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Why the post-1960 divergence for Haiti and the Dominican Republic?

Summary:
Here is a very good post from Noah Smith on that topic, opening excerpt: As recently as 1960, the two countries had similar standards of living. Today, the D.R., by some measures, is eight times as rich as Haiti, while Haiti’s standard of living hasn’t advanced at all since 1950. The D.R. has already surpassed Brazil and Colombia; if Covid doesn’t knock it off its growth trend, it’ll soon pass Mexico and Argentina. A forensic exercise then follows, for instance: When Haiti won its independence from France, France sent warships to demand reparations for Haitian expropriation of French property (i.e. slaves and land). Haiti agreed to pay a considerable sum, and to give France cheap exports as well. Some people blame this monumental act of extortion for Haiti’s poverty. It makes a simple,

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Here is a very good post from Noah Smith on that topic, opening excerpt:

As recently as 1960, the two countries had similar standards of living. Today, the D.R., by some measures, is eight times as rich as Haiti, while Haiti’s standard of living hasn’t advanced at all since 1950.

The D.R. has already surpassed Brazil and Colombia; if Covid doesn’t knock it off its growth trend, it’ll soon pass Mexico and Argentina.

A forensic exercise then follows, for instance:

When Haiti won its independence from France, France sent warships to demand reparations for Haitian expropriation of French property (i.e. slaves and land). Haiti agreed to pay a considerable sum, and to give France cheap exports as well. Some people blame this monumental act of extortion for Haiti’s poverty. It makes a simple, intuitive sort of sense — if someone takes your money, it’s hard to get rich right?

But there are some big problems with this thesis. First of all, Haiti finished paying back this debt (which France reduced) in 1947. That’s at least a decade before Haiti and the D.R. started to diverge economically, and four decades before the divergence became pronounced. Furthermore, Haiti’s total external debt in 2019 was only about 15% of GDP, while the D.R.’s was about 40%! The D.R. is far more indebted to foreign countries now than Haiti is.

I agree with the points made by Noah in the longer post, and would add a few factors.  First, Haiti’s moments of extreme political weakness happened to coincide with a major increase in drug trafficking in the region.  Second, the DR has done an especially good job of mobilizing Special Economic Zones to support its economic growth, at least relative to Haiti.  That in turn had broader feedback effects on subsequent political economy and thus economic growth.  Haiti, in contrast, ended driving out its MNEs — Disney manufacturing was once in the country, baseball production was once significant, and so on, but none of those gains have compounded and mostly they went away, due to bad governance and infrastructure.  (And the massive corruption at Haiti’s main port is a striking contrast with DR export procedures through the SEZs.)  Third, and this one may be as much symptom as cause, but the DR managed to decentralize its power structures somewhat through economic growth on its peripheries, through both tourism and SEZs.  In Haiti, the second- and third-tier cities have not developed, and have turned into backwaters, while centralization in Port-au-Prince has continued unabated, thereby intensifying the logic of Haitian rent-seeking.

The post Why the post-1960 divergence for Haiti and the Dominican Republic? appeared first on Marginal REVOLUTION.

Tyler Cowen
Tyler Cowen is an American economist, academic, and writer. He occupies the Holbert C. Harris Chair of economics as a professor at George Mason University and is co-author, with Alex Tabarrok, of the popular economics blog Marginal Revolution. Cowen and Tabarrok have also ventured into online education by starting Marginal Revolution University. He currently writes the "Economic Scene" column for the New York Times, and he also writes for such publications as The New Republic, the Wall Street Journal, Forbes, Newsweek, and the Wilson Quarterly.

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