From Awareness Times Newspaper in Freetown

COMMENTS & OPINIONS
How the IMF Fooled the Sierra Leone Government into Impoverishing Sierra Leone
By Mohamed A. Jalloh (USA)
Nov 24, 2005, 18:19

In the early 1970s, a Sierra Leonean who wanted one U.S. dollar needed less than one Leone in Sierra Leone currency to obtain it. To be exact, she would need only eighty Sierra Leone cents. Today, that same Sierra Leonean would need more than Le 3,000 if she wanted to obtain the same $1. How did this happen?

 

Did SL suddenly stop exporting diamonds, bauxite, coffee, cocoa, or shrimp, to cause its currency to drop in value against the dollar by a staggering three hundred and seventy five THOUSAND percent over the past 35 years? Or, did the USA suddenly become the world’s number one exporting country, and thereby help propel the dollar to its current stratospheric level of strength against the Leone? The answer to both questions is the same: No. On the contrary, SL has continued to export more or less the same quantity of mineral and agricultural commodities, although at lower prices than before. However, during the same period, the USA has become the biggest debtor nation in the world, setting records for its external trade deficits and its domestic budget deficits.

 

Which begs the question: Why would a country like SL, with exports which have not collapsed, see its currency drop in value by 375,000 per cent against another country such as the USA, which exports less goods and services, compared to its imports, than any other country in the world? The answer is as unsurprising as it is simple: The USA controls the IMF, while the IMF controls Sierra Leone.

 

And that explains how the SL government became the errand boy of the IMF in the latter’s wildly successful scheme that has now made every man, woman, and child in SL 375,000 times poorer than their counterparts in America. So, what, you might ask, is the name of that scheme? The answer: Devaluation, the crown jewel of the IMF’s foreign “aid” package for developing countries. According to the IMF, devaluation – a potent cure in Western and other developed countries for imbalances between a country’s exports and its imports -- is the cure for any and all economic problems of each and every country in Africa.

 

However, the plain truth is that, far from being a cure, devaluation in SL, and in similar African countries, is quite simply, a meticulously disguised catastrophic daylight robbery, of gigantic proportions, of an unwitting nation by opportunistic foreigners. The following analogy should make this plain.


Let us assume that two next door neighbors, JonBull and Dumbeh, produced bread and diamonds respectively for a living. Dumbeh lived in a tropical climate; JonBull lived in a temperate climate. Dumbeh produced 500 carats of diamonds a year. JonBull produced 500 loaves of bread a year. For as long as they could remember, both neighbors traded with each other: JonBull gave Dumbeh one loaf of bread in exchange for one carat of Dumbeh’s diamonds. Everyone agreed that this was an equitable arrangement.


All this changed suddenly one day when a certain dubious relative of JonBull's showed up uninvited at his doorstep and demanded that he be made a partner in JonBull's enterprise so that he could sell his own wares in association with JonBull's brand name. Being a man of God, JonBull easily recognized a non-believer, even before his uninvited guest loudly announced that the name God was no more significant to him than those in Greek mythology, such as "Zeus," etc. We shall call JonBull's crasher DeeCee, for reasons which should soon become clear. DeeCee manufactured winter coats made of fur for a living.


Soon, DeeCee was running JonBull's business. The next time Dumbeh wanted bread, he came to JonBull's house. That was how he came face to face with DeeCee for the first time. The latter assured Dumbeh that he had obtained a Ph.D. in economics from the University of Chicago, and Milton Friedman, the renowned monetary economist, had been his mentor there. Dumbeh, not being an economist himself, was thoroughly impressed with this man of vaunted letters whose gods included only the mortals Friedman and other monetarists, none of whom came from Dumbeh's neighborhood.


Then, Dumbeh proffered his one carat of diamonds and stretched out his hand for his usual loaf of bread in return. That was when a strange thing happened: DeeCee took out a knife (Dumbeh didn't bolt for his life only because he was not yet aware that DeeCee didn't believe in God)! DeeCee took the knife and cut the loaf of bread into ten slices. He then offered Dumbeh one of those slices in exchange for his one carat of diamonds.


Being a smart guy, Dumbeh pointed out that he had not received the entire loaf of bread, as he always had, at least when he dealt directly and exclusively with JonBull. To which DeeCee replied: “This is the dawn of a new era that will make you more prosperous than you've ever dreamed of.” Beaming with the false camaraderie of the practiced conman that he was, DeeCee startled Dumbeh by wrapping his arm around his shoulder and walking him to JonBull's back room which he had usurped as a store for his winter fur coats.


He then pointed out one of his shiny winter coats and told Dumbeh: "You will need this winter coat soon, even though you don't know it yet from the 100 degree tropical temperatures here. But trust me, as a Ph.D., I swear to you that you will need that winter coat soon. Just to show you how confident I am of my prediction, I will sell it to you on credit for 100 carats of your diamonds and you don't have to start paying me back until after 20 years. How's that for fairness?"


