The Institutions Hypothesis & Haiti
By Charlie Estes
Published October 23, 2024
This year’s Nobel Memorial Prize in Economic Sciences was awarded to Daron Acemoglu, Simon Johnson, and James Robinson last week for their work studying how historical institutions have shaped today’s countries and economies. The researchers use the institutions hypothesis–one they’ve spent twenty years refining–to link the legacy of colonialism to modern prosperity.
The prevailing theory before the institutions hypothesis was the geography hypothesis, which blamed differences in country outcomes on natural causes–climate, disease burden, etc. The institutions hypothesis shifts the blame onto humankind, and more specifically, colonialism.
They say that two types of colonies, and two types of institutions, were established as Europe began its invasion of the Americas. In more sparsely populated areas with lower mortality rates for initial incursions, Europeans set up settler colonies and therefore more “inclusive” institutions based on democratic values. These institutions were meant to govern colonists (relatively) equally, prevent elite aristocratic rule, and promote property rights among those living in the colony, and in the long-term, led to democracy and prosperity. The United States, Australia, and New Zealand are all cited as examples of these areas.
In other areas, where indigenous societies had established more densely populated areas and the mortality rate was higher for initial settlers, the Europeans established “extractive” institutions, built to literally extract natural resources, protect elites, and hoard wealth. The Congo and the Gold Coast are both used as examples in the research. These extractive institutions led to a reversal of fortune–in other words, more successful nations pre-colonialism are among some of the least prosperous now. Haiti was not studied as a case in the Nobel Prize-winning research, but it certainly can be examined through the same lens.
Before Christopher Columbus, the island we now call Hispaniola was inhabited by two indigenous groups, the Taino and the Ciboney, with a total population of between 100,000 and several million people. Their economy was built on farming, fishing, and inter-island trade. The Spanish enslaved the indigenous population to mine for gold, the hard labor combined with invasive diseases effectively wiping them out. The French, taking control of the western third of Hispaniola, began bringing enslaved Africans en masse to the colony to continue to extract sugar, coffee, indigo, and other cash crops. Saint-Domingue, as the French called it, was their wealthiest, most successful colony–at one time producing 40% of Europe’s sugar and 60% of its coffee. Society was separated into castes of wealthy whites, their servants, mixed children, and enslaved people, which made up 90% of the population. Slavery in Haiti was among the most brutal in the world, with something like 800,000 people brought to the colony from Africa to maintain the population amidst horrific slave mortality rates.
Following the revolution, the extraction didn’t stop. Unable to continue to abuse the freed Haitians for labor, the French instead began stealing the wealth of what could have been a prosperous nation–and a threat to the global world order built on the backs of enslaved peoples. With military backing, the French forced Haiti to pay $150 million Francs in reparations to their former enslavers. Over 122 years, Haiti paid $560 million of today’s dollars to those who had brutalized and murdered them for more than a century. Worse, in order to pay France, Haiti was forced to take out a series of loans from French banks, and later, other governments.
The new Haitian government and society, built on the legacy of an extractive slave colony, mimicked the structure of their vanquished colonizers–protecting elites and creating a separate legal class of rural “peasants” that were used to generate income for the government and the French. “By 1911, $2.53 out of every $3 Haiti took in from coffee taxes, its most important source of revenue, went to paying debts held by French investors.” Then, during the United States occupation beginning in 1915, most of the Haitian government’s budget went toward paying salaries of US officials.
This use of national budgetary funds crippled the Haitian government’s ability to build any kind of “inclusive” institutions, as Acemoglu, Robinson, and Johnson would call them–ones that are supposed to be based on wealth-sharing and equality. Haiti used much of its funds to pay back debts and the salaries of foreign officials, and the rest was concentrated among the elites of Port-au-Prince, leaving nothing for the rural peasantry. The presence of non-governmental organizations (NGOs) continued to undermine the Haitian government and the development of institutions, creating a “Republic of NGOs” that made Haiti’s people dependent on foreign interventions for basic services, rather than creating the conditions for the government to provide them.
Hope is not lost. The Nobel laureates also found that there can be “substantial economic gains from improving institutions,” citing Japan and South Korea as examples. In other words, there could be another reversal of fortune for exploited countries—one that is built on strengthening democratic values and institutions. The international community should focus our efforts on creating space for and lending support toward that goal.
Roots of Development’s partners in Haiti, Gwoup Konbit and Rasin Devlopman, mobilize marginalized communities to reclaim historical practices of Konbit, a traditional form of collective labor and mutual aid rooted in rural agricultural solidarity. The Konbit model encourages pooled resources, shared responsibilities, mutual aid, and solidarity economy, which promotes community well-being. In Haiti, where the social fabric has been so thoroughly eroded by centuries of foreign intervention and governmental mismanagement, our partners seek to rebuild based on a historically Haitian, peasant model that is fundamentally rooted in our cultural concept of community, reducing dependency on foreign entities and promoting citizen participation.