By: Ryan McGuine
Today, Haiti is the poorest country in the western hemisphere, infamous for countless debilitating natural disasters as well as for a rampant sex tourism industry. Last summer, NPR ran a story about the sorry state of the country’s sewage system, including a cameo for a Haitian who cleans latrines for a living in the absence of pump trucks. What can explain the current state of affairs? First, a brief history is in order.
Hispaniola—the island comprised of present-day Haiti and the Dominican Republic—was “discovered” by the west in 1492 on Christopher Columbus’ first trip to the New World. The island initially served as a gateway to the rest of the Caribbean for Spain, but the Spanish Empire eventually lost interest due to its lack of mineral resources. By the end of the 17th Century, France had gained control of the western half of the island. Under the French, Haiti became famously productive in a range of agricultural crops. By the end of the 18th Century, Haiti grew about 60 percent of the world’s coffee, about 40 percent of the sugar imported by France and Britain, and two-thirds of Europe’s tropical produce. Behind this efficiency, though, was a notoriously brutal slave industry. At one point, the island’s slave population totaled 500,000 (compared to its 32,000 whites and 28,000 free blacks). One-third of new slave arrivals died within only a couple years, most often from sheer exhaustion.
In 1791, Haitian slaves led by Toussaint L’Ouverture launched an uprising against their French masters and would slowly chip away at French forces over the next decade. They eventually gained control of the entire country and passed a constitution in 1801, declaring L’Ouverture Governor-General For Life. Napoleon, however, determined L’Ouverture to be too destabilizing and dispatched a major operation to overthrow him in 1802. Although the French won L’Ouverture’s surrender, his supporters continued to engage the French. When events in Europe forced France to reduce its presence in the Caribbean, Haitian leader Jean-Jacques Dessalines and his forces overran what French troops remained. In 1804, Haiti declared independence from France to become the first black republic in the world, the first independent state in the Caribbean, and the second independent state in the Western Hemisphere.
Unfortunately, independence did not bring with it the glory and success that Haitians had fought and died for. It was difficult for Haiti to find markets for its exports. Nearly all major powers—including Haiti’s only non-colonized neighbor, the slaveholding United States—refused to recognize or trade with the black republic, and the United States and France even encouraged other nations to cut off trade with Haiti. Then, faced with another French imposition of slavery in 1825, Haitian leaders signed a document agreeing to pay France 150 million francs in exchange for recognized independence, in order to repay French landowners for their lost land, equipment, and human “property.” These indemnity payments, which continued until after World War II, seriously crippled the young republic by completely eliminating its ability to generate revenue.
Beginning with the Monroe Doctrine in 1823, the United States claimed dominion over the Americas. For Haiti, this meant trading one overbearing superpower for another. In 1915, fearing the consequences of the unstable political atmosphere and increasing intervention in Haiti by European powers, Woodrow Wilson authorized a military occupation of the country that would last until 1934. During that time, America often supported undemocratic regimes that were beneficial to US interests at the expense of the Haitian people.
In 1957, Francois Duvalier—a physician and voodoo practitioner dubbed Papa Doc—was elected President of Haiti and soon declared himself President For Life. Although Duvalier’s rule was brutal, he was a serious student of Haitian history and used his understanding of his people to win a significant degree of popular support. Following Papa Doc’s death in 1971, his son Jean-Claude Duvalier, commonly referred to as Baby Doc, took over control of the Republic at age 19 and similarly declared himself President For Life. Known for his womanizing and embezzlement of public money, Baby Doc left most of the substantive matters of running a country to his mother, Simone Ovide Duvalier. After a decade in power, he and his family left the country in 1986 on an American airplane to France amid widespread unrest and a military-led plot to remove him from power. His legacy was an economy shattered by his family’s blatant corruption and a political atmosphere devoid of good governance.
Jean-Bertrand Aristide—a Roman Catholic priest known for promoting Liberation Theology—was elected President in 1990 by massive margins in elections widely recognized as free and fair by the international community. In 1991, though, he was removed from office by a military coup that some suspect was backed by the US and France. The US contends it had no direct role. However, not only was Raoul Cedras, leader of the paramilitary group born of the disbanded tonton macoutes—the Front for the Advancement and Progress of Haiti (FRAPH)—and President of Haiti between 1991-1994, educated in the US but both he and Michel Francois, another key coup participant, received military training there was well. There is also abundant evidence of CIA involvement in propping up the FRAPH, despite the US maintaining an official stance against the group.
