In July, thousands of Haitians in the US and around the world protested the violence in our motherland. After months of begging for an intervention, a Kenyan-led UN security mission is in works.
Like many Haitians reading these stories, I wonder: What good is a security solution that doesn’t address the economic roots of the crisis?
Haiti’s real problem is explained in one word: monopoly.
A tiny part of the population controls key industries, killing opportunities for millions of Haitians. No serious account of Haiti’s political and social problems can ignore the near-total consolidation of economic power.
Take the steel industry, controlled entirely by one family: the Bigios. They control Aciérie D’Haiti, and all of the steel operations in Haiti. A few other families control imports of rice, cooking oil, and other key goods and sectors. When every entrepreneurial avenue is closed off by monopolies, how can the average Haitian make a decent living?
I was born in ’79, toward the end of the father-son Duvalier regime, which ruled from 1957-1986. In my 44 years, I’ve known vanishingly few Haitians to have found normal jobs or entrepreneurial success in Haiti. If you can’t escape to the US (which entails its own challenges), the options are limited to this: selling cheap exports in the informal economy, working brutal hours in a sweatshop, eking out a meager subsistence on a tiny farm, or death.
Nearly 40 years since the Duvalier regime’s fall—through four decades of coup d’etats and other crises—Haiti is worse off than ever.
The effects of monopoly are severe and compounding. First, the incentive to maintain monopoly leads to anti-competitive practices. Rather than investing in worker’s skills or other kinds of innovations, monopolies look to lower costs, raise prices, and further exploit their market position. (US readers need only consider their internet service providers for a reminder of how monopolies impact consumers).
Without competition, there’s little room, or incentive, for collaboration. Industry partnerships that might enhance the capacity of other firms become risks rather than synergies. Without energetic competition and collaboration, we see an erosion of pluralistic institutions (think industry associations or chambers of commerce). Without these institutions, it becomes impossible to coordinate and diversify investment, foster innovation, and optimize economic output at the national level.
Of course, no monopoly goes unchallenged. The more they exploit workers and consumers, the more they encounter resistance. This is why monopolies need political corruption (if not over dictatorship) to survive.
The US State Department has recognized the links between Haiti’s political and business elites and the armed gangs. Just a few weeks ago, the Canadian government sanctioned Gilbert Bigio (of Aciérie D’Haiti) and several other businessmen accused of supporting the gangs.
This is good news, but a few sanctions (and even a security mission) won’t cure what ails us.
Over 200 years of Haitian history, economic monopoly has been a constant. But this was never inevitable. Other nations recognized and responded to the threat of monopolies, from the Dutch West India Company, to Bell Atlantic, to Meta.
In 1915, the US Congress established the Federal Trade Commission, creating an institution with an explicit mandate to curb monopoly power. Today, the European Commission antitrust inquiries into Microsoft and other tech companies show a clear commitment to competition.
While the international community debates Haiti’s future, let’s make one thing absolutely clear: Monopolies have always been a driving cause of Haiti’s problems; they were never just a symptom.
If we’re serious about meaningful change in Haiti, any further international interventions needs to squarely target Haiti’s monopolies.
My next blog posts will go into detail about potential solutions. For now, here are four things that Haitians and the international community can do:
Ensure that the UN-approved mission to Haiti eliminates the gangs and prosecutes their leaders and financiers. Any security intervention must have a specific, time-bound mandate, limited to reinforcing the National Police. Anything else will only repeat the foreign invasions of the past.
Hold elections and elect a government with a clear mandate to support and enhance the judiciary. An operational legal structure is fundamental to curbing monopoly power.
Create a legal body, similar to the US FTC, that outright forbids economic monopolies. This body must carefully regulate industries to protect workers and maintain competition.
Reform the tax code to encourage entrepreneurship. Our 200-year old tax code is inadequate to curb the power of monopolies.
Each of these steps is extremely difficult. Success is never assured. But other countries have curbed monopoly power and established a competitive economy.
Technology and Innovation in Haiti: Recognizing the Challenges and Taking Advantage of the Opportunity
Technology and innovation in Haiti offer a plethora of opportunities for growth for Haiti, the small-island nation state in the Caribbean. When one hears the word innovation, the first thought might be of Uber, patents, big-budget R&D departments, and/or creating cool, new products that makes people’s lives easier. However, OECD (2005) gives a comprehensive take on what we actually mean by innovation. “Innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization, or external relations.” (46). It is important to think about innovation in all of these contexts as you move through this piece.
First, there are obviously challenges when it comes to the implementation of technology and innovative activity in Haiti, a country with poor economic indicators across-the-board, poor infrastructure, weak institutions, and instability, which can make it an uphill battle to realizing these opportunities of growth. The speed of adoption or the ability to even adopt a technological change or innovative activity of large scale is something that is more prevalent in developing countries. Again, weak institutions and infrastructure, and sub-par distribution channels that would be the vessels for relaying and quickly adopting technological change or adaptation cause this problem. There are also usually high costs when trying to prove proof of concept and in the first few years of the life span of the innovation or technology, especially when considering implementing or introducing a new product. So, in Haiti, where the distribution channels are weak, marketing isn’t as influential of a tool, and a large percent of household budgets are going towards basic needs, having something catch on can be a difficult task.
Another challenge is that there is large incentive to operate under the table for employers, mostly because of the lack of over sightor ability for the government to monitor informal market activity. The gig economy is alive and well (moto drivers for transportation, construction workers, odd jobs, and the presence of self-employment and bartering informally is something that results in lost tax revenues for the government, which would give the government a larger pool to draw from when investing in things like infrastructure, education, or healthcare. Whether it would get spent there is another question. However, the point is, people want to keep their money, and if they can work informally without much threat, they will.
