Reparations From France Should Go to Haitian Entrepreneurs

Generations of poor Haitians paid France — its colonizer — roughly $560 million in today’s dollars. Had these funds stayed in Haiti, according to some estimates, the Haitian economy could be eight times larger than its 2020 GDP of roughly $14.5 billion.Attention is steadily growing on these reparation payments, as are calls for France to pay Haiti. Yet, as The New York Sun argued recently, payments to a corrupt government should be a non-starter because they are unlikely to lift the people of Haiti out of poverty.Our research suggests one significant addendum. Waiting for an ethical government and strong institutions to come to Haiti’s rescue is unlikely, in and of itself, to pull the country out of poverty. That suggests there is a better path forward for the dollars France owes Haiti.The French should invest them now in local Haitian entrepreneurs creating new markets that will help sow the seeds of a thriving society. This conclusion stems from our research that has discovered that corruption does not cause poverty. It’s a symptom of it.Scarcity, fueled by poverty and conflict, is the perfect breeding ground for corruption to flourish. In many poor countries, corrupt politicians embezzle state funds and civil servants like police officers extort money from hard-working citizens.In those countries, economic opportunity is scarce and most civil servants don’t earn a living wage. For them, embezzlement, bribery, or extortion is an attractive way to gain wealth. This describes Haiti. It’s the poorest country in the Western Hemisphere.Poor countries, though, don’t need to eliminate corruption in order to become prosperous. They must become prosperous in order to eliminate corruption. This is what happened in America, South Korea, and countless other countries. How did they do it? Our research shows that the march toward prosperity begins through investments in “market-creating innovations.” Market-creating innovations transform complicated and expensive products into simple and affordable ones.That enables many more people in society to access them. In contrast to other types of innovations, market-creating innovations create the foundation for robust, sustainable growth. As they create new markets, these innovations alleviate scarcity through a multiplier effect.They create jobs and provide tax revenue that can then be reinvested in communities, anti-corruption efforts, and institutions. In short, these powerful innovations spur significant economic development, while creating the conditions for good governance. Epitomized by William Magear “Boss” Tweed, who dominated New York City politics through extortion payments, overt corruption ran rampant in the United States in the mid-19th century through the early 20th. As the effects of the Industrial Revolution spread across the country, though, more Americans created more wealth for themselves. Their ability to fight corruption increased.“Politically, the rage of victims [of corruption] counted for very little in 1840, not much in 1860; by 1890, it was a roaring force,” according to a Stanford law professor, Lawrence Friedman.The story unfolded similarly In South Korea. In the 1950s, South Korea was poor. The country was ruled by an authoritarian government. Bribery and embezzlement were prevalent. As companies like Samsung, Kia, and Hyundai invested in market-creating innovations that made goods and services more affordable for more people, South Korea became prosperous.As the country grew prosperous, it moved to a more democratic government from an authoritarian and corrupt government. Its investments, largely through taxes from market-creating innovations, helped build better institutions capable of tackling system corruption.In 2018, South Korea’s president was sentenced to 25 years in prison on corruption-related charges. This could never have happened when the country was poor.This same story could unfold in Haiti, via local entrepreneurs pioneering market-creating innovations. Deliberate investments to solve challenges that the population on the ground are looking to solve — around food, water, education, healthcare, housing, and more — could make an immediate impact. That could lead to better institutions and a less corrupt government in Haiti.Crédit Industriel et Commercial, a French bank that received significant fees and interest from Haiti’s payment of reparations to France, plans to hire researchers to investigate its history and work in Haiti. They are unlikely to find easy ways for France or Crédit Industriel to fix past sins.Simply investing in Haiti’s current government, without direct private investment, is a mistake. Waiting to invest is as well. What France should do is commit to investing in market-creating innovations in Haiti. These innovations can ultimately transform Haiti’s economy and society and help Haiti recoup that which it is owed.Efosa Ojomo, a Nigerian author, researcher, and speaker, is co-author of this column.

Reparations From France Should Go to Haitian Entrepreneurs

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