Diagnosing What Ails Haiti’s Economy

The World Bank fingers cronyism, of which Bill Clinton was for years a symbol.

Secretary of State John Kerry and Haitian President Michel Martelly in Puerto Principe, Haiti, Oct. 6.

Secretary of State John Kerry and Haitian President Michel Martelly in Puerto Principe, Haiti, Oct. 6. Photo: jean jacques agustin/European Pressphoto Agency


Mary Anastasia O’Grady

Oct. 11, 2015 6:00 p.m. ET

U.S. Secretary of State John Kerry made a stop in Haiti last week to lend support to the country’s Oct. 25 presidential and second-round parliamentary elections. Amid allegations by some opposition members that the preparations have not been impartial, and calls to cancel the vote, Mr. Kerry urged Haitians to “come together” to make the election a success.

U.S. officialdom is perturbed by the violence and low voter turnout—a measly 18%—in Haiti’s first-round parliamentary election in August. It’s worried that Haitians again will stay home on presidential election day, further undermining the legitimacy of the country’s frail institutions.

Mr. Kerry might have contributed more by reflecting on why Haitians have become so cynical about casting ballots, and what role U.S. policy has played in their disillusionment.

A May 2015 World Bank “systematic country diagnostic” on Haiti is instructive. The report notes that the U.S. embargo of 1991-94, which was implemented to force the return to power of deposed President Jean Bertrand Aristide, badly damaged the country’s important manufacturing sector. The bank reports that manufacturing “never returned to pre-embargo levels.” That was the first time Bill Clinton decided to use his presidential power to “help” Haiti. His return to the country after the earthquake in 2010 may have been even more damaging.

As the World Bank report notes, Haiti suffers from crony capitalism that holds back economic growth. Yet it’s unclear how the U.S. could have pressured Haitian politicians to confront this problem in recent years while Mr. Clinton, himself a veritable symbol of cronyism in Haiti, was unofficially running U.S.-Haiti policy, through the help of his wife Hillary, the secretary of state.

The record of Haiti’s elected politicians, since the transition to democracy at the beginning of the 1990s, is dismal. The political class still uses its power for personal aggrandizement, as the infamous dictators François Duvalier and his son Jean-Claude did for almost 30 years.

Just as discouraging is that after more than two decades of going to the polls, Haitians have yet to taste economic freedom, and emigration has become the only option for those who hope to get ahead by hard work. The World Bank reports that between 1971 and 2013 gross domestic product per capita “fell by .7% per year on average.”

Haitian poverty is appalling. But as the political economy has degenerated, the developed world’s response has largely been to treat the country as a giant charity case. Emblematic of this patronizing attitude is the Caracol Industrial Park, once championed by the Clintons. It sits in the poor rural north of the country but has been left unfinished at a time when locals need the tens of thousands of jobs it could provide. It’s as if self-sufficient Haitians would undermine the poverty industry.

Destitute citizens find it hard to stand up to government corruption and ineptitude. This explains the World Bank findings that Haiti vastly underperforms an average of Latin American and Caribbean countries and its index of low-income countries in the areas of controlling corruption, the rule of law, and providing government services and accountability.

Haiti claims to have a difficult time collecting taxes but seems to do its best to discourage the growth of taxpaying firms. Using the World Bank’s “Doing Business 2015” survey, the diagnostic report finds it takes an average of 29 days to start a business in low-income countries in the world and an average of 31 days in the Latin America/Caribbean region. In Haiti it takes 97 days.

Economic mobility, up or down, in the private sector is practically unheard of. The World Bank report says a small number of powerful families enjoy near-monopoly privileges in crucial markets. This results “in high concentration in a number of key industries, distorted competition, and non-transparent business practices.”

When a small number of companies control imports, consumers are victims. Among the most “important food products in the Haitian consumption basket” the bank found prices “on average about 30 to 60% higher in Haiti than in other countries from the region.” The bank also says that in the World Economic Forum’s Global Competitiveness Report 2014-2015, Haiti scores poorly (140th out of 148 countries) “in terms of intensity of local competition” and exhibits high market dominance by few firms.

The World Bank authors gently speculate that there is “little competitive pressure.” They observe this “could be the result of high legal or behavioral entry barriers” and this “could facilitate tacit agreements among families/groups to allocate markets among themselves, which may harm productivity and incentive to innovate.”

This is polite jargon for collusion, which Haitians already know. They also know that absent the political will to open markets to competition, elections won’t matter much.

Write to O’Grady@wsj.com.


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