Aristide was restored to power by the US government in 1994 and stepped down according to term limits in 1995. He was re-elected President in 2000 and was again removed by a military coup in 2004. There was some degree of disillusionment among Haitians at the time, especially among the poor masses, to whom much of Aristide’s electoral success is attributed to. While perhaps less corrupt and brutal than the Duvaliers, Aristide had trouble working with those who remained in government from the Duvalier era and is even rumored to have ordered the killings of a number of opposition members. Indeed, although current Haitian politics are characterized by a huge number of parties and candidates—the first round of the most recent presidential elections in 2015 consisted of 56 candidates from as many political parties—it often boils down to contests between factions of Duvalier loyalists against Aristide loyalists. Additionally, Aristide’s combative attitude towards the West won him few friends abroad and made it even more difficult to fund his poverty alleviation policies.
Despite maintaining a more reserved stance towards Haiti following the military’s exit in 1934, the US has never fully left the country alone. For example, during Jean-Claude Duvalier’s dictatorship, the US deemed the vast majority of Haitians fleeing the country “economic refugees,” granting political asylum to just 8 of the 24,559 who applied for the status and forcibly returning any Haitians attempting to reach the US. During Aristide’s first term, the Bush administration funneled large sums of money to both the opposition and to the military that would eventually overthrow him. Following the 1991 coup, President Bush instated a trade embargo on all goods other than food and medicine, which one study concluded was responsible for the deaths up to 1,000 children per month. This embargo was continued by President Clinton until he sent troops to reinstall Aristide to power in 1994.
When the reinstated Aristide government formed a “truth commission” to investigate crimes conducted by paramilitary forces and their commanders after the 1991 coup, the US refused to release 160,000 pages of relevant information stolen by its troops during the 1994 military intervention in what Priscilla Hayner, an expert on truth commissions and transitional justice, called “the worst example of a foreign power blocking a state’s access to its own truth.” Between 2000 and 2004, the US enacted an aid embargo against the democratically-elected Aristide, most notably freezing four Inter-American Development Bank (IDB) loans to Haiti totaling $146 million for health, education, drinking water, and road construction despite the fact that no IDB member country is supposed to be able to block already-approved loans.
In order to explain cross-country income differences, economists often employ the Solow Model of economic growth. According to it, income differences can be explained by the combination of technology level, human capital per worker, and physical capital per worker. Comparing these values across countries can be useful since they tend to go a long way towards explaining relative levels of income. However, if improvements in technology and accumulation of capital do lead to growth, the question arises of why countries often do not invest as much as possible into doing just that. Thus, technology, human capital, and physical capital are referred to as proximate causes of growth, which depend on other factors, referred to as fundamental causes of growth.
The most significant fundamental causes include culture, geography, and institutions. The culture hypothesis focuses on how differences in shared experiences or religious beliefs across societies produce diverging development experiences. Often used to make perhaps politically-incorrect claims about the superiority of certain cultures above others, researchers have famously used the culture argument to explain why Protestant countries in Europe underwent industrialization before Catholic ones, and why countries with warmer climates often have lower productivity than countries with temperate climates. Despite being notoriously difficult to measure, culture can indeed affect growth by influencing both the degree of cooperation between individuals, as well as individuals’ willingness to sacrifice consumption today for consumption tomorrow–that is, the savings rate. The former is not easily quantifiable, but the latter is fairly common. Haiti actually has a relatively high savings rate at 25-30 percent of its Gross National Income (GNI), compared to the world average of around 25 percent of GNI. The savings rate is important for growth because it is used as a proxy for investment in capital, but in the case of Haiti, the high savings most likely has to do with the fact that there are few social safety nets available, rather than translating into significant investments. The number of tractors per 100 square miles of arable land, an important productivity-enhancing investment for agriculture, which employs almost 40 percent of Haiti’s labor force, was estimated by the Food and Agriculture Organization (FAO) to be 2 in the year 2000, compared to an estimated 22 in the Dominican Republic, despite having nearly-identical populations.
