Jan 24 2010
Day Zero in Haiti
Published by Andrew McCarthy at 7:20 pm under Development,Economic Growth,Education,Health,Human Development Index,International trade
A week after the earthquake, the Haitian people now speak of day zero plus seven. Day zero was the day when an earthquake rumbled and shook the shallow bay near Port-au-Prince and crumpled the many fragile houses, hospitals, churches and hotels. The quake did not discriminate against the rich and the poor, but in the months and years to come the world needs to ensure that the country gets a fair chance to rebuild.
Some consider the day of the quake, as the day a new nation began. As Economists we can offer insights about the path to improved living standards, through our understanding of what has worked, and not worked, in other countries.
Haiti has a history which is more turbulent than most. In 1697 when Spain ceded control of Haiti to the French, much of the land was deforested and the ecology wrecked as sugar fields were planted. In 1804 the republic was founded, and later the dominant political figure was Dr. François Duvalier, and his son who reined as Presidents of the country from 1957 – 1972 (François) and his son till 1987. In 1990 the ruling military junta gave up power and President Clinton sent in 20,000 troops to a country ravaged by HIV and entrenched poverty. Hurricanes in 2004 and 2008 displace hundreds of thousands of Haitian’s and ruined existing infrastructure. But the recent earthquake might be the biggest challenge yet for most fragile and poorest nation in the Caribbean. On the Human Development Index, Haiti is classified as one of the least developed nations in the world at 149th of 182 countries (HDI Report, UN 2009).
After the mourning and eventual stabilisation, the government will need explain what the future holds for Haiti. This is a window of unfortunate opportunity that the government will never see again and mustn’t squander. The developed world has made promises of aid to support the reconstruction, but health care and education, skills and employment must be offered to the people to help the nation grow from the depths of this disaster in a sustainable way. From our learning about Development Economics we can explain strategies appropriate to Haiti.
Former President Bill Clinton who is the UN’s Special Envoy to Haiti, offered a good insight on the nations challenge in his excellent essay in last weeks Time Magazine.
Time Magazine – Jan 14 2010 – Bill Clinton: The Haiti Earthquake
We’ve got to all work together toward a common goal (for Haiti). We have to relentlessly focus on trying to build a model that will be sustainable, so we don’t plant a bunch of trees and then revert to deforestation, or adopt a program to bring power to the country that can’t be sustained, or adopt an economic strategy that is going to wither away in two years.
What the economic strategy will be for Haiti will likely be influenced by the trade agreement with USA called the Caribbean Initiative. This has recently provided an impetus for the clothing industry in Haiti. Hanes, which sells T-shirts throughout North America, produces part of their stock in Haiti in the factories, which are now being protected from looting. These labour intensive industries are important in a nation with approximately two-thirds of labour force unable to find work. The quake and eventual rebuild also offer opportunities to build on existing plans as Clinton explains,
Haiti isn’t doomed. Let’s not forget, the damage from the earthquake is largely concentrated in the Port-au-Prince area. That has meant a tragic loss of life, but it also means there are opportunities to rebuild in other parts of the island. So all the development projects, the agriculture, the reforestation, the tourism, the airport that needs to be built in the northern part of Haiti — everything else should stay on schedule. Then we should simply redouble our efforts once the emergency passes to do the right sort of construction in Port-au-Prince and use it to continue to build back better.
It is evident that Haiti can use this opportunity to develop the country as Clinton explains. In addition, there are many other ways that the country could improve the living standards of the Haitian people. These development and growth strategies could include;
- The development of Fair Trade schemes to improve Haiti producer’s access to world markets.
- Facilitating the provision of small loans through Micro Finance schemes
- Developing the export sector by investing in the transportation infrastructure to transport products.
- Exploring new trade agreements with nations.
- Promoting foreign direct investment in Haiti by multinational companies.
Nevertheless the task is daunting for Haiti. As a UN staff member recently explained to a New York Times reporter, the immediate recovery is complex. The future reconstruction and redevelopment will be difficult, and the road long.
