Papers Relating to the Foreign Relations of the United States, 1918

File No. 882.51/785

The Chargé in Liberia ( Bundy) to the Secretary of State

[Extracts]

No. 169

Monrovia, January 15, 1918.

Sir: It has been thought advisable, in view of certain information contained in some of the enclosures herewith transmitted, to prepare and forward this confidential report on financial conditions in Liberia in order that the Department may have before it the fullest possible light on the situation. While this report is really a continuation of Legation’s No. 168, Diplomatic,² it seemed desirable to make the matters herein treated the subject of a separate despatch.

It has been mainly by virtue of the agreement between the Bank of British West Africa and the Government that the Republic was able to continue operation in 1917. This agreement went into effect February 21, 1917. Between that date and December 5, 1917, the Government through the working of the agreement has become indebted to the bank $49,663.73. When the Republic’s indebtedness to the bank reaches $100,000, no further advances, according to the terms of the agreement, are to be made. At the present rate of increase of this debt the $100,000 limit will be reached about July 1, 1918.

The bank management has been for some time past, I am informed, urging upon the Government through certain of its officials the necessity of considering ways and means for the Republic to get along when no further advances will be made. Suggestions were constantly offered, verbally, by the bank manager, and finally the President asked him informally to put his views in writing in order that the Government might see exactly what he had in mind.

On December 9, 1917, therefore, the bank manager addressed a private letter to the President embodying the suggestions he had previously made in conversation. Copy of this communication is herewith transmitted. To say the least, some of the observations and suggestions are very extraordinary. …

In a letter to the President dated December 11, 1917,² concerning the discussion of his suggestions, the bank manager said:

Events move rapidly in these days, and we in this bank confidently anticipate very marked financial events, affecting Liberia, taking place before long—hence my wish to keep in the background. …

When the suggestions of the bank managers were discussed by members of the Executive Government, it was decided that their implications were so far-reaching that Liberia should without delay frankly state her condition to the United States Government and appeal to it for aid. To that end the Secretary of the Treasury prepared a confidential memorandum on the financial condition of the Republic which he submitted to the President for the purpose of having him authorize its transmission to the Department through the Legation.

On January 11, 1918, the Secretary of State addressed a confidential note to the Legation forwarding the above-mentioned memorandum, requesting at the same time that it be transmitted to Washington. The note of the Secretary of State also contains an appeal to the United States for aid.

The memorandum of the Secretary of the Treasury, besides setting forth Liberia’s need of assistance, records a report of conversations between the bank manager and the Secretary of the Treasury, on the financial condition of the Government. These reported conversations shed considerable light on the suggestions of the bank manager to the President. …

A few observations by the Legation at this point may be of some value:

1. At the rate things are now going, it will not be many months before the Liberian Government will be compelled to get assistance from some source, or face a crisis which will challenge its existence.

2. There appear at present to be only three sources from which assistance can come: the Bank of British West Africa, Ltd., the Government of the United States, or an agency representing the Governments of France, Great Britain, and the United States.

3. Relief must take the form of the loan of considerable money.

4. To make the loan effective, and to safeguard the securities on which it would be based, as well as to assist the Republic to rehabilitate itself, would call for the introduction of several foreign agents.

5. Realizing that much power will have to be conferred upon foreign agents to get the aid so necessary, the Government of Liberia is sincere in its desire to have the United States alone assume responsibility for the conduct of the affairs of the Republic.

6. If the Government of the United States should consent to assume this task, it would seem that the following American agents would be required to give satisfaction to all interests involved. The functions of financial adviser should be separated from those of general receiver. I am convinced that it is physically impossible for one man in a country like Liberia to do the work as it should be done, which has been designated as falling under these combined offices. Mr. Worley thinks differently on this point. He believes one man can successfully carry on both functions with an assistant. I do not think so, and feel that I have very good reasons to support my position, but there is no need to introduce them here. But to return to an enumeration of the American agents before-mentioned:

(a) Financial adviser with general supervision of all fiscal and financial matters of the Republic, and with sufficient power to straighten things out and keep them so.