The opportunities for Haiti to establish itself as a magnet of investment, innovation, and technological change are there, and there are many positive actions that can be taken right now that will allow technological change and innovation to spur greater levels of economic growth.
First, one can look at how foreign direct investment has historically impacted economic growth and development. Huet et al. (2015)analyzes the impact of what a new mobile phone operator did for Haiti in terms of development and economic growth. After a 260 million dollar (USD) investment between the years 2005-2009, Digicel created a ripple in the economy in terms of jobs, tax revenue, and overall growth (181). Digicel’s investment led to 63,000 direct and indirect jobs being created, and at the time of writing, Digicel had contributed to around 20% of Haiti’s GDP growth. When taking into consideration the three mobile phone operators in Haiti, they represented between 25-30% of tax revenues in 2011. It’s beyond the scope of this piece to lay out the many ways that foreign direct investment has positively impacted economic growth, job creation, and tax revenue. But, this is just one example of the impact that foreign direct investment can have in these areas. Ultimately,economic growth is what we aim to maximize in development and job creation and tax revenue are obviously beneficial as well.
Another one of the opportunities is that if you teach,empower, and foster entrepreneurial people, those internal characteristics built can overcome barriers in a place like Haiti. Individuals with this pedigree can enter the labor market, can climb corporate ladders or start businesses, and make decisions that will have a positive impact, because of who they are and what they’ve been taught.
This leads to the next point, that there are things that can be done right now that can allow technology and innovation to be a conduit to greater levels of economic growth in the near future. NGOs, schools, and other institutions should start training for STEM-type jobs right now. There is an argument that is sometimes made that lower-income countries aren’t as susceptible to tech changes that are going to modify what the labor market looks like because the labor force and the economy don’t yet have the capability to receive it successfully. But, I would argue that it will happen quicker than a largely agrarian and gig economy might expect, and that it will just skip steps (and large revolutionary shifts) in the labor market, leaving more people behind.
If you build it, they will come.
As a nation, Haiti should not only seek to incentive investment and new technology both from foreign firms and domestic but should be proactive in readying its labor force and its leaders of tomorrow to be able to capitalize on high-skill jobs that will come. It is important for the federal government to realize that they play the most crucial role in proactively and indirectly triggering investments into the nation, investments that will propel the economy and the nation forward. Fostering camaraderie between the powers at be and the people and attempting to create an environment where people want to put their money is a great first step in attracting investments with technological and innovative characteristics. It is also important for teacher sand organizations to realize that they play a role in this too. They should seek to provide opportunities outside the scope of normal education based on test scores and regurgitated information. STEM curriculum, gifted programs to challenge high-IQ children, economics or debate clubs, and chess are all ways to begin to be ready when the technology and innovation comes.
Click here to read my book ‘ From Aid to Trade’ for more analysis of how Haiti and other developing countries can get out of poverty.
Huet, J., Viennois, I., Labarthe, P., & El Barkani, A. (2012). Impact study of the arrival of a new
mobile phone operator in haiti.Communications & Strategies, (86), 175-192,219-
OECD/Eurostat (2005), Oslo Manual: Guidelines for Collecting and Interpreting Innovation
Data, 3rd Edition, The Measurement of Scientific and Technological Activities, OECD
Women entrepreneurship: A Sure Path Forward for Haiti’s Economy
History books in Haiti and all over the world will forever bear pages of the events of the January 12th, 2010 earthquake that changed how the world looked at Haiti and her people.
Almost a decade later, Haiti is still a stark difference to what the media has fed the world. We’ve heard that the aid agencies significantly reduced health challenges, starvation, poverty and every different situation the country faced at the time.
But as much as the media paints the wonderful and succesful strides Haiti has taken ever since that dreadful event that shook our very core; I want everyone to know that Haiti remains a shadow of what it was once with even a more grim possibility to climb out of it.
Some might argue the country is gradually rising from the rubble of the catastrophic event that crippled our economy. What have we been able to show for it? On the opposite, the constant economic decline begs to differ.
For several decades, Haiti has lived on foreign assistance in the form of grants and our economy would’ve thrived if we hadn’t allowed these grants to get in way over our heads. I have discussed on several platforms that foreign aids aren’t what a third world country like Haiti needs. It is merely a short-term solution, while the real problem of economic instability, low GDP, entrepreneurial crisis and dependency pervade.
So, how we get our economies back up and running in no time? How do we move our economy from what it is now to where we all want it to be?
After a careful evaluation of our problems as a nation, and what other nations are doing to become developed countries, I have laid out ways our own country: One of many I would like to discuss is Women Empowerment through entrepreneurship.
It is no longer news that most of the people who engage in subsistent farming and micro businesses are women. They are also the ones who invariably bear the pain of catering for their immediate families. Unfortunately, women in Haiti are mostly succumbed to mostly minor roles and do not get involved enough in leadership. Obtaining the necessary funds to improve what they are doing can be a challenging task.
We are faced with a dilemma. After the earthquake happened, a significant number of women retreated to take responsibilities back in their homes, and the socio-political sphere of our country was left with a male-dominated atmosphere. With only one woman in the senate in Haiti today, women are and still are being segregated in Haiti. For our economy to truly move beyond the aid narrative, and for us to truly have an economic boost, it’s a known fact that women are natural leaders, so let’s involve them in policy making roles, politics, in small and medium scale enterprises so they can contribute towards short and long-term economic recovery of Haiti.
Their acumen and deftness in handling crisis is what Haiti needs. So, let us encourage and empower our women. After all, the first fair elections that have happened in Haiti were done under a woman’s leadership. We should trust and encourage more of that to happen.
