Economic Growth in Liberia: 10 Weeks to Remember

Guest blog written by Fred D. Koilor

This is a blog series written by the alumni of the Leading Economic Growth Executive Education Program at the Harvard Kennedy School. Participants successfully completed this 10-week online course in July 2020. These are their learning journey stories.

What if this was a one-week journey? Well, many things about the Leading Economic Growth (Online) course probably would not have been the same. Firstly, I can certainly say that students would not have had ample time to digest the course materials and make adequate appreciation of knowledge acquired during the ten weeks. Secondly, the one week on campus would not have given us the opportunity to reach out to institutions and development stakeholders for vital pieces of information, which helped to shape our understanding of the lecture materials discussed during the course. During the ten-week period, I had the opportunity to meet with two departments within the Central Bank of Liberia (CBL) for data and analysis on aspects of my growth strategy. Thirdly, the span of ten weeks provided enough time for the lecture materials to be sequenced into ten weekly modules. This approach enabled the students to navigate the course in a consecutive order of logic, chronologically sequenced from week one through week ten. More importantly, it made learning a lot easier than it would have been in only a week.

In spite of my economic background, this course offered some key insights, which are not only novel, but also shaped my understanding of economic growth, especially considering the growth challenges of my country, Liberia.

The Scrabble Theory of Economic Development provides a fundamental explanation for why some countries are rich and others are poor. With the help of the scrabble metaphor, the theory explains, in very simple terms, that the wealth of nations or prosperity of economies is determined by the level of societal knowhow, which is represented as letters used to produce products, represented as words. Knowhow, described as what the society knows how to do, is not measured by the depth of knowledge individuals in the society possess, but the diversity of knowledge spread across different individuals at the societal level. With a higher level of diverse knowhow, otherwise known as letters, more complex products, otherwise known as words can be produced, thus increasing the complexity of goods and services produced by a nation. The intuition of this theory explains, to a large extent, why Liberia is economically poor, even though it is enormously endowed with natural resources. Liberia has vast deposits of rubber, iron ore, timber, gold, and palm oil, but these resources are mostly exported to other countries in their raw or unprocessed forms because the population does not have diversified knowhow (letters) to produce products of more complexity (words) that could generate higher export earnings, reduce or cancel out our balance of payments deficit, generate more foreign exchange, increase employment opportunities, spur growth of industrial activities, and improve the macroeconomic outlook. Liberia needs more knowhow to manufacture more complex products from its natural endowments. Local manufacturing will generate more jobs locally, add value to our local products, increase their worth as exports, and positively impact many macroeconomic indicators, including balance of payments, net foreign capital inflow, international trade, etc.

Another key takeaway from this course is the concept of identifying the binding constraints to economic growth of an economy. This concept underscores the need for proper diagnosis of the growth problem before deriving reforms to address it. In such case, reforms must directly focus on lifting the binding constraints because their presence poses a barrier to the success of the growth strategy. The binding constraints must be identified using an empirical strategy called the Four Principles of Differential Diagnostics. Identifying the binding constraints forms one of the bedrocks of development of a growth strategy because it helps the growth strategy to focus on what matters most, instead of a laundry list of reforms, which will not necessarily induce growth of the economy. The concept of identifying binding constraints is also important because it is one of the initial steps of developing a growth strategy, and it has a direct bearing on the outcome of the strategy. This means that if the identification of binding constraints to goes wrong, all other aspects of the growth strategy will turn out ineffective and vice versa.

Throughout the ten-week period, I thought of engaging my growth challenge “minimizing Liberia’s Balance of Payments Deficit in the short-run and achieving a Balance of Payments Surplus in the long run” through a framework of local ownership of the strategy. A common attribute of growth successes discussed during this course is that successful growth strategies are pivoted around local populations. From Albania to Sri Lanka and Singapore, locals have always been at the heart of growth success stories. The “Sense of Us” narrative underpins the success of these growth strategies and same insight has guided my thoughts about addressing my growth challenge identified throughout this course. For Liberia to achieve increased level of exports and/or reduced import level, all sectors of the local population must be included in driving the strategy. Increased export level requires the promotion of local manufacturing through a diverse distribution of knowhow across the local population, while reduced level of imports requires more consumption of local goods and services. These strategic objectives cannot be achieved without the full inclusion of locals in a way that supports a broader/deeper sense of us.

Also, I was inclined to believing that addressing the growth challenge, requires the collaboration of many stakeholders across the private, public, and non-governmental domains of society. Over the ten-week period, I was of the insight that private sector investors need to collaborate with public sector and non-governmental institutions within Liberia to provide knowhow and industries responsible for the production of products within our product space. It involves an increase in the provision of technical and vocational education throughout Liberia. This can be done by integrating more technical and vocational skills into the national secondary and tertiary curricular as well as proliferating the number of technical and vocational schools across all geographical regions of Liberia.

During our last Peer Learning Group Session, we organized ourselves into a small growth team of six members, comprising of all Liberians who have completed this course. We also initiated a project to produce a policy paper that synthesizes key concepts from this course and recommends points of policy actions to tackle some dimensions of our growth challenge and drive a more successful national growth strategy. The paper will build upon key takeaways from lectures, case studies, additional materials as well as country-specific data to posit relevant policy recommendations and a practical implementation guide, open to iteration and adaptation.

We are aware of the inherent challenge of public bureaucracy, but we remain glad that the lectures and resource materials of Professor Matt Andrews particularly offered some useful tips in that regard. More so, the diversity of our team from different professional spheres gives us leverage to tap into the experience of team members who have encountered public bureaucracy, especially in Liberia. Good luck to us!

To learn more about Leading Economic Growth (LEG) watch the faculty video, and visit the course website.

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