(b) General receiver of customs and three deputy receivers. Aside from customs work proper, these officials could be disbursing officers for the frontier force, and receivers of internal revenue in the coast districts.

(c) An auditor for the general government and receivership.

(d) A civil engineer to complete boundary demarcation, and when that is finished, to open roads throughout the country and take charge of a department of public works.

(e) Not less than five officers for the Liberian frontier force. Oversight of this organization should be the work of the military attaché who should have real power to do whatever may be necessary to put the force on a proper basis.

(f) A commissioner general and four assistants to institute a system of interior administration for the hinterland and get Liberia’s problems respecting the native tribes adjusted.

(g) A physician for sanitary work; an agricultural expert; and an expert for educational department.

(h) A competent man of recognized legal ability should be engaged temporarily to study the judicial system and make recommendations looking to its improvement which the Republic should be required to adopt.

(i) The Government of Liberia is willing to consider the conditions under which the German wireless and cable station at Monrovia may be turned over to the United States. It might prove desirable, if the United States becomes responsible for Liberia, to have this station. In such event wireless and cable experts would have to be imported from America.

Speaking generally, Liberia is as much deserving of assistance now as when the commission of 1909 reported favorably upon the United States rendering the aid she requested.¹ Liberia has always regarded the United States as her natural protector. It is thoroughly understood throughout the Republic that the United States has never had, and will not have, ulterior motives in its dealings with Liberia. Unquestionably there is a deep undercurrent of uncertainty which looks, now as heretofore, with misgivings upon the connection of European colonizing powers with Liberian affairs. It is feared that the goal toward which the agents of these Governments must inevitably work is the colony or protectorate.

The institutions of the Republic are American in origin and nature; accordingly Liberians feel that the United States would have a better understanding of the problems which face the country, and more sympathy with the efforts made toward their solution. Not only does the Government earnestly hope to keep intact the sovereignty of the Republic, but also to preserve unimpaired the political institutions upon which the State was founded. A period of tutelage under the United States would be acceptable because it is thought that this could only mean progress, growth, and stability for the country.

The bank manager says that the condition of Liberia is politically dangerous. This statement is not understood by the Government. Financially the situation must be regarded as critical, but from the political standpoint it was thought that the guarantees given by France and Great Britain to the United States were quite adequate to confirm the political status of the Republic.

It seems from expressions of the bank manager that, for the time being at least, something of the nature of a receivership of all unaligned revenues given the bank would be the price asked for its further financial aid to the Government. This arrangement it is indicated would be worked temporarily side by side with the customs receivership. The injection of other foreign agents in this fashion into Liberian affairs would only further complicate an already too complex situation and get matters hopelessly involved without any corresponding benefit to the country.

The economic commission of inquiry which the bank manager suggests the President should appoint to make the indicated investigations would, it is felt, be a sheer waste of time and money. It is difficult to see that its chief function would not be to establish and publish that the leadership of the United States in Liberian affairs has been a failure. The American commission of 1909 thoroughly investigated conditions in the Republic. This work does not need to be done over again. The reforms that should be made in Liberia are already very well known. What is now needed is the money and the agents to carry them out.

It has often been reported to me that the opinion is held and expressed among the British in Liberia that the United States or its citizens would never lend the Republic money to the amount necessary to put it on its feet; that the most that could be expected from the United States was advice that didn’t cost anything; and that when the real test came, it would be the British who would have to come to the rescue of Liberia.

The financial strigency through which the country is passing undoubtedly emphasizes the serious defects in Liberian administration. These are no greater now than in normal times when many of them passed unnoticed. The reforms suggested by the Department cover most of what needs to be corrected, but money and assistance are essential to make them effective. …

I have [etc.]

Richard C. Bundy

[Enclosure 1]

The Manager of the Bank of British West Africa, Ltd. ( W. H. Ross-Bell) to President Howard of Liberia

Monrovia, December 9, 1917.