Investing in skills training
Another ingredient to help our economy grow is investing in our skill acquisitions and entrepreneurship development programs. Unemployment has been a Haitian problem long before the devastating events of the earthquake. It has increased exponentially in 8 years.
We have a pressing need right now. We want to curb dependency on foreign aids and support, and we can achieve this through investing in labor-intensive products, manufacturing, textile industry and agriculture. If our government can invest in our youth in skill and entrepreneurship development initiatives, the fight to be more dependent to focus better on driving our economy to lofty heights will become more evident.
Entrepreneurship creates the avenue for foreigners to invest in our industries, expanding the businesses which pave the way for job creation and improve the unemployment index. When foreign countries invest in our industries, instead of providing tied-end grants, we will begin to experience economic change with better numbers on the GDP, and national income.
We must also note that through entrepreneurship, more people are getting involved and jobs are created, a tax can be generated to boost the internal revenue board. The funds generated from these taxes can be used to focus on sectors like the construction industry, the healthcare sector, the transport sector, the energy sector, and most importantly the tourism sector.
Entrepreneurship development can bring about more innovative and faster ways to do labour, which can increase productivity and generate more GDP and increase exports out of the country. Income from exports that will help our economy grow.
China and Japan
Look at China and Japan. These countries have been rocked over the years by earthquakes and tsunamis. But they were able to look past the rubble and focus on improving their economies. They saw the disasters as an opportunity to do better, and today both countries are the largest exporters of technology in the world.
Haiti responded differently. We saw foreign aids as our beacon of hope, instead of foreign investment in our agriculture and many other industries. We drove our local entrepreneurs out of business because the competition from the foreign agencies that intervened was fierce and they couldn’t keep up.
But like China and Japan, we can do the same, and we can even do more to revive our economy better than it was before the disaster. We have before us an opportunity to sieve through the history books yet again in the near future. We have before us a window of opportunity to engage in reforming towards prosperity so others can say If Haiti, after all these many years of remaining stagnant can raise up and boast of a good economy, we can too.
A Reflection on Haiti’s Economy in 2018: A Snapshot
As we turn the page to a new year and we struggle to remember to turn our 8s into 9s, it is important to look back at what happened in Haiti in 2018. There was some good, some bad, and some lessons to be learned economically and politically that we can use to change Haiti into a place that is business-friendly and a champion of growth moving forward. In my book, From Aid to Trade, and in past pieces, I have explored why it is important to attract investment, how we move from aid to trade, and why this growth that I talk about that comes from it is important for Haiti’s future.
I will start by laying out some economic indicators and data that encapsulates Haiti’s economic situation in 2018 and then move toward my thoughts on some of the events that happened in 2018.
Summary of Economic Indicators
Below is a chart showing the trade deficit trend from January 2018 – August 2018 (latest data available).
By looking at the following chart it is clear that Haiti lags drastically behind the rest of the world when it comes to attracting foreign direct investment, and although data for 2018 is not yet available, the disparity and trend is clear in comparison with developing economies, other individual countries, the region, and the world.
The unemployment rate in 2017 was 13.99%, according to the World Bank. Because it is difficult to capture dense data in Haiti and with the prevalence of informal workers, this number can be taken with a grain of salt.
In 2018, the currency was devalued in relation to the dollar. All this means is that we purchasing power became weaker… we went from seeing $1 USD equal around 64 gourdes (in January) to around 77 gourdes at the close of the year. Inflation was at a whopping 13.27%.
Inflation is simply the natural rise of prices in an economy and decrease in the value of purchasing power. Talk to anyone… things like rice, vegetables, chicken, rent, transportation etc… became more expensive, and it hurt the people. Here you can look at the changes in price for staple items in different regions of Haiti for both domestic and imported goods.
As we see in the charts, Haiti is running a severe trade deficit—we are importing more than we are exporting—and this has negative long-term implications for employment, economic growth, and the value of the gourde.
You could say that the intentions were good from the IMF for its subsidy-lift which could lead you to saying that the Haitian government was simply trying to uphold its end of the bargain. You could also say that the uprising from the Haitian people was justified because of what happened to commodity prices, price and supply of gasoline, and subsequently the livelihoods of families across the nation when the price hike went into effect.
I think another lowlight of 2018 and a clue that corruption is still alive and well was the issue of the Petrocaribe money. This refers to the $2.8 billion in low-interest dollars that has been given to Haiti since 2008 from Petrocaribe, a Venezuelan-led oil-purchasing alliance. “Kot Kòb Petwo Karibe a?” became a battle cry for the people of Haiti in our attempt to fight against the corruption that has been a common occurrence in Haiti. Where did the Petrocaribe money go? It is suspected that it went to ghost businesses and the political elites’ pockets, along with other financial misuses. I think that the people deserve to know what exactly happened, and the parties need to be held accountable. I am not speaking against corruption because I am trying to be politically manipulative or because I disagree with someone’s politics. I just know that corruption is going to be the thing that holds Haiti back from achieving what I know we can achieve as a country. Whether an internal commission or foreign independent body unravels the details of if the money actually went to government officials’ pockets and shady businesses remains to be seen. Hopefully the persistence and mostly non-violent demonstrating by the Haitian people will lead to bringing to light what exactly has happened in this case of corruption.
The Impact of Unrest
How has Petrocaribe impacted the economy? On September 19th, 2018, my firm, Bridge Capital, organized the first National Day of Foreign Investment in Haiti. At this event, our goal was to connect entrepreneurs in Haiti to a group of American investors. Not only was this an opportunity to network and collaborate under a shared vision with the Haitian government, institutions, investors, and citizens, but there was the potential for dollars to be pledged to good business ideas, which in turn would create jobs, lead to higher productivity, and positively impact the economy. This was the inaugural event of a push and mindset shift that Haiti desperately needed.
