haiti-t or love it

Haiti-t or Love it

The Modern Day Model of Inequality

Martin Ibasco [email protected] U96565117EC102 DD Jay ZagorskyEC102 D2 Eyno Rots

Boston University

mailto:[email protected]:[email protected]

Haiti, The Minuscule Meniscus

Located in the Caribbean, west of the Dominican Republic, in between the Carib-bean Sea and the North Atlantic Ocean, is Haiti. Formally known as the Republic of Haiti, the country is governed by a republican ad-ministration that has been independent since January 1, 1804. Haiti has a population of around 9.9 million people (as of July 2013) with three main ethnicities. Blacks are the majority com-posing 95% of the population. Mulattos and whites are the minority composing 5% of the population. Considered to be a country rich in natural resources, nearly two-fifths of all Hai-tians depend on the agricultural sector of the economy.

Despite being a free market economy benefitting from low labor costs and tariff free access to the US for most of its exports, corruption is prevalent in Haiti. The effects of which have been passed on to most of the population, maintaining high levels of poverty (80% of the population living under the poverty line of $2 per day) together with low levels of educa-tion (more than 50% of children aged 4 to 12 are not enrolled in school). Bearing in mind Haitis susceptibility towards natural disasters, the continuous growth of its economy can only be considered as dependable as the stability of a torn meniscus.

This paper will explore the different macroeconomic trends in the history of Haiti, util-izing factors such as growth, debt, and labor, in conjunction with the current state of wide-spread poverty and income inequality present in its society.

Martin Ibasco EC102

Haiti-t or Love it The Modern Day Model of Inequality 2

A Bumpy Economic Path

Macroeconomics in Simple TermsMacroeconomics in Simple TermsMacroeconomics in Simple TermsMacroeconomics in Simple TermsTerminology What is it? How is it calculated? Types

GDP

Gross Domestic Product

The market value of all goods and services produced in a countrys geographic boundaries in a given time period, minus the value of all goods and services used in the process of production.

GDP is the sum of Consumption (C), Investments (I), Government Purchases (G), and Exports (X), minus Imports (M).

Nominal GDP is the value all goods and services produced, not adjusted for inflation using the current price.

GDP

Gross Domestic Product

The market value of all goods and services produced in a countrys geographic boundaries in a given time period, minus the value of all goods and services used in the process of production.

In formula form:

GDP = C + I + G + X - M

Real GDP is the value of all goods and services produced, adjusted for inflation using a constant price.

GNI

Gross National Income

The sum value of GDP plus net receipts of primary income (employee compensation and capital investment income) from abroad.

GNI is the sum of GDP, Net Income (Foreign Income FL-Domestic Income DL), and Net Capital Income (NCI)

Nominal GNI is the combined value of GDP with net receipts of primary income abroad, not adjusted for inflation using the current price.

GNI

Gross National Income

The sum value of GDP plus net receipts of primary income (employee compensation and capital investment income) from abroad. In formula form:

GNI = GDP + (FL-DL) + NCI

Real GNI is the combined value of GDP with net receipts of primary income abroad, adjusted for inflation using a constant price.

After defeating the French forces on January 1, 1804, Haiti was declared an inde-pendent nation. Exactly fifty-nine years later, on January 1, 1863, Abraham Lincoln recog-nized Haiti, authorizing the provision of tariff free exports to the US, commencing Haitis

route towards economical progress.

In early years of the 1990s, there much political in-stability in Haiti. Aristide, a priest, was elected president in 1990 but was ousted in 1991 only to be restored to power by the UN in 1994. During this time,

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(199142011)&&Nominal"GDP" Real"GDP""

Martin Ibasco EC102


the GDP of the country decreased significantly, plummeting a net of 21% over the four years. It was only in the latter part of the 1990s that Haitis GDP improved, soaring 10% (Real GDP) in 1995 when UN peacekeepers started replacing US troops. The election of Rene Preval re-inforced this growth as, after his election in 1996, Real GDP grew at a constant rate of around 3% per year all the way till 2000.

In the years of the 20th century there has been constant growth in the real GDP of Haiti. There have been occasional dips which are attributed to the natural disasters that strike the country such as the severe floods that occurred in 2004 causing a decrease of 4% in real GDP and the massive earthquake that struck Port-au-Prince, Haitis capital, causing a 5% decrease in real GDP.

