Haiti, Poverty and Earthquakes

Ronald Bailey | January 20, 2010

Haiti Satellite Photo That poverty made Haiti's recent earthquake devastating is a media truism. But what makes poverty? Haiti's annual per capita income (purchasing power parity) is $1,300. The World Bank issued a fascinating report, Where is the Wealth of Nations?, that tries to quantify the tangible assets (farming, forestry, infrastructure, mining, industry) and intangible assets (courts, education, honest bureaucrats, free press) each country has. It turns out that nearly three-quarters of the world's wealth is intangible, that is, wealth is largely embodied in our social and political institutions, not in physical items.

For example, on average Americans enjoy access to about $418,000 in intangible wealth and total wealth of $512,000. In contrast, on average Haitians have access to only about $6,800 in intangible wealth and $8,200 in total wealth.

So one way to account of Haitian poverty is to look at the effectiveness of that country's institutions. The World Bank's Worldwide Governance Indicators rate the quality of variety of institutions in each country on a scale of 1 to 100 - 100 being the best. How does Haiti do?

Voice and Accountability (free press and democracy): 27 (U.S. 86)

Political Stability/No Violence: 11 (U.S. 68)

Government Effectiveness: 9 (U.S. 93)

Regulatory Quality: 19 (U.S. 93)

Rule of Law: 6 (U.S. 92)

Control of Corruption: 7 (U.S. 92)

Go here for my Wall Street Journal op/ed on the intangible wealth of nations. See also my advice to tyrants on how to keep their subjects impoverished here.

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Young 'Un|1.20.10 @ 12:38PM|#

If government effectiveness in the United States is rated at 93, I'm afraid to see what a score of 9 looks like.

Troll|1.20.10 @ 12:40PM|#

Looks like dis: "Government Effectiveness: 9"

DER.

Old Mexican|1.20.10 @ 12:40PM|#

That poverty made Haiti's recent earthquake devastating is a media truism. But what makes poverty?

You mean besides either not being productive or having your meager production taken away from you?

Haiti's annual per capita income (purchasing power parity) is $1,300. The World Bank issued a fascinating report, Where is the Wealth of Nations?, that tries to quantify the tangible assets (farming, forestry, infrastructure, mining, industry) and intangible assets (courts, education, honest bureaucrats, free press) each country has.

Only clueless bureaucrats like those in the World Bank would have the chutzpah to say that tax consumers are intangible "assets."

Zeb|1.20.10 @ 1:36PM|#

While I agree with the sentiment, I think that there are an awful lot of people in the world besides clueless bureaucrats who see such things as intangible assets.

Old Mexican|1.20.10 @ 1:38PM|#

Zeb,

You're right - just look at Tony's post jsut a few inches below...

anonymous|1.20.10 @ 9:40PM|#

I think it was assuming the bureaucrats, and considering the honesty the asset.

Jeff P|1.20.10 @ 12:41PM|#

The regulatory quality score raises an eyebrow: by what criteria? Haiti has little-to-no inspection/regulation of buildings and no construction regs (at least that is what the reporting I am reading is saying), and collapsing buildings (often just two or three floors) seem to be the main killer in this.

Have any nanny-staters used the lack of regs as a case for stricter standards?

|1.20.10 @ 12:46PM|#

Jeff P: According to the World Bank folks who put together the governance indicators:
Regulatory quality measures the ability of the government to formulate and implement sound
policies and regulations that permit and promote private sector development

Joe M|1.20.10 @ 12:47PM|#

Those numbers are ridiculous. How the fuck does the U.S. get a government effectiveness rating of 93 and a political stability (no violence) rating of only 68? Were there some riots involving lots of death recently that I missed? I would probably reverse those ratings.

|1.20.10 @ 12:53PM|#

Joe M: Good question. I note that the UK gets a 66 and France a 67. Germany on the other hand gets an 86.

Joe M|1.20.10 @ 12:58PM|#

Now see, I know that France has had rioting in the last few years. I don't think we've had anything comparable, really, have we? Oh wait... probably they're counting those nasty Tea Partiers and their Town Hall riots.

|1.20.10 @ 1:00PM|#

We're still crawling back from that 27 we got after the War Between The States.

Joe M|1.20.10 @ 1:02PM|#

Ha, then Germany should definitely be lower than us.

MEx|1.22.10 @ 11:41AM|#

ya hes weird

The Gobbler|1.20.10 @ 1:33PM|#

We're still crawling back from that 27 we got after the War ~~Between The States~~ of Northern Aggression.

