The Foreign Service Journal, November 2006

A Bitter Legacy The deterioration of Haiti’s econ- omy is rooted in the rapacious poli- cies of past governments and the misguided efforts of foreign donors and the international financial insti- tutions to ameliorate their effects. Under the dictatorial regimes of “Baby Doc” Jean Claude Duvalier and his successors in the 1970s and early 1980s, the Haitian economy was starved of resources for sustained growth and development. To attract outside capital, suc- cessive Haitian regimes offered foreign investors gener- ous incentives, including tax exemptions on income, profits and raw materials. Investors flocked to take advantage of the abundance of cheap, unskilled labor and the absence of foreign exchange controls and gov- ernment interference. With an infusion of foreign investment, Haiti experienced rapid growth in its assem- bly, construction and public utilities sectors. This “golden age” was short- lived, however, and failed to foster sustained economic growth and commercial development. By 1984, it was evident that the Haitian assembly industry — established according to the international com- munity’s development strategy — provided no long-term benefits to the country. Materials were imported for assembly, while finished products were exported and consumed abroad. Reliance on cheap, unskilled labor did little to enhance the skills of Haiti’s labor force, encourage train- ing or stimulate technology transfer. The dominance of the American market meant Haiti was at the mercy of U.S. import quotas and consumer preferences. Moreover, the Haitian government failed to benefit because commercial profits were tax-exempt and public services were subsidized. Thus, the system not only had a largely neutral effect on income distribution in Haiti F O C U S N O V E M B E R 2 0 0 6 / F O R E I G N S E R V I C E J O U R N A L 47 Even after the U.S.-led intervention in 1994, Haiti’s economy actually shrank.