Liberia: Description, History, Problems

by Frederick Starr

It is curious that, in connection with the next financial undertaking of the Republic, which was little, if any, more satisfactory than the loan of 1870, Sir Harry himself should have played a significant part. When President Barclay and his companions were in London in 1906, they made arrangements for a new loan, also of £100,000. An interview was held at the office of Consul-General Hayman, at which were present Sir Harry H. Johnston, chairman of the Liberian Development Co., Limited, together with some of this company’s officers, Mr. Clark of the Foreign Office, Emil Erlanger, and Consul Hayman. Mr. Erlanger represented the brokers through whom the Liberian Development Co. were to secure a loan of £100,000 for the benefit of Liberia. Excellent discussions of this loan by Mr. Ellis, who was so long connected with our Legation at Monrovia, and Mr. Scott, who was a member of the United States Commission in 1909, have been printed. It is from these articles that we draw our details.

The proceeds of the loan of 1906 were to be applied in the following manner: (a) $25,000 was to be used for pressing Liberian obligations; (b) $125,000 was to be employed in the payment of domestic debts; (c) $35,000 was to be loaned to the Liberian Development Co.; (d) the balance was to be devoted to the development of banking, and for road schemes by the Liberian Development Co. in Liberia. As security for this loan, two British officials, as chief and assistant inspectors of customs, were to have charge of the Liberian customs revenue; the chief inspector was to act also as financial adviser to the Republic; $30,000 annually (in semi-annual payments) was to be turned in as interest until the whole loan was repaid; 10 per cent of any excess over $250,000 in customs revenue per year was to be received by the Liberian Development Co. The “company was charged with the responsibility of returning the loan to Erlanger and Co. by the payment of 50 per cent of the net profits derived from the exercise of the powers and privileges of the charter of the former company, together with profits from the banking and road schemes to be undertaken in Liberia.”

The loan was actually applied as follows: (a) to the extinguishment of domestic debts, £30,000; (b) loaned to the Liberian Development Co., £7000; (c) in carrying out road schemes, £32,776.11.3; (d) obtained by Liberia on ratification of tripartite agreement of 1908, £30,223.8.9; total, £100,000.

Friction soon arose in the administration of the customs. The Liberian Development Co. constructed fifteen miles of automobile road in the Careysberg District, bought a small steam launch for the St. Paul’s River, and purchased two automobiles; it then announced that its road fund was completely exhausted, after having spent, on an ordinary dirt road, about $163,882. Liberian dissatisfaction was great, and question was raised regarding the “balance of the £70,000 which had been entrusted without security to the management of the company.” In the investigation which followed in an attempt to rearrange affairs, considerable feeling appears to have been shown. Sir Harry Johnston had repeatedly ignored the requests of President Barclay for an accounting by his company; in the interview in which efforts at adjustment were made, he is said to have conducted himself in a supercilious manner and to have expressed his surprise “that the President should have required the company to furnish him with a statement of accounts, and disclaimed any responsibility for the manner in which the money had been expended”. Under the tripartite arrangement which was entered into between the Government of Liberia, Erlanger and Co., and the Liberian Development Co., Chartered and Limited, it was finally arranged that “Liberia assume direct responsibility to Messrs. Erlanger and Co. for the loan of 1906, and, aside from obtaining some advantages in the new Agreement, secured from the Liberian Development Co. the residue of the loan, amounting to £30,223.8.9, and practically dispensed with the future services of this company in the solution of the new Liberian problems.”

Mr. Emmett Scott makes some pertinent observations in connection with this affair. He says: “Sir Harry Johnston, in his book, quite spiritedly criticizes the agreements under the loan of 1871. It is hard to determine, however, how less one-sided they were than those of his own benevolent corporation, even if his company had in perfect good faith carried out their part of the bargain. The suggestion that the customs should be collected by European experts, Englishmen being understood, introduced, of course, the feature of external control into the customs service . . . of the so-called experts sent to Liberia under the agreement, the first one’s selection was, to say the least, unfortunate. He all but confessed his utter failure after two or three months to understand what he was about, although he had been granted a salary of about $3500 a year, much more than he had received in the British service in Sierra Leone. The second one appointed has developed into a somewhat capable official, although his chief claim to being called an expert was, it is said, that he had successfully raised oranges in California. He was certainly no customs expert, and, I learn, had probably never been inside of a customs house. He received £500 a year. The present chief inspector of customs is a wholly efficient man, but while doing similar service at Freetown, Sierra Leone, the neighboring country, he received a salary of £300 or $1500 a year, while the Liberians are called upon to pay him a salary of £1000, or $5000 a year. This salary, perhaps I should state, is twice that received by the President of the Republic. Efforts to reduce this salary to £700 or $3500 have recently been made, but with what success I cannot chronicle.”

Again: “The company’s high-handed manner of expending the money on hand, however, engendered so much bad blood, that at last President Barclay applied to Sir Harry Johnston, managing director of the Liberian Development Co., for an accounting. The latter, it is said, expressed the greatest surprise that such a demand should be made upon him, and disclaimed any and all responsibility to the Liberian Government for the way in which the money had been or was to be expended. He persistently refused to render any accounts until he found the position he maintained was so untenable that he could not depend upon his government for support; he also found that President Barclay was about to sever all relations with his company, maintaining, in the absence of any accounting, that the Government of Liberia would hold itself responsible only for the cash actually received. About $200,000 of the amount raised on the credit of the government, it is said, had been frittered away on badly managed schemes.”

And finally: “In dismissing this loan of 1906, may I say that no one now contends that the Liberian Development Co. has, or has had, any money aside from that raised on the Government’s credit; to-day it is practically bankrupt. The relations between the Government and the Company have been severed, and under the agreement of 1908 with Messrs. Erlanger, London, the Liberian Government is responsible for the whole loan.”

