Wednesday, January 20, 2010

Chart of the Day: Same Island, 7X Difference in GDP


I first thought this huge difference in per-capita GDP between Dominican Republic and Haiti could be explained by the difference in economic freedom, but according to the Cato Economic Freedom of the World report, Haiti (#94) actually ranks just slightly ahead of the Dominican Republic (#95) for economic freedom.

If that doesn't explain it, what does?

Update: The
Heritage Foundation/WSJ 2010 Index of Economic Freedom was released today (h/t to Steve in the comments), and the Dominican Republic ranks #86 vs. #141 for Haiti. Haiti ranks especially low for Property Rights (score of 10 out of 100 vs. 30 for Dominican Republic) and Corruption (14 out of 100 vs. 30 for D.R.).

31 Comments:

At 1/20/2010 10:57 AM, Blogger Chris said...

Here is one blogger's concept, which isn't very PC:

http://alfin2100.blogspot.com/2010/01/why-is-haiti-so-poor.html

 
At 1/20/2010 11:09 AM, Blogger Matt said...

I believe what explains it is the language/protectionist gap.
Haitian creole is dominant. Also French, but the history tells that French colonies were inferior to the British. British/Carribean(english speaking) Islands advanced far better culturally, economically by FAR...fast forward to today. Barbados vs. Haiti - case in point.

 
At 1/20/2010 11:13 AM, Blogger C. August said...

Interesting question. Do you have any thoughts on this, MP?

In looking at the report, I wonder if teasing apart the summary rankings into their constituent parts might be helpful.

The Dom. Rep. is rather consistently poor across 4 areas of measure (minus Size of Govt.). The Size of Govt. measure seems to be simply the amount of govt. spending and the tax rates. So its relatively high rank (27) just says it can't afford more bureaucracy. [side note -- for me, this calls into question the wisdom of even including this measure in the report.]

Haiti has an even "better" Size of Govt. score: ranked 6th. My guess is because it's significantly poorer than Dom. Rep. But what of the other measures? Consistently low for 3 of them, but one stands out in comparison.

Haiti is ranked 129 out of 141 countries in terms of "Legal Structure and Security of Property Rights." Or, 1.5 out of 10 (10 being the most security of property rights). All other things being somewhat equal, this stands out to me as a possible cause for the disparity between the two island neighbors.

The rule of law and the protection of property rights is apparently quite worse in Haiti, and I think that would account for the difference in GDP.

As Ayn Rand wrote, "The right to [one's] life is the source of all rights—and the right to property is their only implementation. Without property rights, no other rights are possible."

 
At 1/20/2010 11:18 AM, Anonymous gettingrational said...

Former British colonies can have high economic success -- Singapore and Hong Kong come to mind. Why is this? The low tolerance for corruption by the British civil service at the lowest levels during colonialism. This became entrenched in the culture and society.

I have heard reports that $20.00 could buy off a building inspection in Haiti.

 
At 1/20/2010 11:20 AM, Blogger Steve said...

Not sure about Cato's report, but the report from the Heritage Foundation that came out today has Haiti ranked 141 and the DR at 86, so maybe economimc freedem does explain it.

 
At 1/20/2010 11:40 AM, Blogger Todd said...

Here's the best take I've seen on why Haiti is so poor:

http://www.webster.edu/~corbetre/haiti/misctopic/leftover/whypoor.htm

 
At 1/20/2010 11:55 AM, Blogger juandos said...

Consider the following from economist Matthew Kahn: THE DEATH TOLL FROM NATURAL DISASTERS: THE ROLE OF
INCOME, GEOGRAPHY, AND INSTITUTIONS

 
At 1/20/2010 11:59 AM, Anonymous Obey Obama said...

Compare inner city productivity vs the suburbs. Values are a big factor. A Religion of Voodoo doesn't produce goodness.

Of course, self-imposed totalitarianism prohibits these words.

 
At 1/20/2010 12:38 PM, Anonymous Anonymous said...

Jared Diamond had some comments on this in his book Collapse. Environmental degradation in Haiti, especially deforestation, is dramatically worse so that the border between the two countries is actually visible from space.

 
At 1/20/2010 1:02 PM, Blogger Methinks said...

civil wars?

I don't know, I'm just wondering. Political instability is a big obstacle to economic development.

 
At 1/20/2010 1:10 PM, Anonymous Ian Random said...