My Dear Mr. President: With reference to our conversation of the other evening, when you were kind enough to see me, and when you were kind enough to ask me to write to you privately in connection with the suggestion I threw out on that occasion that it might be to the advantage of this Republic if some kind of a financial commission were appointed by the Government to enquire into and advise the Government upon the whole economic position of the Republic as it is to-day, it is with no small diffidence that I take you at your word. And it is because I am anxious to avoid creating any idea that I am mixing myself up in the political affairs of this Republic, unduly, that I accept your offer to make my suggestions with reference to a financial commission of enquiry to you privately for your examination.

To begin with, it is necessary to dwell on the fact that the economic position of this Republic to-day is not only unsound but politically dangerous, and I think I may say that nobody is more concerned about the state of affairs here than my chief manager, Mr. Leslie Couper, and myself. The Republic passes from one economic difficulty into another, and it appears to be almost impossible to arrive at some sound scheme that will really remedy matters. The loan act of 1911 under which the Customs Department passed into the control of foreign officers seconded for that purpose to the Liberian Government, was really the first sound step taken to set this country upon a better financial footing, and it was certainly succeeding until the present cataclysmic world conflict broke out which has to a great extent cut down the only revenues it could control. But it is my opinion that the loan act of 1911 was only a partial solution to Liberia’s difficulties, in that it did not grapple with the question of internal revenue, as indeed, it could not well do as the matter was not referred to it, for obvious reasons.

I think it would be well to recognise that until the end of this war, an end which no man can foresee as yet, and even possibly until long after it, Liberia will have to depend more on her internal wealth than upon anything else. And if this is seriously recognised, the question at once arises: How is this internal wealth to be best secured?

With these preliminary remarks, I come to my subject.

Even the most optimistic Liberian or friend of Liberia has to admit that up to the present, the internal wealth of the Republic has not been as fully available for the purposes of the Government as it should be. One man or one department cannot be expected to find the best solution to the problem of internal wealth and development, without aid, without deliberate, exhaustive, and expert investigation. Without such investigation, no real improvement can be effected. To my mind, as I took the liberty of suggesting in conversation to you, the one and only real step to be taken towards a sound solution consists in the setting up by you of an economic commission of enquiry on the most up-to-date and improved lines to go into the whole economic position of this Republic, the object of such a committee being:

(a) To enquire carefully and exhaustively into causes of the present position;

(b) To enquire into military and departmental uses and abuses of authority;

(c) To finally draw up a majority report and such other minority reports as may be necessary, all of which are to be published at Government expense and submitted to the Governments of the United States of America, Great Britain, and France, and to the Government of Liberia, and the press of each country for publication;

(d) To draw up and suggest in such reports a comprehensive scheme of reconstruction for recommendation to the Government of Liberia.

I would suggest that such a commission should be composed of members selected on something after the following lines:

1. Three members of the cabinet;

2. A foreign expert who should be nominated by the Governments of the United States, Great Britain, and France;

3. One representative each from the following sections: clerical, legal, civil, banking, and commercial;

4. All the receivers of the customs receivership in Liberia;

And such other additions as would occur to the Government, which would be calculated to assist in the deliberations of the commission.

Such a commission would be nearly useless and simply a waste of public money if very full powers were not granted it while it existed. Its powers should include:

(a) Right to complete access at will to all departmental accounts, records, documents, and correspondence;

(b) Right to demand any witness to appear before it and give evidence, whether that witness be a foreigner, Liberian, or official, provided always that such witnesses are resident in Liberia;

(c) Right to proceed at will to any part of the Republic, at the Government’s expense.

If it was to be conducted properly and in an expert manner, the work before such a committee would be very onerous indeed, for it would embrace:

1. The whole existing and past systems for the collection and application of revenues, internal as well as external;

2. The Liberian frontier force;

3. Railways, roads, and telegraphs;

4. Harbours, shipping, and coastal communications;

5. Agriculture;

and many other questions that would arise in connection with the above, as the enquiry proceeded.