Added to the lost of investment is the opportunity cost for businesses losing much needed revenue to curb inflation and grow to create employment, taxes and overall economic growth. Businesses in lodging, transportation, food and beverages as well as entertainment lost significant amount of income during the days of unrest as well as near and long term opportunities from cancelled purchase orders, guests and travellers to Haiti. Can Haiti further afford such lost?
Unfortunately, as you may have seen, in late 2018, we had to differ all monies pledged from the Foreign Direct Investment Forum, an amount which totaled 2.4 million dollars (USD) which included capital allocations to four businesses, due to political instability and elevated risks. Ultimately, this was a tough decision because of the impact we know that investments like these can have when a political and economic climate allows it to be a vessel for growth and success. So, the Petrocaribe scandal and the tension from the fuel price hikes caused instability, which kept away investment dollars that otherwise would have been helping reversed the escalading depreciation of the gourde and a positive impact for Haiti’s economy.
Looking backward but focusing forward
One of the positives coming out of 2018 is the growth potential for textiles. From January to November the number of workers in the textile sector increased from 48,820 to 52,950. Several foreign countries have invested in Haiti in textile facilities, but the lack of the Haitian state’s support has caused the plans to not come to fruition. There was an investment by Palm Apparel Group in the amount of $15 million, but this investment echoed Bridge Capital’s decision to pull pledged dollars. It never went through because of the socio-political situations that festered in 2018. I believe that you can learn how to handle the future by looking at the past. It is time for us to strengthen our institutions and come together to get rid of the corruption that is keeping investments like these out of the country.
As I look back on what happened in 2018, continuing to speak out for truth and for justice is one of the most important things I can do. I will also continue to speak out informatively about how the good and the bad actions of policymakers, institutions, and the people affect economic growth, job creation, and the livelihoods of the people in the nation that I love. When we start to understand the economics of things like halted foreign direct investment, government corruption, political instability, and a devaluation of the currency, all of which we saw unfold this year, we can begin to make better decisions about how we approach these situations and what types of scars they can leave on a country. 2018 was a year where GDP growth in Haiti gained .50 % but was below expectations and was one of the lowest growth rates in the Caribbean and Latin American regions. However, it was also a year in which we learn from 2018 and we turn the page. Looking forward, forecasted GDP growth is expected to jump to 2.4% in 2019 and grow again at 2.4% in 2020, according to the World Bank. Such miraculous growth in wealth creation would be a much needed answer to prayer!
As post-natural disaster influxes of human and physical capital start having some breathing room to take shape, 2019 could be a year where change happens. People are fed up, and the government is in the spotlight. The young people try to leave to find employment in Brazil and Chile but are being sent back by the thousands. As I continue to work to educate and inform you on the many intricacies of development and economic policy in Haiti and how change is going to come for the better, I hope everyone will look to what I say with an open mind and with a confidence that 2019 is a year where we change how the world sees Haiti and how we see ourselves. In 2020, when we look back on what happened in 2019, I hope that we will see change, even if it is slow to come to fruition.
Haiti’s economy is behaving like a business that is consistently ignoring its consumer preferences and end up of offering a product or service no one wants, completely out of synch and unhinged with reality. Business like this goes bankrupt. That means, most of the sectors that are competitive and are creating jobs and move double digit growth around the world are not even being considered by Haiti’s leadership. Let alone put in place the stability and policies needed for more businesses to pursue more opportunities to enlarge the size of the economy and create more wealth.
Today, when the manufacturing of capital good, tech related products, capital markets and services industries are creating massive wealth, Haiti settles for consumer goods and low margins products like t- shirts and agricultural production (when that’s even there) with zero presence of a real financial market to capitalize one while exporting good most of the time within their natural state. It’s an economy with less than minimal leverage and that’s a sign of extreme lack of productivity. Ultimately, Haiti’s economy is not performing to the level that will move its citizens out of poverty. The growth rate is simply too insignificant. The road for Haiti is bright considering the opportunities but the challenges are equally significant which means the country is stagnant. The only way forward is through better leadership and a drastic change of direction for the economy.
Be watching for a blog on why strong institutions matter (as discussed briefly here) in the fight for strong economic growth and a stable business environment.
Click here to read my book ‘ From Aid to Trade’ for more analysis of how Haiti and other developing countries can get out of poverty.
Why Reliable Government Institutions Matter in the Fight for Robust Economic Growth
In a recent post, I discussed how Haiti can create wealth and enjoy a more prosperous future. I touched on why economic growth and creating wealth is the primary goal of economists and policymakers and how Haiti can create economic growth. It is not really a point of contention that economic growth and wealth creation isn’t good or that it isn’t important for Haiti. As I’ve talked about economic growth and the future success of Haiti, one of the things I have mentioned is the importance of strong institutions. In this piece, I want to help you better understand what institutions are, the evidence of why strong institutions are arguably the most important factor for low-income countries in being able to break the cycle of poverty, how we quantify or define a strong institution, and how Haiti can get there. Creating strong institutions sounds like a fluffy, wide-ranging concept that people at places like the World Bank talk about as being key to prosperity. However, at the end of this piece, I hope you will gain a better understand about what strong institutions are and why they matter.
An institution can be defined as an “establishment, foundation, or organization created to pursue a particular type of endeavor”. You could also define institution as a “mechanism of social order”. Think of an institution as the “foundation”, the “environment”, or the “glue” that holds a country and an economy together. Institutions are a plenty. Businesses, non-governmental organizations, the legal system, the police force, a central bank, the office of the presidency, etc. are all institutions. Yes, a single individual in an office is an institution. In this piece, we are highlighting the role of government institutions in Haiti’s growth more specifically.
