Economics blog

Unit 4 Macro must-read - Development Economics: Why is Liberia’s development so slow?

Liberia has an apparently stable government, plenty of aid available, and the debt hanging over the country has been written off. And yet, as Evan Davis explains in this valuable article, for many people in Liberia, conditions are still medieval.

Regular listeners to Radio 4's 'Today' programme will know that they have run a series of reports about Liberia. It's economy is in ruins, after years of civil war. That conflict was partly funded by exports of timber and diamonds, and the UN placed bans on those exports. However, those bans were lifted in 2006 and 2007 respectively, so why does Liberia still record unemployment of 80%?

Evan explores the multiple causes of the problems which hold the country back, and condemn it to a catch-22 in which investment cannot easily occur. It should be highly attractive as a destination for inward investment, with wage rates of about $5 a day in the formal sector of the economy (about a fifth of those in the most industrial parts of China). But for industrial development, as the article points out "...you first need electricity; for electricity, you need some trained workers; for trained workers, you need some schools; for schools you need some money; for money, you need some industry."

There are other examples of the practical issues which individually hold back progress, and which combine to slow it to a barely perceptible crawl. The article provides a superb example of how to analyse the factors that might hold back development, and is a must-read for unit 4 students over Christmas!

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