by Tyler Cowen
on January 14, 2010 at 5:31 pm
Here is a short essay, I thank MR commentator Bobabdil for the pointer.
that was an interesting essay. Not to dismiss its serious points, but probably my favorite out-of-context snippet was this, found on a discussion of Voodoo practices: “…such exotic and socially damaging practices as death curses and the creation of zombis.”
And you know what, it’s true–the creation of zombies is a socially damaging practice.
Then you need to explain why Haiti has the economic institutions it does, which the article does, by describing Haiti’s earlier history, and linking specific causes to specific motivations by various historical actors.
Something that stuck out to me was that Haiti had a ban on foreign ownership of property. For a poor country that sounds like a terrible way to get money to flow in.
Somewhere near the bottom of Bob Corbett’s essay, he says,
“However, the American firms who own and run these plants earn fantastic rates of return
on capital, profits entirely generated by the labor of the Haitians.”
I find it hard to understand how that could be true. We have just been through a decade
where investments with marginal rates of returns have had lots of investors. In an environment
where there has been such a frantic search for activities that do give decent rates of return,
it seems implausible that a place with “fantastic” or even decent rates of return would be ignored.
If american firms really were earning fantastic rates of return in Haiti, then there
would be lots of american companies in Haiti — not to mention other nationalities — instead
of just a few.
From the essay:
Finally, in 1838 President Boyer of Haiti accepted a 150 million franc debt to pay this indemnity. This debt plagued the economy of Haiti for over 80 years and was not finally paid until 1922. In the meantime Haiti paid many times over 150 million francs in interest on this debt. It is difficult to measure the incredible harm which this did to the Haitian economy, but by the most conservative measures it was extremely significant.
Really? They paid 1/10th of a percent APR on their outstanding debt? If this has had any sort of “extremely significant” impact on the Haitian economy it can only have been beneficial to have had access to such generous loan terms.
Bear in mind, too, that the franc hasn’t inflated as significantly from the beginning of the 19th C as the pound or dollar. We’re talking about an amount of money worth, today, about USD$500M. Not insignificant, but far from economy-crushing – particularly with such trivial interest rates applied to it.
i ask this out of ignorance-
Jamaica is massively helped out by what I’ll call first and second order effects of Bob Marley-ism. BM created, almost personally, a vacation destination, spwned hundreds of coat-tail riders who then bring money to JAM etc. And brought JAM tons of good-will (seriously, would “cool runnings” have worked with an aruban bobsled team?). Heck, even dead the Marley estate still makes 9 mil per annum, a tremendous fortune by Jam standards. I don’t think it is a crazy position to say that without reggae and all that comes with it, JAM would be much worse off.
Does Haiti have a break-out personage like this? I imagine if they did it might be limited to la francophonie. Can any french/canadian/african readers give a hand? Is one of Haiti’s fallings in what I’ll call “branding”?
Jared Diamond, author of “Guns, Germs, and Steel,” has a new book out called “Natural Experiments” that focuses on Haiti v. it’s neighbor the Dominican Republic. Here’s an excerpt from Diamond’s new article on why Haiti is poor in The Guardian:
“France also imported far more slaves into its colony than did Spain. As a result, Haiti had a population seven times higher than its neighbour during colonial times – and it still has a somewhat larger population today. But Haiti’s area is only slightly more than half of that of the Dominican ÂRepublic so that Haiti, with a larger population and smaller area, has double its neighbour’s population density.
“The combination of that higher population density and lower rainfall was the main factor behind the more rapid deforestation and loss of soil fertility on the Haitian side. In addition, all of those French ships that brought slaves to Haiti returned to Europe with cargos of Haitian timber, so that Haiti’s lowlands and mid-mountain slopes had been largely stripped of timber by the mid-19th century.
“A second social and political factor is that the Dominican Republic – with its Spanish-speaking population of predominantly European ancestry – was both more receptive and more Âattractive to European immigrants and investors than was Haiti with its Creole-speaking population composed overwhelmingly of black former slaves. Hence European immigration and Âinvestment were negligible and Ârestricted by the constitution in Haiti after 1804 but eventually became Âimportant in the Dominican Republic. Those Dominican immigrants included many middle-class businesspeople and skilled professionals who contriÂbuted to the country’s development.”
Maybe Tyler’s readers can figure out some common threads in the above list of 25 countries as poor as Haiti.
I disagree with this article and am disapppointed that such an important free market economic blog misses the key problem in Haiti. That problem is one of property rights.
Besides the fact that China doesn’t have better property rights and is near the top in growth, how does owning the land eliminate the need to cut wood for charcoal to cook one’s food?
Perhaps one cuts the trees you planted down, then sells the land to buy a kerosene stove and a few months of kerosene?
Otherwise, I don’t see how property rights solves the problem of insufficient resources given the knowledge the people have. Do you think that just owning the land suddenly creates the knowledge of how to cook without charcoal so that one doesn’t cut down the tree on ones own land?
Perhaps highly efficient kerosene stove ownership that makes kerosene and affordable trade-off for cutting trees and making charcoal is the ticket. But I suspect that property rights in Haiti are strong enough to provide sufficient kerosene stove ownership rights.
Land ownership, property rights, is not a magic bullet, and in many cases, land ownership/property rights limits growth.
Do you think the US would exist as we know it today if property rights were honestly recognized by whites and their government? Those who owned the land of Ohio had to be defeated and driven off to open the West to European settlement. If property rights were honored, the US would be maybe 15 States. Then again, strictly speaking, recognizing property rights would have made that impossible as well.