Evidence of the Importance of Institutions
There is a lot of evidence from studies, both theoretical and empirical, that show the importance of why strong institutions matter in the fight for strong economic growth. I won’t get into the intricacies of the studies or the empirics behind them, but I will share some of the findings.
Dort, Meon, and Sekkat (2013) found that investment increases economic growth more in countries with high institutional quality than in countries with defective institutions. The results are driven and measured by metrics like government instability, corruption, and rule of law.
Das and Quirk (2016) also found that institutions matter in term of economic growth, but different institutions matter differently for growth. They concluded that poor countries benefit the most from market-creating institutions and institutions that support market stability, like a central bank, for example. They also conclude that democratic institutions are not necessarily optimal for growth in poor countries. So, you can see that financial stability and institutions that create a perceived strength and stability are important for poor countries. With the devaluation of the gourde, inflation, and the overall instability, it is plausible to say that these are big drivers of Haiti’s inability to attract investment and create economic growth right now.
Furthermore, goal 16 of the United Nations’ Sustainable Development Goals is titled Peace, Justice, Strong Institutions. Did you know that among the institutions most affected by corruption are the judiciary and the police? Is this true of Haiti? Can weaknesses in these institutions help explain why Haiti doesn’t have robust economic growth? This is one of the Sustainable Development Goals because strong institutions create trust between a government and the people, a central bank and investors, and a judicial system and a police force, for example. The interconnected web of relationships in Haiti that need to be stronger, more trusted, and more equitable is a long list. Strong institutions also help bring together the “haves” and the “have-nots”.
Thinking about weak institutions in the real world
So, how do you quantify or define a strong institution? Think about it… if people engage in bribery or don’t get prosecuted for their crimes because there is corruption in the justice system, what discourages future crimes? If a government employee takes aid money and keeps it for himself or funnels it where it doesn’t need to be, the people don’t see the benefits and international aid bodies will consider wrongdoing like that in the future. Using the World Bank’s Doing Business Report of 2019 that just came out, Haiti has come out as the worst ranked country in the world in terms of investor protection. If there is no trust (if the institutions involved in investment aren’t strong) why would anyone want to invest… and we know how important investment is.
Property rights ensure ownership, the ability to legally and transparently buy and sell the asset in a market, and insulation from corrupt officials or criminals. This is important for economic growth and for a strong economy. But, legitimate property titles are often non-existent in Haiti, and even if they do exist, they conflict with other records or titles for the same property. It can also take months or longer to even verify titles. These are all examples of weak institutions, and Haiti has a lot of them.
How Does Haiti Strengthen Its Institutions?
I have laid out some evidence from economists and have given some practical examples of what weak institutions look like in the real world. How does Haiti get to a place where its institutions are strong, and how long will it take? I have four suggestions or steps that can be taken that will lead us to having stronger institutions. One is to have people of credibility in institutions. This won’t happen overnight, but it starts with educating our young people, speaking against injustice, speaking up for truth, and training the leaders of tomorrow to have integrity, step up to the challenge, and be confident to work towards position of power or influence. The second thing that needs to happen is for the public to be informed. We saw an example of that with the Petrocaribe scandal. What started out as a hashtag quickly spread like wildfire and took Haiti by storm. Today’s interconnectedness online and ability to share information will make this the most easily attainable. It is already happening, and transparency further discourages bad behavior. The third suggestion for Haiti is to encourage peaceful, but contestable elections, while the fourth and final suggestion is applicable to the international community. Institutions in Haiti need oversight and accountability. The institutions themselves (the central bank, government, judicial system, committees, etc.) need to humble themselves and welcome it. This would create a stronger Haiti.
There are of course direct effects of stronger property rights, a fair justice system, a police force that works for the badge and the force, and institutions in general that are fair and do the right thing. But, there would be additional effects of having stronger institutions. Creating stronger institutions would lead to more dense data for economists and policymakers and would allow oversight and policymaking to be flexible and Haiti-specific; dense, up-to-date data is hard to come by. Strong institutions create trust. Strong institutions can happen in Haiti, which will in turn matter in the fight for strong economic growth, but as for how quickly it can happen, there is no exact answer. I can say that Haiti does not carry the same burden as more resource-rich countries in sub-Saharan Africa. These countries have historically faced an uphill battle in combatting weak institutions because resource-rich countries have built in conflict, something of value, and an incentive to fight for de facto political power.
Government ensures policies are applied. They are crucial to implement rules, regulations that foster economic transformation. Countries with weak institutions are likely to lag behind and dwell in practices that breed more poverty than wealth. Having reliable and working institutions can simply mean being poor or wealthy. Just simple as that. In the end, I think that this is one of the more looked-over policy focuses when it comes to creating growth because it isn’t necessarily an exciting policy topic. However, that doesn’t make it any less important.
Click here to read my book ‘ From Aid to Trade’ for more analysis of how Haiti and other developing countries can get out of poverty.
Why Haiti creates more poverty than wealth today. The reason: we are myopic.
In my last article, ‘The end of Haiti’s problem is not for tomorrow’, I explained how Haitians are poor today. It was very easy to explain because Haitians gave birth to 152,210 babies in 2018 at the same time the growth of GDP in nominal terms was $126 million. 1.5% GDP growth vs 1.31% the population growth. Doing the math, basically, the average Haitian is netting a deficiency of $3.30 a day, thus causing them to live in poverty by a greater amount than they have to meet their needs. This is where we are as of March 4th, 2019.
But, for cry out loud, how did we get here?
