The West Owes Haiti a Bail-Out
The West Owes Haiti a Bail-Out
Last week started with a conference in Montreal, called by a group of governments and international agencies calling themselves Friends of Haiti, to discuss the long and short term needs of the recently devastated Caribbean nation. Even as corpses remained under the earthquake's rubble and the government operated out of a police station, the assembled "friends" would not commit to cancelling Haiti's $1-billion debt. Instead they agreed to a 10-year plan with no details, and a commitment to meet again -- when the bodies have been buried along with coverage of the country -- sometime in the future.
A few days later in Washington, Timothy Geithner, the US treasury secretary, came before the house oversight committee to explain why he paid top dollar for $85-billion worth of toxic assets when he bailed out the insurance company AIG. Geithner said he was faced with a "tragic choice". "The moral, fair and just choice is to protect the innocent," he said.
There is no connection between these two events. But in the public imagination maybe there should be. The world cannot yet find $1-billion in debt relief for Haiti, the poorest country in the Western hemisphere, a country that spent more in 2008 servicing its debt than it did on health, education and the environment combined and that has now been flattened. But, over a weekend, a single country could rustle up $85-billion to keep a single company in business. It is an obscene reminder that, in the world of global capital, distressed assets are still more valued than distressed people.
The scale, urgency and determination with which Western governments moved to salvage a broken system stands in stark contrast to their laggardly, inadequate and negligent approach when it comes to rescuing a broken society. I refer here not to the emergency aid operations in Haiti, which, given the logistical obstacles of operating in a crushed nation, have been impressive. Nor to the charitable donations from all over the world that prove that people are far more generous than the governments they elect. But to the resources and long-term systemic solutions that Haiti needs and the West could summon -- if it so desired.
The recent earthquake was an act of nature. But the magnitude of the devastation, the consequent human toll and the inability of the country to recover unaided are the product of its political and economic marginalisation. Haiti was not so much a disaster waiting to happen as a disaster that kept happening, but that too few cared about. Haiti needs a bail-out. And if it does not get one the disasters will never end.
A recent UN study on the effect of 21 natural disasters on heavily indebted poor countries concluded that rebuilding costs leave long-term financial burdens. The UN's trade and development body found that a natural disaster leads to a 24%-point increase in a country's debt-to-GDP ratio.
"Shocks on such a scale can lead to a vicious cycle of economic distress, more external borrowing, burdensome debt servicing and insufficient investment to mitigate future shocks," it said.
Like a moviegoer walking into a thriller halfway through, those unfamiliar with Haitian history could be forgiven for mistaking the villains for the victims and benefactors for malefactors. For it was not simply a mixture of bad governance and even worse luck that got Haiti to this place (though they have played their part). Haiti is not a failed state; it's a state that has been failed since its birth, and precisely because of the nature of its birth.
Haiti gained its independence from France in 1804 through a slave rebellion -- the first postcolonial, independent black-led nation in the world. For this audacity they would pay for generations. Napoleon told one of his ministers at the time: "The freedom of the negroes, if recognised in St Domingue [as Haiti was then known] and legalised by France would at all times be a rallying point for freedom-seekers of the New World." The US president Thomas Jefferson was similarly concerned that Haiti would set a bad example.
The US refused to recognise the new country for more than half a century, and would then go on to occupy it for 20 years between the wars. The French burdened it with a punitive debt the country shouldered for over a century.
Both the US and France backed the Duvaliers' brutal dictatorships and when democratic government did arrive it was hogtied by terms imposed by the IMF and the World Bank. Among other things, rigged trade agreements transformed Haiti from a self-sufficient rice producer to importing the bulk of its rice from subsidised growers in the US. When Haiti fined American rice merchants $1,4-million in 2000 for allegedly evading customs duties, the US responded by freezing $30-million in aid. With friends like these, Haiti does not need enemies.
So Haiti's bail-out would not be an act of charity, but reimbursement and reparation. This is not a hand out but a hand back. In terms of Haiti's needs, it would be the beginning not the end. The country needs investment in its social and civic infrastructure so that it can shape its own future. It needs the kind of long-term interest from honest brokers that does not arrive for a coup or disaster and then leave when the cameras are gone.
A few months after President Betrand Aristide was ousted in a coup in 2004, Kofi Annan, the UN secretary general, told the UN forces: "The stakes are high. This time let us get it right." A month later I visited the town of St Marc to find the Red Cross centre had only one (broken) ambulance; the chief inspector of police had no walkie-talkies and one car; the town hall had no phones, and few tables or chairs; and its unelected deputy mayor had not been paid for four months. The stakes were high. But they did not even come close to getting it right.
The West owes Haiti. And yet still it keeps trying to extort more from the misery. The living had not yet been pulled from the debris when the vultures started circling. A day after the earthquake The Street, an investment website, published "An opportunity to heal Haiti", claiming: "Here are some companies that could potentially benefit: General Electric, Caterpillar, Deere, Fluor, Jacobs Engineering."
James Dobbins, a special envoy to Haiti under President Clinton and director of the International Security and Defence Policy Centre at the Rand Corporation, saw other possibilities. "This disaster is an opportunity to accelerate oft-delayed reforms," he argued. The reforms included "breaking up or at least reorganising the government-controlled telephone monopoly", and restructuring the ports. In other words, privatising what little is left of the country's state enterprises.
It is difficult to see what more the West could extract from a country where half the population struggle to eat once a day and people pay to have their children sold to families in the neighbouring Dominican Republic. Tragic choices indeed.
When they believe something to be a priority, western governments can forgive bad loans, pump out money and ease restrictions on credit. They have done it to save the wealthy from themselves; now they must do it to save the poor from the wealthy.