Haiti, Poverty and Earthquakes

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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.