What happens when you drop billions of dollars onto a country like Haiti? Immediately after the earthquake happened, in January 2010, I said that “one of the lessons we’ve learned from trying to rebuild failed states elsewhere in the world is that throwing money at the issue is very likely to backfire”. But that’s exactly what we did — with predictable results.
I’d urge you to read Janet Reitman’s full 12,000-word Rolling Stone article on what an enormous amount of foreign aid has done for Haiti; it’s a wonderful piece of journalism, albeit a very depressing one.
The first thing to note is that most of the money given to Haiti hasn’t even started to be spent yet: a whopping $11 billion was pledged by donor countries and financial institutions in the wake of the earthquake, but if you take the US as a good example, it’s so far managed to spend just $184 million of the $1.14 billion allocated to the country. Even the Red Cross is barely halfway into its $479 million fund — all of which has been earmarked for Haiti, and none of which can be spent elsewhere, no matter how much better it might be put to use in some other context.
But even the amount of money that has been spent has been harmful in its own way. Haiti has been known as “the Republic of NGOs” for well over a decade now, but the earthquake just turbocharged their presence while devastating everything else, leaving foreign aid the only game in town:

“I’ve had two ministers come up to me this week, personally, and ask what’s in it for them,” says a frustrated IHRC official. “Since money grows on trees in this disaster, the attitude among Haitian officials is: Just call up your buddies in Washington, and they’ll send another check.”

Meanwhile, given that it’s difficult to effectively spend money in Haiti, millions of dollars are making their way to people like our old friends at Dalberg:

There was significant grumbling in aid circles, for example, when the department awarded a $1.5 million contract to a New York-based consulting firm called Dalberg Global Development Advisors. Glenn Smucker, an anthropologist who specializes in Haiti, was asked to brief the Dalberg team, which included several summer associates from Harvard Business School. “They were nice people, but they struck me as naive about Haiti,” he says. “They asked the appropriate questions and were eager to learn, but from what I gathered, they had never lived overseas, didn’t have any disaster experience or any background in urban planning, and they’d never carried out any program activities on the ground. Only one of them spoke any French. They were being asked to do extremely important things that they had no background to do.”
One of Dalberg’s assignments was to do an assessment of a broad, bow-tie-shaped swath of land near the Corail camp, where thousands of Haitians had moved earlier that spring. Even as refugees were streaming onto the land and establishing squatter camps, the State Department hoped to create new communities in the area as part of an attempt to depopulate Port-au-Prince. It was the second time in three months that consultants had assessed the area, and after Dalberg was finished, a team of experts from USAID was brought in to reassess the assessments. “One of the sites they said was habitable was actually a small mountain,” says Bill Vastine, one of the experts on the USAID team. “It had an open-mined pit on one side of it, a severe 100-foot vertical cliff, and ravines.” After looking at the photos in Dalberg’s report, he said, “it became clear that these people may not even have gotten out of their SUVs.” The process of assessments and reassessments dragged on for months. In the end, only one of the six sites approved by Dalberg was deemed viable for relocation.

I’m pretty sure that when individuals and politicians committed billions of dollars to Haiti, they weren’t intending for it to be spent on callow HBS types who generate headlines like “With Andrew Stern’s Help, US Executes Holistic Rebuilding Approach in Haiti”.
Meanwhile, Haiti’s suffering if anything is getting worse. Not only are new shantytowns springing up in places like Corail, but disease is now spreading disastrously: cholera hadn’t been seen in Haiti for more than 60 years, before the earthquake; it has now infected more than 250,000 Haitians, with no sign that it’s remotely under control.
It’s worth remembering, too, that there was reason for optimism regarding the rebuilding of Haiti. There was lots of money, and the country’s right on America’s doorstep, which also helps. On top of that, it had the best conceivable international ambassador in Bill Clinton, backed up with the full support of the US government in the form of his wife’s oft-stated commitment to getting Haiti back on its feet.
Development is a tricky game, easy to get wrong; as a rule, it only works when the people providing the aid are working at the margin, helping to strengthen existing projects, industries, and institutions, rather than trying to build them all from scratch. Let’s target it where it can be most effective, rather than where there happens to have been a newsworthy natural disaster. Of course Haiti needed help after the earthquake, but $11 billion was far too much for the fragile and damaged economy to bear. It’s a lesson worth remembering, the next time a natural disaster triggers another wave of appeals for financial aid.