“You’re talking about a country that pre-earthquake had limited resources and capability, and what resources it did have were concentrated in the capital,” said Kim Bolduc, who is coordinating the relief effort for the United Nations. “This context helps explain why this emergency is probably the most complex in history, more than the tsunami, more than the Pakistan earthquake” of 2005. Link
Here are some interesting facts about Haiti
- 40% of the population is under 14 years of age.
- The nations main exports are coffee, mango and other agricultural products.
- 66% of all Haitian’s work in the agricultural sector on small subsistence farms.
- Before the quake foreign aid made up a large proportion of national income. In 2004 over $1 billion was pledged by USA, World Bank and Canada and France. Partly in loans but also in direct assistance.
- In 2006 Haiti was ranked as the most corrupt nation in the world by Transparency International, followed by Burma and Iraq.
Sources:
http://news.bbc.co.uk/2/hi/business/3522155.stm – Haiti: An economic basket-case.
http://news.bbc.co.uk/2/hi/business/6120522.stm – Transparency International
https://www.cia.gov/library/publications/the-world-factbook/geos/ha.html – Haiti – CIA World Factbook
http://www.flickr.com/photos/un_photo/ – UN Photo stream, Creative Commons
http://topics.nytimes.com/top/news/international/countriesandterritories/haiti/index.html – New York Times, Haiti News.
Discussion Questions:
- In your opinion, what is Haiti’s most valuable resource endowment? Explain.
- Choose two development or growth strategies and explain how these could be implemented in Haiti.
- Evaluate the strengths and weaknesses of each strategy.
- How could corruption be a barrier to the future development of Haiti?
- What do you think Haiti will be like in 20 years?
About the author: Andrew is an International School educator based in Singapore, who specialises in teaching Economics and leading change in a 1:1 Apple laptop environment. He enjoys teaching the International Baccalaureate curriculum and has taught the Diploma Economics course to both Higher and Standard Level students. Previously Andrew taught in New Zealand as a Geography and Economics teacher and eLearning coach. He is an adventurous New Zealander, who enjoys running, travelling and spending time with friends and family.
Andrew is currently the head of Educational Technology at the United World College of Southeast Asia. Read more posts by this authorNo related posts.
I am thinking of using this to begin my regular economic section next week. We always start economics looking at the fundamental economics problem – scarcity – and the idea that economics is the study of how people organize to allocate land,labor,capital and entrepreneurship. And we must begin also with an understanding of the type of system we will use. Haiti is in a position to basically begin again. Their greatest resource is labor, although what I see in the photos seem to be very young people and children, many who will be maimed. They will need health care, education, infratstructure. Where should a society start? Thanks for posting this – I believe a good discussion can be had by students as they consider what a country like Haiti is up against, and how lucky we are in countries that have developed infratstruce, sound government, and capital.
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Patti,
I agree that this post has some great potential for use in class. My IB year 2 students are in the middle of their development Economics unit right now. We'll be reading this post in class today and reflecting on the growth and development strategies Andrew suggests above. Thanks Andrew! Great contribution to our students' learning!
Jason
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1 I think haiti's most valuable resource is Hanes clothing industy. it is importent because with a big buisenes providing new jobs it will help to stabilize the country economicaly and provide it with a means to rebuild itself with less help from the outside world, wich i think would be more benificial in the long run.
2 the needs of the people of haiti are to rebuild there homes and in the aftermath set up a very stable and uncorupt government. there wants are probably to become an stabalized country with uncorrupt leaders who will help the average person.
3 a good example of scarcity for haiti is the lack of jobs. i think that they really need to put more people to work because if they stop taking hand outs from the other countries they will need to create the supplies themselves wich will improve unemployment as well as get a good buiseness infastructure for future years. this will also help provide for the scarcity of food water and shelter for many people.
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1. Haiti's most valuable resource endowment to me would have to be the impetus of the clothing industry in Haiti (Hanes). Because its their main industry that sell mostly throughout U.S.
2. Haiti's needs would have to be a safe home, and food which they lost a lot of. Haiti's want are better industry that offer more jobs and also a stable and good gov't.
3. Some examples of scarcity in Haiti are lack of job opportunities, and shelter, water, and food to please all the population of Haiti.
