The Political Economy of Disaster

Mats Lundahl

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781135071738
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Haiti, one of the least developed and most vulnerable nations in the Western Hemisphere, made the international headlines in January 2010 when an earthquake destroyed the capital, Port-au-Prince. More than a year later, little reconstruction has taken place, in spite of a strong international funding commitment.

Mats Lundahl has written several seminal works on Haiti, and this volume brings together the best of his past work on Haiti's economic and political history, along with a comprehensive introduction and two new chapters which bring the story right up to the present day. Together, the volume provides both historical background and explanation as to why Haiti was so badly affected by the earthquake, and to why reconstruction efforts have been ineffective this far. Lundahl argues that the two main causes can found in the interaction between the growth of the population and the destruction of the arable soil on the one hand, and in the creation of a predatory state during the nineteenth century, which still exists to this day. This book provides a comprehensive analysis, which charts these themes from the time of the arrival of Columbus in the island in 1492, to the present day. The book also deals with contemporary market and policy failures, as well as the crucial recent elections, and considers the path ahead for this impoverished nation.

This book will be of huge relevance and interest not only to students and researchers in economic history, but also for all those working on development economics, development studies and American and Caribbean Studies more generally.

Part I

Before the quake

1 The economic consequences of 1809, or ‘Was Haiti doomed to fail?’

A story of factor proportions, labor market institutions and politics

The central theme in James Leyburn's classic The Haitian People¹ is the gap between the elite and the masses in Haiti. This gap, according to Leyburn, had at least seven dimensions: occupation, education and language, wealth, residence, marriage, religion and skin color. The elite did not work with their hands; the peasant masses did. The elite had a formal education and were able to speak French; the masses were uneducated and could speak only krèyol. The standard of living and the level of wealth were much higher among the elite than among the peasants. The dominant classes were urban dwellers while the peasants necessarily lived in the countryside. Peasants did not marry formally but lived in what is known as plasaj ònèt, i.e., in a common-law marriage, while the elite married in church. The elite were Roman Catholics while the masses practiced voodoo. Finally, the upper classes were light-skinned and the masses black.

Since Leyburrn wrote his book a number of things have changed in Haiti. Above all, the degree of urbanization has increased and brought scores of poor people into slum areas in the cities. Protestant sects have increased their presence, and Haiti also has a much more numerous middle class than at the beginning of the 1940s. This middle class to a very large extent is black; blacks have also made it into the elite.

The economic characteristics separating the elite and the masses, however, show few signs of change, if any. The elite do not work any more with their hands than they did when Leyburn undertook his study, and the gap in income and wealth between the elite and the masses is still wide, possibly even wider than in the 1940s. The abyss between the elite and the masses runs like a thread through the entire economic history of Haiti – ever since the discovery of the island by Columbus on his first voyage in 1492.

In the present chapter we will focus on the interest conflict between elite and masses and its relation to the factor endowment of the country on the one hand and the political situation on the other hand. At the root of the problem is the endeavor of the elite to wring a work-free outcome out of the masses in a situation where the existing factor endowment called for exceptional measures – measures that worked to the detriment of the masses. We will trace the development of the special labor market institutions that had to be created to solve this problem, see how some of these institutions broke down under the pressure of the factor endowment, how other, political, institutions were developed instead and pose the counterfactual question of whether a different sequence of events that would have allowed for the creation of a prosperous peasantry would have been possible.

The Spanish failure

The economic history of Haiti to a very large extent is a history of changes in factor proportions. When Columbus arrived on the island of Hispaniola, he found an indigenous population of between 50,000 and perhaps one million people.² During the course of a single generation, this figure would be reduced, virtually to zero, as a result of disease and harsh treatment. The factor endowment had changed drastically. The Spanish colony displayed a relative abundance of land and a pronounced scarcity of labor.

The standard Heckscher–Ohlin factor proportion theory of international trade envisages a change in the production pattern when a country or a region is pulled out of autarky and put in contact with other countries. Adjustment is smooth. Production factors leave those activities in which the country has a comparative disadvantage, i.e., they leave high-cost branches, and move into low-cost activities where the country is internationally competitive. If we use the two-good representation, as relative commodity prices change following the opening of international trade a reallocation of factors moves the production point on the transformation curve in response to the change, preserving the efficiency of production.