In 2007 there were over 1.5 million Haitians working abroad sending more than $1.65 billion in cash to relatives in Haiti. This amount is equivalent to about 30% of the countrys GDP during that year, emphasizing the significant impact Haitians living abroad have on their home countrys economy.

Comparing real GDP with real GNI, there is a discernible difference in the amount con-tributed to the Haitian economy with real GNI contributing around 70% more for every year. Though this is the case, comparing nominal GDP with nominal GNI, GNI contributes an aver-age of 1% more, noting that even though there are over 1.5 million Haitians working abroad contributing remittances to Haitis economy, they only contribute a small percentage of Haitis total economical pie.

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Health Very Much is Wealth

In respect with other countries, there is a high risk for being infected with diseases in Haiti. In 2009, Haiti ranked 29th out of 153 countries in HIV/AIDS deaths that year with 7,100 deaths. The adult prevalence rate that year was also relatively high at 1.9% with 120,000 people living with HIV/AIDS. Despite this, there has been a steady rise in the total population in Haiti, with an average yearly increase of around 1.7% from 1990 all the way to 2011. In conjunction with total population, the total labor force has also been increasing from 1990 all the way to 2010, with a slightly higher average yearly increase of about 2.2%.

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(199062010)&

Martin Ibasco EC102


Relative to its total land area of 27,560 square kilometers, Haiti is a moderately sized country with a population of around 9.9 million people, ranking 88th out of 239 countries in terms of population size. Segmenting the whole population by age, it is apparent that Haiti has a fairly young population with 96% of individuals being below 64 years of age. Of the youth, 35% are incapable of working while seniors (those above 64 years of age) consist only 4% of the population. With only 39% of the population unable to work, Haiti has a fairly large labor force of 4.81 million to support the growing economy.

Using the information given by percentage total population by age and labor force participation rate by age, the average labor force participation rate for the age group 25 to 64 years old as well as the total population participation in the different age groups was de-termined.

Age GroupPercentage of

Total PopulationTotal Population in Age Group

Average Labor Force Participation Rate

Total Population Participation in Age

Group15-64 61% 6,039,000 68.87% 4,166,91015-24 21% 2,079,000 39.60% 831,60025-64 40% 3,960,000 84.23% 3,335,310

0"14%%35%%

15"24%%21%%

25"54%%35%%

55"64%%5%%

Above%64%%4%%

Percentage)Total)Popula/on)by)Age)(July)2013))

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Percen

tage

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Year)

Labor)Force)Par*cipa*on)Rate)by)Age)(199092011))Ages"15064" Ages"15024"

Martin Ibasco EC102


Looking at the graph of age de-pendency percentage over time, it is seen that dependency is decreasing at an aver-age annual rate of 1.33%. With the con-stant increase in Haitis total population, it can be concluded that, every year, there are more individuals that join the produc-tive part of the population than they do the dependent.

In 2012 Haitis exports totaled $785 million or around 11% of its GDP. Of the com-modities that were exported, most were agriculture products such as cocoa, mangoes, and coffee. If the countrys GDP was segregated by sector, agriculture would compose 25% of total GDP, with an occupational labor force of 38.1%. Considering that of 27,560 square kilometers available, 18,400 square kilometers are being used for agricultural purposes (66.76% of all available land) Haitis economy can be said to be dependent on agriculture.

With agriculture economies requiring large amounts of labor, the trend of a growing population along with an increasing labor force, will ensure future growth in Haitis currently modest economy.

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Age)Dependency)Percentage))(199092011))

Martin Ibasco EC102


The Gift That Keeps On Giving

Historically speaking, Haitis first incurred debt was on January 1, 1804, the day it gained independence. After the successful rebellion, France, in admittance of defeat, de-manded compensation for lost property and freed slaves. The debt was priced at 150 million gold francs to be paid over the next 122 years. With the acceptance of the debt, one colo-nizer was merely traded for another.

As of 2012 Haitis external debt stood at $1.125 billion, a 67% increase from the $674.6 million external debt the country had on 2011. The large increase in debt size is due to the lack of promised financial aid to continue the reconstruction efforts from the aftermath of the 7.0 earthquake that the country two years back. Contributing to the debt was the defi-cit of $113 million incurred during the year as government revenue was $1.001 billion while government expenditures was $1.114 billion.

Macroeconomics in Simple TermsMacroeconomics in Simple TermsTerminology What is it?

External Debt StocksThe sum of public, public guaranteed, and private non-guaranteed long-term debt, use of IMF credit, and short-term debt.

