Liberian Online - Liberia Portal - Liberia must fight corruption

Mike Thomas
An Economist

Events in the past two months in Liberia have raised hope about the government's willingness to fight corruption. Members of Liberia's transitional parliament voted to indefinitely suspend their parliamentary speaker, George Dweh, for corruption along with his deputy and two other members of the house, A report by a special parliamentary committee, published at that time, concluded that the four men had spent US$92,000 of government money without authorisation. Public officials looted the public treasury as if they were competing for the Olympic gold medal in embezzlement. Hence, Liberia repeatedly scored very high on the Transparency International's list of countries notoriously known for corruption.

The money had been intended as resettlement allowances for some members of transitional parliament, set up with representatives from the Liberia's three former armed groups, political parties and civil society, under the 2003 peace deal that ended 14 years of civil war.

There is no chance these people may face trial. To my surprise, I saw these same people roaming Liberian streets. In any case, it is obvious that without a decisive action to defeat corruption, Liberia will merely exist as nation state and nothing more. The country is like a worn out basket full of holes. Whenever money is put into it, the money leaks away just like water in a basket. No one can account for the millions of dollars that the country has earned in the past years or more years due to the fact that those who are supposed to use the money to address the developmental needs of the country have simply stolen the money.

Now, the big questions are: Is the President playing to the gallery and trying to impress some forces? Is he serious about fighting corruption? Does he have the moral standing to fight corruption without being consumed in the process? Will the President be bold to take the battle to some people in certain parts of the country if they are found to be involved in corruption i.e., some powerful elites from rebel factions? Will the President be bold to take the battle to former military and rebels leaders with well-known record of corruption?

This questions become pertinent given the President past performance in this area since he assumed office. It will be recall that the President assured us when he came in as care taker president that his administration is determined to fight corruption in all places including the high places. Yet, we hear of " corruptions, Long term contracts with foreign companies.

The purpose of this article is to answer why Liberia must fight corruption. Yes, Liberia must fight corruption because corruption has no place in Liberia and our country economy. The effect and impact of corruption results in an imbalance in the economic system, and it is directly responsible for the cancer called INFLATION.

When I was in Liberia, years ago, 50 Liberian Dollar was a lot of money, you can feed on it for a day; I have been told I need about 200 LD for a good lunch. How does corruption result in inflation? I will explain it by my rudimentary economics. This rudimentary economics posit that economy, in a capitalist system, sits on a two-legged stool. One side of the stool is what I will call PRODUCTIVITY and the other side is MONEY.

To explain this economic model of mine, you have to assume that the money in circulation is represented by what you and I get paid for the hard work of creating goods and services, and that is all the money available. For the economy to be stable, there must be a balance between the two sides. The imbalance manifests itself in INFLATION or DEFLATION. The worst is inflation. The productivity side, in simplistic term, is represented by goods and services produced through hard work and industry of the people. The money side is the money earned by those who produced goods and services on the productivity side. Where people start making money from means outside this model, then an imbalance sets in.

If everybody starts collecting bride, 10% graft from contract, police and custom collecting money from importers and exporters, messengers collecting bribe before they locate files etc, these are money that is not supported by productivity or production of goods and services. In essence, you will have more money in circulation than goods and services produced from hard work and industry, thereby creating artificial demand that outstrips supply. In effect, you have lots of money chasing few goods. In essence, you have inflation

It is my submission that the in-balance in Liberia is from excess money in circulation. I mean the excess money that cannot be supported by productivity or genuine economic activity, and must be checked by the government to bring sanity to the system.

If you disagree with my model, then think about this scenario. You are a hard working young man. In the course of looking forward, you plan to own a house in the nearest future. Currently, a house goes for $40,000 in your area. Suddenly, house price starts climbing and there are no economic indicator(s), i.e., a sharp drop in interest rate to support the rise in house market. And before you know it, the same house has gone up to $100,000. You wonder why, and found out that drug dealers and corruptors are the ones buying the houses and pushing up the price.

In essence, money that cannot be supported by hard work has invaded your community and your dream of buying a house has been shattered because your salary has not changed significantly. There is no difference between drug money and bribe money; they are both unsupported by genuine economic activity. They both create artificial demand, and consequently, inflation. Why did governments in the West world fight illegal drug trafficking? They are not doing it because it is a moral thing to do; they are protecting their economy from bad money.

If you disagree again, think of a situation where a supplier supplies raw material to a manufacturer at say $1,000 a piece, and the Purchasing Manager demands 10% graft. To make profit, the supplier will have to increase the price by the 10% bribe. The increase in cost of supply will go into cost of production and finally pass on to the consumers in increase price. If this is a common practice everywhere, you will get what the economics called cost-push inflation.

Now corruption goes one step further to destroy a country. It destroys the moral fabric that makes a strong country and people. The debasement of moral values is the beginning of the end for any country. In the scenario above, if the scourge of drug and bride money is not checked, a time will come when the young man will ask himself: Why am I working so hard to earn a living when the boys buying the houses are not as smart?

In Liberia today, money is being worship like god. You could be poor today and become a "big man" tomorrow. Nobody ask questions. There is a serious rat race. It explains why we have rouges as lawmakers. People go into government poor and come out rich, and nobody ask question. Instead, they become heroes and heroines. No nation can survive such depraved moral value for a long time.

Some months ago, an ambassador to Liberia explains why Liberia is not a magnet for foreign investment. He cited corruption and lack of infrastructure. He said corruption has increased the cost of doing business in Liberia. He is right. How do you account for the bribes and extortion? In business you have to report them as expense or cost of doing business. If you are a multi-national business, you compare cost of doing business in country A and B and make strategic business decision. The lack of infrastructure like energy, roads and water, which is a direct result of corruption, also escalates cost of doing business. If you have to run the business with a generator, you will pay more than those who operate with hydro.

Liberia holds a strategic position in the world. It is a shame that a country like Ghana just celebrated 2 years of uninterrupted power supply while LEC supply of power is a dismal failure, all because of corruption.

Yes, Liberia must fight corruption, but can President Bryant or the incoming president do it? We'll see.

Watch out for my next article
To contact the Author : mt19@myway.com