THE AMERICAN LOAN.

Conditions became desperate; there were now two obligations to British creditors, each for a handsome sum, and both drawing interest; more than that, there had grown up a considerable domestic debt; real bankruptcy seemed to threaten the nation. As a result of the visit of the American Commission to Liberia in 1909, the United States used its good offices in favor of the Republic, and arrangements were perfected whereby certain banking institutions of the United States, Germany, France, and Great Britain furnished the Republic of Liberia with a loan of $1,700,000; this loan was to be used in the payment of its domestic and foreign debts. According to the official report of the Commission, the public debt of Liberia in 1909 amounted to the sum of $1,289,570.60. Mr. George W. Ellis has prepared an excellent paper regarding this loan, and from it we abbreviate our own statement. In order to secure the loan, the Liberian customs revenues are temporarily to be placed in charge of a customs receivership, with a general receiver appointed from the United States by the President, and holding office during his pleasure, and three receivers, one each from Great Britain, Germany, and France, appointed by, and holding office during the pleasure of, their respective governments. As further security for the loan, the revenues from exports and imports, duties on rubber, and all head moneys are pledged. Five per cent gold bonds in denominations of $1000, $500, and $100, for a period of forty years, interest and principal payable in New York, are to be issued by the Liberian Government. The Liberian revenues subject to the loan are transferred for its service and are termed “assigned revenues”; these assigned revenues are in charge of the receivership. The majority of the receivers have the power to suspend customs officials, make temporary appointments, make rules and regulations relative to the assigned revenues; they have a right to adequate patrol for land and sea, and in case such is not furnished, to supply it themselves. The general receiver has a salary of $5000, the others, $2500. A monthly report of accounts is to be rendered to the government. As a condition of the loan, the frontier police force is to be maintained; the President of the United States is to assign training officers, to be paid from the assigned revenues. The General Receiver is also the Financial Adviser of the Liberian Government; he is to systematize the finances of Liberia; and to approve statements before submission to the legislature. Appropriations must not overrun the revenues; after the legislature adjourns, the President, Secretary of the Treasury, and the Financial Adviser must revise the appropriations if they have overrun; their act is binding to the Secretary of the Treasury. The Financial Adviser co-operates with the government in establishing economical and efficient administration and expenditure. The debts of the Republic are to be at once paid—by bonds where the creditors chose to receive them. The bankers are to receive for their services their out-of-pocket expenses, legal charges, commission on the face value of the 5 per cent bonds, and 5 per cent on the bonds purchased by themselves. Residue bonds are to be held by the fiscal agents to meet approved, unadjusted indebtedness: final residue bonds will be sold and the money paid to Liberia for public improvements approved by the General Receiver. In order that this agreement should go into effect, it was necessary that the Liberian Legislature should pass all necessary measures of approval before January 1, 1912. This was done. There was some delay in finally placing the funds at the disposition of the Liberian Government, but at present everything has been arranged and the new loan is in effect. This arrangement caused general joy throughout the Republic; it was felt not only that it released the people from a heavy and dangerous obligation to unfriendly creditors, but that it probably began a period of closer relationship between the United States and Liberia. It is possible that too much of a feeling of security existed. It is likely that more joy was felt over the receipt of $1,700,000 than of responsibility for its ultimate repayment. On the whole, it must be admitted that the loan is favorable to the Republic. The government has realized a much larger percentage of actual funds than in any of its preceding financial undertakings. There are, however, some weak points in the plan. It is unfortunate that the loan was theoretically made through banks of different nations; as a matter of fact, it was an American enterprise, and should have been so in word as well. There is no reason why foreign nations should be interested—except indeed that Great Britain should experience a sentiment of joy in having the interests of her citizens secured. The sum of $1,700,000 is so small that it could have been easily supplied by American houses and considered a little matter with no actual political relations. That the loan should have been secured by a receivership is just, but it would have been much better to have appointed a single American receiver instead of four men of different nations. In this international receivership there lies considerable danger. Friction is likely. France, England, Germany are suspicious of each other. The simplest act is liable to misconstruction, and one or another of the three sub-receivers is likely to feel his dignity and that of his nation affected, and squabbles are certain to arise. The American receiver, as is proper, is given the position of leadership. Suppose he were to die or be unfit for service; which of the other three receivers will take his place? There appears to be no arrangement made for such a contingency, yet it is quite certain to arise, and if it should, the man who temporarily assumes the duties, will be particularly likely to find himself in trouble. The question as to location of the four receivers may some time or other raise difficulties. Suppose, for example, the British receiver were placed at Cape Mount, adjacent to British territory, and the French receiver were to be located at Cape Palmas, close to French authority; opportunity for unfaithfulness to the Republic would be very great. There is nothing in the history of the past to warrant us in assuming that these officials would be men of such high spirit and principle as to resist temptation. The possibility of difficulties between the General Receiver and the Liberian Government is also very great. He is given large powers; unless he is a man of extraordinary ability and well-balanced character, it is certain that complications will arise; there will be constant risk of his inter-meddling in every field of governmental affairs. Some of these difficulties of course are inherent in a receivership, and as a receivership is absolutely necessary, their risk must be accepted.

On the whole, the American loan should be a great help to Liberia. Friends of the Republic hope for the best results. The government is given a breathing spell, and time and opportunity for the re-adjustment of its economic interests. There is no danger, if the receivership is competent, but that the income of the nation will easily carry the loan with all its obligations, and leave ample funds in balance for the legitimate enterprises of the government. It is reasonable to hope that Liberia has entered upon a period of prosperity.