By now, Dumbeh was almost sold on DeeCee's pitch. He thought to himself: Well, he's the only one in town with a Ph.D. from the mighty USA! And he studied with Milton Friedman, who knows money! Wow! And what if I do end up needing that winter coat in these tropics as he has already assured me? Then I would have to buy one in a hurry, but here is this good man, willing to do me a favor by offering to give it to me now, and I don't have to pay for it with 100 carats of my diamonds until 20 years! And even then, I don't have to pay the full amount, but I could pay it off in installments!


Dumbeh was just about ready to say to DeeCee, who was now beaming from ear to ear in the confident anticipation born of years of experience conning God-fearing people, "I'll take it!"


But DeeCee still held back the shiny winter coat and said: "Well, now, Dumbeh, if you want this coat and you don't want to pay for it until twenty years hence, then you can only get it if you agree to take one of the ten slices of bread, instead of the whole loaf, every time you sell one carat of your diamonds to JonBull. And you must agree to do so not just for today, but for any and every time you trade with JonBull!


Dumbeh, still focusing on the free credit that would come with the not-yet-needed winter coat that might only be needed in the future, gladly agreed! But DeeCee was not yet finished taking Dumbeh to the cleaners! Still holding back the winter coat as Dumbeh longingly gazed at it, he made a final request of Dumbeh: Would he agree to announce to his entire family that with immediate effect, not only Dumbeh, but anyone who wanted to exchange Dumbeh's diamonds for JonBull's bread would receive NOT a loaf of bread as before, but only one slice out of ten slices of the whole loaf.


Dumbeh looked at DeeCee in bemusement. Didn't this man say he had a Ph.D.? Why then would he ask him to announce to his family what he -- the head of the family -- had already agreed to do between the two of them? DeeCee, of course was thinking: As soon as he announces that he agrees that his diamond is now worth only one-tenth of a loaf of JonBull's bread, not just him, but his entire family would have to abide by his agreement. Yippee! Another one bites the dust!


Dumbeh shouted: "I agree!" Immediately, DeeCee, masking his glee with the ease that comes naturally to a born fraud, declared: "Great! Now, sign this devaluation agreement and then make the announcement to your household members. Tell them that, from this moment hence, you have now devalued your household diamonds vis-à-vis JonBull's household's bread."


And so it came to pass that, by a mere announcement, induced by the opportunistic promise to sell to Dumbeh on credit an entirely unnecessary winter coat that he most certainly would never use in his tropical homeland, Dumbeh agreed to DeeCee's deceptive offer, namely: That he (Dumbeh) agree to accept DeeCee's self-serving and entirely unsubstantiated opinion that Dumbeh's diamonds be considered to be worth only one-tenth of their previous value in relation to JonBull's loaves of bread. (Meticulously disguised daylight robbery).

 
And that is how it also came to pass that Dumbeh's household went from giving JonBull only one carat of diamonds every time they wanted a loaf of bread from JonBull, to giving JonBull ten carats of diamonds, while JonBull only then gave them the same one loaf that he had been giving them before in exchange for one carat of diamonds! (Daylight robbery of a nation comprising Dumbeh's household).

 
That, in turn, is how Dumbeh's household, which produced only 500 carats of diamonds a year went from eating 500 loaves of bread a year (1 loaf for one carat) to eating ten times less after the devaluation, i.e., 50 loaves of bread a year (1 loaf for 10 carats). In other words, Dumbeh's household went from eating just about one loaf of bread EVERYDAY before the devaluation to truly starving on less than one loaf every SEVEN days, because of the devaluation! (Catastrophic national impact of daylight robbery).


Should Dumbeh want to save his family from imminent starvation, he could sell the winter coat to JonBull for bread. However, because the coat was now used, JonBull would properly ask that he buy it for less than Dumbeh had bought it from DeeCee. But, with JonBull, unlike DeeCee, being a God-fearing person, let us assume he agreed to pay the same price that Dumbeh had paid. Would Dumbeh receive 100 loaves of bread for his 100 carat winter coat? Not at all! Not after the devaluation! Remember that, after the devaluation, any and every carat of Dumbeh’s diamonds were now worth only one-tenth of their pre-devaluation value! Therefore, in exchange for his 100 carat winter coat, Dumbeh receives NOT 100 loaves of bread, but a measly 10 loaves for his pitiful and likely soon-to-be-dead starving family to fight over! (Catastrophic national impact of daylight robbery).