Almost unrreal but Haiti has found ways to squander its best opportunities over time: the ability to learn, apply and grow. Nations of the world have learned and applied what they learned and generate substantial growth resulting in better living conditions for their citizens. Haiti has not. Rather, it has gone down the path of self-destruction as the prioritized method of solving problem with no chance of learning to do things better, a double sadness.
Haiti’s past opportunities
After its independence, which was gained from destroying plantations and killing the colonists, it was expected to completely liberate the slaves and allow for economic reforms prioritizing large property farming in agriculture to sustain the key position in the world’s most lucrative markets at the time in agricultural products such as coffee, cocoa etc. That would have been the right and the best thing to do. We did no such thing; instead we divided the country into smaller plots and allow each and every one to plant tiny farms allowing an agriculture of subsistence to take place and grow overtime. The agricultural sector became weak over time while other nations gained substantial ground.
After the industrial revolution, nations of the world have been taking advantage of machines to allow productivity to take place, building factories, equipment to help building infrastructure like road, bridges and facilities for health, schools. Overtime, mechanization has removed most workers from agriculture but, instead, put them in factories to allow more jobs to be created while increasing the productivity in both sectors. We did no such thing. We leave most of country men and women working with pick axes and hoes with virtually no trace of substantial manufacturing.
Now, when hundred people are needed to farm here, a few workers, one tractor and some equipment are needed to yield far more results elsewhere leaving an untapped opportunity to create jobs in both agriculture and the manufacturing of that tractor and equipment with advanced knowledge and technology. That is exponential growth for countries that embrace this type of opportunities and they are economically and socially better for it. This is called economic progress, unfortunately only visible in other countries.
Post industrial revolution, production techniques and accumulation of knowledge allow for goods to be created easily with less resources which triggered the needs for marketing, customer services, insurance, banking etc… basically the creation of a whole service sector. The transition and growth from working bare farms to factory integrations have triggered many opportunities for employment and economic growth for the countries that had the vision to upscale in that direction. That would have been the coolest and most productive thing to do. Haiti does no such thing. Instead, did the same old thing. The thing that doesn’t work. The unproductive thing. Haiti has continued the sad path of poverty creation leaving its citizens lingering in abject poverty.
Haiti’s present situation
The basic order at a restaurant today will testify of how far behind we are in the service sector and how customer service is none of our concerns. We act like we don’t care while the rest of the world is moving forward and most of us live in dire poverty but yet, we fail to realize today the poverty is directly related and connected to our inability to adapt and pursue the right opportunities that were presented in the past and present. This is called myopia. Myopia in medical terms is when you don’t see far. In economic development terms, myopia is the inability to foresee future opportunities and remain stuck in the present. That explains why we still prefer leaving most of our country men and women working the field with bare hands with no sights of manufacturing and almost no integration in the service sectors; all perfect opportunities to create employment and create wealth.
I had the opportunity to interview recently a gentleman named Freud Dimitry St Louis, the CEO of Haiti Job Booster. Freud is in his early thirties and believes in Haiti’s future. He thinks Haiti still has a shot at becoming self-sustaining but has to catch up on over two hundred years of capital accumulation by building an economic consensus to integrate what the world needs the most with what we do best. This is what I describe as our angle of opportunity. While Freud gave no further thought to this, it brings me to my own economic framework developed in my first book ‘From Aid to Trade’ of how opportunity can become a trigger for economic growth.
What service jobs has to do with it
The word today needs services, visual content and faster processes. What if Haiti, this time, does not let this opportunity lags behind but instead embraces it and train hundreds of thousands of young men and women in IT, transcript, customer services and allow young Haitians to bypass the mechanization in agriculture, factory but skip directly into serving countries customer services, HR while sitting at home enjoying the warm climate. With a higher income, we would be able to buy more from the local market and that would trigger economic growth from within. That’s what India is doing and many other countries are taking advantage of this opportunity to create massive employment for their youth. We can do this thing. It’s not too late.
My friend, Fednar Duquesne, along with Digicel and many other companies are doing just that today. It just has to be expanded and become a worthwhile industry to be developed with the right tax incentive, capital and government support. Having a dream for Haiti’s development include anticipate on sectors in high demand and propose proactive solution instead of missing or ignoring those opportunities and write about it with regret fifty years from now. We need to do this. We can do this.
Click here to read my book ‘ From Aid to Trade’ for more analysis of how Haiti and other developing countries can get out of poverty.
How Foreign Aid Has Helped in Keeping Poor Countries Poorer
Over the years and as much as the figures have shown, several developed countries seem to have taken it upon themselves to reach out to the poor countries with relief materials and support of other forms. In 2017 alone, the United States government budgeted over 42 billion USD for foreign aid purposes, most of which were targeted at underdeveloped and developing countries; all for the purpose to improve the adverse living conditions of the population in these areas. Other economically wealthy nations, individuals, and humanitarian non-governmental organizations have also contributed to foreign aid in huge amounts, with developing countries in Africa and the Middle East receiving massive foreign aid on a year to year basis.
According to statistical reports released by the OECD, foreign aid issued out to poor countries reached an estimate of about $134.8 Billion USD in just one year. As it stands, even these figures did not adequately take individual and non-documented philanthropic gestures to consideration, hence it is, in fact, certain that the figures are way higher than what is presented on the record. Foreign aid donations have continued to troop in, and at the end of the year 2018, we may expect to see the figures on a substantial rise again.
The crux of the matter
Now, with all of these enormous figure facts that have continually starred us in the face, it should be expected that there be a corresponding improvement in the overall standard of living, especially as measured by such index as the cumulative GDP of the benefiting countries. But this is apparently not so, as all the signs and indications show that the prevailing underdeveloped economies are in fact not getting any better. This brings the puzzling question as to why those economies have not been able to bounce up, even with the huge foreign aids that have become as constant support?
