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Wednesday, January 13, 2010

How To Help Haiti For The Long Term

After yesterday's horrific earthquake rocked the Caribbean nation of Haiti, there are calls everywhere for people to help, from the USA's largest Registered Nurse union calling for volunteers to assist in Haiti, to "Help Haiti" trending on Twitter, to the American Red Cross's call for "text donations" (via HuffPo), to the White House's thoughts and prayers.

It's heartwarming to see such an outpouring of love and help for the troubled island nation. This desperately needed emergency and medical aid will certainly make a huge impact on the lives of the people in Haiti, but let's also ask what we can do over the long term to help Haiti. You see, by just about any economic standard, Haiti is the poorest nation in the entire Western Hemisphere. But it doesn't have to be that way.

How to Help Haiti Emerge From Poverty

The carnage and devastation wrought by the earthquake in Haiti would have been horrifying if it had occurred in Miami, but just imagine how much worse it is in a desperately impoverished, Third World country without the emergency infrastructure or medical expertise that we enjoy in the First World? How can we help Haiti to emerge as a First World country so that its people will be happier, healthier, and better prepared for future disasters?

Often we don't understand the causes of poverty well enough to combat it. World-renowned Peruvian economist Hernando de Soto (who runs the Institute for Liberty and Democracy in Lima and has been hailed by President Bill Clinton as "the world’s greatest living economist") explained the root of Haiti's problems in his landmark book "The Mystery of Capital."

Starting on page 5, he writes:

"...that most of the poor already possess the assets they need to make a success of capitalism. Even in the poorest countries the poor save. The value of savings among the poor is, in fact, immense- forty times all the foreign aid received throughout the world since 1945...

In Haiti, the poorest nation in Latin America, the total assets of the poor are more than one hundred fifty times greater than all the foreign investment received since Haiti's independence from France in 1804. If the United States were to hike its foreign-aid budget to the level recommended by the United Nations- 0.7 percent of national income- it would take the richest country on earth more than 150 years to transfer to the world's poor resources equal to those they already possess.

But they hold these resources in defective forms: houses built on land whose ownership rights are not adequately recorded, unincorporated businesses with undefined liability, industries located where financiers and investors cannot see them. Because the rights to these possessions are not adequately documented, these assets cannot readily be turned into capital, cannot be traded outside of narrow local circles where people know and trust each other, cannot be used as collateral for a loan, and cannot be used as a share against an investment.

In the West by contrast, every parcel of land, every building, every piece of equipment, or store of inventories is represented in a property document that is the visible sign of a vast hidden process that connects all these assets to the rest of the economy. Thanks to this representational process, assets can lead an invisible parallel life alongside their material existence... By this process the West injects life into assets and makes them generate capital."

In this incredibly sophisticated understanding of what keeps the world's developing nations poor, Hernando de Soto also holds the solution to helping Third World countries like Haiti develop: reforming and streamlining formal property institutions to uniformly and easily document property rights in these countries.

At present only the wealthy people of developing countries can navigate the complicated and poorly contrived private property laws, systems, and bureaucracies, so only the wealthy get to "play the game" of capitalism and turn their assets into value-creating businesses and investments. This is a terrible form of economic apartheid.

De Soto is working tirelessly and directly consulting with multiple governments to help them acknowledge private property rights to lift the barrier of apartheid and let the poor use the capital they already have to build a better life for themselves and their families.

I encourage you to read more on his work here and to purchase his book, "The Mystery of Capital" to educate yourself and others on the root causes of poverty and barriers to development for the people of Haiti and all Third World countries.