The above does not constitute an adequate representation of the encounter between Spaniards and Tainos since it does not touch on the core problem: the destruction of the Indian population, following the opening of trade:

a large percentage of the population soon died. The complex pattern of Western rule and colonization that existed in Asia was … not duplicated in Latin America. There was a total collapse of society and enormous losses from trade…. The crucial feature … is that the overall gains from trade were small and the deadweight loss was large…. Many of the gains accruing to the elites in the underdeveloped world and Europe (and possibly to workers in Europe) arose mainly from the shifts of power rather from increased productivity. This slash and burn capitalism was possible only because … [the system] was able to use the human capital accumulated over previous centuries and did not worry about maintaining its reproduction.³

There is a good economic explanation for this demographic catastrophe. The conquerors were intent on material gain without doing any hard work themselves. Their ideal was one of obtaining loot in battle rather than of grinding out an income from pacific work on farms or in mines, and this mentality did not fail to influence their choice of labor market institutions:

Fighting men and early settlers sought gain for themselves. The experience of the early years showed how apt the first colonists were to conquest and how unsuited most were to settlement … The fantasy of gold for the taking lured them all, and they followed this will-o'the-wisp from island to island and to far corners of continental America.

The problems of empire-building that faced the monarchs of Castile were to turn a frontier of plunder into a frontier of settlement; to reward the conquerors to whom empire was owned yet to replace them by stolid and governable settlers …⁴

This was no simple problem for the Crown, since it clashed with the logic of those who conquered the New World. Their logic was simple: in a situation where there is free land and free labor you cannot simultaneously have a non-working upper class. Either you have to monopolize the land or you enslave the workers.⁵ When Columbus arrived in Hispaniola, the island was hardly overcrowded. On the contrary, much of the land was still clad with virgin forest, i.e., the island had a frontier of more or less unexploited land, and free workers could always turn to this should working for the Europeans turn out to be unpalatable. Thus, drastic measures were required. In Hispaniola, as elsewhere in the New World, the economic system created by the Spaniards had to be built on compulsion.

The system built on control of labor, in repartimientos or encomiendas, i.e., the Indian communities were distributed to deserving conquistadores and were forced to provide labor services in exchange for defense and instruction in the virtues of Christianity. The system chosen worked at a high cost for the Indians. The Spanish conquest of Hispaniola altered the factor proportions, lowering the man-land ratio by destroying the population. In the main this was the result of European diseases, but the hard labor to which the Tainos were subjected made them more susceptible to illness. Thus, the contact between Europeans and Indians moved the production possibility frontier inwards. In 1514 less than 23,000 Indians (excluding the children and the aged) were left,⁶ and in 1548 not even 500 surviving Tainos were recorded.⁷ At the same time the alluvial gold dried up, which in turn made the number of Europeans diminish as well. In 1517 less than 4,000 of the 10,000 that had been present in 1510 remained.⁸ Hispaniola could not compete with the opportunities for quick enrichment that opened elsewhere:

The opening of Cuba rapidly drained Espanola of most of its Spanish population after 1513; news of entry to the mainland accelerated this exodus after 1517 and it turned into a stampede from all the island settlements when … [Cortés] secured a firm grip on the Aztec Empire in 1521.⁹

Not even the promulgation of the death penalty for leaving the island helped.¹⁰ An attempt to replace gold with sugar failed as well, in spite of the rapidly increasing European demand at the beginning of the sixteenth century. Sugar required heavy concentrations of both capital and labor, none of which were available. The sugar price was not high enough to make it possible to overcome the cost disadvantage. Importation of black African slaves had begun at the beginning of the sixteenth century. In 1546, their number amounted to 12,000 (and the number of whites to some 5,000, with the Indians close to extinction), and in 1568 it had not increased to more than 20,000. Already in 1555, a decline in sugar production had set in, and when the price of ginger began to rise toward the end of the sixteenth century while sugar was beginning to feel the pressure from Mexican competition, the sugar episode came to an end.¹¹ Ginger exports survived for about four or five decades into the seventeenth century before they were out-competed by supplies from the non-Spanish Antilles and Brazil.¹²

The Spanish colony in Hispaniola gradually went into the doldrums as the presence of other European powers made protection of transports an increasingly difficult issue and the organized, armed fleets from the Old to the New World began to bypass Santo Domingo in favor of Havana. As a result, the Spanish market for goods from Hispaniola in practice disappeared. In the 1570s, the foreign trade of the colony was little else than contraband trade. The Spanish were not in a position to enforce the commercial monopoly of the Crown.¹³ Thus, the Santo Domingo colony did not have any other option than to carry on contraband trade with other European nations if it were to survive.

