Hispaniola's Great Divergence
Why are Haiti and the DR so different?
In July 2021, Haiti's president was murdered in his own home. Although he had personal security, not a shot was fired to defend Jovenel Moïse against the mercenaries, who invaded in the middle of the night. One year later, the mastermind behind the assassination still hasn’t been found.
A month later, an earthquake hit Haiti’s southern peninsula. It killed over 2,000 people and damaged or destroyed over 137,000 homes.
By September, thousands of Haitians began appearing on the border of Texas and Mexico. Their story went viral as pictures showed them being chased by American border patrol agents on horseback, like a twisted reenactment of hunting fugitive slaves.
Haiti is a country that can’t catch a break.
Any analysis of Haiti must state two facts. First, Haiti is the only country where slavery was defeated by a slave revolution. Second, Haiti is one of the poorest countries in the world, and the poorest in the Western Hemisphere. Now that I’ve stated these facts, I’d like to explore deeper. What do we know about Haiti’s poverty? How does this relate to its history? And why does it compare so unfavourably with the Dominican Republic?
Haiti is poor, but compared to what?
When we ask, “Why is Haiti so poor?”, we must also ask, “Compared to what?”. After all, there are dozens of African countries that are poorer than Haiti. In fact, many Haitians are descendants of slaves ripped from Benin, and until 2018, Haiti’s GDP per capita was higher than Benin’s. The reason why Haiti’s poverty stands out is because of two obvious comparisons.
First, Haiti is poor compared to its past. When Haiti was the French colony of Saint Domingue, it was the most valuable colony in the world. It supplied half of the world’s coffee and half of the world’s sugar. Of course, this value was created on the scarred backs of hundreds of thousands of slaves.
Second, Haiti is poor compared to Latin America and the Caribbean. In particular, Haiti is much poorer than the Dominican Republic, with which it shares the island of Hispaniola. While they started with similar natural endowments, today the DR’s GDP per capita is more than five times greater than Haiti’s. The Dominican Republic’s living standards are comparable to Mexico or Brazil, yet if you cross to the western side, you walk into a nation comparable to Cameroon or Senegal.
What’s interesting is how the relationship flips when we go back in history. When Haiti was an important piece of the global economy, the Dominican Republic was a trivial property in the Spanish Empire. Spain was so preoccupied with extracting as much as it could from the South American continent that it left the DR as cattle-raising pasture. The island of Hispaniola is a microcosm of what economic historians call a ‘reversal of fortune’. Historically fruitful colonies are today relatively poor (think Mexico and Peru), while historically unproductive colonies are today the richest (think the U.S. and Canada).
When did the DR overtake Haiti?
When did the Dominican Republic overtake Haiti? Unfortunately, we’re not sure. It looks like Haiti’s GDP per capita was higher than the DR’s as recently as 1954. But, as I have written before, that’s probably a miscalculation. This is one of the troubles of working with Haiti: it’s nearly impossible to get good, consistent data. Although there is more relevant data than you might think, it pales in comparison to what we have for many other countries.
Let’s look at the most basic data and compare. A competent state should at least know how many people live in it, so do these countries succeed in conducting censuses?
The Dominican Republic recorded its first census in 1920, and this year it is preparing to conduct its 10th. Haiti conducted its first census in 1950 and since then has done only three more. Given Haiti’s struggles just to count its population, it is unsurprising that we don’t have a lot of detailed economic data.
There are, however, hints that Haiti and the DR began diverging much earlier than the 1950s. In the 1920s, hundreds of thousands of Haitians were migrating to the Dominican Republic to work on sugar plantations; economic opportunity was greater for many abroad. This is more consistent with divergence occurring around 1900, as was calculated by the economist Victor Bulmer-Thomas.
Haiti’s low standard of living
Haiti is strikingly poor. Half the population lives on less than $3.20 per day. 40% of the population lacks access to essential health services. Barely half the population has access to safe water. These figures are abysmal by the standards of Latin America and the Caribbean.
One popular theory is that Haiti’s poverty is a result of its indemnity to France. Although Haiti declared independence in 1804, France refused to formally recognise it. In 1825, Haiti and France struck a deal: France would recognise Haiti’s independence in exchange for an indemnity for the lost plantations and slaves. Haiti paid millions of dollars every year to France until the debt was finally paid off in 1947. Interest in this explanation has been reignited with recent attention from the New York Times. But the debt payments were a fraction of customs revenues, which were themselves a small fraction of the Haitian economy. Furthermore, the most significant divergence came long after the debt was paid off.
Indeed, Mats Lundahl, the leading economic historian of Haiti, does not even include the indemnity in his list of decisive events in Haiti’s economic history. He believes that Haiti’s number one economic problem has been the erosion of arable land. As Haitian land quality has declined, agricultural productivity has plummeted. In The Uses of Haiti, Paul Farmer writes that, in 1985, “Haitian soil was so exhausted and poor, it could produce only .90 units of rice per hectare whereas the Dominican Republic produced 2.67” (p. 120).