But that is not the end of the windfall for JonBull's household, thanks to devaluation! This is because, now, Dumbeh's household would owe DeeCee not 100 carats of diamonds that they had started out owing him 20 years earlier when DeeCee foisted the unnecessary winter coat on Dumbeh, but ten times more, i.e., 1000 carats, 20 years later, not including interest! (Opportunistic and meticulously disguised gargantuan daylight robbery perpetrated on an entire nation led by an unwitting government by the unacknowledged collaborator of a foreign trading partner).


And that is how, through his kinship with the dubious DeeCee, JonBull's household came to siphon at least 450 carats of diamonds a year from Dumbeh's household, while at the same time dooming Dumbeh's household to almost certain death through the starvation diet that had forced upon them by the devaluation. That diet consisted of one loaf of bread every seven days for the entire Dumbeh household instead of one loaf of bread everyday before the devaluation.


In addition, thanks to the devaluation, 900 carats of Dumbeh's diamonds (the devaluation-enhanced difference in the repayment of the original cost of 100 carats for the fur coat after 20 years, not counting interest) would be siphoned off to the coffers of JonBull's household! Not to mention the transfer to JonBull of an additional 900 carats of Dumbeh's diamonds if Dumbeh, wishing to save his starving household from certain death, resells the same fur coat. That would end up costing him an additional 900 carats when he repays DeeCee!


And since Dumbeh produced only 500 carats of diamonds a year, that is how Dumbeh came to owe a debt that would require him to entirely forgo food (bread) for two straight years before he could pay off only the principal on his debt of 1000 carats of diamonds for DeeCee's unnecessary fur coat after 20 years!. Should Dumbeh still be alive then, he would then start paying interest also (to desegregate and simplify the example). (Catastrophic robbery of a nation).


Of course, not surprisingly, Dumbeh's, and his entire family's, trip to the cleaners was surreptitiously engineered by the self-serving and meticulously concealed scheming of a fur coat hawker -- the self-proclaimed unbeliever in God, DeeCee – who opportunistically turned his own personal misfortune in having set up shop in the steamy heat of Dumbeh's tropical homeland, into a personal misfortune not just for Dumbeh, but for his entire household! Thereby, the self-admitted Godless DeeCee shamelessly and callously profited from his tall tale of an impending calamity facing the gullible Dumbeh and his hapless household (needing a fur coat in the tropics) that was highly unlikely to happen.


Did anything change in the relative characteristics between Dumbeh and JonBull's diamonds and bread respectively before the former agreed to succumb to DeeCee's self-serving ploy to unilaterally and fraudulently devalue Dumbeh's diamonds? Not at all! Yet, there was Dumbeh, agreeing to "devalue" his diamonds in relation to JonBull's bread! In the aftermath, Dumbeh and his household suffered entirely predictable and almost irreversible economic, social and political catastrophes!
    
How is the above story analogous to devaluation in SL? Substitute the following for the characters, items, and places in the above story: Dumbeh is the government of SL. Dumbeh's household is comprised of the citizens of SL. DeeCee is the IMF; DeeCee's fur coats in tropical SL are the ubiquitous IMF so-called structural adjustment loans and their similar antecedents and successors. JonBull is a western country trading with SL.

In summary, that is how devaluation is -- and facilitates -- daylight robbery involving the wholesale transfer of a poor nation's resources to the undeserving coffers of a foreign trade partner and its institutional collaborators.

It is also how devaluation, as I have long and consistently maintained (in public speeches and in the published media, since 1979), is, and involves, the imposition of harrowing physical and mental hardship on the devaluing country's hapless citizens. Meanwhile, the beneficiaries of the devaluation (foreign countries and the IMF) enjoy a predictable and significant windfall in the form of newfound wealth entirely derived from a transfer of the poor, suffering country's wealth to that of the non-devaluing country's undeserving coffers!

A final sobering caveat that should leave no doubt about the pervasive and perverse nature of devaluation and its catastrophic impact on the daily life of each and every Sierra Leonean in SL:

The example above assumed a devaluation of less than 1000 per cent (precisely 900% --from parity to 1 loaf of bread = 10 carats of diamonds). By contrast, the actual devaluation in SL, since 1973, when the exchange rate was Le 1 = $1.25, to now, when the exchange rate is $1 = Le 3000, is a stratospheric 375,000%. Let me repeat that: Three hundred and seventy-five THOUSAND percent.

Is it any wonder, then, that Sierra Leoneans are the poorest people on earth? Or that the IMF, aided and abetted by a succession of clueless governments in SL over the past 35 years, is the culprit most responsible for our people’s longstanding poverty?

© Mohamed A. Jalloh

Editor’s Note: Moh’m Jalloh, a Sierra Leonean living in Maryland, USA, whose views on economics and finance have been widely-published in the U.S. and the U.K., first advised the SL government against devaluing our country’s currency in an article entitled: “Devaluation: A Rich Man’s Cure,” published in Freetown in the We Yone newspaper in 1979.



© Copyright 2005, Freetown, Sierra Leone.