NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

“Civil war is development in reverse,” writes Oxford economist Paul Collier (p. 27). And few nations know this brutal reality better than Liberia.

In 1989, this small West African country was making steady economic progress, its GDP having almost doubled since 1970. Then came 14 nightmarish years of near-constant civil war.

The effect was catastrophic. Two hundred fifty thousand people–almost one in 12–were killed. Infrastructure was ruined, business collapsed, and the economy nosedived by 60 percent, bottoming out at one point at almost 10 percent of its pre-war level (lower even than its 1960 GDP).

The situation seemed hopeless in 2005, when Ellen Johnson Sirleaf won the first presidential election after two years of transitional rule, and became Africa’s first female elected head of state.

Six years later, Liberia’s charismatic, soft-spoken leader stood before a Washington, DC crowd and explained why she believed the war-ravaged country was now an attractive environment for private enterprise and foreign investment. At a Center for Global Development event on June 23, Sirleaf highlighted the stark, ongoing challenges her country faces in recovering from years of internal strife. And yet her overall theme was one of strident optimism.

“If we continue on this path…in 10 years, Liberia will not require foreign assistance,” Sirleaf declared, later adding, “Liberia should be a middle-income country by the year 2030.”

The fact that her audience applauded instead of laughed is a testament to the power of good governance to address even the most intractable development problems. After all, development is difficult enough in societies with weak governments and economies–add years of internecine violence to the mix, and it can seem near impossible. Countries that have experienced civil war in the past are roughly twice as likely to relapse into conflict. Disease and poverty rates skyrocket; the legacy of violence erodes the concept of political rights.

Upon assuming office, Sirleaf was immediately struck by the extreme poverty she saw all around her. She made economic growth her administration’s first priority.

“Putting the private sector at the center of our development agenda became the key,” she says. Sirleaf went to work revitalizing the country’s most productive industries, re-opening mines, restarting forestry operations, supporting agriculture.

In many other important ways, Liberia became friendlier to entrepreneurs and business interests. Since Sirleaf took office, the average number of days required to start a business plummeted from 68 to 20. (The worldwide average is 24). The number of start-up procedures required to register a business dropped from 10 to five, well below the worldwide average of 7.8. It is still expensive to register a business, costing 55 percent of the average Liberian’s annual income–but this has to be preferable to the 540 percent it used to cost in 2006.

Liberia is also slowly mobilizing more domestic credit to the private sector, providing capital such as loans and trade credits that help new businesses begin operations. Since 2005, the percentage of GDP devoted to this funding has nearly tripled.

These reforms have gone hand-in-hand with broader economic and social policies, such as those seeking to improve the capacity of Liberia’s workforce, tamp down on corruption, and eliminate national debt. Progress is slow in such a deeply damaged economy, but in the last five years, Liberia has mobilized almost a billion dollars in foreign direct investment and experienced steady GDP growth in a time of recession.

There is still a daunting amount of work to be done. Liberia is one of the poorest nations in the world, with the attendant problems in health and education. The devastating effect of a long civil war in a small nation with already-low institutional capacity cannot be overestimated.

But Liberia’s government–as very publicly demonstrated by Sirleaf herself last week–refuses to cloak itself in this kind of excuse. While many other factors will clearly be necessary to achieve a true national turnaround, at least Liberia appears to have a key ingredient that many other poor countries lack: an engaged and responsible national government.