Haiti’s poor land quality is the unfortunate outcome of land mismanagement, which can be traced back to its fight for independence. In the 1700s, when Haiti had incredibly fertile land, agriculture was organised under large slave plantations. After the slaves revolted in 1791, the newly free people did not want to return to anything resembling slavery. The new government broke up the former plantations and distributed the land to the people. In contrast to South America, where agricultural land was divided into large-scale farms called ‘latifundios’, Haiti began independence with widespread land ownership where nearly every household claimed a few acres.
This redistribution did not guarantee that a small-farm economy would persist. After all, when slavery ended in the British Empire, Jamaica also divided its plantations and gave them to the former slaves. Yet by the early 1900s, large-scale agriculture had returned to Jamaica.
This didn’t happen in Haiti, primarily because its constitution banned foreigners from owning land. There were also heavy restrictions on foreigners operating businesses in Haiti. Any foreigner who died in the country could not be buried there for fear that relatives could use the grave as a claim to land. When foreign merchants discovered that they could marry a Haitian woman and put all property in her name, there was a rush for Haitian wives. The government quickly dammed the flow by amending the constitution to ban these wives from owning property.
With such strong defences against foreign property ownership, no one could come in and reassemble the plantations. Contrast this to Jamaica. Although slavery was gone and the plantations were divided, Jamaica was still part of the British Empire. It was impossible to ban wealthy white businessmen from buying land. When the prices of bananas and sugar began rising, capital flowed into Jamaica and the plantations returned.
Haiti began independence with a small-farm economy and fiercely protected it from foreign interference. How did that create today’s problems with erosion?
The first farms were small, and they were families’ primary source of wealth. Each generation, the parents would divide the land among the children. Thus, the farms got smaller. By 1950, the average farm size in the country’s most fertile region was 0.65 hectares, compared to 83 hectares in the United States. As the population grew, the number of workers employed per square mile of land increased. Since capital was expensive and labour was relatively cheap, the most profitable farms used labour-intensive cultivation. Focusing all of that labour on such little land meant that every square meter was broken and ploughed every season. The soil was loose and exhausted, so erosion took its toll and agricultural productivity declined.
The reason why this does not occur in all countries is that larger farms benefit from economies of scale. Haiti’s small farms were too small to justify investments in labour-saving technologies. They were also too small for basic investments in soil fertility, like leaving land fallow. It’s hard to leave land uncultivated when your family must eat from a small plot. Finally, small farms create erosion through a tragedy of the commons. Erosion does not just affect your farm, it affects neighbouring farms. Investing in erosion prevention for your own land has little effect if your neighbours do nothing. Farmers on small plots, therefore, have an incentive to ignore the erosion problem and overfarm their own land.
Low agricultural productivity is only an explanation for Haiti’s poverty if Haitians had no other options. If agricultural productivity was so low, why didn’t they move into other industries?
It turns out, they did. While today Haiti is not known for its manufacturing, in the 1970s and 80s, Haiti became the world’s 9th largest assembler of goods for U.S. consumption. Haiti was the world’s largest producer of baseballs, and every baseball used in the MLB was stitched in Haiti. But all of Haiti’s manufacturing was low value-added assembly. The country was attractive because poor agricultural productivity gave Haitians few outside options, so wages were low. One of the reasons manufacturing declined in Haiti was the arrival of cheaper, more efficient assemblers in China and Bangladesh.
But manufacturing didn’t just leave because of competition. There was another pressing issue, and it illuminates how Haiti and the Dominican Republic diverged.
Why did Haiti and the DR diverge?
The gap between Haiti and the Dominican Republic started to widen during the 1960s and it blew open starting in the 1990s. It’s no surprise that divergence exploded during some of Haiti’s worst politics. However, Haiti has always had political problems – what stands out about this period?
Let’s start with Haiti’s early politics. From 1806 to 1915, 17 of Haiti’s 24 presidents were overthrown by revolution, and 11 were in office for less than a year. Just from 1910 to 1915, seven different men held the office of president. Before 1915, Haitian presidents could not find an agreement that shared ‘rents’ in such a way that gave the elites an interest in achieving political stability. Lundahl thinks this failure is related to the land redistribution: since everyone had land, there were no landless laborers to exploit, so the elite’s only chance at rent extraction was through overthrowing the government. Given the dearth of business opportunities, one of the only ways to get rich in Haiti was to back a coup in exchange for special treatment from the new government.
We break at 1915, because that’s when U.S. marines landed in Haiti, beginning an occupation that lasted until 1934. The invasion was prompted by five preceding years of extreme political instability combined with a fear of German influence in the region. In contrast to the Haitian presidents of the previous century, the Americans found a way to subdue any opposition.
