Corporate Welfare in Haiti
Haiti, having the lowest wages in the entire Western Hemisphere,
offers a very enticing environment to U.S. corporations intending
to set up plants overseas. Such companies as JCPenney, Disney,
and Sears actually search for Third World countries characterized
by high unemployment and poverty. In addition, they seek out those
governments which have weak labor ministries, offer financial
incentives, and are willing to meet infrastructural demands of
corporations. Such concessions granted by the host government
are called corporate welfare. Whereas corporations receive vast
incentives to set up plants in Haiti, and, in the case of Disney,
can even afford to pay their top CEO $97,000 an hour, returns
to the Haitian economy are minimal, and working and living standards
of Haitian people, whose wages are generally below the minimum
of thirty cents an hour, steadily decline.
How is it that exploitation of workers and preferential treatment
of investors became the norm in Haiti? In order to discuss the
complex answers to this questions, it is necessary to first emphasize
that the realities of (usually Third World) worker exploitation
for the benefit of the few is not a naturally-occurring phenomenon;
rather, it has been created through a complex and historically-grounded
process of supplanting local production of the host country with
imports, maintaining low wages, and operating under a lack of
regulation. In Haiti, this process involves the United States
and Haitian governments, multinational corporations, Haitian elites,
and international financial institutions (IFIs), such as the World
Bank and the International Monetary Fund (IMF).
IFI Strategy: Low-wage, Export-oriented
For over a decade, the World Bank and IMF have insisted on a
low-wage strategy as a means of attracting foreign investment
and have both designed and supported policies that restrict wages.
In the early 1980s, the World Bank proposed a strategy to develop
the export potential of both agro-industry and the country's assembly
industry, which involved marginal hillside lands being planted
with coffee or cacao, and large tracts of flat and potentially
more productive land being re-oriented toward the production of
other export crops. Displaced peasants would flock to Port-au-Prince,
forming a large labor pool for assembly industries. At the same
time, new trade regulations, tax holidays, credit funds, technical
assistance projects, and infrastructure services were established
to support the assembly sector, already aided by the continued
suppression of worker rights and wages.
Successes: Benefits to U.S. Investors and Haitian Elites
The narrow strategy to increase Haiti's exports and tie its
economy to the U.S. market was quite successful. By 1985, for
instance, the assembly sub-sector generated more than half of
the country's industrial exports and earned one-quarter of its
foreign exchange.
The World Bank and IMF's broader strategy of using foreign investment
and exports as an engine for development, however, was an unmitigated
failure. Throughout the 1980s, food production continued to fall,
private investment consisted almost exclusively of residential
construction, the assembly sector remained stagnant, and the value
of agricultural exports dropped due to declines in the international
price of coffee. The purchasing power of wages in 1985 was less
than in 1970. Moreover, the value added from assembly-industry
exports is very small; for instance, in 1989 apparel exports were
worth a real value of only U.S. $23.1 million, according to the
U.S. Commerce Department. This is due to the fact that goods to
be assembled were shipped from the United States, pieced together,
and shipped out again, and few, if any, Haitian goods were used
in the process. In addition, much of the tax-free profits made
from the assembly sector are repatriated by U.S. investors, not
reinvested in Haiti.
Real wages in Haiti have been more than cut in half during the
decade of the 1980s, reaching U.S. 25 cents an hour without benefits
in 1989. A full-time minimum wage salary provided less than sixty
percent of a family's basic needs (food, shelter, education) in
Port-au-Prince.
The 1990s: A New Era?
The election of a populist government in 1990 brought with it
opportunities for addressing the root causes of poverty never
before seen in Haiti. Soon after taking office, Jean-Bertrand
Aristide's administration made three proposals for economic reform
designed to benefit the poor: the imposition of price controls
on basic foodstuffs; the raising of the hourly minimum wage to
a combined cash and benefit total of U.S. $.75 per hour; and the
enforced payment of legally required social security taxes. Aristide
also made major strides in improving government efficiency and
structures, which drew pledges of U.S. $511 million in grants
and concessionary loans from the IFIs, USAID, and other bilateral
and multilateral donors. However, despite new realities and opportunities,
donors conditioned development assistance on the adoption of the
same old structural adjustment policies, which included maintaining
poverty-level wages, further opening the Haitian economy, and
stepped-up incentives to the export sector.
Submitting to structural adjustment conditionality was again
the quid pro quo for U.S. support for Aristide's return to Haiti
after three years of bloody and destructive rule by a military
junta between 1991 and 1994. And once again, wage restraint was
a condition for receiving IFI support. In 1995, the IMF happily
noted that the legal minimum wage established in June 1995 of
36 gourdes in reality "falls well short of the real and U.S.
dollar equivalent minimum wage of ten years ago, and should not
affect the good prospects for the export sector." But, because
the Haiti Labor Code mandates wage increases to keep up with inflation,
the IMF wants to take no chances; it is providing part of the
technical assistance to the Haitian government to revise the Labor
Code to support the low-wage strategy of the IFIs. The IMF has
also mandated a three-year government wage bill freeze. This means
that in order to increase the wages of its teachers, nurses, and
other state employees, large numbers of people will first have
to be fired, so that the total wage bill does not increase. This
pits worker against worker and severely and deliberately undermines
workers' rights of association and collective bargaining.
In contrast to the labor-busting IFI policies, investors benefit
greatly from a whole range of subsidies promoted and supported
by the IFIs. Under the current IMF program, tax holidays would
be maintained for a period of 5-10 years. Under the agreement,
the government is committed to "assist the assembly industry
to stay competitive by ensuring adequate electrical supply."
Toward this end, the Government of Haiti (GOH) will invest U.S.
$73 million from the Inter-American Development Bank (IDB) and
the European Investment Bank in electrical plant, hardware, and
repairs. In addition, as part of its loan agreements with the
Bank and Fund, the GOH has reduced the telephone, electricity
and customs fees, and tax incentives for foreign investors. At
the same time, the government has removed food and fuel subsidies
for the Haitian poor and increased their utility fees.
A Call to Action
Decades of public investments and policy manipulation by the
World Bank, the IMF, and the U.S. government have deliberately
created an environment where the exploitation of workers is hailed
as an incentive to invest in Haiti. U.S. multinational corporations,
such as Disney, have apparently found that incentive compelling.
Fifty Years is Enough is calling upon U.S. investors in Haiti
to reject exploitation as a means of increasing profit. The World
Bank, IMF, U.S. government, and responsible U.S. investors should
ensure that, at a minimum, companies operating directly in Haiti
or through sub-contractors respect Haitian laws regarding minimum
wages, working conditions, benefits, and the right of Haitian
workers to organize, to negotiate a collective contract, and to
work for better wages and working conditions over time. Within
such a context of respect for the rights of Haitian workers, foreign
investment could be an important source of employment for Haitian
workers.
Information in this briefing is drawn from a Development
GAP report entitled "Democracy Undermined, Economic Justice
Denied: Structural Adjustment and the Aid Juggernaut in Haiti"
by Lisa McGowan, January, 1997 and from "The U.S. in Haiti:
How to Get Rich on 11 Cents an Hour", by the National Labor
Committee, January, 1996
|