On February 7, 1986, nearly 30 years of a single-family dictatorship ended in Haiti and 39-year-old Leslie Delatour, the new finance minister, then set about to clean up the mess. And what a mess it was.
The Duvaliers—first "Papa Doc" and then his son "Baby Doc"—looted Haiti as if it were their own private feudal kingdom. "The distinction between the public treasury and their private property hardly existed," declared Justice Minister François St. Fleur.
The government that took Duvalier's place was a lame duck almost from the beginning, disavowing any role but a transitional one as the nation was guided toward democracy. Elections are to be held this November, and a new president will take office on February 7, 1988—two years to the day from the ouster of the hated dictator.
That means Leslie Delatour must act quickly to have much impact. Two years isn't much time to undo the kind of damage Haitians have had to endure for so long.
In January, Lawrence W. Reed, director of the Center for the Study of Market Alternatives, happened to see an article in the International Herald Tribune about the new finance minister. He was intrigued at this description of the efforts currently under way to divest the government of the many monopolies that had operated under Baby Doc Duvalier and his father. A few months later Reed made arrangements to interview Delatour, a suave and articulate gentleman who had put in a stint at the World Bank.
Reason: You were trained as an economist at the University of Chicago. How do you describe your personal economic philosophy?
Delatour: I see myself as a liberal in the old-fashioned sense of the word, meaning somebody who is interested in free markets and in certain minimal rules of the economic game—the "night watchman" role of the state. That does not mean I wouldn't occasionally favor intervention; I do when certain externality problems arise.
Reason: Give me an example.
Delatour: Soil erosion. It's a serious national problem. Certainly the state should intervene if your failure to care for your land ends up eroding mine.
The people here are so poor that many of them think only of today and tomorrow, not of years down the road. So they do things to the land—cutting down too many trees, for instance—that are devastating for the future even if they provide food or shelter for the moment. So there is a role for the state, but I do believe that the state ought not to be involved directly in productive activities. It shouldn't be producing automobiles, for example.
Reason: Do you see the soil problems as a failure of markets?
Delatour: Yes, in the sense that there has been a failure to properly enforce property rights. A lot of the land here is government land and there was a very old tax which a person had to pay for permission to cut down a tree on the land. The tax stayed the same for decades while inflation diminished the value of the tax to where it meant virtually nothing. There was a feeling that government property was everybody's property and therefore I can go out and cut down trees anytime.
I would say it's a failure of markets that is induced by government. The price of wood was rising, but the real price of trees, thanks to the government, was falling. The land was stripped of trees and there was no incentive to invest in planting more. Soil erosion resulted.
Reason: What other policies of the old Duvalier regimes worked to prevent economic development here in Haiti?
Delatour: What happened here was a government making decisions to basically close down the economy—with tariff barriers, quantitative restrictions on imports, and the like. And domestic monopolies were granted and sheltered from both domestic and international competition. Prices stayed up and the monopoly profits were distributed among the key decisionmakers of the government. Licenses were allocated for all sorts of activities. It was corruption in action.
The government was engaged in a massive effort to create artificial profits for the benefit of itself and its friends and families. You scratch my back and I'll scratch yours was the way the economy was run. All sorts of people are very unhappy that we are demolishing this situation and replacing it with open markets.
Reason: Give me some examples of the old monopolies.
Delatour: Every day, it seems, I run into another one of them to demolish, which sets off howls of anguish from the protected. One of the newspapers referred to me recently as "the AIDS of the Haitian economy."
The guy who was married to the sister of the former president's wife had a monopoly on copper electrical cable. Then there was the brother of the head of the palace guard who had the monopoly on polyvinyl bags. There were monopolies on milk, caps for soft-drink bottles, steel, flour sacks, and tin roofing. Now the game has changed and I'm one of the more unpopular guys in town.
Reason: How have you gone about doing away with these monopolies?
Delatour: We've slashed virtually all tariffs. None are higher now than 40 percent, compared to 100 percent, 200 percent, and even higher during the previous government.