I like the world bank info at their doing business site. It says that the DR requires 19 days versus 195 days for Haiti.


http://www.doingbusiness.org/ExploreTopics/StartingBusiness/

 
At 1/20/2010 1:12 PM, Anonymous Benny The Man said...

Saudi girl, 13, sentenced to 90 lashes after she took a mobile phone to school

By Mike Theodoulou
Last updated at 1:25 PM on 20th January 2010

A 13-year-old girl has been sentenced to 90 lashes and two months' prison in Saudi Arabia after she took a mobile phone to school.


But hey, they have very high per capita income in Saudi Arabia. Let's see, is it free enterprise? No. An entrepenuerial culture? No. Human rights? Double no.

What conclusions can we draw from wide-ranging per capita incomes?

Any that we want.

 
At 1/20/2010 1:19 PM, Blogger stevedp86 said...

Besides the obvious tragic history of Haiti (which was a major influence)...there is an obvious difference in tourism. Most foreigners visiting DR are going on vacation and most foreigners going to Haiti are on humanitarian missions.

Royal Caribbean does own an island off the northern coast of Haiti though (Labadee).

 
At 1/20/2010 1:19 PM, Blogger stevedp86 said...

This comment has been removed by the author.

 
At 1/20/2010 1:20 PM, Anonymous Anonymous said...

The Dominican Republic's citizens have an average IQ of 82 (2006) while Haiti's citizens have an average IQ of 67. This can be explained by all sorts of different factors. The fact remains, however, that an average IQ of 67 is not so good for developing a modern economy.

IQ aside, probably one of the greatest factors is migration of the skilled/educated classes. Dominican Republic, not as much. Also, both countries had dictatorships/despots up until the not so distant past so it isn't as if their governments have been that remarkably different

 
At 1/20/2010 1:26 PM, Anonymous Anonymous said...

When I said that IQ could be explained by lots of different factors I should have mentioned the most important one: That Haitians might score poorly because they are poor and the Dominicans score higher because they are not as poor.

Education, infrastructure, rural vs urban, government institutions, nutrition, etc.

 
At 1/20/2010 1:35 PM, Blogger OA said...

I agree with Matt and gettingrational. It's the history of law enforcement. Not necessarily that everything was just, but extended periods of legal enforcement and governmental stability matter.

Even when they were kicked out, the British legal traditions generally lingered. When the French were kicked out, things seem to have been kicked out with them.

English colonies generally transitioned to a new, organized government. French colonies more often seemed to fall into chaos for a time. And the Dominican Republic was a French colony, just a long time ago and the US has intervened since then.

Cambodia and Vietnam were fairly recent French Colonies. Little bit of anarchy there until recently.

Haiti may be about the same as the Domican Republic now on the Cato's scale. But if they had a historical timeline, the last couple decades would rank really low. Actually even the last decade hasn't been very stable there. Arisitide was kicked out in 2004.

 
At 1/20/2010 1:35 PM, Blogger Methinks said...

That Haitians might score poorly because they are poor and the Dominicans score higher because they are not as poor.

Or the Haitians might score poorly because the higher IQ Haitians have left Haiti. Classic brain drain.

 
At 1/20/2010 1:39 PM, Anonymous Anonymous said...

Methinks,
Mentioned migration in the first post (as probably the greatest factor for why Haiti is so poor). Added the second post so I wouldn't be labeled racist for mentioning iq.

 
At 1/20/2010 2:05 PM, Anonymous Titus Pullo said...

I was flippantly wondering if baseball might be a reason. DR produces a large number of baseball players through training and chemicals. If the average mlb salary is $2 million and there are 250 DR players, then out of a country of 10 million, baseball fans contribute $50 to per annual GDP. Plus there has to be some additional increase by American teams having year round scouts, training facilities, etc to develop even more.

From what I remember reading years ago in a great book called "Mission to Civilize", the French had a habit of taking everything they could out of a colony they were liberating: telephones, etc.

 
At 1/20/2010 3:59 PM, Anonymous Benny The Man said...

The same Heritage Foundation study finds that Saudi Arabia is ranked #65 right below #64 France, but above #66 Thailand and #67 Turkey.
Really?
Turkey has a constitution, and strict separation of church and state.
France is a Western European democracy.
Thailand is an odd monarchy, but people do vote, and there are property rights.
Saudi Arabia? Where women cannot vote or even drive? That is economic freedom? How about all the Christians and Jews doing business in the kingdom?