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1. In your opinion, what is Haiti’s most valuable resource endowment? Explain.
As the industry has always been very backward there has been a lot of capital flight. A lot of the GDP is therefore from financial support from emmigrants. Also their textile industry was very big.
2. Choose two development or growth strategies and explain how these could be implemented in Haiti.
-Micro Finance:
Low income people gain access to money with low interest rates, can build up their own businesses and therefore improve economy.
-Import Substitution:
Haiti should produce goods domestically rather than import them. This should lead to the growth of domestic industries and therefore the growth of the whole economy to compete on the world market.
3. Evaluate the strengths and weaknesses of each strategy.
The weaknesses of Micro Finance is that a great trust is put onto someone. As one has to pay it back improvement in poverty level has to occur.
The Strengths in Micro Finanance are that people gain access to loans with low interest rates and therefore get a chance to escape the poverty trap. People can start to build wealth and children can start going to school. This rases the economic status of a country.
The Strength of Import Substitution is that jobs in Haiti are gained and most importantly Haiti is protected from the power and influence of multinational corporations.
4. How could corruption be a barrier to the future development of Haiti?
5. What do you think Haiti will be like in 20 years?
-As it is in a great poverty cycle it might the situation might have not improved very much in 20 years. But as there is a lot concentration from foreigners on Haiti currently foreign help and donation might lead to significant improvements.
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1. As the others said before I think Haiti's most valuable resource endowment is also the Henes clothing factories, because so many people cannot find a job, so it's important that such a company gives employment.
2. Export-led growth
- economic growth could be achieved if Haiti could export more goods and services
Foreign direct investment
- to achieve economic growth
3. For export-led growth to occur there needs to be of course something that the country can export. So companies and corporations like Hanes need to settle in the country and build factories there. But in Haiti's current situation this will be very hard to achieve.
For this, foreign direct investment is important so that multinational corporations expand into the country. But as said before this will be hard to achieve in Haiti's current situation and also because the country is very corrupt.
4. Because there is a lot of corruption in Haiti it will be hard for the country to achieve economic growth and development. If the government is corrupt than the people do not trust it, and also foreigners will not invest into a country that is so corrupt and it is likely that corporations will not build up new branches of their business there.
5. I think that Haiti's situation will improve and that it will have achieved at least some growth and development. Haiti gets a lot of foreign aid at this point and if they use it wisely, the country could be in a much better situation in 20 years than they are today.
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1. Haiti’s current biggest resource is the land that it is sitting on. Considering that due to the quake dealing its biggest blow to the Port-au-Prince region it gives greater incentive for exploration further around the island. Whereas before the quake the Haitian’s were hearted around city centres, and now that the quake has struck it will not be a safe place to stay for the coming years, after clearing all the debris the vast number of bodies that are not yet found will continue to entice animals, bugs etc that can easily spread disease. At the moment Port-au-prince is the worst place to begin economic growth; for the coming years this area will be solely an emergency zone, needing cleaning and so forth. When the cleaning is complete the region could become an entirely new source of revenue and work for the Haitian’s as the city is rebuilt and firms move back into the area construction workers are needed to build the buildings.
2.
a. New trade agreements will certainly, especially listening to economists such as Paul Collier, benefit the region. A trade agreement with its nations will create incentives, especially with developments into the more rural areas of Haiti (assume infrastructure is built) that will benefit Haiti with wages for its population, tax revenues for its government and may increase interest from other parties.
b. Fair Trade programs are an excellent source for economic developed in LED’s. Knowing the owner of a plantation in Tanzania I’ve been told that these firms who wish to trade under ‘fair trade’ must give fair pay, health cover, accommodation and so forth to its employers. This may be seen as a disincentive for firms; however the ‘fair trade’ stamp costs will be put onto the consumer who will feel more justified in spending extra money knowing that their money will actually benefit people directly.
3. A major problem with trade agreements for Haiti at the current time is that its government has been ranked the most corrupt in the world. A corrupt government may not necessarily be looking for the best deal for their nation moreover just looking to get the most that they can get out of a situation. If trade agreements are to exist, first a non-corrupt government must be in power to stop the normal population of Haiti being ripped off.