Then we allow anyone to engage in competition. Everybody is put on the same level—no privileges. I tell producers that I'm not out to do anybody in. The old arrangement distorted price signals and now it is up to them to adjust from the old fiction to the new reality. They must put themselves in a competitive position to deal with both the imports coming in and anybody else's production here in Haiti. Anybody who wants to enter a business is now much freer to do so.
Reason: As you've implemented this policy, have you seen any impact yet on consumer prices?
Delatour: Of course. Domestic inflation in 1986 was down to zero. The prices of those things previously monopolized—such as cooking oil and rice—have actually fallen dramatically. And, by the way, we have abolished price controls.
Reason: Your emphasis on markets as opposed to central planning makes you rare among Third World officials, doesn't it?
Delatour: I think things have been changing. People are coming around to realizing that if the key to economic development was government taking everything over and spending money it doesn't have, then everybody should have been developed by now. They have been doing that all over the world long enough now for us to learn from the results. Don't tell me to do like they've done in those places, because they're bankrupt.
It doesn't take any real brains to subsidize consumption; the key question is, How long can you do that before you face the inevitable collapse? If an individual does that, he's everybody's hero while it lasts but pretty soon he's out of business and leaves everybody else holding the bag. The fact is that development is an old-fashioned matter of blood, sweat, and tears. No easy way out, not by planning, not by printing presses.
One thing I learned from George Stigler [Nobel prize–winning economist at the University of Chicago] is that you don't pretend to know better about somebody else's business than the guy who's doing it. I don't sell shoes, and I don't have the arrogance to pretend that I know more about selling shoes than the man who's selling them. If I did, I would be in that business making tons of money. So yes, I would ask the planner, If you are so smart, why aren't you rich from honest effort in business?
Reason: Are you a supply-sider on the issue of tax rates?
Delatour: Well, it's quite obvious that the higher marginal rates are, the greater the incentive to cheat, to operate under the table. So we have brought marginal rates down from a high of 55 percent to a high now of just 30 percent.
We've reduced the maze of tax brackets down to just three. The top rate of 30 percent applies at the income level of $700,000, compared to the old rate of 50 percent taking effect at $100,000.
Reason: With per capita income under $400, how many Haitians actually pay income taxes?
Delatour: Not many, but now that rates are much less confiscatory we expect more people to surface and enter the legal economy and pay taxes. We are going after them because, look, if you want things from government, you should pay for them. Otherwise, it's easy for everyone to say, Let the government do it.
Reason: The press in the United States has been quick to declare that since Duvalier was ousted, there has been little change in Haiti. Why do you suppose this dramatic story you've been telling isn't told?
Delatour: When they come here, I start by telling them that nobody is stealing millions of dollars any more from the state treasury. Isn't that a change? We now have freedom of speech. Isn't that a change? What about freedom to form labor unions and political parties? Before, we had none; now we have two unions and perhaps ten parties. Isn't that a change? What do they want in a year? Apparently these things are not so newsworthy. They see poverty still in the streets and assume there's been no change.
They ask me, Why don't you do more public works, public employment projects? To that I say, How many people would we employ this way—100,000? With what are we going to pay them? How are we going to select those to be employed, since we cannot employ everybody who says he is out of work? Those that aren't lucky enough to have the right connections and get left out, what are they going to do? They'll probably be more upset than before. And when we eventually release the ones the state employs, we have the problem all over again.
Do they expect us to print more money? If we do that, we'll have a return of inflation. If we raise taxes, we drain the economy. There just is no such thing as a free lunch—period.
Reason: How do you respond to the skeptic who says, This may be all well and good, Mr. Delatour, but you're just part of a lame duck government. How do we know that socialists won't be elected in November, and all this will be undone?
Delatour: We don't know that, but either you are a democrat or you're not. People must choose in the economic sphere just as surely as they must choose in the political sphere. We must show by performance that our way works. But if socialists someday get in charge, their certain failure will again make people realize that socialism doesn't work.