In the course of my research, I discovered that war and poverty-ravaged DRC received grants totalling €5.5 million in the year 2017 in one project along; but this aid did not seem to have translated to any visible development on the country’s infrastructural and economic stamina. That was just one projects amoung many others. My country, Haiti, since the last major earthquake that further crashed down on the country’s already dilapidated economy, has also received several form of foreign aid grants, with the country still remaining on a dark path to finding its way out.
All of these translate to the fact that the foreign aid issued out to developing countries are in fact not a solution to their physical and economic challenges. Thus, instead, the funds have created avenues for adverse effects that have continued to hold down the possibility of bring economic recovery for the affected countries; all because of aid gestures that are thought to be harmlessly beneficial.
Foreign aids and their methods of distribution have become the problem
Considering the ideal purpose of foreign aid, they are meant to serve as an arrangement that helps a needy country get immediate support provisions, with the incorporation of integral means of assisting the nation in gain stability in all its forms. Hence, foreign aid should be short time support that adequately sees to it that the affected countries are able to pick themselves up, upon receipt of the delivered assistance.
Nowadays, the methods of foreign aid distribution do not largely follow the ideal purpose for their institution. There are subtle trends in the modalities that are employed, thus bringing an unfavourable pattern to trigger a state of continuous poverty for the receiving ends. Some of these methods include the following:
Foreign aid poses negative effects on indigenous business services
Most of the times when foreign aid comes to a country, the arriving materials and utility products come from the donating country, thus there was no production input coming from the part of the receiving country. When this happens, indigenous companies are set on the path of running out of business since there would be little or no market for their own products. Activities of local businesses are set to increasing the economic capacity of an embattled economy, hence if all of the country’s local businesses and companies cannot produce because of an absence of demand for their own goods, then the country is definitely far from development. If there must be any improvement in this regard, then foreign aid providers must find a way of a synergistic partnership with local businesses through foreign direct investments. This would also pave the way for job creation and employment opportunities, while still actively fulfilling the underlying objective of providing aid. In summary, foreign aid subtly competes with local businesses, instead of serving to encourage the creation of more.
Foreign aid may affect entrepreneurial tendencies
This is an accompanying effect of providing foreign aid to poor countries in a manner that is not well structured. The effect on the entrepreneurial tendencies of the population tends to decline with time, as less people may see the need to create alternative solutions. Instead, people are likely to depend more on the ‘free resources’ that comes to them. If foreign aid providers do not adopt a framework distribution that encourages the benefiting countries to think of innovative ideas for moving their economy forward, then we can rightly conclude that such aid does not meet the criteria for an ideal aid. Unfortunately, most of the common foreign aid services have not thought of this, or out it to consideration.
I have studied these trends and have evaluated possible solutions to the ravaging menace of foreign aid on poor and developing countries and these solutions will be outlined
Every intending foreign aid must have an effective strategy that adequately considers the overall development of the poor country and must regard same as of paramount importance. Foreign aid should not be about donating utility and product materials alone, but about developing the country’s innate abilities that could help it gain economic growth and stability.
Poor countries must be encouraged to strive towards having a meaningful contribution towards their development, instead of depending solely on foreign aid. In fact, it would be better if they considered foreign assistance as a grant that should be used for long run developmental purposes, and not for immediate gratifications.
Foreign aids in some instances should be aimed at strengthening an existing product or service delivery. Thus instead of bringing in an intimidating product of the superior quality, the aiding party can rather pump in resources to develop the poor country’s existing service or product company, and they would have provided solutions to a major need.
All of these recommendations and more are important, because if foreign aid continues to take the current pattern (which has always been), then we may see a rapid and complete economic breakdown for the third world economies in the near future, and foreign aid as it were, would ultimately become total dependence. If this happens, then we may be seeing a potential reversion back to the days of colonialism; especially since a large bulk of the poor and developing countries, are concentrated in Africa.
A gift of what really matters: Self-Sustainability
Christmas is the season of joy, gifts and happiness. Christmas gives us the opportunity to take a break and reflect on the important things around us. Christmas is the tenderness of the past, the courage of the present and the hope for the future, says Agnes M. Pahro.
Many Christians struggle. They often mix donation and self- sustainability. Helping people for far too long often time produce unintended consequences. The best gift is to help your neighbors, church members, co-workers on how they can help people in the developing world without harming them in the future.
Gifting someone with my new book “From Trade to Self-Sustainability” will help them connect those dots with step by step principles of how poverty can be overcome with wealth creation. Helping can be done without hurting. You just have to know how. This books holds the answer.
Merry Christmas to you and your family. May the Lord enrich you with vision, knowledge and resources to truly help brothers and sisters achieve self- sustainability in Haiti and around the world.
In the wake of January 12, 2010, a massive earthquake occurred in Haiti. There was a huge crash in the economic activity of the country. They lost over 8 billion dollars as their GDP (gross domestic profit) which impacted negatively on both small and large businesses in the country. Foreign aid flew in mass from developed countries to lend out helping hands to a falling nation. They did try their best, but their help still came with unintended consequences. Gradually, the foreign aid eroded opportunity for small and large businesses to thrive in Haiti. Doctors outside Haiti came in with facilities, set up their tents and started offering free health care for the injured. There was a newly completed private hospital before the earthquake, but it quickly went out of business because the foreign doctors failed to synergize with the local ones.
A local soap company in Haiti controlled by a friend was a family business that makes locally made soap completely crashed due to foreign aid’s $ 50 million worth of soap and soap substitutes in the soap market in Haiti all at once. Another businessman who sells over the counter drugs planned on producing hand sanitizer, but all that hope went down the drain when foreign aid agencies made hand sanitizer available for free. Any product that comes to mind was made available by an NGO for free. You can’t compete with free!!!
