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Wednesday, April 19, 2017

USAID Forced Sweatshops on Haiti

US policy in Haiti is developmentally unsound and morally repugnant.

An economy cannot be forced into prosperity. Voluntary sweatshops that emerge from a spontaneous market order make people better off, but in Haiti, the sweatshop industry has been forced on the people through government expropriation and cronyism. U.S. policies designed to aid and develop Haitian sweatshops have resulted in stolen lands, economic dependency, and less economic freedom.

Coercing people into a sweatshop economy via central planning and physical force is developmentally unsound and morally repugnant. The U.S. should reconsider its methods of foreign aid and refrain from creating policies that undermine the rights of Haitians.

Friends Like These

The United States Agency for International Development (USAID) is responsible for enforcing U.S. policy intended to aid and develop international economies. In the aftermath of the 7.0 magnitude earthquake that killed upwards of 80,000 Haitians in 2010, the U.S. congress allocated over $500 million to USAID for the purpose of reconstruction. The USAID directed $170 million dollars of this U.S. emergency aid to develop the Caracol Industrial Park.

366 Haitian families were forced to leave their homes, farms, and livelihoods against their will with little to no compensation.

The Caracol Industrial Park is a large sweatshop facility intended for garment manufacturing in northeastern Haiti. In order to foster development, USAID determined the Caracol Park needed a port and a power plant funded by the U.S. taxpayers. The USAID had no experience building ports, so the job was largely contracted out. The Caracol Industrial Park serves as the most expansive U.S. development project undertaken in Haiti.

The Caracol sweatshop facility was a joint effort initiated by the Haitian government, U.S. State Department, and the International Development Bank. The Caracol Park’s largest private investors were South Korean Sae-A’s Trading Co, Ltd. and The Clinton Foundation, but private investment has been difficult to come by. The Clinton Foundation and the Clintons had good intentions to develop Haiti and bring prosperity to the Haitian people, but the good sentiment was short lived.

Their project thrust Haitians into poverty. In order to construct the Caracol Park, the Haitian government expropriated land from individuals who were living in the construction zone. 366 Haitian families were forced to leave their homes, farms, and livelihoods against their will with little to no compensation.

Policy Fuels the Fire

The Caracol Park was doomed from the outset because it disregarded the underlying institutions and local knowledge of Haiti. The U.S. aided one of the most repressive governments on the planet, and Haitians are worse off because of it.

The U.S. gives Haitian garment manufacturers incentives and tax exemptions under The Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008 (HOPE II).

The targeted tax exemptions might be helpful in countries with economic freedom and strong institutions for private property, but the HOPE II policy in tandem with USAID policy have eroded the already weak private property institutions underlying the Haitian economy.

Land is expropriated to take advantage of industries that are given preferential treatment and access to conditional foreign aid marked for “development”. Former landowner, Marie Rocksaint, one of the more than 1,000 people who were forced off their property, explained,

I had farmed my land for 22 years but was made to leave without any compensation. Afterwards, the government sent investigators asking for all kinds of information from us, but they never told us how much compensation they were going to give us. There were no negotiations; we were told to accept the compensation that they were going to give us.”

Another farmer, Elie Josué, had a similar experience saying,

I’ve farmed my land for 21 years and was then forced to leave for the construction of this park….I would hire 100 seasonal workers during our planting seasons…..Now that I’ve lost my land, I don’t have a penny.”

Paul Collier, former Development Research Group director at the World Bank, believed policies like HOPE II that incentivized garment exports would be effective saying, “if the Bangladeshi government can do it, so can the Haitian.” Dr. Collier is a brilliant economist, but he came to a faulty conclusion based on his observations in other countries.

The success of garment sweatshops to promote growth in other countries does not mean that garment sweatshops are a precursor to development or the only path to development. Development often gives rise to manufacturing, but forcing manufacturing into an economy is socially unjust and may prevent development by crowding out the private market.

An Abysmal Failure

The results have been abysmal. Cost and economic impact estimates for the park suffered from “significant margins of error”. In 2013, USAID disclosed that the port construction had been delayed by 2 years, and the initial cost estimate of $170 million for the port and power plant fell short by at least $117 million.

Haitians need the political freedom to protest and provide a check against government corruption.

USAID acknowledged that the employment expectation of 75,000 new jobs was largely unattainable, so the number was reduced to an expected 22,000 jobs by 2016. This lesser objective failed as well. As of May 2016, only 9,062 employees worked at the Caracol Park. In February 2017, the Clinton Foundation cut its ties with Haiti, signaling the failure to turn a profit or influence Haiti in a positive way despite the injection of hundreds of millions of aid dollars.

Voluntary sweatshops produced by market forces have contributed to development in the past, and voluntary sweatshops would likely help the Haitian economy. Sweatshops predicated upon government force are an economic bad, and Haitian sweatshops largely fall into this category. The only investors rendered able to make relatively low-risk investments here are the Haitian cronies or the ruling elite in foreign countries, such as The Clinton Foundation.

Haitians need economic freedom and strong institutions of private property. In the absence of those qualities, Haitians need the political freedom to protest and provide a check against government corruption. A United Nations’ “peacekeeping” occupation has been ongoing in Haiti since 2004, and Haitian protests have been thwarted by “peacekeeping” gunfire. Until a sound institutional framework is established in Haiti, there is no quantity of aid dollars that can achieve meaningful economic development.

  • Michael Kastner is an economist and research fellow at the Johnson Center for Political Economy at Troy University.