Haiti as a nation has been troubled with natural disasters all of its History but has been exacerbated by earthquake and hurricanes in the past few years which has led to an accelerated rate in the loss of lives and properties.  The impact of these unfortunate events has been daunting on the economics of the nation as a whole because of the immense loss that has been encountered. Economists have proven that entrepreneurship is the way out of the poverty problem; although a market economy, Haiti has, nonetheless, plunged into chronic economic decline despite the effort put in trying to restore it back to how it was before. Foreign aid has increased and so did poverty. This sharpe contrast has led me to a deeper study suggesting that perhaps foreign aid has an adverse effect on entrepreneurship of Haiti as well as other third world countries.

The harsh reality of the Haitian economy

Economic Watch publishing shows a low economic growth of Haiti with over 80% of their population living below the poverty line, which means that Haiti is faced with an economic dilemma as a third world country. Statistics put out by World Bank has served as a harsh awakening to us Haitians on the economic toll these disasters have had on them, the statistics includes a 1% economic growth rate and a 1.2% GDP growth rate in 2017, down from 1.5 % the year before, a full display of how the economy of Haiti has fared from 2013 to date is available on Global Finance.  Haitians are forced to ponder on factors that may be causing the poor economic performance as well as means to pull their economy out of that deep economic depression.

On this quest, two of the suggested strategies by World Bank to tackling the problem are to generate economic opportunities outside the nation’s capital as well as to strengthen human capital, these go in line with the opinion of economist since entrepreneurship is indeed a way to apply these strategies. However entrepreneurship in Haiti faces another problem which is foreign aid, a deeper look into how entrepreneurship has been challenged by foreign aid.

Entrepreneurship and Foreign aid in Haiti

A 2016 study by Vanessa Gowreesunkar and Hugues Seraphin highlights that in Haiti 47% of the labour market are in the private informal sector with 39% involved in agriculture, these numbers go to show how largely dependent the Haitians are on entrepreneurship and this is inevitable a high driver of the economy.

Since entrepreneurship is an intrinsic part of the Haitian community, it is expected that the economic growth of the country as a whole should be better than it is today considering that entrepreneurship is seen as one of the major players in achieving a thriving economy. Focus on these contrasting facts about entrepreneurship and national economic growth as existing in Haiti and other third world countries has been brought up in several statements.

Haiti as a nation has received high figures in form of foreign aid, these aids are not limited to money but extend to labour, services and goods in a bid to help the nation but the economy of the nation remained crippled.  In one of my lectures titled ‘from Aid to trade’ I provided a deeper insight on how this has been happening.

My research, published in my book ‘ From Aid to Trade’  shows that only about 1.6% of funds donated from foreign aid after the 2010 hit reached Haitian businesses. The discrepancies of foreign aid to economic growth has been an issue manifested in third world countries and has brought about suggestions on how to get out of the dilemma and focus more on entrepreneurship like with Dominican republic. It is important to point out that foreign aid is meant as a temporary solution to economic problems of a country with a view that the country will eventually find a way out of their challenges and become more independent and self- sustainable.

How foreign aid kills entrepreneurship

  1. Impossible competition: Haiti already exists as an economy highly dependent on informal economic sector, which means there are social entrepreneurs that cater to the needs of the population by providing goods and services to them and at the same time employing a good number of that population. These goods and services naturally come at a price which consumers have to pay, while foreign intends to make some of these things more available to the general population by providing it free of charge they are creating a competition in the market for these entrepreneurs. This competition however is not a healthy competition because entrepreneurs struggle to sell their products to a market that already gets similar products free from foreign aids “who can compete with free?”, it is practically impossible. The entrepreneurs who employ a good number of the population as labour force are then thrown out of business by this crushing and impossible competitive environment created from the foreign aid which creates a ripple effect on their suppliers also running out of business as well as their retailers. In the end, higher number of dependants are created and more foreign aid is brought in to continue to make the poverty problem even worst.
  2. It does not actually increase income: to boost the economy of a nation, there has to be an increase in income which increases the spending power as well as the GDP per capital of that nation. Foreign aid is not generating income of the nation and since it does not generate sustainable employment to the population, it therefore does not boost the income of the people resulting in a dependent community and does limited economic activities to boost the spending power and the GDP growth of the community.
  3. They make struggling and helpful entrepreneurs appear to be a rip-off: when foreign aid provides aids without helping the local economy, they parallel them at an impossible price to compete with and they create a perception that entrepreneurs are ripping off the population. To fix this they have to buy from those entrepreneurs and make the people learn that it is a reasonable fro them to pay a price to fulfill their needs.
  4. It is one of the three killers of a nation’s economy: Foreign aid as the third killer of a nation’s economy and this is because foreign aids often operate without the cooperation of local labour, this is in no way to discredit the intention of help from foreign aid but when the local labour of the people are replaced rather than demanded, establishments run out of business and jobs are lost and new businesses do not come up. Short term missions need to be replaced by long term coaching, investors and experts to help the local economy grow and create sustainable employment opportunities in the long term.

In conclusion, foreign aid although, with good intention hinders the growth of entrepreneurship and job creation in Haiti and throughtout the developing world; therefore create a bigger problem of economic growth. In order to fix this, foreign aid has to collaborate with local entrepreneurs rather than replace them; that means to function as foreign partnership rather than hanging out aid and to support the entrepreneurial space by purchaising local products and establish long term partnerships so that they are helping local entrepreneurs rather than destroying their businesses.

References are found in My book From Aid to Trade. Click here to read the book.