It will be seen that my proposal is one that would have far-reaching results if it were carried out, and if any recommendations of such a commission were accepted by the Government. The mere fact that the inauguration of such a commission of enquiry should be proposed officially to the Allied Governments interested in Liberia would have a certain effect, and be taken as an earnest of the desire of this people to take the best possible course for its future welfare, progress, and economic development.

It is not for me to outline more than I have done above, the exact nature and duties of such a commission; but what I have written will shew you very clearly what I am aiming at. I fear that the recommendations of such a commission are bound to be drastic, and are even likely to demand considerable sacrifices on the part of the Liberian people; but the more drastic such recommendations are, and the more severe are the sacrifices demanded of the Liberian people, the more will the necessity for such a commission be demonstrated.

I do not flatter myself, Mr. President, by thinking I am proposing anything very new or startling to you, nor do I want to have any public connection with the discussions that might arise as a result of these proposals, and I sincerely hope you will overlook the liberty I am taking in writing in such a way to you, a liberty I have taken at your own invitation—please remember. I am actuated only by a strong desire to assist Liberia through her daily growing troubles and difficulties: troubles and difficulties that promise to increase rather than diminish. My training is a financial one, and my work wholly financial; hence my interest in the financial problems of this Republic.

With kind regards [etc.]

W. H. Ross-Bell

[Enclosure 2]

The Liberian Secretary of State ( King) to the American Chargé ( Bundy)

No. 10/D

Monrovia, January 11, 1918.

Mr. Chargé d’Affaires: I have the honor, by direction of the President, to forward you, for transmission to your Government, the enclosed memorandum on the financial situation of Liberia submitted to His Excellency by the honorable Secretary of the Treasury.

The financial danger at present threatening the Republic, as foreshadowed in the enclosed memorandum, is, in the opinion of the President, so imminent as to warrant His Excellency’s firm conviction that a strong and candid appeal should be immediately made to the Government of the United States to come to the relief of the Republic without delay by:

1. A loan of not less than $5,000,000 to enable the Republic to cancel the refunding loan of 1912, and to establish a receivership under American control alone; to take up our internal floating indebtedness; to stimulate education, agriculture and industry, and to inaugurate such public works as will operate for the complete financial and economic rehabilitation of the country.

2. By the loan of additional American agents to assist the Government in perfecting its desires and plans for effective administration and control, both in the several Departments of Government and in the administration of our hinterland.

To this end, therefore, does the President desire this memorandum to be laid before the Government of the United States through your Legation. Knowing as he does your warm interest and concern in the welfare and prosperity of Liberia, His Excellency feels justified in relying upon your support and endorsement of this appeal now being made to your Government.

With assurances [etc.]

C D. B. King

[Subenclosure—Memorandum]

Financial Situation of the Republic of Liberia

The healthy signs of budding progress and financial stability which characterized the years immediately following the establishment of the customs receivership of Liberia are being entirely destroyed by the economic effects of the war in Europe upon the Republic. For more than three years now the Republic has been battling to preserve something of that stability in the face of steadily decreasing revenues and increasing stagnation of business.

During the first few months of the war the revenues dwindled so woefully that the receivership could pay the Government practically no residue of revenue from the customs receipts, and the Government was compelled to adopt measures which it felt would be reasonably certain to provide the needed income required to bear its minimum expenses working with a restricted, official list. All salaries were retrenched by 20 per cent and the Government endeavored to pay 50 per cent of these retrenched salaries. The employees of the customs service were placed upon the same basis. To replace a part at least of the residue of revenue, a surtax to the value of 20 per cent of the assessed duties on all imports was imposed. This surtax, together with the internal revenues, realized a partially satisfactory though uncertain income for the service of the Government as distinguished from the receivership.

