Thursday, January 28, 2010

Haiti and Starvation

On the way to work a few days ago, I listened to an NPR segment on how relief efforts are going in Haiti. The long and short: not good. The most basic of necessities (food) is not getting where it needs to get. When relief trucks show up, the crowds absolutely mob the truck, immediately. And those who are the strongest get all the food. And those who go without on one day are very likely to go without again the next time the truck shows up. There’s too little food and an ineffective way of distributing what’s there.

However, the piece also mentioned that markets (as is their tendency) are emerging, allowing for people to buy food. The problem, however, is that no one is working and as a result everyone is depleting their savings trying to get food.

But this mix strikes me as odd. Because what you’ve got is:
  1. A *LOT* of people not working, and
  2. A *LOT* of work that needs to get done
Why aren’t these two things combining to reward people willing to work by paying them, thus solving the food crisis?

Sure, some people who are idle are incapable of working right now. Let’s assume that for every 2 families, that at least one person could work. And that work would be sufficient to purchase food for those 2 families. Why is this not happening?

One answer could be that no one is hiring. Because, of course, they don’t have any money to hire either. There are two problems with this answer:
  1. Hiring to do a task increases wealth. For example, if you hire someone to help you pick fruit, you have twice as much fruit to sell. Roughly doubling your profit margin. So hiring should generate more money, not less.
  2. Foreign investors, who have money, should be anxious to get access to the labor force that is desperate to get paid so that they can eat.
And I suspect that #2 is the key to solving the conundrum. Haiti started off as a poor country for a reason. That reason being that the institutional structure of the country has been in turmoil since Aristide took office in late 1990. This creates uncertainty for investors. They are not sure what type of government will exist, and what type of rules it will have. Will it have rules favorable to investment or will it behave like Venezuela, where foreign investors spent a lot of money building their oil production capacity only to have the Hugo Chavez’ government come and confiscate it. If you had money to invest into Haiti, but you were completely uncertain as to whether or not you’d lose it, what would you do? Would invest it there or find someplace else that had rules that you understood? Most people do the latter.

The question that investors have for Haiti is this: what type of government will Haiti have? Will it be worth it to invest there and help rebuild Haiti? If investors do this, will they get to keep their investments, or will the Haitians confiscate them? The fact that investors are not doing this in Haiti tells you what they think the answer will be. To solve this, the Haitian government, whatever is left of it, along with the Haitian military, needs to convince investors that stable institutions that encourage investment will remain. That investment brought to Haiti will not be stolen.

Convincing investors that Haitian institutions will be stable is not easy. But that is what is needed in Haiti to solve the starvation problem.

Another solution: let the Haitians become refugees and come here to work. But that has its own set of hurdles.