Saturday, January 16, 2010

Haiti's Economy

1. The worlds perhaps leading expert of Haiti's economy is a Swedish economics professor, Mats Lundahl. His research has emphasized the political economy of Haiti, overpopulation and a vicious cycle in resource use (which he links to ill functioning institutions). In "The Root of Haitian Underdevelopment" (1985) Lundahl writes:


Population growth in a country where the institutional environment did not enable an industrial sector led to more and more labor intensive agricultural techniques and products (food instead of coffee). This led to land erosion and a vicious cycle : erosion made useful land even more scarce, which leads to an even higher labor to land ratio, more labor intensive agriculture, more erosion etc.

Another problem that Lundahl studies in depth has been the kleptocratic nature of Haiti's political leadership. People who are interested about Haiti should read some of his work.


2. Between 1960 and 2008 Haiti received $8.6 billion (real) dollars in Official Development Aid, not a shocking amount by most comparisons. If someone would have invested this aid money in a bank account earning 3.5% real returns, it would be $16 billion, twice Haiti's nominal GDP. Haiti has become somewhat more aid dependent in recent year, as this graph shows.


The failure of development aid is no argument against catastrophe aid, quite the opposite. The problem with development aid is that it does not increase productive investment, it typically gets consumed. However the purpose of catastrophe aid is to get consumed. The lesson of 50 years of aid failure is that the west should give more catastrophe aid and less (no) development aid.


3. Much of the discussion about Haitis poverty centers around pre-WWII history. Any debate should however take into account that Haiti in 1950 was not poorer than the Dominican Republic. Only by the mid 1960s does Dominican start to diverge. if historical forces are at work they are operating with a lag (needless to say these figures are nowhere as reliable as for industrial countries).


4. There are about 800.000 Haitian in the US. If they were treated as their own a country their per capita GDP would be $28.200. The total income of this group is twice the GDP of Haiti (population 10 million).



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