Why Haiti Can’t Recover

Commentary, Property Rights, Frontier Centre

Of all the words I’ve read to describe post-quake Haiti, the most apt is “dystopian.” Haiti is not only the poorest nation in the Western hemisphere, it is also the most wretched and dysfunctional. By nearly every measure — stability of civil society, corruption, GDP, per capita income — Haiti is in the bottom 10% of nations worldwide. The UN’s human development index pegs it at 145th of 169 studied. The only greater cesspools are in Africa.

In his seminal 2000 book, The Mystery of Capital, Peruvian economist Hernando de Soto wrote that Haitians and Haitian businesses had plenty of money, they merely lacked the methods for leveraging that capital that North Americans and Europeans take for granted.

Because Haiti was then (and remains) without an impartial court system for defending property rights and had no means of registering title in land or buildings, banks were unable to lend money using property and possessions as collateral. By de Soto’s calculations, Haitians owned, in real estate alone, more than 150 times the value of all direct investment made by foreigners in the country’s history, but it was what he termed “dead capital.” Because they could not be used to acquire loans to open new businesses, build new buildings, buy new machinery, all these assets were “dead” to the people who owned them.

It’s easy to see how this lack of a functioning banking and land titles system has crippled Haiti’s recovery. While as many as 150,000 homes were destroyed in and around the capital, Port-auPrince, alone — and 250,000 nationwide — only about 5% of Haitians had clear enough title their homes to obtain insurance. If you put everything you have into building a house that is then wiped out, but you lack insurance to rebuild it, it might take years to save up enough cash to start over — and years longer, still, if you have no work and have to pay to clean up the rubble of the old house, too.

So why should it come as a surprise to anyone that one year after Haiti’s devastating earthquake, there has been little recovery?

Chile had a similarly forceful ’quake a little more than a month later (Feb. 27, 2010). But as a modern, functioning democracy with rule of law, independent courts, a robust financial sector, sophisticated public and private infrastructure, enforced building codes that prevented structural devastation in the first place, a middle class and professional class, Chile had largely resumed normal operations within days. Power was back on, schools reopened, garbage was collected and food delivered again to supermarkets. Within weeks, most of the debris had been cleared away and reconstruction begun.

Critics of the world’s effort to help Haiti should consider the contrast. How is that Chile was able to absorb the shock of a major earthquake with little foreign aid, while Haiti has received billions and is almost as chaotic and foul now as it was in the immediate aftermath?

Writing in Wednesday’s Halifax Chronicle Herald, that paper’s Ottawa reporter Stephan Maher blamed the governments of donor nations — including Canada’s — for having failed to live up to their aid promises. Perhaps there has been some shortfall. But it is hard to see how 50% more aid, or 100%, or even 200% would have produced better results.

The problem is not lack of aid, it’s lack of Haitian ability to deal with the aid. Scores of brand-new, U.S.-donated pickups sit, weed covered, for instance, at the Port-au-Prince airport because, while aid groups could use them, the Haitian government will not let them in until hundreds of thousands in import duties are paid — hundreds of thousands that would likely end up in the pockets of Haitian officials.

Haiti is a true basket case. It has been misruled for so long by drug lords, kleptocrats and voodoo cults that it utterly lacks the civil culture needed to hold a valid election, much less deal with the devastation it currently faces.

The world should not wash its hands of Haiti, but it must accept that money alone cannot fix what is broken there.