The Secretary of State to President Harding

My Dear Mr. President: The Legislature of Liberia convened on December 5. President King, who with his fellow commissioners arrived at Monrovia on the U. S. S. Denver on December 3, has doubtless already made public the details of the financial plan for aiding Liberia which was signed at Washington on October 28,2 and it seems likely that foreign interests not in favor of the plan will endeavor to obstruct it unless by timely action on the part of this Government, the loan provided for in the plan is made available at an early date. I do not wish to take any further steps in the matter until I have first laid it before you, thinking that you may prefer yourself to address the Senate Finance Committee and point out the necessity for prompt action.

It is incumbent upon us not to lose time because when this Government consented to receive the Liberian Commission, which was in the Autumn of 1920, the Liberian Government was informed that it was expected that a definite agreement could be reached which would be put into force without delay.3 Because of the time consumed in perfecting the plan, Liberia, in order to meet current expenses, has been forced to have recourse to the Bank of British West Africa. This Bank which has made certain advances states its determination to make no further advances after the present credits are exhausted, which will be about the first of March, 1922. After that date all Liberian revenues must go to the international receivership and to the Bank of British West Africa, and the Government will have nothing whatever with which to provide for its administrative expenses.

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I enclose herewith a memorandum intended to show that Congress should without delay make available to Liberia the credit of $5,000,000 contemplated in the loan plan.

Faithfully yours.

Charles E. Hughes

Memorandum on the Necessity to Reestablish Promptly the Credit of $5,000,000 for the Republic of Liberia

In appreciating the moral obligation of the Government of the United States to the Republic of Liberia, it should be pointed out that upon the entrance of the United States into the world war, Liberia made common cause with this country and the Allies against Germany. It was largely in consequence of this participation that the economic situation of Liberia was imperilled and that her Government was compelled to appeal for financial aid. In these circumstances the United States gave assurance that it would come to her relief as it had come to the relief of other nations fighting against Germany. Accordingly a loan credit of $5,000,000 was extended by the Secretary of the Treasury on September 9, 1918,4 under the authority of the Act of April 24, 1917 “to authorize an issue of bonds to meet expenditures for the national security and defense and for the purpose of assisting in the prosecution of the war to extend credits to foreign governments and for other purposes.” On September 12, 1918,4 the Government of Liberia was notified of the opening of this credit and negotiations were initiated covering the terms, service and general purposes of the loan. The plan drawn up was intended to safeguard the money so advanced by American administration of expenditures and collection of revenues, and also to provide for repayments of all monies due other foreign creditors, and thus cause their withdrawal from participation in the financial and other public affairs of Liberia. The Governments interested were informed of the opening of this credit, but for various reasons the loan plan was not submitted to the Liberian Government until June 15, 1920. The Liberian Legislature requested certain modifications in the loan plan, but it was clearly understood, both by the Liberian Government and by the Government of the United States that there was no question of withdrawal of the offer of the money already promised, the time when the credit should be made available merely depending upon the conclusion of a satisfactory agreement as to details of administration.

Replying [relying] on the assurance that the United States was ready to enter into a definite agreement, the President of Liberia [Page 608] came to Washington some time ago with other plenipotentiaries to conclude the negotiations. In anticipation of this journey and at the request of this Government, the Liberian Government gave to him and his associates full and necessary authority to conclude the loan plan. The negotiations were brought to a successful issue and the plan was signed on October 28, 1921, whereupon the President of Liberia with his fellow commissioners returned to Liberia.

The Legislature of Liberia has been in session since December 5, 1921. President King has no doubt laid the loan arrangement before that body. The loan terms and provisions are, therefore, now publicly known throughout Liberia and in those European countries interested in Liberian affairs.

An examination of the course of the negotiations produces the conviction that commitments have been made by this Government which impose a moral obligation to make the loan. The broad authority conferred in connection with the prosecution of the war, was adequate to the consummation of the plan, but the fact that this authority may not be deemed longer to exist, while making it impossible to proceed without congressional sanction, does not change the if act that assurances were given which should be made good. In view of these circumstances and of the obligation to which they give rise, to which this Government cannot fail to be sensitive, it is not necessary to dwell upon the fact that the extension of the loan is imperative. And now that the loan plan has been signed and carries the same implications as the earlier publicly-announced commitment, it is plainly to be seen that on all moral grounds the credit of $5,000,000 for Liberia must be reestablished. The situation is one which calls for immediate and appropriate action.

This Government should reestablish the Liberian credit not only because its honor is engaged but for other reasons as well. From the standpoint of our interest in the Negro race, of our traditional friendship for Liberia, of the proper protection and assistance of American trade, and of the new trade routes of the American merchant marine on the West Coast of Africa, it is essential.

In order to complete these statements and to throw light upon other factors in the situation, the following considerations are detailed to show the necessity for the reestablishment of the credit.