BTW, Canada, with its national health plan, ranks above the USA on the Heritage chart. I guess we can pass national health insurce and move up the charts.

The wrap: You can say whatever you want, and draw whatever conclusions you want.

There is one fact: The Heritage Foundations was on an all-weekend-long pot smokeout when they made this "study."

 
At 1/20/2010 4:51 PM, Blogger OA said...

Nice pick and choose Benny. The women in Venezuela vote. Why is Venezuela so low? And Cubans have universal healthcare but they are again low on the ranking.

If you note, Saudi Arabia and Thailand are tied, but just in alphabetical order. Saudi Arabia declined from last year while Thailand bumped up.

France has a terrible score for government spending (52.3% of GDP), high taxes, and high labor regulation which is why it's that low in the rankings.

Saudi Arabia scores high for their low tax rates, openness to trade, and easy of starting a business. But does take a hit for property rights and other more individual oriented categories.

Thailand takes a hit for property rights and corruption. Including intellectual property issues (DVD's anyone?) and customs officials corruption. Also for restrictions on foreign investment.

Also note that the US was apparently higher than Canada last year and dropped in several categories. I think it's indisputable that economic freedom did decline in the US in the last year.

 
At 1/20/2010 6:06 PM, Blogger bix1951 said...

babies and schools

Haiti rate of literacy is 62%
Dominican Republic rate of literacy is 89%.

Births per 1000 people in Haiti is 35.7

Dominican Republic rate of births is 22.6.

 
At 1/20/2010 6:56 PM, Anonymous Anonymous said...

It is the legacy of slavery that keeps them down.

After all, their ancestors were slaves up until 1805!

Maybe in another 200 years they will be able to pull out of it.

 
At 1/20/2010 8:06 PM, Blogger Craig said...

There was a time (go ahead and call me a racist) when I attributed Haiti's poverty to cultural factors. But Hernando De Soto's The Mystery Of Capital spoke at length about the difficulty (or near impossibility) of owning property in Haiti. It changed my mind.

All the factors mentioned in the comments: language, education, the power of the elites -- contribute to Haiti's desperation. But the difficulty of buying your own hovel or patch of pasture which might later become your capital, I think, is the best explanation for Haiti's eternal status as the hell-hole of the hemisphere.

If you haven't read De Soto's book, I heartily recommend it. It is definitely not an economic treatise stuffed with formulae. It's a fascinating look at the difficulties facing the people who inhabit the third world.

 
At 1/20/2010 8:25 PM, Blogger juandos said...

Devastation In Haiti Shows Up In Google Earth's Before-And-After Images

(5 shots)

 
At 1/20/2010 9:53 PM, Blogger C. August said...

Interesting point, Craig. Take a look at my previous comment (#3) for an analysis that supports your points.

So many have talked about superficial or secondary factors, but property rights (and the objective rule of law to protect them) are at the core of the stability individuals need to flourish in society.

Of course there are other factors, so one can't simply look at the "property rights freedom score", sort it in ascending order, and have a direct "prosperity ranking," etc. But of all the measures in these reports from Heritage and Cato, the property rights ranking is the most fundamental and most important.

 
At 1/21/2010 2:57 PM, Blogger Methinks said...

Added the second post so I wouldn't be labeled racist for mentioning iq.

Sad that we're all so inanely PC that you felt you had to do that.

 
At 1/22/2010 1:51 AM, Blogger OBloodyHell said...

> That Haitians might score poorly because they are poor and the Dominicans score higher because they are not as poor.

Or the entire concept of IQ doesn't work outside the context of the social mileau the test is designed for...

"If the aborigine drafted an IQ test, all of Western civilization would presumably flunk it."
- Stanley Garn -

 
At 1/22/2010 2:48 AM, Blogger OBloodyHell said...

> Maybe in another 200 years they will be able to pull out of it.


Shhhh. Don't let the Democrats hear, or they'll start a foreign aid program to help them, with the same negative success rate as their domestic programs.

 
At 1/23/2010 7:37 PM, Blogger bix1951 said...

what is cause
what is effect
who can say
who knows
chicken or egg

it is all because to the BIG BANG
and whatever came before that....

 

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