Where Haiti’s money has gone

By Felix Salmon
August 22, 2011

What happens when you drop billions of dollars onto a country like Haiti? Immediately after the earthquake happened, in January 2010, I said that “one of the lessons we’ve learned from trying to rebuild failed states elsewhere in the world is that throwing money at the issue is very likely to backfire”. But that’s exactly what we did — with predictable results.

I’d urge you to read Janet Reitman’s full 12,000-word Rolling Stone article on what an enormous amount of foreign aid has done for Haiti; it’s a wonderful piece of journalism, albeit a very depressing one.

The first thing to note is that most of the money given to Haiti hasn’t even started to be spent yet: a whopping $11 billion was pledged by donor countries and financial institutions in the wake of the earthquake, but if you take the US as a good example, it’s so far managed to spend just $184 million of the $1.14 billion allocated to the country. Even the Red Cross is barely halfway into its $479 million fund — all of which has been earmarked for Haiti, and none of which can be spent elsewhere, no matter how much better it might be put to use in some other context.

But even the amount of money that has been spent has been harmful in its own way. Haiti has been known as “the Republic of NGOs” for well over a decade now, but the earthquake just turbocharged their presence while devastating everything else, leaving foreign aid the only game in town:

“I’ve had two ministers come up to me this week, personally, and ask what’s in it for them,” says a frustrated IHRC official. “Since money grows on trees in this disaster, the attitude among Haitian officials is: Just call up your buddies in Washington, and they’ll send another check.”

Meanwhile, given that it’s difficult to effectively spend money in Haiti, millions of dollars are making their way to people like our old friends at Dalberg:

There was significant grumbling in aid circles, for example, when the department awarded a $1.5 million contract to a New York-based consulting firm called Dalberg Global Development Advisors. Glenn Smucker, an anthropologist who specializes in Haiti, was asked to brief the Dalberg team, which included several summer associates from Harvard Business School. “They were nice people, but they struck me as naive about Haiti,” he says. “They asked the appropriate questions and were eager to learn, but from what I gathered, they had never lived overseas, didn’t have any disaster experience or any background in urban planning, and they’d never carried out any program activities on the ground. Only one of them spoke any French. They were being asked to do extremely important things that they had no background to do.”

One of Dalberg’s assignments was to do an assessment of a broad, bow-tie-shaped swath of land near the Corail camp, where thousands of Haitians had moved earlier that spring. Even as refugees were streaming onto the land and establishing squatter camps, the State Department hoped to create new communities in the area as part of an attempt to depopulate Port-au-Prince. It was the second time in three months that consultants had assessed the area, and after Dalberg was finished, a team of experts from USAID was brought in to reassess the assessments. “One of the sites they said was habitable was actually a small mountain,” says Bill Vastine, one of the experts on the USAID team. “It had an open-mined pit on one side of it, a severe 100-foot vertical cliff, and ravines.” After looking at the photos in Dalberg’s report, he said, “it became clear that these people may not even have gotten out of their SUVs.” The process of assessments and reassessments dragged on for months. In the end, only one of the six sites approved by Dalberg was deemed viable for relocation.

I’m pretty sure that when individuals and politicians committed billions of dollars to Haiti, they weren’t intending for it to be spent on callow HBS types who generate headlines like “With Andrew Stern’s Help, US Executes Holistic Rebuilding Approach in Haiti”.

Meanwhile, Haiti’s suffering if anything is getting worse. Not only are new shantytowns springing up in places like Corail, but disease is now spreading disastrously: cholera hadn’t been seen in Haiti for more than 60 years, before the earthquake; it has now infected more than 250,000 Haitians, with no sign that it’s remotely under control.

It’s worth remembering, too, that there was reason for optimism regarding the rebuilding of Haiti. There was lots of money, and the country’s right on America’s doorstep, which also helps. On top of that, it had the best conceivable international ambassador in Bill Clinton, backed up with the full support of the US government in the form of his wife’s oft-stated commitment to getting Haiti back on its feet.

