What were early Liberian economics like?

Answer 1

From its creation in 1847, Liberia has suffered through many economic hardships, the worst being the major economic collapse which occurred shortly after the country’s creation. The collapse of their economy was caused three major factors. Tensions between Americo-Liberians and traditional Liberian tribes disrupted the country’s economy, forcing Liberia to open its doors to foreign trade, and eventually allowing Liberia to suffer through many years of abuse by foreign corporations. When Liberia was created in 1847, it was founded by Americo-Liberians, African Americans that had been enslaved and were sent to Liberia after they were freed. Americo-Liberians found cooperation with Liberians in major cities, but many native tribes fiercely opposed their rule. By the mid to late nineteenth century, these tensions between the native tribes and the ruling Americo-Liberians eventually escalated to the point of the tribes claiming land for their own, and acting as sovereign states. The actions of native Liberian tribes destroyed all hope for economic prosperity in the near future. The trade routes going to major port cities were held by native tribes that would not allow anyone to pass through their lands. Liberia’s natural resources could not be moved to industrial centers or ports for use, making any raw materials virtually worthless. The problem worsened when simple goods such as shovels become much more expensive because the raw materials involved were so hard to come by.These price changes caused many businesses to close and led to many Liberians losing their jobs. Farmers were also affected by the price changes, as they could not purchase items crucial to farming such as steel plows or shovels. The Liberian government wanted to build a strong, free country, and as said by Chester Bowles, “There can be no real individual freedom in the presence of economic insecurity.” Therefore, the Liberian government strode to give Liberia a sense of economic security. Unfortunately, Liberia was still a very young control, and its government lacked the political and military power necessary to force the native tribes to cooperate. The Liberian government, in an effort to stop the tribal control of trade routes, adopted an open door economic policy, thus enlisting the help of foreign corporation to reopen the trade routes. Unfortunately, this switch form a closed door economic policy to an open door economic policy had many negative side effects. The previous closed door economic policies allowed Liberia to carefully monitor trade and foreign companies operating in Liberia had to follow strict regulations. This policy allowed Liberia to enjoy the benefits of world trade without having to worry too much about abusive foreign corporations or the ups and downs of the global economy. Liberia’s new open door economic policy made Liberia much more dependent on the world market. If the prices of raw materials dropped in Europe, Liberia would feel the consequences of the price drops. The open door policy also eliminated most regulations on foreign corporations. These drastic changes in Liberia’s economic policies did reestablish their internal trade routes, thus allowing goods to move freely, but the Liberian economy was still severely wounded by the recent halt of internal trade. By the turn of the century, Liberia had spurred trade through their new economic policies, but many of the people that originally suffered from the tribal resistance to Americo-Liberian rule were not affected much by the increase of trade. Any Liberian businesses that had sprung up after the reestablishment of the trade routes were outmatched by their more advanced foreign counterparts. Many Liberians had to work for the foreign corporations that paid very low wages. The Liberian government was trying to gain as many foreign investors as possible to provide jobs for their people, so they began offering tax breaks, or concession agreements. These concession agreements allowed foreign corporations to establish large rubber plantations and iron ore mines in Liberia, pay very low wages to their Liberian employees, and pay almost no money in taxes. The results of the concession agreements were disastrous. Foreign corporations came in and exploited Liberia’s Natural Resources, the Liberian workers were in more poverty than ever, and the government generated almost no tax revenue from these corporations. Eventually the Liberian government began to realize the economic ruin their country was in. After the complete collapse of the Liberian economy at the turn of the century, it would take Liberia nearly fifty years to recover, and the effects are still felt today. Liberia suffered major economic hardships after its creation in 1847. Conflicts between native tribes and Americo-Liberians closed internal trade routes. This forced Liberia to adopt open door economic policies, and eventually allowed the country to be ravaged by foreign corporations. All of these events lead up to the major collapse of the Liberian economy in the European Imperialism era.