America and Haiti

Haiti is very instructive to the US. First, when listening to economists remember they have no consensus on the seemingly straightforward question 'why is Haiti so poor?' Thus, when some economist tells you the optimality of some fiscal policy is "Economics 101", remember that any interesting important macro fact is basically a puzzle to "Economics 101". While economists can model their opinions, they do not agree on the big economic issues of the day any more than garbage men or biologists do.

As the aerial photo of the Dominican-Haiti border shows, property rights are clearly an issue. Property rights are weak in Haiti, so no one has an incentive to cultivate or protect land, and so it turns into a literal sewer. The January earthquake has highlighted this problem, as to date very little debris has been moved according to the AP:

a major obstacle to demolishing buildings has been the lack of property records, which either were destroyed in the quake or never existed at all.

Without an owner's consent, it is difficult to remove debris, he said.

In Haiti, like the USA, there is great concern that if people own land, this will exacerbate inequality. The solution, that no one, or 'the state' owns it, leads to a wasteland.

My local paper highlights the same problem in my community. Most home loans are non-recourse: the bank has no 'recourse' to go after a borrower if he doesn't pay his mortgage, merely take the property. But this seizing of collateral takes 12 to 24 months given all the rules designed to protect homeowners. The result are many properties in foreclosure have no one managing them who wants to maximize their value. Indeed, the homeowner sure to default can cannibalize the house, ripping out $2 worth of fixtures and selling them at $1. Such venal behavior would be immediately condemned by politicians and journalists if it were done by banks, but because individuals are doing it there's no outrage. Here's a case where giving bankers more power would greatly improve neighborhoods. The following is from the Minneapolis Star-Tribune:

On Labor Day, Deneen Clarke was scraping the woodwork in her bathroom when she heard banging from outside. From her window, Clarke could see workers hauling doors, leaded glass windows and even a built-in buffet out of the century-old home next door.

Clarke called the cops. Another neighbor cussed out the workers. But they learned the police weren't interested as soon as they determined the person who authorized the work -- the homeowner.

It turned out that Clarke's neighbor decided to strip out valuable pieces of her foreclosed house the day before the bank took possession of it.

"The person is lowering my property values by taking stuff out," Clarke said. "The house is worthless next door now... The house can't be occupied the way it is."

One key characteristic of civilization is property rights, where people have clearly delimited areas of responsibility.