VOLUME XIII 1988 NUMBER 2 LIBERIAN STUDIES JOURNAL 1 8°W LIBERIA 8 °N- -8 °N MONSERRADO MARGIN! 6 °N-, -6 N RIVER 1 111111 W40160 LIBERIA tfr °W Geogrophy Deportment IO 8 °W University of Pittsburgh of Johnstown i 1 Published by THE LIBERIAN STUDIES ASSOCIATION, INC. PDF compression, OCR, web optimization using a watermarked evaluation copy of CVISION PDFCompressor Cover map: compiled by William Kory, cartography work by Jodie Molnar; Geography Department, University of Pittsburgh at Johnstown. PDF compression, OCR, web optimization using a watermarked evaluation copy of CVISION PDFCompressor VOLUME XIII 1988 NUMBER 2 LIBERIAN STUDIES JOURNAL Editor D. Elwood Dunn The University of the South Associate Editor Similih M. Cordor Kennesaw College Book Review Editor Dalvan M. Coger Memphis State University EDITORIAL ADVISORY BOARD Bertha B. Azango Lawrence B. Breitborde University of Liberia Beloit College Christopher Clapham Warren L. d'Azevedo Lancaster University University of Nevada Reno Joseph S. Guannu Thomas E. Hayden Cuttington University College Africa Faith and Justice Network Svend E. Holsoe J. Gus Liebenow University of Delaware Indiana University Corann Okorodudu Glassboro State College Edited at the Department of Political Science, The University of the South PDF compression, OCR, web optimization using a watermarked evaluation copy of CVISION PDFCompressor CONTENTS ECONOMIC ADJUSTMENT PROGRAMS UNDER STAND -BY ARRANGEMENTS WITH THE INTERNATIONAL MONETARY FUND: LIBERIA'S EXPERIENCE 1980 -85 ......... 153 by J. Mills Jones THE ELUSIVE TRIO IN QUALITY EDUCATION IN LIBERIA ....... 178 by Sakui W. G. Malakpa PUBLIC CHOICE APPLICATIONS TO GOVERNMENT SIZE IN LIBERIA 187 by Alfred B. Konuwa SETTING THE STAGE: HISTORICAL ANTECEDENTS TO THE APRIL 12, 1980 COUP D'ETAT IN LIBERIA ...................... 203 by George Klay Kieh, Jr. THE RESULTS OF THE 1985 LIBERIAN ELECTIONS ...................... 220 by Patrick L. N. Seyon LIBERIAN POLITICAL OPPOSITION IN THE POST- ELECTION PERIOD 240 by J. Gus Liebenow BOOK REVIEWS Kappel, Robert, Werner Korte, and R. Friedegund Mascher, Liberia: Underdevelopment and Political Rule in a Peripheral Society ...................................... ............................... 255 by Jo Sullivan Thomas, Lamont D., Rise to be a People: A Biography of Paul Cuffe .................. 259 by Svend E. Holsoe NEW BOOKS ON LIBERIA ..................................... ............................... 262 RECENT DISSERTATIONS ON LIBERIA 264 NEWS AND NOTES ................................................. ............................... 265 CONTRIBUTORS TO THIS ISSUE ......................... ............................... 268 INDEX ............................... .. ............................... 269 A referee journal that emphasizes the social sciences and humanities, the LIBERIAN STUDIES JOURNAL is a semiannual publication devoted to studies of Africa's oldest republic. The annual subscription rate is $20.00, $12.00 for students and $20.00 for institutions, and includes membership in the Liberian Studies Association, Inc. All manuscripts and related matters should be addressed to The Editor, Liberian Studies Journal, Department of Political Science, The University of the South, Sewanee, TN 37375. Subscriptions and other business matters should be directed to The Executive Secretary, Liberian Studies Association, P. O. Box 1043, Oak Park, Illionois 60304. The views expressed herein are those of the individual contributors and do not necessarily reflect those of the editor or the Liberian Studies Association, Inc. Copyright 1988 by the Liberian Studies Association, Inc. ISSN 0024 1989 PDF compression, OCR, web optimization using a watermarked evaluation copy of CVISION PDFCompressor Economic Adjustment Programs Under Stand -By Arrangements With the International Monetary Fund: Liberia's Experience 1980-85 J. Mills Jones* This paper reviews Liberia's recent quest for economic stabilization in the context of Fund -supported adjustment programs during the period 1980 -85. The stabilization effort began shortly after the military seized power in April 1980, and the first stand -by arrangement with the International Monetary Fund (IMF) was concluded in September of that year. In all, five successive stand -by arrangements were approved by the Fund between September 1980 and December 1984. Most studies on Fund -supported stabilization programs in developing countries indicate that such programs have been largely unsuccessful, suggesting that adjustment is more difficult than conventional wisdom would lead to believe.' For instance, Diaz-Alejandro has suggested that stabilization programs were a case of "overkill" in Latin America in the sense that they led to a decline in economic activity far more