Development is a tricky game, easy to get wrong; as a rule, it only works when the people providing the aid are working at the margin, helping to strengthen existing projects, industries, and institutions, rather than trying to build them all from scratch. Let’s target it where it can be most effective, rather than where there happens to have been a newsworthy natural disaster. Of course Haiti needed help after the earthquake, but $11 billion was far too much for the fragile and damaged economy to bear. It’s a lesson worth remembering, the next time a natural disaster triggers another wave of appeals for financial aid.

10 comments

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People seem to have serious trouble understanding that money, the same as everything else, follows the law of diminishing returns. Given any problem, a little money often helps, but a lot usually doesn’t help lots more. The limiting factor simply becomes something else. When confronted with a complex problem (such as Haiti), studying what are the limiting factors that stop them from sorting things out and providing the right amount of each resource they need would be the ideal response. Instead, people just assume that money will buy everything else.

The truth is, money doesn’t always and automatically buy food, medicine, expertise, industrial capital, social organization, or whatever is missing from the equation. With this problem, as with any other one, it’s always a mistake to assume that money will always magically know how to transform itself into the other resources that are needed. Somebody needs to work that one out, and it isn’t always easy.

Posted by Doly | Report as abusive

ADD ANOTHER 5OOO CHOLERA CASES PER MONTH IF SOME OF THE $MILLIONS ISN’T USED TO BUILD AN EFFECTIVE WASTE WATER TREATMENT PLANT. FYI THERE ARE PORTABLE SYSTEMS THAT COULD BE USED IMMEDIATEY. ONE WOULD THINK THE PRIORITIES WOULD BE CLEAN WATER,WASTE TREATMENT AND AGRICULTURE THAT MEETS THE NEED .IT’S AMAZING TO OBSERVE AFTER 18 MONTHS THERE ARE STILL OVER 600,000 MEN ,WOMEN AND CHILDREN LIVING UNDER TORN TARPS IN UNSANITARY CONDITIONS. HURRICANE IRENE IS ON THE WAY THAT’S RIGHT. IT’S HURRICANE SEASON # 2 FOR THE HOMELESS

Posted by DOUGC5 | Report as abusive

Felix, I would recommend you check out Paul Farmer’s Haiti After the Earthquake. Farmer points out the effectively none of the international aid money pledged to Haiti in the wake of the earthquake was directed to the public sector. For the abundance of generosity to have a lasting effect, he argues, a meaningful portion must be funneled through the (unquestionably troubled) public sector. I’m dramatically oversimplifying the thesis, but the example of Rwanda, itself the victim of a existential tragedy, serves as the model Farmer, his organization, and organizations like the Clinton Foundation, hope to mimic in Haiti with the help of the Haitian government.

http://www.npr.org/2011/07/12/137762573/ paul-farmer-examines-haiti-after-the-ear thquake

Posted by seanh | Report as abusive

Clinton’s shelters apparently weren’t all that.

http://www.thenation.com/article/161908/ shelters-clinton-built

Good overview though, even if it’s like shooting (Harvard BS) fish in a barrel.

Posted by edwardericsonjr | Report as abusive

Felix, while I agree that you can’t just throw money at Haiti, no one has actually thrown money at Haiti! The vast majority of the $11 billion you cite has not been disbursed. It was only pledged– and it was pledged over the medium term.

For 2010-2011, donors pledged about $5.6b, a billion of which was in (some previous authorized) debt relief. Of the $4.6b for actual programming, less than $1.75b has been disbursed.

The question at this point is less Where did the money go? than Where is the money?

The best resource on post-quake financing is the UN Special Envoy’s office, from which I gathered the above information. I would urge you to consult it before further articles on the Haiti reconstruction.

See http://www.haitispecialenvoy.org/downloa d/International_Assistance/2-overall-fin ancing-data.pdf
and
http://www.haitispecialenvoy.org/downloa d/International_Assistance/1-overall-fin ancing-key-facts.pdf

Posted by PABhatia | Report as abusive

Uh, Felix, you’re arguing backwards. If Haiti had actually =received= the $11B, then it might have been too much money. But, from your figures, they might have received 1/10th of that–to rebuild the entire country.