With the Fair Trade logo many could see the problem of getting the initial investors into Haiti with the such high barriers they would face that will include their initial building costs for factories, and building costs for their employers etc. Then on top of that the sheer costs that mount up to the employer in terms of providing health care for their workers – initially this may not seem to make economic sense for a private firm – and without a non-corrupt government willing to make tax breaks or equivalents to create incentives then firms would not move to Haiti.
4. As touched upon in the above question a corrupt government may not be so inclined to look after the people of their nation before they look after number one. This kind of mentality can cause all sorts of internal (and external) problems for a nation. A corrupt government can lead to invasion from other nations wishing to secure their own assets, it can lead to a complete breakdown in economic trade between nations, and aid etc may even be halted due to a corrupt government.
5. In 20 years I still see Haiti being one of the lowest ranked nations on HDI; however I see some economic progression being made. GDP will most likely have increased at least tenfold, with per capita following suit (at a less rate no doubt). I think with such a corrupt government, and gangs taking control in the streets that tourism will be a no go for a minimum of ten years, harming the Haitian economy for at least double. Exports may increase but if gangs take control then barely any money will trickle down into the massive percentage living under the poverty line. Haiti will definitely still be ranked as an LED on the HDI rankings, and its economic performance will, I believe, again be one of the poorest in the world – even with its resources. The corrupt government will do barely anything to help the people of their country – especially with education as an educated population would no doubt revolt against them, and if too much aid is given over the coming years – Haitian’s will have no incentive to get out of their poverty cycle and this situation could continue for many, many years to come.
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1. Haiti's most valuable resource endowment is the Hanes clothing industry. This helps Haiti stay some what stable because it offers jobs to the population. Some of Hane's stock is produced in Haiti and because the factories are being protected from looting they are making a profit and helping the economy grow.
2. One growth strategy would be is to rebuild homes and buildings and to clean the city up from a disaster. This would help in Haiti because the people's homes were destroyed and their jobs were lost. The rebuilding would be able to provide jobs and that would be able to get them back on their feet and the economy would grow. Another strategy would be is to form a non-corupt government so people would be given their rights and protected by the legal system. Haiti would really benefit from this because with the disaster everyone is stealing and taking advantage of everything around them because of the countries shortages and scarcity.
3. The strenghts of rebuilding homes and building would be that there are available places for jobs and space to make products. Families would be able to earn money to provide for each other and to live. The weaknesses of that would be is that it would take time to rebuild and a lot of money from the economy. Not everyone would have a job just because of scarcity and the entire country would not be able to survive. The strenghts of creating a non-corupt government would be that there would be less crime in the streets and people would be able to live with rights they deserve and to make money. The weaknesses of this strategy would be is that creating this government would take a lot of time and effort and it could get out of hand where a group of people or person could gain too much power.
4. Corruption could be a barrier to the future of Haiti because it is preventing people from owning businesses and making money. There is no one stopping people from breaking the law if it even exists. Haiti will not be able to grow or be able to be stable without making money to produce goods and services and the nation will fall apart.
5. I think that Haiti will be a developing nation in the next 20 years because everyone around the world is trying to help them in some way. Even if it is a little bit it still makes a difference. I think Haiti can learn from this and the world as well as to think of the impossible to keep their economy stable and to invest for the best of the future. Haiti can get back on its feet we all just need to help and think of ways to better their economy.
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1. to me haits most valuable resourse endowment is the impetus clothing industry this could help them to get back on their feet and it could help them with there money problems. A clothing industry could bring about alot of money to a country if they sell to the right people which haiti is doing by selling to the u.s.
2. Haitis needs are still the same as before; they still need food,water,shelter,etc., but now they just have a greater demand for all of that stuff. there wants are things like money, more clothing, etc. these are things that haiti wants but dont really need as much as the vital things to survive.