FIFY

Zeb|1.20.10 @ 1:39PM|#

That does seem rather odd. Besides a few isolated nuts, I really can't think of much in recent time that should really count as political violence.

QUIET RIOT|1.20.10 @ 1:55PM|#

U.S. get a government effectiveness rating includes damage done to Hummers during snowball fights.

Old Mexican|1.20.10 @ 12:47PM|#

How much of the intengible wealth is the phony "wealth" of having "honest" bureaucrats? Expenditures on the non productive tax feeders do NOT equal wealth.

Idiots.

|1.20.10 @ 3:57PM|#

Delicious intangible wealth. Sometimes I dream that I'm swimming in a pool of intangible money. Then I wake up as soon as I realize that the money is intangible.

Jersey Patriot|1.20.10 @ 12:55PM|#

I think everyone knows that Haiti's government is terrible. That's no surprise. The interesting questions are why and how it's so terrible. How did Haiti's institutions get & stay so lousy?

Joe M|1.20.10 @ 12:56PM|#

Probably the local conservatives blocked health care reform.

|1.20.10 @ 1:06PM|#

Jersey Patriot: Actually, considering that abject poverty and tyranny have been the norm for most of history, the better and harder question might be: how did our institutions get to be so good?

Old Mexican|1.20.10 @ 1:12PM|#

Ron,

Two likely reasons:

1) Common Law
2) The flintlock.

Jersey Patriot|1.20.10 @ 1:22PM|#

Institutions most everywhere have been improving over the past 200 years, somewhat amazingly so over the past 20. Haiti's institutions have stagnated, even worsened, over its history, and have barely improved since Baby Doc's tenure ended. I think that itself should require some explanation, no? I mean, we're talking about people who are literally poorer and less free than English peasants c. 1200 A.D.

Old Mexican|1.20.10 @ 1:30PM|#

JP,

Maybe the fact that the good-hearted Clinton and Bush administrations propped up a series of subsequent corrupt regimes after Baby Doc?

MS|1.20.10 @ 8:24PM|#

JP, I found this article to be informative: http://www.allempires.com/arti....._dominican

Mo|1.20.10 @ 1:33PM|#

Among other things, they were global pariahs for most of their history* and they had a ginormous bill for their independence to pay the French (that took 100 years to pay). It's kind hard to build a well functioning society when noone will treat you with good faith and you have to pay a good portion of your GDP to a foreign entity.

* Other countries didn't want to encourage slave revolts by dealing with the Hatians.

|1.20.10 @ 1:36PM|#

"How did Haiti's institutions get & stay so lousy?"

Haitian institutions, even the Catholic Church, get smashed and remade every 10-30 years. They never have time to actually transform from trainees to good-old-boys. When the new regimes come to power they replace as much as they can, and when faced with resistance, hire the local thugs/criminals to crush the middle-aged guard (no one lasts to become an old guard).

Under such circumstances, it is hard to get a road crew setup and running, let alone a judicary or town council. Too few people have skin in the game, even when it's a corrupt game.

Tony|1.20.10 @ 1:14PM|#

For example, on average Americans enjoy access to about $418,000 in intangible wealth and total wealth of $512,000.

Kinda makes the taxes we pay seem like a very good deal for the money.

|1.20.10 @ 1:20PM|#

Good point, Tony, except that the vast majority of those taxes don't go to support the intangible wealth.

Old Mexican|1.20.10 @ 1:22PM|#

See? What did I say? Only the clueless would consider feeding tax consumers an intagible "asset". I rest my case.

Jersey Patriot|1.20.10 @ 1:23PM|#

Post hoc ergo propter hoc.

Tony|1.20.10 @ 1:41PM|#

The rule of law and access to education don't happen by magic.

Old Mexican|1.20.10 @ 1:49PM|#

Re: Tony,

Neither through taxation.

For some reason, some people seem to equate "Education" with "Public tax-fed Education", which is incorrect - Education is an action [i.e. a choise], whereas public education is just another expenditure, same as paying people to clean the bird nests our of street lights.

Old Mexican|1.20.10 @ 1:50PM|#

Shit - a CHOICE.

Old Mexican|1.20.10 @ 1:52PM|#

The Rule of Law does not require bureaucrats nor taxation. That's a myth - if people are willing to pay for a driver's license, they can perfectly pay courts for relying on their service, leaving the rest of us OUT OF THEIR BUSINESS.

Jersey Patriot|1.20.10 @ 2:09PM|#

They don't. Paying taxes may be necessary for the rule of law - though I would dispute that - but it certainly isn't sufficient, as we have often seen. The rule of law requires more than a tax bill.

