Saving Haiti's Destitute from Jeffrey Sachs
Last week's tragic earthquake in Haiti not surprisingly generated a great deal of commentary about the proper response to the impoverished nation's miseries, most of it concerning how much money our government might pledge in order to supposedly reverse the country's descent into chaos. The Washington Post's editorial board wasn't particularly unique in calling for the immediate transfer of $100 million in new funds ($3 billion has already been sent over the last two decades) that would merely comprise a "slice of American relief."
Least surprising of all were the solutions offered by global poverty insider Jeffrey Sachs. Always armed with worthless platitudes about how to solve the very privation that continues to elevate his status among the world's alleged deep thinkers, Sachs asserted without a hint of irony in the Post that we'll "have to do things differently than in the past" on his way to asking for the same financial aid that has never worked; in this case disbursements to Haiti of $2 to $3 billion per year "over the next five years."
In an op-ed that never once mentioned private investment of any kind, the hubristic Sachs paid lip service to "a new approach" in a piece indistinguishable from all his failed musings of the past on how to eradicate human suffering. Rather than accept the recycled droolings of one of worldwide poverty's greatest beneficiaries, it should at least be hoped that this time, Haiti's destitute are spared the advice of Jeffrey Sachs.
Sachs asserts that "Haiti needs a bank account to fund its survival and reconstruction", and it's there that he shows most plainly how very blind he is to what drives individual productivity. To simplify what Sachs apparently can't see, humans are most economically creative when they have unfulfilled wants, and least creative when do-gooders blunt their natural survival instincts with handouts.
In the U.S. we see the above very clearly. Be they beneficiaries of welfare, or inheritors of large fortunes, those who are given money while being asked for nothing in return frequently lead lives marked by indolence. It is when our needs are unmet that we act in productive, economy-enhancing ways so that we can trade our labor for the things we desire. In Sachs's case he puts the cart before the proverbial horse when it comes to aid that will seemingly only increase if Haitians do as they're implicitly told - as in remain poor.
To fund these disbursements, Sachs asserts that "the obvious way" is to impose "special taxes on Wall Street bonuses" which he sees as "utterly unjustified." It is there that Sachs shows yet again how unequal his thinking is to the problems faced in Haiti, and by the poor more generally.
Not excusing for one second the past bailouts of Wall Street firms that were certainly unjustified, and which have and will continue to weaken our nation's symbol of finance, it is Wall Street's historical model of finance that provides true solutions to the misery in Haiti. In short, incentives matter.
As opposed to financial aid which comes without strings attached, and which increases in concert with rising poverty, Americans are generally the lucky recipients of investment which does come with strings attached. The economic activity of the average American is happily rated by harsh, greedy investors who, if their return projections are not met, starve the ineffective of capital.
Looking at Haiti in comparison to the investment magnet that is the United States, the alleged "trade deficit" that supposedly weighs on our economic growth is in truth a signal that investors see the U.S. as the best place to put what is limited capital to work. The more we achieve, the more greedy, return-oriented investment we attract. Sachs seeks more money for Haiti as though money itself will finally solve what it never has. But as evidenced by the persistent poverty within countries that accept a lot of aid, the incentives are backwards; as in the more failure and poverty within aid-dependent countries, the more free, unaccountable money that flows their way.
This is important when we consider Sachs's description of "squalid housing" in Haiti "built of adobe or masonry without reinforcements, perched precariously on hillsides." The question there is why we should be surprised. Indeed, while Sachs clearly decries Wall Street "greed", it is greed among private investors that ensures housing that is built to last. Those who might build living spaces that would collapse in response to an earthquake whose impact failed to bring down Northridge (CA) in 1994 would be quickly relieved of the funds necessary to build at all.
Sadly, that's not the case in a country like Haiti, and it's precisely that way thanks to the horrific advice offered up over the years by Sachs, and people of his ilk. It's a human tautology that we're never as careful spending money not our own, and that's why government investment and spending in the U.S. (think Amtrak, HUD and the IRS) is never as efficient as private-sector investment which quickly dries up if its recipients fail.
Looking at this in terms of Haiti, the country's collapse is certain evidence of too much aid crowding out private investment. Do-gooders inside and outside government will no doubt be patting themselves on the back for the billions of dollars certain to arrive on Haiti's shores in perpetuity, but their smug countenance is unwarranted. The aid ensures more of the unaccountable kind of "investment" that makes future "natural disasters" within the country's borders a certainty.
Sachs concludes that "Haiti will suffer a quick death of hunger and disease unless we act", but the reality is that Haiti and other alleged beneficiaries of Sachs's tragic advice have been dying for years thanks to a false compassion that ignores why people are productive, and why businesses serving profit-oriented masters rarely build that which doesn't crumble. Sachs would like to weaken Wall Street in order to set Haiti up for failure as far as the eye can see, but the simple truth is that Haiti needs a lot more Wall Street, and a lot less of Jeffrey Sachs.