Personal Incentive Destroyed in Haiti

As we have previously stated the three pillars of capitalism are Personal Incentive, Property Rights and Freedom as defined by Adam Smith in his book the The Wealth of Nations. Let’s focus on personal incentive. It is the idea that a person should be rewarded for their efforts and hard work. The Scriptures are many, here are just a few.

Poor is he who works with a negligent hand, but the hand of the diligent makes rich. For Scripture says, “Do not muzzle an ox while it is treading out the grain,” and “The worker deserves his wages.” Proverbs 10:4; 1 Timothy 5:18  

Let’s look at what the elimination of personal incentive has done to a nation like Haiti as presented by Mary Anastasia O ‘Grady in the Wall Street Journal:

In 2010 Hurricane Matthew devastated Haiti with the death toll above 1,000 people. Homes were shredded by fierce winds and crops wiped out. Residents lost the little food they had. Of course planeloads and shiploads of humanitarian aid arrived in the country, as it should. The desperate plight of so many in Haiti spurred a surge of charitable giving that was sorely needed.

Unfortunately the humanitarian aid, necessary in an emergency, morphed into permanent, long-term aid, which undermined local markets and spawned dependency. It created harmful distortions in the local economy because – when what would otherwise have been traded or produced by Haitians is given away – it drives entrepreneurs out of business.

Haiti wasn’t always so tragically helpless. The country was once self-sufficient in rice thanks to the work of rural peasants. That changed in the early 1980s long before Hurricane Matthew. That’s when Haiti opened its rice market and the U.S. began dumping subsidized grain in the country with the goal of “ending hunger”. Most Haitian farmers could not compete with Uncle Sam’s generosity and they lost their customers.  

The Haitian economy was too rigid for farmers to adapt. The glut of locally grown rice was not easily exported because Haitian farmers weren’t efficient enough to overcome their competitive disadvantages caused by tariffs and subsidized markets abroad. More U.S. rice donations after the 2010 earthquake compounded the problem.

Donations of bottled water, clothing, shoes and even solar panels destroyed the local businesses in the same way. Just ask Jean-Ronel Noel, who co-founded the solar-panel company Enersa in his garage in the mid-2000s and expanded it to more than 60 employees. He was proud of his workforce, which came mainly from Port-au-Prince’s notorious slums.

The company was doing a robust business until the 2010 earthquake. “After the earthquake we were competing mostly against NGOs . . . coming with their solar panels and giving them away for free. So what about local businesses?” The demand stopped because it’s hard to compete with free. Mr. Noel zeroes in on another related problem: “Those NGOs are changing the mentality of the people. Now you have a generation with a dependency mentality.”

Personal incentive to work and start businesses was destroyed. When the cleanup from Matthew was finished, aid groups should have packed their bags and left so the Haitians could enjoy personal incentive to work and see the reward of their labor.

Source: The Curse of Charity in Haiti by MARY ANASTASIA O’GRADY Wall Street Journal. Oct. 16, 2016

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