3. scarcity in haiti is now bigger than ever. haiti wants more food than they can get, haiti wants more water than they can get, haiti wants the shelter that it desprately wants and needs but due to scarcity they cant get most of the wants and needs that they desire so much. also they have a want for the things that they really cant have right now, that is another example of scarcity as well. haiti is a perfect example of what scarcity is really about
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1. I believe that the Hanes clothing industry is one of the most valuable resources in that area. The people need to have a use for this physically demanding labor force. Not only will this provide the area with much needed income, but it will also keep the people of the area from being disillusioned and prevent them turning to more corrupt forms of gaining income.
4.Corruption can only worsen the problem. not only will the aid already provided by foreign powers not reach those who need it but the very same foreign powers may grow tired of the government misusing the funds and could very easily pull out their support entirely.
5.Sadly the situation in Haiti will probably not improve that much. it has always been a very impoverished nation and while they have a chance to make a fresh start im not sure if the people will be able to act on this chance. in 20 years i see Haiti in the exact same position it was before the disaster and that is truly disheartening.
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some nice responses everyone! It is good to see people thinking beyond the problems of corruption to possible solutions such as micro-lending and fair trade.
This weekend Paul Collier wrote a great article in the NY Times which further develops many of the ideas you have mentioned above. http://www.nytimes.com/2010/01/29/opinion/29colli…
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1. In your opinion, what is Haiti’s most valuable resource endowment? Explain.
Right now Haiti has a large amount of labour available but much of the land is not agriculturally productive as implied by the fact that a large number of farms simply provide what the owners need to live and not excess. As most of what little industry was centred around the capital, most of which was destroyed. If a company chose to set up a factory in Haiti now they would have virtually unlimited, cheap labour as there are so many homeless and impoverished people.
2. Choose two development or growth strategies and explain how these could be implemented in Haiti.
As labour is so cheap, and I assume land would be fairly cheap as it is not agriculturally productive, removing tarifs on Haitian goods in the developed world would encourage factories to set up and increase employment.
Another method for development would be to use aid to give farmers courses on how ot be more productive. This would enamble them to produce more food and then sell the excess enabling more people to move into industry or tertiary sectors.
3. Evaluate the strengths and weaknesses of each strategy.
The first strategy would be hard ot impliment as governments would have to agree to reduce tarifs. THis could have international political backlashes and would only work as long as tarifs stay low. This does have an advantage as Haiti is much closer to the US and would have an advantage over east asia due to shipping costs.
THe second option would be dependant on each farm being able to produce more.food then they do currently.
4. How could corruption be a barrier to the future development of Haiti?
Corruption leads to higher start up and running costs for firms along with reducing aggregate demand as people will have less money to spend.
5. What do you think Haiti will be like in 20 years?
I do not think Haiti will be much more developed. Although the developed countries are working ot help the people they will not make lasting changes, but restore the country to what it used to be.
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I think that the main target of the development project should target education as well as the general governance of the country. According to the data, 40% of Haiti's population is under 14 years of age. Since such a large portion of the population is so young, I think that should the future Haitians be more educated, then the country would have much more competent and valuable human capital. In other words, this would increase the productivity of the country itself (workforce is one of the three factors of production). So, schools should be built as well as a university to provide further education (if possible).
Furthermore, the other development projects should target the few exploitable resources the country does have, which seem to especially lie in the primary sector (66% of all Haitians work in the agricultural sector). More specifically, the few products that they do produce (in this case mango and coffee etc), should be perfected and replanted (specialization). This would require reforestation and the fertilization of any usable land. However, Haitian development projects do not necessarily have to be situated in Haiti itself. That is to say, investments could be made to further advertise Haiti and reduce the fear foreigners currently have to venture into Haiti. Rebuilding consumer confidence would revive the tourism, and hence foreign investment.
On the other hand, there is a more "social" aspect if you will, that direly requires attention. That is politics. Haiti has had a very turbulent history with a record of corruption. Its politicians use their position of power to further their own needs, creating a handicap to Haiti's potential. What foreign governments could do would be to implement a new, efficient and functional government that serves the people, where the power is not endowed in a single person, but is shared amongst many.
So, aid should be given where necessary. However, the major part of the financial aid should be targeted at developing the country instead of aiding it. (Aid has seemed somehow inefficient in Africa, so adopting a new policy should prove to be a better approach).
