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Haiti - Growth and Structure of the Economy
Growth and structure of the economy
After Christopher Columbus's discovery of Hispaniola (La Isla Española) in 1492, Spanish mercantilists generally neglected the island and instead focused their endeavors on the more richly endowed areas of Mexico and Peru. In 1664 France successfully converted the western third of Hispaniola into an unofficial territory; over the next 140 years French colonialists transformed the colony of Saint-Domingue into a slave-based plantation economy known as the "pearl of the Antilles." By the late eighteenth century, SaintDomingue boasted thousands of profitable plantations: 800 produced sugar; 3,000, coffee; 800, cotton; and nearly 3,000, indigo. Haiti became France's most lucrative overseas possession. In his classic 1776 publication, The Wealth of Nations, economist Adam Smith declared Saint-Domingue "the most important of the sugar colonies of the West Indies."
The Haitian Revolution (1791-1803) devastated agricultural output. The leadership of the new nation faced the daunting task of reviving economic activity without relying on slavery. After the 1806 assassination of Haiti's first national leader, JeanJacques Dessalines, Haiti operated under a dual economy, with forced labor on large plantations in the north and small-scale farming in partitioned land in the south. The 1820 unification of the nation entailed the abandonment of plantation agriculture and the establishment of a peasant-based agricultural economy. Although policies of land redistribution and limited social and economic reform improved the lives of the former slaves, the policies also produced a severe and ultimately irreversible decline in agricultural production.
Successive Haitian presidents gave priority to selfenrichment and to the payment of a controversial debt with France, which left little capital for improving the standard of living. The rigid social stratification and the political disparity between mulattoes and blacks further widened the gap between the rich elite and the poor.
The nineteen-year United States occupation of Haiti (1915-34) brought unquestionable economic benefits. United States administrators controlled fiscal and monetary policy largely to the country's benefit. The United States military built major roads, introduced automatic telephones in Port-au-Prince, constructed bridges, dredged harbors, erected schools, established clinics, and undertook other previously neglected public works. The troops departed in 1934, but economic advisers remained in Haiti to manage the national treasury until 1941. The Haitian economy enjoyed some growth in the 1940s and the early 1950s, partly because of improvements in the country's infrastructure, but mostly because of improved prices for its exports.
François Duvalier fashioned the modern Haitian economy into a system dominated by personal patronage, institutionalized corruption, and internal security concerns. Bent on retaining power at all costs, Duvalier heavily taxed the citizenry to finance the military, the paramilitary security forces known as the tonton makouts, and his family's vast expenses. His subordinates, from cabinet ministers to rural section chiefs (chefs de sections), followed Duvalier's example, essentially plundering the peasantry at every level of the economy. The most notorious example of Duvalier's overt corruption was his administration of a tax agency, the Régie du Tabac (Tobacco Administration), for which no accounting records were kept. Although he proclaimed himself a champion of black nationalism, Duvalier almost completely ignored the impoverished rural black population in his government expenditures. As a result, many Haitians--rich, poor, educated, and uneducated--left the countryside or fled the country altogether. "Brain drain" became a serious problem. In 1969, for example, some observers believed that there were more Haitian health professionals in Montreal than in all of Haiti.
Overall, Duvalier's policies had no positive effect in Haiti. According to the United Nations (UN), Haiti was the only country in the world that did not experience real economic growth for most of the 1950s and the 1960s, a period when the world economy expanded at its most rapid rate in history.
During the 1970s, Haiti enjoyed a 5 percent annual economic growth rate as foreign aid, overseas investment, and higher commodity prices buoyed the economy. A key factor in this growth was the 1973 renewal of foreign aid from the United States and other donors after a ten-year suspension. The rapid development of assembly manufacturing that began in the late 1960s also stimulated economic expansion. Higher prices for coffee, sugar, cacao, and essential oils boosted previously depressed cash-crop production. Infrastructure development proceeded, construction boomed, banking prospered, and tourist arrivals more than doubled. Haiti modernized considerably, especially in Port-au- Prince and the major provincial cities. Agriculture stagnated, however, and per capita food production in real terms continued to decline. Jean-Claude Duvalier showed some interest in developing the nonagricultural sectors of the economy during his regime, and the state slowly expanded its role.
Haiti's fortunes soured in the 1980s, as real economic growth declined by 2.5 percent a year from 1980 to 1985. Inflation rose over the same period from 6 to 8 percent, and official unemployment jumped from 22 percent to more than 30 percent. After an interval of positive growth in 1986 and 1987, the negative growth trend continued in 1988, when the economy contracted by 5 percent. Although the country's poor performance in the 1980s to some extent reflected hemispheric trends, Haiti faced its own peculiar obstacles, many of which stemmed from decades of government indifference to economic development. Uneven foreign aid flows, resulting from disputes over human rights violations and a lack of progress toward democracy, hampered government spending.Worsening ecological problems hindered agricultural development, and tourist arrivals plummeted because of negative media coverage of the island's political situation and the high incidence of AIDS among Haitians.
The most fundamental problems of the Haitian economy, however, were economic mismanagement and corruption. More avaricious than his father, Jean-Claude Duvalier overstepped even the traditionally accepted boundaries of Haitian corruption. Duvalierists under Jean-Claude engaged in, among other activities, drug trafficking, pilferage of development and food aid, illegal resale and export of subsidized oil, fraudulent lotteries, export of cadavers and blood plasma, manipulation of government contracts, tampering with pension funds, and skimming of budgeted funds. As a result, the president for life and his wife lived luxuriously, in stark contrast to the absolute poverty of most Haitians. Allegations of official corruption surfaced when Duvalier appointed a former World Bank official, Marc Bazin, to the post of finance minister in 1982. Bazin sought to investigate corruption and to reform fiscal accounting practices in connection with a 1981 International Monetary Fund (IMF) economic stabilization agreement. More zealous than Duvalier had anticipated, Bazin documented case after case of corruption, determined that at least 36 percent of government revenue was embezzled, and declared the country the "most mismanaged in the region." Although quickly replaced, Bazin gave credence to foreign complaints of corruption, such as that contained in a 1982 report by the Canadian government that deemed Duvalier's Haiti a kleptocracy.
After the fall of Duvalier, the provisional National Council of Government (Conseil National de Gouvernement--CNG) enacted numerous policy reforms mandated by structural adjustment lending programs from the IMF and the World Bank. These reforms included the privatization of unprofitable state-owned enterprises, trade liberalization, and export promotion. The CNG, however, never fully implemented the economic reforms because of nagging political instability. At the close of the decade, the economic direction of the military government, led by Lieutenant General Prosper Avril, remained unclear.
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Haiti Economic Structure | Economy Watch
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