Hernando de Soto leads a group that has studied in detail the economic context of the lower
and non-governmental middle class in a number of third world countries. That is they have
studied the practical situation that most people in these countries face. And what they have
found is that practically every wealth-generating activity is illegal. There is nothing you
can legally do to empower yourself.
Of course people do need to live, and so they do generate wealth regardless. But the practical
implication of all this activity being illegal and the point of it being illegal is that
the government, or more specifically it’s human agents, sits above this landscape of people,
looking for signs that anyone is making money, and if they detect such they swoop down and
ask for a bribe. And then of course that’s just the first of many bribes. Or if the person
in question is disliked or refuses to pay the bribe then what they have accomplished is
simply taken because one way or another the activity is going to be illegal.
In most third-world countries people are poor because the government is very actively killing
every economic bud. It’s agents do this not because they are opposed to economic progress
but because they perceive themselves as underpaid and deserving. Plus of course they are
upholding “the law.”
Hernando de Soto’s larger point is that to achieve economic progress people need to change
their perceptions of what is governments really do. Obviously we need to get rid of this
vast legal clutter that makes almost every economic activity illegal. Far easier said
Meanwhile the most significant asset of most lower and non-governmental middle-class people
in third world countries is their home — which naturally they don’t legally own. Because
even though they may have built the dwelling themselves or have paid to have it built, almost
invariably they don’t own the land underneath. So as one part of a larger program de Soto’s
argues for taking ownership from those that the law recognizes as owning the land and giving
it to the person that actually occupies it.
We used to have such a process in the United States. Under english rule and for years after
the revolution most of the land was owned by a few large landholders. For example, George
Washington inherited a very large amount of land. Before his death, a considerable part of
that was taken from him, by people moving in and building farms on his land. Although this
wasn’t formalized under U.S. law until later, in practice George Washington and other landowners
had a few years to eject those that were stealing their land. If they didn’t, then american
courts, which recall at that time, were elected from the local communities, would legally
transfer ownership to those that occupied it.
Hernando de Soto argues that the third-world needs to do something similar today. That
although this certainly isn’t going to solve the whole problem, it would nonetheless by a
significant step forward.
You’ve got to be kidding me with this crap. Just grow a pair and face reality.
“However, the American firms who own and run these plants earn fantastic rates of return on capital, profits entirely generated by the labor of the Haitians.”
Yeah, so I blame all the USA firms that did not move production to Haiti because if they had they might have bid up the wages in Haiti. Clearly it is their fault. If GM, F and DCX were more charitable they would have moved production to the poorest countries that they could break even in.
BTW for those who did not notice I am being sarcastic.
Sorry for the double post it appeared at first like my first post was lost.
My answer is “Yes.”
Yes, Haiti is poor because they don’t have highly valuable resources to monetize.
Yes, Haiti is poor because of absurd cultural inertia.
Yes, Haiti is poor because of a lack of free trade principles.
Yes, Haiti is poor because there is little economic incentive for most of its people to do better than to subsist.
Maybe Haiti even suffers from Steve Sailor’s suggested IQ dearth.
Haiti is poor because Haiti is poor. Fixing it…that’s a tough nut. You need to fix all the problems above to some degree and do it in such a way that one of those problems does not drag down progress in those other areas.
Given that the U.S. is currently “fixing” several other nations and suffering serious economic problems, the U.S. is not likely able to manage the job of fixing Haiti well, though help from the U.S. might be better than nothing.
Would I sound overly cynical if I invoked hell-in-a-handbasket?
I do hpoe 20 years from now Haiti is better off as the result of world focus. But how much of that will come at equal or greater costs to the rest of the world?
The elite dominate the country, and keep the mainstream down. What’s so hard to understand here?
Haiti would have gone the way of Cuba long ago, no doubt, if the Sovs had their way back in the day. And you know what, maybe that would have left them better off than they are now.
Chavez would do well to put some of his mouth and muscle, such as it is, into Haiti, and Haitians. He’ll destroy Venezuala eventually, as it is somewhat mature and developed, and doesn’t need his proscriptions. But Haiti? They could use some of that bluster and authoritarianism, properly directed.
@ Zamfir – Well observed; I hadn’t noticed that the Franc was revalued in the 1960s. I’ll do you one better and put the value of USD$30M in 1838 at about USD$3B today (as a share of world wealth rather than a strict inflation calculation) – a large, but not overwhelming, sum.
To calculate the interest rate, I amortized 150M over 80 years to achieve a total payback of 300M; the rate is so low as to be trivial. I will have to disagree that this was not a loan – while Haiti didn’t receive cash upfront, what they were buying was the national legitimacy that opened foreign markets to them (to say nothing of the French infrastructure that they seized).
That they subsequently failed to take advantage of those markets is the problem the essay’s writer is trying to trace. The cost of access was, in international terms, quite low.
The Haitian government is very, very, very small. This is a paradise for the low regulation low tax society that the right wing wants – taxes are all on the poor. Governments and regimes too often are in survival mode – and will do anything to survive. These days that includes swallowing suicidal ideology in a bid to appease foreign masters who hold the keys to the palace.
Haiti is the perfect leftist paradise: mostly young people of limited intelligence who will believe any swill they are told.
Perhaps Harvard should set up an extension campus there? After Mr. Obama leaves the White House permanently, he should be appointed permanent ambassador to Haiti? Perfect.
What’s up with trying to make people smarter by genetically engineering them? You can’t do that, it’s not going to happen, and it’s not going to solve any problems. Maybe they need more teachers who teach in Creole and some teaching supplies. Also, Ronald, inflammatory posts like yours don’t help anyone.
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