The geography hypothesis focuses on how major differences in physical and ecological situations across societies produce diverging development experiences. There are a number of variants of the geography argument. One says that better agricultural productivity leads countries to turn their energy towards developing complex organizations and advanced technologies sooner than if more people had to work the land for more hours in order to feed the population. While Haiti did not hit the jackpot with its natural resources, its colonial history indicates the potential for prolific agricultural productivity. There are a number of reasons that the country has not since reached that potential. Located in a region that is heavily exposed to hurricanes and tropical storms, Haiti’s agriculture often suffers blows from nature. While feasibly manageable, that damage is exacerbated by an unforgiving combination of low levels of agricultural investment, man-made land degradation, and population pressure.
Another variant of the geography hypothesis draws a connection between poverty and locations with a high prevalence of infectious diseases. While infectious disease may well be a symptom, as well as a cause, of poverty, it is well established that unhealthy individuals are less productive and even less able to learn and accumulate human capital than healthy individuals. Some evidence suggests that a 10 percent increase in life expectancy at birth can lead to a 0.3 to 0.4 percent increase in annual economic growth rate. This variant of the argument is particularly salient in Haiti, where the main contributors to premature death—including exposure to nature, respiratory infections, and diarrheal diseases—are almost never fatal in more developed countries because they are both preventable and relatively inexpensive to address. Haiti ranks last among comparator countries for health-adjusted life expectancy at birth. The country’s environmental degradation, lack of water and sewage infrastructure, and tropical climate all make managing disease especially challenging.
The institutions hypothesis focuses on how differences in man-made rules, regulations, laws, and policies that affect the incentives of individuals produce diverging development experiences. Institutions vary crucially from culture, in that institutions refer exclusively to man-made factors rather than those factors that have evolved over time without intentional action. Among the economic institutions most closely correlated with economic growth are property rights and the existence of well-functioning markets. Societies with economic institutions that facilitate technical innovation as well as human and physical capital accumulation, will be more prosperous than those, such as Haiti, which lack them.
The primary obstacle to institution-building in Haiti is its colonial history. Beginning with its French colonizers, systems of power were established in which a small minority claimed most of the wealth generated in the country, and the majority of citizens had no say in political affairs. Crippled by debt taken at exorbitant interest rates in order to pay its reparations to France between 1825 and 1947, Haiti was spending close to 80 percent of its entire annual budget on debt repayments in 1900. Eventually, leaders realized it was easier to loot the country’s money, rather than address its problems, and as such, there is no tradition of political leaders providing services for citizens—social, economic, legal, or otherwise—or living modestly, while citizens have grown to expect little from political leaders.
Property rights are generally recognized as an important feature of effective economic institutions. Without them, individual agents lack an incentive to adopt more efficient technologies or to invest in human or physical capital, an issue that affects both Haitian citizens and companies interested in investing in the country. In Haiti, there is a general uncertainty about who owns what land. This is a result of the refusal by early Haitian elite to divide their newly-won land among the peasants as well as the Duvaliers’ propensity to give land away to political friends without clear legal documentation. However, the issue is not only that property rights are uncertain, but also that the authorities lack the political will or resources to address grievances. In the wake of the 2010 earthquake and multiple recent political crises, resolving land ownership disputes has not been at the top of the agenda.
Another problem related to property is man-made land degradation. Strong storms that should not be devastating are often made so by the bare, deforested landscape, which leads to excessive flooding. Roots, which serve as the “glue” keeping soil together, are ripped out of the ground and arable land is reduced to mere dust. Deforestation has a deep history in Haiti. The French colonists practiced poor land management, often clear-cutting large areas for timber and fuel. Americans would also clear 50,000 acres to plant non-native rubber trees in the name of the war effort during the 1940s, and Papa Doc would clear-cut forests to deny refuge to political prisoners. Today, it is common for small-scale entrepreneurs to cut down trees, regardless of where they are planted, in order to burn and sell as charcoal. While the phenomena could feasibly be minimized with proper enforcement, this would require not only political will and government spending but also ignore the ethical implications of denying a crucial source of income to many of the poorest citizens.
