Why Charity Hasn’t Done Much for Haiti

(by Mary Anastasia O’Grady, The Wall Street Journal) – When a 7.0 earthquake centered 16 miles from Port-au-Prince flattened Haiti three years ago, hundreds of millions of dollars flowed into aid organizations serving the country. Governments the world over promised billions more. The suffering was unfathomable, the call for relief impossible to resist.

But beyond meeting emergency needs of victims, throwing money at Haiti does not seem to have done much material good. In economic terms, the country is stuck in neutral, though this is not to say that there is nothing new to observe.

One notable development in recent years is the increase in Islamic proselytizing. A credible source reports that there are now 14 formal mosques in the Port-au-Prince area and at least one “madrassa” religious school in the small city of Miragoane. Qatar has been pouring in money. In December 2011, Louis Farrakhan, the controversial leader of the Nation of Islam, organized his own mission to Haiti.

Given that some sects of Islam deny rights to women and teach intolerance, and even violence, toward nonbelievers, this religious proselytizing is worthy of attention. Like many Africans, Haitians are desperate and vulnerable, and Western efforts to improve their lot are failing. A recent observation by Canada’s minister for international cooperation, Julian Fantino, that aid results are suboptimal was not a sign of flagging interest. Canada is instead demonstrating justifiable concern about whether its generosity is helping the Haitian people.

Handouts from the U.S. and Canada – which now seem to be largely channeled through foreign nongovernmental organizations [NGOs] – have helped the country earn the moniker [nickname] of “the republic of NGOs.” Yet blanketed as it is with charity, Haiti remains a basket case. Haiti-based writer Tate Watkins has observed that many NGO workers “are disconnected from the people they are here to help,” don’t learn Creole, “work on shorter timelines” and experience high turnover.

To add insult to poverty, foreign aid (whether it goes through the governments or NGOs) distorts both politics and commerce, undermining the evolution of market economics. Free resources reduce the pressure on politicians to make the reforms necessary to attract capital. When food and services are given away, entrepreneurs who might serve those markets are shut out.

President Michel Martelly, inaugurated in 2011, is the first Haitian leader in almost 20 years who is not connected to strongman Jean Bertrand Aristide’s Lavalas Party. But expectations for better economic growth under his administration have not been met. …

There are more plausible explanations for the Haitian economic malaise, starting with the vast divide between the lip service that government pays to reform, and the reality. Prime Minister Laurent Lamothe uses the right buzz words about “strengthening the rule of law” and “making Haiti a place that’s attractive to foreign and local investors.” He speaks glowingly about a government-planned industrial park in the north of the country that he says will bring 20,000 jobs to Haiti. “With an unemployment rate of 52 percent,” Mr. Lamothe wrote in July, “this park represents a unique opportunity to create much needed jobs that Haiti needs to break the cycle of extreme poverty.”

Wouldn’t that be grand? But the real problem of Haiti is revealed in the World Bank’s 2013 “Doing Business” survey, which rates the climate for entrepreneurship in 185 countries. This year, Haiti’s ranking fell one place to 174th. When it comes to the ease of “starting a business,” Haiti ranks 183rd in the world. In”protecting investors,” it ranks 169th, down from 167th last year. In “trading across borders,” Haiti lost three places from last year and now ranks 149th. “Paying taxes” also got more difficult relative to the rest of the world, as did “getting electricity.”

Such a dismal report card suggests that Haiti has a political problem, not one merely of poor infrastructure or not enough charity from abroad. One example is the decades-old open secret that the country’s main port is a dysfunctional nest of corruption, which hamstrings trade.

The interests at the port are dug in and apparently the political cost of fixing this problem is too high for President Martelly. Fair enough. But no one should be surprised when the transaction costs of getting around the problem – driving goods over the Dominican border or paying huge bribes – choke business.

Building a new port in the north of the country, as the aid gurus now want to do, will accomplish nothing on its own to fix what is essentially an institutional problem. On the contrary, it is likely to reduce the government’s interest in spending its own political capital to resolve the problem.

Published January 13, 2013 at The Wall Street Journal. Reprinted here January 24, 2013 for educational purposes only. Visit the website at wsj.com.