The close relation which the prosperity of Liberia has to all that pertains to the advancement of the Negro race makes the situation of that Government a subject of vivid and constant concern. At this critical time in Liberia’s history we have opportunity to give a practical expression of our continued solicitude by coming to her aid in her present severe exigency. The reestablishment of the credit would demonstrate the real interest our Government has [Page 609] always felt in the welfare of the Negro and remove the unfavorable impression which has come about in the Negro population of the United States on account of the withdrawal, for technical reasons, of the credit established during the war.
The Republic of Liberia had its origin in the efforts of American citizens. Liberia was founded by men who were sent to West Africa by the American Colonization Society with funds supplied by Americans. The movement was assisted by President Monroe, Henry Clay, and other prominent citizens. The Liberian Declaration of Independence, its Constitution, flag, coinage, etc., are replicas of those of the United States and nowhere in the world is there a foreign government built so closely upon the model of the United States. Liberia’s capital, Monrovia, is named for an American President and many of its towns bear American names. Liberia has at various times sought the aid and counsel of the United States which up to the present have always been freely given.
The loan to Liberia is of great importance for the protection and assistance of American commercial interests in West Africa. Liberia (which is about the size of the State of Ohio) is immensely rich in natural resources but this wealth is in the interior and almost entirely unexploited. It has the richest palm forests in Africa. It has minerals, hardwoods, coffee, cocoa, gold and diamonds. With but little expenditure roads would make these resources available—only two or three hundred miles would be required—and Liberia would become not only self-supporting but rich.
Palm oil, Liberia’s greatest product, has become in Europe an essential raw material, almost as important as petroleum. It is used for the manufacture of soap, glycerine, edible oils and in the steel and tin plate industry. The United States has no independent source of supply of palm oil and now that it also is becoming an extensive user of such oil, our importers find that they can obtain it only through firms in London, Liverpool, Antwerp and other European ports where it is received from the British and Belgian colonies in Africa. Liberia could be a vast and independent source of supply for American manufacturers.
Liberian ports are now the only ones on the West African coast where American ships may operate without discriminatory competition and where they may readily obtain the necessary labor to work their ships along the coast. The location of Liberia is such that in the future it will be of great value as a coaling and oil station not only for our merchant marine but for our Navy. It lies along the great north and south trade routes and the Liberian Government is anxious to have a coaling station established there.
In any effort made by American cable and radio companies to expand their business along the West African coast, Liberia is the [Page 610] only point at which they may now establish themselves with the assurance of the support and cooperation of the local authorities. Indeed, the Liberian Government now desires to interest the American Government or an American private concern in taking over and operating the former German wireless station and cable at Monrovia.
Liberia’s financial embarrassment, while directly due to the war, is also traceable to the encroachment of the British and French interests. One-third of the territory attributed to Liberia in 1892, has since been lost by the Liberian Government and joined to the British Colony of Sierra Leone on one side or to the French Colony of the Ivory Coast on the other. At times when this Government was not able to give to Liberian matters the attention they merited (shortly after the Civil War and again in 1906), the Liberian Government was furthermore induced by British capitalists to accept loans for public improvements under such terms and provisions that only a small percentage of the proceeds became actually available for use, so that, in 1909, Liberia found itself indebted to the extent of more than a million dollars. President Roosevelt recognized the need for action and sent a Commission to Liberia in the early part of that year and brought about an arrangement by which American bankers agreed to make an advance of $1,700,000 upon the security of the customs revenues to meet Liberia’s needs. An International Receivership was set up composed of an American, a Britisher, a Frenchman, and a German, which has never operated successfully enough to afford the necessary relief.6
This ineffectual receivership must now be replaced by some effective and capable control. The crisis in the economic and financial affairs of Liberia precipitated by her participation in the war diminished her revenues by more than two-thirds and the salaries of her government officials were, with their consent be it said, cut to less than one-half what they were in 1914. Obviously such a situation cannot go on. It seems quite evident that without assistance it will be impossible for the Government to attain solvency or for the Republic to recover its stability.
Failure to grant the credit desired will compel Liberia to turn to other sources for the financial aid which it must find at once. If it does so whatever there is of advantage in the Liberian situation will be secured by the country making the loan. Liberia desires, as she has shown by signing the loan plan, to obtain her funds from America from which source she has received the most disinterested advice and counsel. Liberia has become accustomed to the supervision of her finances by Americans who have been employed [Page 611] under the International Receivership as officials by the Liberian Government. It seems quite within the nature of the case, therefore, that Americans should take hold of the present situation and aid Liberia in solving her difficulties. Failure to do so would be a species of desertion and it is doubtful whether the financial equilibrium of the country would ever be restored. The extent to which American prestige will thereby be impaired needs only to be mentioned to be appreciated.
The granting of a credit of $5,000,000 to Liberia will enable the United States to make good its moral obligation, to live up to its historical obligation, to safeguard the commercial interests of the two countries and to demonstrate the sincerity of its interest in Negro affairs. It should enable Liberia, under American supervision, to refund its entire indebtedness, to reorganize its finances and to make the public improvements upon which the increase in public revenues will depend. Under the plan agreed upon the revenues are confidently expected within three years to amount to more than $600,000 per annum, a sum not only ample to meet the current expenses of the Government but to assure the payment of the principal and interest of the loan. Since the public revenues are pledged in their entirety as security for the loan, it would seem that on a purely financial basis the loan is a sound business; proposition.