than was necessary in terms of what could have been considered as reasonable objectives? Dell and Lawrence observed that in several countries pursuing adjustment programs the rates of decline in real wages were of the order of 20 to 40 percent, and that despite firm evidence there is a presumption that in many countries the decline was accompanied by a deterioration in the distribution of income? More recently, a study by Zulu and Nsouli on the African experience with Fund -supported adjustment programs showed that economic performance in many cases fell below target level; the target for the budgetary deficit (excluding grant) as a proportion of GDP was exceeded by substantial margin; and external debt for nearly all countries exceeded the target.' Table I contains selected economic data on Liberia. The picture is one of an economy more removed from stabilization and with problems more acute than when the adjustment effort was initiated in 1980. Real GDP declined at an average annual rate of 3.6 percent during the period 1980-85, public sector finances remained in disarray, and the level of debt increased substantially. Meanwhile, Liberia faced a growing problem of large external payments arrears, including a sizeable amount owed to the Fund, a situation which further eroded its credit standing. Because of outstanding obligations, the Fund declared Liberia ineligible to use its resources in January 1986. Why is this so? Liberian Studies Journal, XIII, 2 (1988) 153 PDF compression, OCR, web optimization using a watermarked evaluation copy of CVISION PDFCompressor 154 J. MILLS JONES Was the orthodox approach to stabilization appropriate to the circumstances in Liberia? Was it a mistake to assume that short-term credits from the Fund was suitable for financing the country's adjustment effort? To what extent did the international economic environment create problems for the Liberian economy? What role did institutional and political factors play in thwarting the adjustment process? This paper attempts to provide some answers to these questions. We begin with a discussion of economic and institutional weaknesses which antedate the economic crisis in the 1980s. Our contention is that it is not possible to understand the failure of the stabilization exercise except in a context which takes into account these basic problems. Then we outline a simplified analytical framework which underlies Fund -supported Programs. We argue that this approach, with its monetarist orientation, takes a narrow view to correcting economic disequilibrium and, hence, was not fully suited to dealing with Liberia's economic problems. This will be followed by a discussion of the main elements of the programs underpinning the stand -by arrangements with the Fund. The principal theme in this section is that the programs were flawed in assuming that Liberia could have achieved stability and a viable balance of payments position without directly addressing the question of economic growth. A related argument is that the early 1980s was a difficult time for Liberia, a small, open economy, to implement stabilization policies because of the prolonged global recession which adversely affected the country's terms of trade. Under these circumstances, it was inevitable that large scale, short-term borrowing from the Fund would create a debt servicing problem for the country. Next we attempt to show that, as in the past, Liberia's capacity to implement economic adjustment programs was severely constrained by the socio- political environment. We believe that it was important to incorporate this element in the adjustment matrix in order to have realistic expectations as to what the programs could have achieved over the medium term. The final section contains some conclusions and lessons which might be drawn from the Liberian experience. I. Background In the 1960s the Liberian economy grew at an average rate of 5.1 percent .5 However, by the mid 1970s the economy had virtually run out of steam. Between 1975 and 1979 the average growth rate was only about 1.8 percent, reflecting the impact of the first oil shock of the early 1970s and the slowdown of the global economy later in the decade. The economic expansion of the 1960s was built on a narrow productive base, with two primary export commodities (rubber and iron ore) accounting for the bulk of GDP. The modern enclave sector was developed primarily by foreign private investment, with minimal linkages with the rest of the economy.' The structure of the economy has remained virtually unchanged over the past two and a half decades, remaining highly vulnerable to external shocks as it was in PDF compression, OCR, web optimization using a watermarked evaluation copy of CVISION PDFCompressor Table I Liberia: Selected