The ships calling at Liberian ports and the cargoes brought maintained a steady average up to the beginning of the present year. Since that time there has been a serious decline in respect of shipping, so much so that the receivership is at present woefully embarrassed both as to the matter of transmission of interest and sinking fund as well as discharging its obligations in respect of payment of employees and the maintenance of the Liberian frontier force. The position of the Government proper is graver still in view of the consequences which are sure to result from the operation of the bank loan agreement concluded with the Bank of British West Africa, Ltd., on February 21, 1917, unless the Government should be able to keep down its indebtedness with that institution well within the limit fixed for advances.

Before this agreement was signed the bank had, at sundry times, made loans to the Government. Bach loan, however, was a complete transaction and had to be entirely liquidated before the question of another would be considered by the bank, and then only when there were healthy indications of appreciable revenue in sight for the next few months succeeding such loan. This precaution on the part of the bank compelled the Government to patiently wait until sufficient revenue had accumulated to make a decent payment. Incidentally, this was a good safeguard for the Republic, but there was manifest dissatisfaction among officials and employees of the Government at these occasional payments, which did not, on the whole, work out at the rate of 50 per cent of retrenched salaries. With the cost of living constantly rising, with business and commerce slowing down, and with the material conditions of the people generally growing steadily worse, there arose an insistent importuning of the Treasury and the Government to devise some plan for general relief. This relief was sought from the Bank of British West Africa through an agreement whereby the bank makes advances of $9,000 to the Government monthly until the total of these advances over the revenues paid into the bank reaches the sum of $100,000. The present indebtedness to the bank is $49,663.73, and at the rate of this increase it will reach its limit by July or August next, and the Government may then expect the real and distressing dangers, now imminent, to bristle up very tangibly.

This precarious situation is keenly perceived by the bank, as I have every reason to know, and it will use the advantage of its financial position and the indebtedness of the Government as a ram to batter down what the Republic regards as its bulwarks of safety, but what are esteemed by Europeans generally as “barriers to the investment of capital in the country and hindrances to good government.” Since his arrival from Europe, the present manager of the bank has had several conversations, both official and unofficial, with me on the broad subject of what will be the position of the Government when the bank ceases to make monthly advances under terms of the present agreement, and what will the Government do to cope with the terrible conditions which will then prevail.

The intention of the bank in respect of its future relationship to and position in the affairs of the Republic evidently is that it shall become the dominant factor in the country financially; that it shall be supreme commercially in that it will finance the firms or corporations who may be selected, under a general scheme, for the development of the resources of the country, and its political complexion and rôle are disclosed when it is realized that the bank firmly insists that a share in the control and administration of internal affairs is the only sufficient security which would warrant either further consideration by the bank or large investment of capital. This intention expresses itself now by a policy of “peaceful penetration.” For the present the bank would be content if, upon the initiative and invitation of the Government, it were allowed to assist in the collection of unassigned revenues, and at the same time be made the de facto Treasury of the Government, the Secretary of the Treasury paying all salaries and obligations by cheque on the bank. This would be considered a logical step after the bank loan agreement, and having been achieved, the bank would give itself no concern as to the ultimate peaceful consummation of its designs. If the cooperation of the bank in this respect is not voluntarily sought, it feels it can afford to await the financial collapse which must undoubtedly develop with the cessation of the advances made by it and when the Government will surely make approaches for further relief. The bank will then be in a position to dictate its own terms. I am of the opinion, however, that the bank would prefer to pursue its policy of peaceful penetration. It is less disagreeable and presents fewer obstacles. It takes longer for the consummation of plans, but the result is the same in the end.

The manager has told me quite plainly what, in his opinion, will follow when the bank ceases to make monthly advances, and the logic of the situation would certainly support his views. The tendency is in the direction of a collapse. I shall summarize the several conversations with the manager, giving substantially what has been said in disclosing the intentions of the bank, what it is willing to do for the Republic and how it proposes to effect its rehabilitation in the event the opportunity to do so should finally present itself.