Reasons Why the NGO Failed to Partner with Local Business:
They complained local business were too expensive
The quantity and quality were lacking in the products of a local manufacturer, so they want to buy more quality products from outside the country.
They thought that business owners were not communicating enough.
That their delivery time was inappropriate and it’s not meeting up to standard.
It graduated to a point where the opinion of people about the foreign aid became polarized, with some people becoming a proponent for the international assistance while others castigating the idea of having foreign aids in Haiti.
In the heat of the earthquake, developed countries made a contribution of over 234 billion dollars to be used by developing countries. But unfortunately, only 1% of this donation was able to trickle down. The USAID donation for relief materials and economic aid, only 1.65% got to Haiti. Already a proof that foreign aid is limited to achieve its goals since most of its resources never made it to the intended countries. Those are facts; not opinions.
Effects of Private Investment
In the last 20 years, the lives of over 1 billion people have been improved in various developing countries mainly business of private investment while countries like Haiti are still attached to foreign aid. A relentless and deadly strategy. Let’s do a quick comparative exercise between Haiti and the Dominican Republic – a neighbouring country on the eastern part of one island. When Haiti suffered a substantial economic downturn due to the colossal hit of hurricane Hazel that occurred in 1963, the red cross came to lend their support. This brought about the influx of NGO from various parts of the world and Haiti saw it has modelled for survival in the wake of natural disasters. The Dominican Republic is also not immune to these disasters, but they went back into their boardroom and made concrete plans on how to survive and awaken their economy. So they developed their local businesses through private investment, which later bear good fruit in the development of their economy. In 2017, Haiti released a budget of 2 billion dollars while the Dominican Republic released a budget of 17 billion dollars. What an enormous difference. Haitians now are looking for work in the Dominican Republic, a clear sign that Haiti’s choice to hang on to foreign aid failed while the DR succeeded. Carefully considering the situation of these two countries, they both faced disasters. Just two different paths, two different strategies, and two different results. Simply their choice of economic development is different.
The moral of the story; business and private investment work while foreign aid doesn’t.
With this similar report, the question that keeps coming from NGO is: What can we do?
Here are some answers to this question that will duly guide them on how they can help resuscitate local business operators in Haiti.
Embrace the local system by buying as much as possible from local businesses.
They should share information regarding the lessons learned during their transactions; the difficulties, the challenges but most importantly let them know it is achievable and allow other people to learn, grow, and also make a financial contribution to Haiti
Help build infrastructure where businesses can be easily accessed bids and available opportunities. When I mean infrastructure, I am talking about an online framework, email messages that will help connect actors in the field
They should connect them to private investors who will contribute to expanding and growing their businesses.
Haiti is not alone. Many other countries in the world like Guatemala and other countries in Africa are also suffering from the influx of foreign aids which comes in varying forms; this comes with two eventualities. These are casualties to giving away aid.
They prevent new business from being created. The foreign aids cluster up the few entrepreneurial spaces in the country.
They also compete with the existing business in the country. Leaving no space for indigenous entrepreneurs to be successful.
These facts attest to the reason why, a country like Haiti would not be successful, owing to the fact that they have much of these obstacles and challenges in their economy.
Traveling to different countries around the world, help me identify three country killers around the world:
There is no country that has made it successfully through political instability.
Poor countries such as Nigeria, Haiti, and Iran are corrupt, scoring the worst in the corruption index. This shows that there is a thin line between corruption and economy development.
Foreign aid is not a long-term plan for economic development, it primarily serves as a short-term plan that helps country gets back on track after a natural disaster, economic drought. It was never meant to be a measure to restore a poor country in the long run. No country has made it out of foreign aid nor that has existed or will ever exists.
How can NGOs help?
Since they have a lot of resources at their disposal, and they are here. The first thing they should do is stay away from the entrepreneurial space and give an opportunity for a local entrepreneur to gain ground and experience.
Four primary categories describe an entrepreneurial opportunity.
A demand follows the need. People need a purchasing power, to buy the goods and services they want.
There must be enough frequency for the product you’re selling, that is when people will consume your product and thereby sustaining private investment.
Cost per unit
The cost per unit of the product made needs to be inferior to the price of the product.
This occurs when the gain from making a product is lower when an individual is pursuing other things.
When all these measures are present, NGOs need to move out of the entrepreneurial space and allow private investment to come into the picture and acts profitably and satisfactorily. One more thing NGO should watch out for is the fact that, if these four criteria is not met they should come in and offer help in that particular sector and get out as soon as those conditions are met.
The blatant truth is that most poor countries like Haiti are jobless; 70 % of people with Haiti are jobless and this problem will continue to fester when we don’t make use of our local market, goods, and manufacturers.
Countries like the United Kingdom made the highest earning in foreign direct investment this past year. The European countries also made a 21% increase of the foreign direct investment. The OECD countries made 6% jump in foreign direct investment. The Dominican Republic also did well in the area of foreign direct investment compared to Haiti. When we compare these statistics for the two system (i.e., Haitian and the Dominican Republic), it is obvious something is wrong here. Latin American countries knew that creating more private investment will increase the living standards of their citizens. It is essential to remember that private investment leads to business creation and business creation brings forth job creation and income generation. That leaves us the developing countries with the question, how do we create more jobs? Pretty simple bring in more foreign direct investors who will build more businesses and in the end there will be enough jobs for everyone. Former US president Ronald Reagan said that “the best Aid a country can get is JOB!; that reality still pervades today, especially for developing countries like Haiti.