the money wages of public sector workers and further butchers their already appalling living standards. It is this underlying economic condition that is fuelling the periodic protests of the health workers in Liberia. If the GOL fanatics [social media propagandists of the Government of Liberia] disagree with this assertion, we will wait to see the amount that will be generated from these salary cuts and to which sector(s) such amounts have been or will be directed.

The cuts are also an IMF condition which must be met to qualify for the Fund’s financial support which it says has the proclivity to restore macroeconomic stability or rebound the economy – a goal which has rarely been achieved by the Fund, not in Greece, Haiti, Honduras and not least in Liberia.

The “financial crisis” is the crisis of capitalism. And this crisis will not be resolved anytime soon. It will get worse and the masses of workers, peasants and urban poor will grow angrier and begin to take their destiny into their own hands. The capitalist system can offer nothing progressive to the former colonial countries. Insofar as the products of labour produced by the big corporations in our economy remain the ownership of foreign monopoly capital that repatriates the profits and pays paltry sums in wages to workers and taxes to government, the fate of the exploited layers (workers, peasants and urban poor) will continue to hang in the balance.

As Professor Benny Barclay once said “Economic straitjackets designed by the Bretton Woods Institutions are not the way forward for the people of the Third World. You have gold, diamond, timber, rich land for agriculture, rubber, iron ore, rich marine life, etc. and yet you reach out for peanuts to balance your budget and subject your people to crude sacrifices in the 21st Century”.

A crisis of capitalism

The pattern of production and exchange of commodities which places the commanding heights of the country’s economy in the hands of private corporations has deprived our people of the needed capital to deal with the questions of economic development. While the budget deficit amounted to more than 200million in the last fiscal year, the export values for gold, iron ore, rubber, and diamonds amounted to more than 400million in 2018.

Such values were produced by the sweat and blood of Liberian workers who are paid starvation wages that cannot cater to their basic needs. The bulk of the values were repatriated instead of being reinvested or circulated in other sectors of the economy. This amounts to a preclusion of large reserves of capital accumulation by domestic private citizens.

Liberia requires a genuine party of the working masses / Image: fair use

The current government and leading opposition parties lack the means to deal with these contradictions in present-day Liberian society as they are all subservient to imperialism. As the regime relies on the IMF prescriptions, the opposition laments that it can apply the same policies better than the ruling party and with greater honesty. Thus, “the more things change, the more they remain the same”.

Senator Darius Dillon of Montserrado County stood out as an exception on the question of cutting the salaries and benefits of Members of Parliament. He was elected just over two months ago and upset the gentlemen sitting in the Senate when he made public his gross salary and benefits as senator, declaring that his salary and gross benefits after tax came to US$12k.

This stance of Dillon explains also why he was able to oust the ruling party's candidate in a by-election in Montserrado, a county that has been a stronghold of the ruling party since 2005.

He was the candidate of the Collaborating Political Parties (CPP). The collaboration is a coalition made up of four bourgeois parties, the Alternative National Congress (ANC), Liberty Party (LP), Unity Party (UP) and the All Liberian Party (ALP). The UP is the former ruling party. Dillon is the Vice-chair of the Liberty Party. He was also the spokesman of the Council of Patriots (COP), the protest movement that led the June 7 Protest.

Weah must step down but what is the alternative?

Lacking any genuine mass workers’ and poor political representation, the masses expressed their anger by voting for someone who was perceived as being more honest than other politicians. That explains why the objective conditions in the country are rallying the people behind the COP call for President Weah to step down. The COP has scheduled the protest for the resignation of the President for December 31. But with the level of general anger in the country, that might spontaneously take place before the stipulated date! The COP could find itself catapulted into government earlier than they imagine. But lacking a programme that can solve the economic crisis gripping the country, like night follows day, they will disappoint the masses who are pushing them towards power.

It will require a vanguard revolutionary working-class leadership to provide the real answer to the present crisis. Such a party leading the working class, in alliance with the peasants and urban poor, would be able to construct a new society where the wealth produced by the masses of workers and peasants is used to provide the needs of the people and achieve genuine social development in Liberia. This cannot be done without the nationalisation of the commanding heights of the economy under democratic workers’ control and management. This would include the expropriation of the multinational corporations who are extracting profit from the country with no benefits going to the workers and poor of Liberia.

For this programme to be carried out requires the building of a genuine mass party of the working masses of Liberia. The task of building such a force starts first with a clarification of the nature of the crisis and what programme is required to resolve it. We invite all those who agree, to get in touch with the IMT and open up discussions on the tasks facing the workers, students and peasants of Liberia.

[1] “kakistocracy” is a system of government that is run by the worst, least qualified, and/or most unscrupulous citizens.