This is why I tell people that I'm not pro-business, I'm pro-market. There's a fundamental difference. If I were pro-business, I would be subsidizing this guy or that guy, but I'm not for that. I just want everybody to go out and sweat for the money that they earn. Once they earn it that's fine with me. I'll stand by and be a cheerleader, but it is not my job to take people by the hand, shepherd them around, and do things for them. If they don't have the motivation, they should do something else.
Reason: Haiti has a minimum wage of about $3 per day and it also has a reported unemployment rate of 50 percent. Do you see any connection there?
Delatour: First of all, I don't believe that unemployment is really 50 percent. This is a country without social security and with practically no public welfare. So what does that 50 percent rate mean, that people are sitting around doing nothing, waiting for death to occur? I assure you that is not what I see in the streets. What you do have is a market that is often below the minimum wage. This is a problem because employers, as a result, just won't pick up anybody off the street. The least skilled are shut out, which may or may not encourage them to develop skills.
In the sense that the number of jobs that are available at the minimum wage is less than the amount of people who are willing to work at that wage, then it is rational for an unskilled person to offer to pay a potential employer to hire him at minimum wage.
On the other hand, in this area of great poverty, if I were to say, Let's abolish the minimum wage, I would get politically blown out of the water.
Reason: Because people don't understand the economics of it…
Delatour: Because people don't understand the economics of it and because anyone who says it would get drowned under the noise that, This guy is really a sonofabitch, selling off the poor Haitian workers to international capitalists who are drinking the blood of the people, blah, blah, blah. I have enough troubles. You have to pick the battles you know you can win.
Reason: Have you been privatizing government assets or operations?
Delatour: Well, we have been closing down some of them. The problem has been, Why privatize dead ducks? But we've done a little of that. I've told the workers at one agricultural plant that the plant is theirs if they can run it and make it profitable. I'm not giving them one bit of subsidy.
Reason: What about the state budget, which frequently ran deficits under Duvalier? Is it true that it's balanced now?
Delatour: Basically, last year we ran a balanced budget and we will again this year too—balanced in the sense that whatever deficit there is is fully financed by grants coming in from the outside, so there is no recourse to domestic borrowing.
Reason: That's a remarkable achievement in such a short period of time, is it not?
Delatour: Well, it's harder to do in many Third World countries because they subsidize so much. Here, subsidies weren't so much the problem as just outright stealing by government officials. We just ended the stealing and got rid of the few subsidies we did have, for the most part. That meant that the social cost of clamping down on public expenditures was virtually zero.
Reason: What about the printing presses?
Delatour: No, we don't issue any checks in excess of the resources that we have, so with no overdrafts, we haven't had to resort to the printing press.
Reason: How do you feel about foreign investment?
Delatour: We should have a nondiscriminatory system, one in which it's irrelevant where the investment comes from. No rules for foreigners separate from what applies to natives. So I don't have anything particular to say about it that I wouldn't say about domestic investment. I want simply to create a climate favorable to any and all investment.
Reason: If you could speak freely to a nonpublic gathering of Third World finance ministers, what advice would you most like to give them?
Delatour: The problem is not so much with the finance ministers. They generally know economics better than their governments' policies would suggest. The problem is either that you have a planning ministry to struggle with that is messing everything up or that political pressures are too great to allow the right things to be done. So basically, I couldn't tell them much that they don't already know.
What they would most want from me, I suspect, is how it is that I am able to do the things I've already told you about. They would say, My God, how lucky you are, Delatour. How is it that your boss would let you do these things? This is where the real problem is. Perhaps you should have asked, What would I most like to tell a gathering of presidents, rather than finance ministers? In which case I would have answered, Let your finance minister take the politics out of your economies.
Reason: Finally, Mr. Delatour, what change in American policy toward Haiti would you most welcome?
Delatour: The single most important one would be to lift immigration quotas. Just as there should be no impediment to the movement of capital, neither should there be impediments to the free flow of labor. Open up and let Haitians migrate and perform work in the United States. And also, lift the quotas on things like textiles so we can sell to Americans.