How an aid gusher helped and hurt Liberia
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Jessica Eise, Purdue University and Stacey L. Connaughton, Purdue University
(THE CONVERSATION) Two violent civil wars in Liberia killed a quarter million people between 1989 and 2003 and destroyed the West African country’s economy. A massive influx of foreign aid followed that turmoil, ushering in a period of relative peace and stability. Yet Liberia remains among the world’s poorest countries.
In 2017, one democratically elected president stepped down and another took office for the first time in over 70 years. At the same time, Liberian foreign aid subsided. According to the World Bank’s database, total aid fell from an all-time high in 2010 of US$359 per capita to about $130 in 2013, although aid flows did rebound briefly to $243 per capita during the country’s 2014-2015 Ebola crisis.
Having lost so much foreign support, Liberia’s economy is struggling. Reportedly accompanying these economic woes are an uptick in violence and political unrest that’s now hard to ignore. Thousands of demonstrators joined together to protest how the government is handling the economy in June 2019.
We belong to a team of researchers that includes one Liberian, several Americans and people from India, Nigeria and other countries. Our team has been working to reduce political violence in Liberian communities by partnering with local leaders, concerned citizens and police forces for more than five years.
Because we know economic and political tensions often rise as foreign aid agencies withdraw, we are deeply concerned about the long-term prospects for Liberia’s new-found stability. We also believe the situation in Liberia may serve as an example of how foreign aid that can seem to be healing a war-torn country’s wounds may do little to strengthen those nations in the long term.
A short-lived patch
Overseas development assistance, the most common kind of non-military foreign aid, is a mix of money, food and other supplies, plus services that goes to countries that are low-income, enduring a crisis or both. In Liberia’s case, it has included everything from UN peacekeepers to nurses caring for pregnant women and newborns. This assistance was intended to end armed conflicts and human rights violations while reducing poverty rates and fighting illnesses like malaria and Ebola.
The civil wars slashed the size of Liberia’s economy by 90%, causing its gross domestic product, or GDP, to decline to only $54.50 per capita by 1995. In large part due to the foreign aid influx, its gross domestic product ballooned from $748 million in 2003 to $3.3 billion in 2017, with per-capita GDP of about $600.
Relying heavily on foreign cash established a false sense of stability and growth in the economy, as infusions of foreign cash were temporary. The lasting impacts of Liberia’s aid flows are coming into focus now that much of the world has moved on.
The United Nations Mission to Liberia has pulled out altogether. Other major organizations and countries have also reduced their funding too. Sweden, formerly one of its leading donors, has given Liberia no funding at all in some recent years.
Aid from the U.S., whose leaders helped found Liberia in the 19th century as a destination for freed African Americans who either moved there by force or free will, fell sharply as well. It dropped from $228 million in 2011, when assistance began to dry up, to $86 million in 2018.
There were two apparent aftershocks: inflation surged and growth faltered.
After hovering around 8% in recent years, Liberian inflation reached an all-time high of 28.5% in 2018. Following years of growth rates ranging between 5% and 10% per year, the economy contracted in 2016 and growth remained low for the next two years.
The International Monetary Fund projects a meager 0.4% uptick in 2019 that will not keep up with population growth. Many Liberian civil servants have told us that their pay is being cut or their paychecks delayed, prompting struggles to pay rent and school fees for their children.
Too much aid?
International economists have tried and failed to prove that getting more aid makes economies healthier, even when a boost in aid coincides with faster growth. In this case, rather than strengthen the economy in the long term and make Liberia more able to fend for itself, international assistance may have merely propped it up.
The $776 million in aid per year Liberia obtained between 2010 and 2017 accounted for anywhere from 40% to 25% of its GDP during that same period.
Given how the economy has shrunk since aid declined, international assistance would likely be better equipped to succeed in the long run if it emphasized building the skills of local people to make them better at running their own country and building their own economy how they deem best rather than depending on outsiders to get things done. As the Chinese proverb says, “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.”
Even so, it is hard to see a country in crisis and do nothing.
According to the United Nations’ Human Development Index, Liberia ranks No. 181, among the world’s lowest. In 2007, for instance, foreign aid paid for more than three-quarters of the cost of Liberia’s health care. Without it, many more people, especially children, would have suffered malnutrition and died, according to an interagency international health report.
Spending also brought about many other significant benefits. For example, the share of children dying before their fifth birthday fell by half, from 220 per 1,000 live births in 1986, to 110 in 2007. Liberian life expectancy gained a decade after the war ended in 2003, rising from about 53 to 63 years and is much closer to the global average than it used to be.
It’s easy to see how when foreign aid provides most of a country’s health care, withdrawing it can leave that health system in tatters.
And it is still too soon to tell what the future holds for Liberia – a return to war or just a long, rocky path toward economic and political stability. While we hope for the latter, the economic woes following a steep decline in foreign aid make us fear for the worst.
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This article is republished from The Conversation under a Creative Commons license. Read the original article here: http://theconversation.com/how-an-aid-gusher-helped-and-hurt-liberia-116877.