Haitian Woman in Ouanaminthe
One of the fascinating aspects of our activities along the border is the chance to work in both Haiti and the Dominican Republic. This island of Hispaniola (or Quesqueya as the Haitians prefer) is less than half the size of Florida and yet is divided between two very different worlds. Although neither country is well-off by US or European standards, the Dominican Republic is doing dramatically better than its neighbor. Whereas the Dominican Republic’s economy is based on exports and tourism, most Haitians work in subsistence agriculture. Over much of the last forty years, the Dominican Republic has had one of the fastest growing economies in the hemisphere while Haiti has had one of the slowest. In real estate, brokers say that the value of a property is based on three factors: location, location, and location. Yet somehow, Haiti’s location has not helped its value.
The International Monetary Fund took on this challenging question in a working paper entitled, Growth in the Dominican Republic and Haiti: Why has the Grass Been Greener on One Side of Hispaniola?. This working paper, prepared by Laura Jaramillo and Cemile Sancak and distributed in March 2007 tries to answer the question using the IMF’s standard toolkit. As befits IMF economist, they quickly discounted the factors that Jared Diamond had raised in his excellent book, Collapse, to explain the difference such as the relative amounts of rainfall and population density. They also largely discount the impacts of each country’s different history stating that prior to the US occupation of the island in the early 20th century; both countries had equally weak institutions. They admit that by 1960, there was already a divergence in income between the two countries, but a far smaller one than exists today.
The paper then focuses on the specific economic variables for both countries to try and determine their impact on growth for each country between 1960 and 2005. They focused on two factors: institutional and macroeconomic stability. It is noteworthy that institutional stability is far more important than institutional legitimacy—the relative institutional stability of the coup years in Haiti (1993-1996) counted for more than the relatively chaotic years surrounding the return of President Aristide and the first election of President Preval. On the Dominican side, the authors consider the Dominican institutions to have slowly strengthened throughout the period. For macroeconomic stability, the authors found that both Haiti and the Dominican Republic were quite similar did better than the rest of Latin America in both the 1970s and 1980s. The marked difference came in the 1990s when the Dominican Republic and the rest of Latin America tamed their economies and Haiti did not.
The authors then looked at a variety of other factors that could contribute to economic growth: secondary school enrollment, availability of credit, monetary policy, and trade openness. In all of these areas, the Dominican Republic made great progress and Haiti did little. Again the differences were most noted during the 1990s.
The authors conclude:
The panel regression and case study approach allow us to conclude that policy decisions since 1960 have played a central role in the growth divergence between Haiti and the Dominican Republic. In general, structural policies have been the key determinant of growth in both the Dominican Republic and Haiti, followed by political stability and stabilization policies. In particular, we find that the Dominican Republic has consistently outperformed Haiti and LAC in terms of implementation of structural measures, stabilization policies, as well as political stability. Meanwhile, Haiti has lagged the region in implementing structural policies, while being subject to numerous political shocks that have severely affected its growth performance. (p23)
I found this paper to be fascinating in that the authors look at the situation in the two countries from a very distinct perspective. I disagree with their conclusion that structural policies were more important than political stability—unstable institutions or those with questionable legitimacy have great difficulty in implementing structural policies. I would argue that Haiti’s instability have blocked its institutions from implementing structural reforms.
In an upcoming entry, I will look at the history of the two countries and how that has led to the distinctive cultural and economic differences.
The History Series:
Part 2: The birth of the Haitian-Dominican border
Part 3: The border becomes a wall: 1936-1986
Part 4: The porous border
#1 by zach on September 1st, 2009
Seems to me they identified not the causes but the corollaries or effects. It would be difficult to form operable policies out of their analysis. What would they say: make and implement better policies?
#2 by Elizabeth Eames on September 1st, 2009
Could you explain a bit what the term “structural policies” means? And while you are there, spend a little time with “stabilization policies” and “structural measures”.
I do not understand these terms, and so, this report makes no sense to me.