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four factors of production*
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1.In your opinion, what is Haiti’s most valuable resource endowment? Explain.
I believe that Haiti offers great opportunities for foreign investment. Since the economy is at a low, the government has to try to attract foreign firms by offering favorable conditions such as low corporate taxes. The majority of the population is unemployed and would be happy to accept any job which pays. Therefore, firms could enjoy low costs of production and can thus become more competitive in the long run. The only problem is that Haiti doesn't have any valuable resources so that companies have to invest in a new service or industrial sector.
2.How could corruption be a barrier to the future development of Haiti?
Corruption is a big poverty trap for Haiti because it discourages foreign direct investment. Companies do not want to invest in a country with high crime rates or violence because that could automatically lead to political instability. Due to low foreign direct investment, there is little supply of loanable funds in Haiti which means that people do not have the opportunity to borrow money from banks. This will slow economic growth (due to low spending in the economy) as well as development since low levels of income resulting from low economic growth, lead to poor education and health care.
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1.) Haiti’s people and land are probably their most valuable resources. I believe that labor sector could experience great growth if efficient manners of production, for example in the textiles industry, are brought to Haiti. Their closeness to the US already gives them a greater advantage in terms of transport costs, and if infrastructure is invested in and foreign companies invest in producing their goods there, this sector could certainly expand. Their land is also a valuable resource because, as mentioned in the article, 66% of the population works in the primary sector, in agriculture. With a focus on building better and more trade agreements, their exports of coffee and mango could also experience growth, possibly though fair-trade agreements which would allow the country to make higher profits. I can imagine that in countries aware of Haiti’s situation, advertising something like Max Havelaar free trade mangos could attract many consumers wishing to make a contribution.
2.) The growth strategies that the U.N. should eventually pursue in Haiti should involve making the country viable for the efficient production of goods and transportation infrastructure to develop its export sector. The growth strategies are intertwined, and a growth as a whole will follow if aid capital is provided. Either way, after this earthquake, a large investment has to be put into infrastructure. The development of roads to the rural areas, a port with capacity of an increase in exports, and a better and possible second airport (there are plans for one in the north of the country) should be invested in. This would also make direct investment in Haiti more attractive to foreign companies, the second development strategy the company should pursue. Promoting investment in the country to foreign companies, and the development of new trade agreements would lead more companies, like Hanes, to invest in producing their goods there.
3.) The investment in infrastructure is a great strategy, which would certainly promote investment in the country, and create many jobs for the high amount of unemployed people. But, it is also something that takes many years to develop and is very expensive. In the near future, aid companies will be focusing more on providing health services, than building new roads, but hopefully the continued aid flow to Haiti will make that happen.
Promoting investment in Haiti to foreign companies is great development strategy, but also a very hard one. The lack of transportation infrastructure and a stable government may be hard to sell to foreign companies, and will probably also take a while to come about.
4.) Corruption is always a barrier to development, because those with money can work around the laws. Most of the time, people working for the government are paid so little, that they end up having to take bribes to make a living. This makes it hard to tax the folk, as those which have money and could be taxed, find ways around paying taxes.
5.) I think it is possible that in 20 years, Haiti will be better off than it was before the earthquake. If the aid flow to Haiti continues for the next 10 years, they will be able to develop their agricultural sector in the primary sector and their labor services in the secondary sector, and eventually even move into the services sector. I believe the U.N will have to be present for the next 20 years, but eventually, new leaders will arise from the schools and universities which various aid groups are focusing on, and they will be able to run the country themselves, and hopefully experience growth.
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I believe that Haiti's most valuable resource endowment is its labor force. Since many are young and unable to find work, helping out the one industry that they already have, the Hanes company, can lead to increased incomes and standard of living in the country because more people would hold jobs. The people first need to rebuild their homes and help build homes for those that did not previously have them. It will be expensive in the short run, but as for the long run, individuals will have more security it more had their own homes. Haiti can also focus on its main exports and increase those (coffee, mango, etc).
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[...] Here is the blog post that I wrote and used with my students Day Zero in Haiti [...]
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