At this point in time a Heckscher–Ohlin interpretation of the economy is possible. The products exported were land-intensive, as one should expect. Livestock raising became the dominant economic activity once sugar and ginger began to experience problems. The free use of pastures had been authorized by King Ferdinand already in 1507,¹⁴ and gradually the hato ranching system was developed, with land being held as terrenos comuneros, i.e., in communal tenure. The hatos were eminently land-intensive. Thus, in 1606 there were 190 hatos in all of Hispaniola, with an average of no more than three slaves in each.¹⁵ By then contraband trade dominated the picture to such an extent that the governor of the island, Antonio Osorio, took the decision to depopulate the part that lay left of a line roughly from Azua in the south to Santiago de los Caballeros in the north. The economy was already in a state of pure misery, and the decision to evacuate the western part made for the loss of both cattle and people, who chose to leave the island.¹⁶ The Spaniards had failed to produce a long-run solution of the factor proportions problem. The factor proportions had beaten the institutions chosen, and the time had come for a new economic system to be introduced.

The wealth-generating machine of Saint-Domingue

The general weakness of Spain during the seventeenth century made it impossible to impede the penetration of the French in Hispaniola. In 1625 they had managed to establish themselves in Saint Christopher (present-day Saint Kitts) and when they were expelled from there by Spanish forces in 1630 some of them came to Tortuga. This was the beginning of the French colony in Hispaniola. In spite of repeated efforts the Spaniards never managed to drive the French out of Tortuga, and little by little they made it into the larger island as well. The creation of the French West Indies Company in 1664 and the installation of a French governor of Tortuga and western Hispaniola put the colony on a firmer footing. In the early 1670s it already numbered some 8,000 inhabitants. Consolidation continued up to 1691, when a French army was destroyed at Sabana Real (present-day Limonade), Cap Français was sacked and French colonists began to leave. However, six years later, after the Treaty of Ryswick, all Spanish claims to the western part of Hispaniola effectively ceased.¹⁷

Now the French were free to build what was to become their richest colony: Saint-Domingue. From the mid-seventeenth century up to around 1730 France recovered from the costly wars of Louis XIV and thereafter a phase of economic expansion began. The French national income more than doubled during the first 75 years of the eighteenth century, and the effects of this were felt also in the colonies, through the expansion of trade. The Saint-Domingue colony was especially lucky, since the French loss of Canada to Britain and Louisiana to Spain in 1763 meant that much of the trade that had formerly taken place with these colonies was now redirected to the French West Indies. In addition Saint-Domingue could profit from selling its products to the growing market of continental Europe and North America.¹⁸

The Saint-Domingue colony had a slow start:

The early years of this new French colony were unimpressive, the majority of its residents being former buccaneers, who could hardly have regarded agricultural life as other than dull, and who certainly did not make successful farmers. Only when new immigrants from France in the seventeen-twenties demonstrated that steady profits could be made by raising indigo, sugar, coffee, and cocoa, all of which flourished in the region, did the era of prosperity begin. Plantations were soon staked out all over Saint-Domingue.¹⁹

The first agricultural product to be exported from the French colony of Hispaniola was tobacco, grown on small farms.²⁰ This was the dominant export until about 1680, but overproduction, French import duties on colonial tobacco and the competition from the rapidly rising sugar plantations made production cease thereafter.²¹ Toward the end of the seventeenth century two more export products were added: cocoa and indigo.²² Cotton was cultivated, usually along with indigo, around the same time, but would soon suffer a setback. Again, the cause was the rise of the product upon which the wealth of Saint-Domingue would rest: sugar, which almost finished cotton production. It was not until the 1750s that cotton production would make a comeback.²³

The rise of sugar may be described as a staples episode.²⁴ A staple is defined as

a product with a large natural resource content. Some part of its fabrication must take place on the spot, even if only in the trivial sense of seizing it away from Nature. The staple is a product which does not require elaborate processing involving large quantities of labor or rare skills. (This does not preclude its using large amounts of capital …) The staple is a product which will bear transport charges and which is in international demand.²⁵

Sugar had been a scarce and expensive commodity in medieval Euro...