#3 by ONeil on September 2nd, 2009
Elizabeth,
Structural policies are the policies that a government puts in place to encourage production or industries. Structural measures are the specific steps that the government takes to put these policies into effect. For example, in 1993 the Dominican Republic eliminated export licensing, minimum prices for exports, and all export taxes. These changes helped stimulate foreign investment and helped lead to the dramatic growth of the late 1990s. By contrast, Haiti’s economy was blocked by the OAS embargo from 1991 until 1994. Neither President Aristide nor President Preval developed any significant new structural policies nor implemented any new structural measures.
Stabilization policies are the government policies that protect the economy by combating exchange rate fluctuation, inflation and budget deficits. According to the authors of the report, the DR undertook comprehensive economic program in the early 1990s that led to a sharp reduction in the national debt, low inflation, and a stable currency. Again, Haiti’s lack of policies led to high inflation and a very unstable currency.
The authors seemed to ignore the reasons that Haiti did not develop more effective policies—the lack of legitimacy for governments installed by coups and the weak power held by all of Haiti’s recent governments—and instead credits Haiti’s poverty to poor policy decisions. Their conclusions do point out the strong need for Haiti to develop more effective structural and stabilization policies as a prerequisite to further growth.
Does that make sense?
#4 by ONeil on September 2nd, 2009
Zach, That’s true. The paper was written more as an investigation of what might have caused the differential growth rates rather than as a guide towards what should be done.
#5 by Elizabeth Eames on September 4th, 2009
Yes, thanks for explaining the terms. Now that I understand the terms a bit I can, in fact, make a case for a bit of disagreement… in that … Our Friends at The Bank… as they are known are perhaps just looking at the “money and trade” side of things…without really looking deeper into the causes inside of Haiti.
Here is perhaps a bit of a deeper analysis by Bob Corbett who has maintained the Haiti English speaking list serve for over 20 years.
http://www.webster.edu/~corbetre/haiti/misctopic/leftover/whypoor.htm
#6 by Lee on September 6th, 2009
It’s ironic that the IMF, who has been feeding Haiti PRSPs (www.imf.org/external/NP/prsp/prsp.asp) for 20-30 years, are now trying to figure out “what went wrong”.
It would behoove them to begin the paper by looking at the IMF’s own predatory lending first. They could call that reflection “Chapter 1″.
I have a basic analysis of the relationships between Aid and external/internal shocks, over the past 20 years. It’s far from perfect, more of a work in progress.
http://leeinhaiti.com/2009/08/development-aid-and-inequality-relationships-in-haiti-1987-2007/
#7 by Elizabeth Eames on September 8th, 2009
Hi, Lee, I am sure that you have some good points but I find them inaccessible as a layperson. Now, I read Stieglitz, and Sachs, and Easterly and Kevin Philips for fun so I am a pretty savy lay person. I am sure that you have some very good points to share. I just can-t get to them. I could not download the PDF or see the graphs.
Also, I would dispute the rates that are given for Haiti´’s population growth. It is well observed here in the DR that most Haitian women have 5 and 6 children. There are a great number of Haitian women who come across the border to give birth as well. Of course the child mortality rate is high. Anyway, I think that almost all stats on Haiti are pretty much works of fiction… except of course how much money is lent or donate by external agencies.
But even in that amount… there is very little measure of how much of that money ever actually reaches the ground… Sure there is a heading for “project costs in the field” but what portion gets to … say… the FARMERS in the form of SEEDS and tools and such?
Do we have a tracking system for that?
#8 by Atabey on November 1st, 2009
I remember as a young undergraduate spending some time looking at the Haitian-Dominican situation and wondering wheather or not Haiti’s problems could not be better solved or at least ameliorate by the former colonial master France allowing a policy of immigration to say French Guyana or any other foreign dependency or department. Simply put, at close to 10-12 million people, Haiti’s demographic pressures on the land and resources are unsustainable, and some other measures need to be placed on the table.
#9 by jvilla on May 22nd, 2012
could it be that haiti has a corrupted government and baby doc took all the doe to france. i dont think that the government likes to educate, hispanics in dominica like education and they want to get ahead. are haitians lacking motivation, education, let s get out of this mess attitude. call it what it is. haitians need to vote someone honest to take care of business instead of putting money in their pockets.