Which hasn’t been done (as DOUGC5 screams above).

It’s almost as if the US has decided that it wants the people of New Orleans to stop pointing out what a, er, poor job was done there, so they’ll keep getting worse at “rebuilding” efforts by using the Iraq “we hire based on politics, not ability or knowledge” model.

Posted by klhoughton | Report as abusive

We do have serious trouble in understanding that money :)
rudraksha

Posted by rudraksha | Report as abusive

1) What “Haitian officials” approached and wanted to know what was in it for them. Name names. Who? What? When? What are you? A reporter or a rumor monger?

2) Haiti has never had an outbreak of cholera in its history.

3) The cholera did not occur in the camps in the capital of PaP, it happened in the countryside, in Haiti’s breadbasket. It has been conclusively proven in many scientific investigations (the latest was a genome study, which linked the South Asia strain of the bacteria to Nepal) that the UN/MINUSTAH brought cholera to Haiti. The cholera was spread because the Nepalese soldiers in Mirebalais dumped their feces into the Meye river, a tributary of the Artibonite river.

4) Haiti is the scene of an ongoing international crime. It’s to be expected that the worst sort of buzzards would be picking its bones clean. The NGOs supported by USAID are expected to return over 90% of the money back to Washington. This is why they are in Haiti.

Haiti is under occupation. Period. There is no freedom, human rights, sovereignty, autonomy or decision making by Haiti’s government. The U.S. and its “partners” are determined to keep real democracy out of the hands of the Haitian people.

It is a stupid decision on many levels, because every upcoming or anticipated disaster, calamity and mismanagement of resources…etc will be and is the direct responsibility of those who have imposed detrimental trade policies that have robbed Haiti of the ability to feed its people, that have sponsored coups, fraudulent elections, brought disease, the entire globe’s occupying armies to play their war games, the multinational exploiters of Haiti’s wealth, and others who use Haiti as their piggy bank and dumping ground for all of their toxic hate, greed… Furthermore, they take the responsibility for making Haiti the ground zero for sexual predators of every base/perverted sexual nature imaginable.

Posted by thezenhaitian | Report as abusive

How The Government Used Our Money In Haiti: Part II

“The only aid mechanism devoted specifically to rebuilding rather than relief is the “Office of Transition Initiatives.” They put Haiti’s future entirely in the hands of two contractors: Chemonics and Development Alternatives, Inc. (DAI)[3].

‎”Chemonics raises eyebrows for multiple reasons. First, it’s a subsidiary of ERLY Industries, which also owns American Rice. Since the 1980s, American Rice captured half of the Haitian rice market, a shift that Bill Clinton recently admitted was the reason Haiti can no longer feed itself. Moreover, the agricultural program it runs, which revolves around distributing hybrid Monsanto seed, is likely to jeopardize the future of Haiti’s agricultural system.

DAI, World Vision, and CHF International have also all been the subject of media scrutiny for their activities both in and out of Haiti.

The Center for Economic and Policy Research described DAI as having a “questionable past” of putting political objectives above humanitarian goals. Last year, World Vision came under fire for using “discredited” aid practices by aid critic Bill Easterly. Finally, CHF International’s spending habits were labeled “ostentatious” in a feature that also contained a confession from CHF’s field director that the organization has no experience in the role it’s filling in Haiti.”

Posted by thezenhaitian | Report as abusive

http://en.wikipedia.org/wiki/Tied_aid
Tied aid is foreign aid that must be spent in the country providing the aid (the donor country) or in a group of selected countries. A developed country will provide a bilateral loan or grant to a developing country, but mandate that the money be spent on goods or services produced in the selected country.

Haiti: Where Did The Money Go? Episode 3
http://www.youtube.com/watch?v=pa7CUhSrA Uc

Posted by thezenhaitian | Report as abusive