As for education, the poor are poorly-educated despite enormous sums spent on them. Again, paying taxes may be necessary for access to education -though again I would dispute that - but it certainly isn't sufficient.

Sufficiency is outside of the tax code, and it's an open question whether the taxes we pay help create sufficiency or help stifle it (q.v. "deadweight loss"). Whether our taxes are a good deal is an open question.

So again, post hoc ergo propter hoc.

Tony|1.20.10 @ 2:13PM|#

Knock off the Latin. I'm not some altar boy you can seduce.

Old Mexican|1.20.10 @ 2:46PM|#

It means: you are full of it.

|1.20.10 @ 4:29PM|#

The rule of law and access to education happen when people don't coerce each other and engage in a voluntary market, in which education, among other things, is traded.

Tony|1.20.10 @ 7:36PM|#

Yeah right. If such a thing were true, there wouldn't have been a need to invent public education in the first place.

Why can't there be some things that people should have access to regardless of how much money they have?

Sean W. Malone|3.24.10 @ 4:06PM|#

For the record, and I'm months late on this, obviously... Public Education started because a number of wealthy businessmen, such as Andrew Carnegie wanted standardized training programs for their future workers. The first "public" schools in the US were funded by businesses who then eventually got governments to pick up the slack. Prior to that point, schools were privately funded by parents who would often board teachers (who at one time were kind of a nomadic class of people) in their own homes... Thus requirements, and then cultural standards, for teachers used to be that they were single and often women.

george|1.29.10 @ 10:00AM|#

nice good call man

Old Mexican|1.20.10 @ 2:02PM|#

Clueless Krugman:

"Bankers Without a Clue"

Consider what has happened so far: The U.S. economy is still grappling with the consequences of the worst financial crisis since the Great Depression; trillions of dollars of potential income have been lost; the lives of millions have been damaged, in some cases irreparably, by mass unemployment; millions more have seen their savings wiped out; hundreds of thousands, perhaps millions, will lose essential health care because of the combination of job losses and draconian cutbacks by cash-strapped state governments.

And this disaster was entirely self-inflicted. This isn’t like the stagflation of the 1970s, which had a lot to do with soaring oil prices, which were, in turn, the result of political instability in the Middle East. This time we’re in trouble entirely thanks to the dysfunctional nature of our own financial system. Everyone understands this – everyone, it seems, except the financiers themselves.

The 1970's stagflation did not happen because of raising oil prices - raising oil prices were the result of the inflationary policy of the Nixon administration, who decided to unpeg the dollar from gold.

[...]there was nothing accidental about the crisis. From the late 1970s on, the American financial system, freed by deregulation and a political climate in which greed was presumed to be good, spun ever further out of control. There were ever-greater rewards – bonuses beyond the dreams of avarice – for bankers who could generate big short-term profits. And the way to raise those profits was to pile up ever more debt, both by pushing loans on the public and by taking on ever-higher leverage within the financial industry.

Uh, yeah, sure, deregulation did it. Never mind the Community Reinvestment Act, never mind the moral hazard promoted by Freddie Mac and Fannie Mae, never mind the two dingbats, Dodd and Frank, who demonstrated their ignorance and stupidity by their affirmation that the mortgage industry was as strong as ever. No, it was the "deregulation."

Tony|1.20.10 @ 4:05PM|#

So, so lame. It's like you live in early 2009 and only read rightwing blogs from that era. This nonsense has been thoroughly debunked. Even the banks themselves admit the cause of the crisis was their own behavior.

|1.20.10 @ 4:35PM|#

Sometimes the innocent have to admit guilt to avoid further punishment. If you want parole, better admit you did it and that you are so very sorry.

|1.20.10 @ 4:36PM|#

They would admit to setting up OJ if it meant they could get backed up by the government's unlimited insurance coverage. The fact of the matter is that the people who took loans that they couldn't afford CAUSED the problem. The banks made it worse by thinking everyone would be good for the loans.

Old Mexican|1.20.10 @ 4:37PM|#

Of course it was their behavior but not entirely BECAUSE of their behavior (ever heard of moral hazard?), but to have the chutzpah to say it was "deregulation" really takes the cake. Also, I don't know why you even mention 2009 blogs (considering 2009 just ended a few weeks ago!) since this knucklehead wrote this piece of Keynesian crap on the 15 of January.

|1.20.10 @ 4:38PM|#

But I'm sure the false confidence that was given to both the loaners and the bankers by the government's promises and regulations had nothing to do with the miscalculations on either side. Nothing at all.

Global Exporters|7.12.10 @ 2:09AM|#

better admit you did it and that you are so very sorry.

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