IMF

International Monetary Fund

An organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

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Looking at the graph of total external debt stocks, it is apparent that from 1990 all the way to 2008 there has been an upwards trend in the total debt incurred by Haiti. It was only in 2009 onwards, when Haiti met the requirements of the IMFs HIPC (Heavily Indebted Poor Countries) initiative that the countrys debt showed a significant downwards trend, decreas-ing by an annual average of 26%. The IMF has given Haiti around $1.2 billion in debt relief so far.

Ranked as 154th out of 205 in the world in terms of debt it seems that Haiti has a

moderate debt when compared to other economies such as Nigeria (ranked 93rd out of 205) with a debt of $10.1 billion. When comparing debt in terms of debt per capita, Haiti has a higher debt per capita of around $113 compared to Nigerias debt per capita of $57. Consid-ering that 80% of the population is living under the poverty line of $2 per day, this 98% dif-ference in debt per capita merely exemplifies the massive burden current Haitians face, and with Haitis yearly budget deficit and dependence on foreign aid, the next generation of Hai-tians may face serious problems.

Martin Ibasco EC102


Impeccably Indiscernible Inequality

Poverty and corruption, are amongst, if not, the most commonplace happenings in

Haiti. Considered the poorest country in the Western Hemisphere, 80% of Haitis population lives under the poverty line, having an income of less than $2 per day. Even worse is that 54% of the total lives in abject poverty, having an income of less than $1 per day.

Looking at the figures of Haitis economy, one would assume that Haiti, despite the large amounts of debt, is stable and growing economy. Most of the numbers show that Haitis GDP, population, as well as labor force has been, and is predicted to grow in the fu-ture. The difference between the perception and reality of Haiti is mostly due to the corrup-tion prevalent in Haitis government, with the poor getting poorer while the rich get even richer. As described by BBC news, the enormous gap in wealth is due to 1% of the French-speaking mulattos (a mix of black and white) owning nearly half the countrys wealth.

One of these elite mulatto families are the Bigios. The Bigio family settled in Haiti in 1896 and established their name in the Haitian economy, owning a group of diversified group of companies under the name of the Gilbert Bigio Group. Segregating the companies by in-dustry, the family operates a fully pledged oligopoly under almost all industries such as agri-culture, construction, consumer goods, energy, environmental service, infrastructure, tele-com, trading, and transportation. With such a diversified group of companies, one would fig-ure that looking at financial figures would not be a problem, but it was. There are no annual reports or any estimates of the groups financial figures whatsoever, leading one to assume the extent of the Bigios political ties.

With the presence of these oligopolies existing in Haiti, it is no wonder that lowest

10% of the population has an income of 0.7% relative to the rest of the economy.

Wealth is not always everything, as seen from the Bigio groups misuse of the spellcheck.

Martin Ibasco EC102


Conclusion

Despite blatant problems with poverty, corruption, and inequality, Haiti is taking baby

steps in growing its economy. For one, the debt of Haiti is shrinking due to the help of the

IMF, freeing up government revenues to be focused on stimulating other parts of the econ-

omy such as healthcare. With a growing population and labor force together with incremen-

tally rising GDP, Haitis economy has a positive future.

Really, the only problem are those damn mulattos.

Martin Ibasco EC102


Sources

1. CIA. "CIA." The World Factbook. N.p., n.d. Web. 10 Apr. 2013.

.

2. "Haitians abroad sent $1.65 billion home last year| Reuters." Business & Financial News,

Breaking US & International News | Reuters.com. N.p., n.d. Web. 11 Apr. 2013.

.

3. "Important Dates in Haitian History." Black News, Opinion, Politics and Culture - The Root.

N.p., n.d. Web. 11 Apr. 2013.

.

4. "The World Bank DataBank." Explore . Create . Share. N.p., n.d. Web. 11 Apr. 2013.

.

5. Jay Zagorsky Lecture Slides

Martin Ibasco EC102


https://www.cia.gov/library/publications/the-world-factbook/geos/ha.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/ha.htmlhttp://www.reuters.com/article/2007/03/06/idUSN06417841http://www.reuters.com/article/2007/03/06/idUSN06417841http://www.theroot.com/views/haiti-historical-timeline?page=0,1http://www.theroot.com/views/haiti-historical-timeline?page=0,1http://databank.worldbank.org/data/views/reports/chart.aspx#http://databank.worldbank.org/data/views/reports/chart.aspx#

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