This brings us to the Duvaliers. François Duvalier (“Papa Doc”) was elected by popular vote in 1957, but just nine months into his presidency he faced the same type of rebellion that toppled dozens of presidents before him. Instead of falling to the insurgency, Duvalier defeated it by rallying and arming civilians. He dismissed anyone in the army who posed a threat, and recruited any civilian with even a hint of ambition into his private militia. Duvalier’s health declined, and when he died in 1971, he had already put his son, Jean-Claude (“Baby Doc”) in power, who continued using his father’s tactics until 1986. Under this arrangement, Haiti achieved unprecedented political stability at the cost of an authoritarian regime that reigned in terror.
On the one hand, the increased stability of the Duvaliers may have acted against divergence. Without stable governance, it’s unlikely that Haiti would have attracted the light manufacturing and assembly industry that became so important to its economy. On the other hand, the Duvaliers fostered a culture of corruption, which exacerbated the gap with the DR. It’s believed that Papa Doc pocketed $150 million during his presidency, which is a pittance compared to the $1.6 billion his son grabbed. This kleptocratic environment contributed to the decline of the manufacturing industry. In the 1970s, Haiti had about 80,000 workers in manufacturing and assembly, but by 1991, it had fallen to 40,000.
The Duvaliers’ largest contributor to divergence was probably the missed opportunities, and this became especially clear after the regime fell. After Baby Doc was ousted in 1986, the interim government was even more brutal. When a democratic election was finally held in 1990, Jean-Bertrand Aristide was elected, but he only lasted eight months in office before a coup overthrew him. Since then, Haiti has been regularly plagued with political problems, culminating in 2021 with the assassination of Jovenel Moïse. The Duvaliers squandered their rare pocket of stability.
Unsurprisingly, Haiti’s political problems have made foreign companies wary to invest. Baseball manufacturing left Haiti in the early 1990s, when the U.S. responded to the ousting of Aristide with an embargo. Other manufacturing firms followed, leading the number of manufacturing jobs to decline to 20,000 by the year 2000.
The divergence between Haiti and the DR accelerated just as Haiti’s economy suffered from the inevitable political fallout of the Duvalier regime. While this story helps explain Haitian stagnation, why did the DR take off so suddenly?
One obvious answer is tourism. In 1995, Haiti received 370,000 tourists while the DR saw 1,806,000. By 2018, the Dominican Republic had 7,551,000 tourists while Haiti only had 1,333,000. Haiti’s struggle to attract tourists is directly related to the problems discussed in this article. Erosion has hurt the country’s natural beauty, and political instability has made it risky to travel there. Almost the only visitors willing to travel to Haiti are aid workers.
Another answer is that the Dominican Republic created special economic zones (SEZs). The DR is seen as a pioneer in SEZs, which give special tax and regulatory treatment to foreign capital. These SEZs only work if the country can credibly commit to its promises, which the Dominican Republic apparently did. As a result, it initially attracted light manufacturing and assembly, and it now produces higher value-added exports. This was a huge missed opportunity for Haiti, which in the 1970s was already attracting the type of investment that fueled the DR’s growth. Haiti never created any SEZs, though a small free trade zone opened a few years ago. Even if an SEZ had been created, it’s hard to imagine that Haiti's politics could have held onto it.
What can we do about it?
While Haiti’s persistently low standard of living isn’t an anomaly in the developing world, it stands out in contrast to its own history and to its neighbour, the Dominican Republic. This poverty stems from historical factors which have destroyed agricultural productivity, and a host of political problems which prevent Haiti from developing beyond agriculture. What, if anything, can we do about this?
While multinational companies would be a boon for Haiti, it’s hard to imagine them settling there in the short term. Likewise, while Haiti would benefit greatly from tourist revenue, the country isn’t currently safe to visit. In May 2022, the Haitian National Police reported 200 kidnappings.
Unfortunately, the most important thing Haiti needs to do is establish legitimate leadership that can restore political stability. I say ‘unfortunately’ because Haiti’s history has proven this to be difficult. We can see this playing out in recent times. After the 2010 earthquake, Haiti elected Michel Martelly, a former pop star, to the presidency. When his successor, the late Jovenel Moïse, took office, an investigation revealed that Martelly’s administration had embezzled about $2 billion of aid. Since Moïse was implicated in the scandal, Haitians filled the street in protest, locking down the country’s economy. Then, of course, Moïse was assassinated. A year after his murder, there is no clear plan for how to transition to a new president.
This is a process that should be guided by Haitians. Any interference from the international community could do more harm than good. For instance, the international community intervened in the 2010 election, demanding the removal of one of the candidates from the final round. His replacement was Martelly, who ended up winning. Research suggests that in the following election five years later, this intervention discouraged voters from participating. Foreign solutions are unlikely to convince Haitians that the government is working for them.
The key to a true solution can be summarised by a Haitian proverb: yon sel dwet pa manje kalalou. The literal translation is “You can’t eat okra with one finger,” referring to the necessity of acting together. Haiti somehow needs to solve a collective action problem to escape its political quagmire. Whether it will succeed, I do not know. But one must hope.
Craig Palsson is an assistant professor of economics in the Huntsman School of Business at Utah State University. He specialises in the economic history of Haiti and writes a newsletter about the Haitian economy. He also runs the YouTube channel Market Power.