1. The bank feels that notwithstanding the availability of our revenues up to $9,000 per month for expenditure by the Government, such revenues will be insufficient for its minimum necessities; that this lack of revenue will revive the disaffection among officials and employees temporarily allayed by the workings of the bank loan agreement; that with diminishing revenues, the receivership will be unable to pay both interest and sinking fund and the frontier force charges, and therefore the disorders of a few months ago will repeat themselves; that to prevent these evils the bank will undoubtedly be approached by both the Government and the receivership for assistance.

2. The bank, feeling that such conditions must arise, will be ready to come to the relief of the Government, but on terms which will involve no half measures. The question of an arrangement for temporary ease will not be considered, as such is deemed an expedient which would result only in more distressing circumstances for the Republic in the future. The bank will be willing to completely finance the Government in every particular which will not disturb the existing covenants and operations of the receivership, or in the exact words of the manager, “the arrangement would be tantamount to receivership of unassigned revenues.” The bank would naturally demand a quid pro quo. The Republic having nothing but its potential wealth to give as security, the quid would mean control.

3. The control to be exercised by the bank would work the practical suspension of the Constitution, “temporarily at least,” according to the manager, and involve sweeping changes in the functions of administration. Europeans, with experience in colonial government, would be appointed, with centralized power in their hands, to supersede the present form of county government. European district commissioners, with summary judicial powers, would control the interior, and so far as is possible, direct the frontier force. Officials would be placed in the Interior and Post Office Departments; the entire collection of internal revenues and the dual administration of Treasury affairs, would be insisted upon, the manager of the bank probably having the right to countersign cheques issued by the Secretary of the Treasury; our entire judicial system would be reorganized or consular courts established; the authority of the Legislature would be restricted, particularly in respect of financial matters. With the example of prosperous West African colonies before it, the general effort of the bank would be to inaugurate in the Republic as many of the methods that have proved beneficial in the colonies as is possible in the circumstances and still leave a semblance of representative Government.

4. Being in a position to force upon the Republic such stipulations as above expressed, the bank would consider the assumption of the refunding loan of 1912, and then develop the country through a scheme involving probably $15,000,000 or more. This it would do, of course, through a syndicate, undertaking the working of concessions, building roads, railroads, harbor works, establishing telegraph and other public facilities.

This is the well-rounded design of the Bank of British West Africa as I gathered it from the manager here, and who expressed himself as conveying the feelings of his directors. In the light of the progress made in the adjoining British and French colonies, it is certain that the Republic must make an effort to catch up with and keep pace with this progress. The country will be developed. Whether it will be the “Republic of Liberia” after such development takes place, depends altogether upon that agency which undertakes the task. There can be no successful resistance on the part of the Republic against the quiet, but firm and insistent, pressure for governmental efficiency and economic development which is being brought to bear by the bank as the exponent of European finance, entrenched as it is by virtue of its financial relationship with the Government. The Republic must yield in the end. This being inevitable, the Government should, with this memorandum, make an earnest appeal to the Government of the United States to assume this task of rehabilitation. It is idle and useless to talk about Liberia making any great reforms under existing circumstances. The Republic has neither the means to evolve quickly nor does it enjoy that confidence of the European powers interested as would cause them to patiently and sympathetically wait for this evolution to take place. Development and efficiency must come about very rapidly in order to satisfy the exactions of our neighbors.

The Republic needs two things: first, an immediate loan to give equilibrium to the present posture of affairs; second, to be furnished with the capital and agencies necessary to carry out a general scheme of economic development and effective administration and control. To this end, the Government should again lay before the Government of the United States its plea contained in the suggestions made to the American Commission of 1910. In doing so it is comforted by the feeling that the United States Government has only the best interests of the Republic at heart, which belief would give to the people, while those changes necessary for the complete rehabilitation of the country were being instituted, a sense of security that would not obtain should this role be played by any other power. It is my opinion that we should act in this matter without delay.

Walter F. Walker

2. Not printed.
2. Not printed.
1. See Senate Document No. 457, 61st Cong., 2d sess.