In addition to property rights, another crucial element to successful economic institutions is well-functioning markets. Effective competition encourages countries to operate efficiently and fosters entrepreneurship, while weak competition can contribute to high degrees of operational business risk and hold back productivity. In Haiti, competition is held back by widespread government control over market variables, limiting potential gains firms can achieve by operating in the country, and by vested interests which hinder innovation by preventing the entrance of more efficient firms. As a result, consumer prices in Haiti are more expensive than in the vast majority of Latin American and Caribbean (LAC) and African countries. However, it needs to be emphasized that a blanket removal of government intervention in markets is not advantageous. In 1985, heavily dependent on loans from the International Monetary Fund (IMF) and World Bank, Haiti adopted IMF- and World Bank-endorsed market liberalization measures that removed restrictions on a wide range of agricultural imports. In 1995, it reduced import tariffs on rice, a key staple in the Haitian diet—accounting for approximately 23 percent of the average Haitian’s daily calories—from 30 percent to 5 percent. With little access to credit or investment, Haitian farmers could not compete with US farmers. Since 1985, the country has gone from a growing nearly all of its rice domestically to importing 80 to 90 percent of its rice. While it is tempting to see the case of Haitian rice in terms of markets working the way they should, US rice production is far from a “free market”—farmers receive billions of dollars in direct payments from the government.
Labor markets must also be considered, especially since more and better-paying jobs contributed the majority of economic gains in the LAC region during the first decade of the 21st Century. Outside of agriculture, the vast majority of citizens are self-employed in low-productivity sectors like commerce and construction. Over the last two decades, employment in the informal sector—non-farm household enterprises that are not registered—relative to the formal sector, have decreased, but rather than an expansion of the private sector, these employees have mostly been added to the government and non-governmental organizations (NGOs), which tend to have lower productivity than private firms and are subject to major fluctuations in donor spending. Further, there are questions regarding the benefits associated with the country’s extreme dependence on NGOs. By providing an inflow of unearned cash, NGOs provide a “spending effect” similar to what is seen when a country goes through a natural resource boom: more money in the economy results in higher prices for nontradable goods while expanding the NGO sector and nontradable sector at the expense of the tradable sector.
The lack of employment opportunities results in a significant “brain drain” effect—meaning that many of the country’s most qualified citizens migrate to more developed countries since an individual with a given human capital level can dramatically increase their income merely by working in a country with a higher productivity rate. While losing its most qualified citizens can hinder a country’s productivity gains, it is important to consider that many of them send significant portions of their income back to friends and family that remain in the host country. There is much evidence that receiving cash directly as is the case with remittances, which account for about 23 percent of Haiti’s GNI, is more effective than traditional models of aid that involve giving people things—including farm animals, grains, building materials, and water pumps—because individuals know their own needs better than anyone else. That being said, such a high rate of remittances further amplifies the spending effect associated with the staggering NGO prevalence.
What is to be done, then? It is tempting to suggest sweeping reforms to politics and society. However, to do so is not only unrealistic but also unlikely to yield results. Much research suggests that developing countries merely copying the form of developed countries’ institutions without the proper substance does not yield beneficial results. Rather, Haiti should focus on interventions that yield the most positive results for the least investment, and over time unique institutions will develop endogenously. Examples of such high-yielding interventions include fortifying dietary staples, reforming the state electric utility, increasing access to quality early childhood education, and boosting infant immunization rates. Additionally, government coordination in identifying competitive industries and removing barriers to entry for them costs little but can go a long way to attract investment.
Answering the question of why is Haiti so poor is not easy. It is a country whose history has nearly ensured its economic failure, and one in which solutions are never straightforward. To say that improvement is impossible, though, is untrue. With thoughtful policy interventions, the country can be set on track for a more prosperous future even without comprehensive societal change. To quote economist Robert Lucas Jr.: “I do not see how one can look at figures like these without seeing them representing possibilities. Is there some action a government of India could take that would lead the Indian economy to grow like Indonesia’s or Egypt’s? If so, what exactly? If not, what is it about the ‘nature of India’ that makes it so? The consequences for human welfare involved in questions like these are simply staggering: once one starts to think about them, it is hard to think about anything else.”