Capital Punishment

Some days won't end ever and some days pass on by
I'll be working here forever--at least until I die
--Huey Lewis and the News

Nice article by Jeff Tucker on the impoverished condition in Haiti. Why is there little wealth in Haiti? Trade is fluid. The people are hard working. How can it be that these people are barely getting by?

Haiti lacks capital. Capital is income that is not consumed. Instead, it is saved and invested in assets that improve productivity. Productive assets lengthen the supply chain as work becomes more specialized. Specialization improves efficiency and drives value toward the market.

Hayek (1941) observed that, although capital in a nonpermanent resource, it must be maintained over a long period of time to provide a continuing stream of income. As such, owners of capital must hire workers, replace parts, and generally maintain operations through extended periods of production.

It is the stability and sophistication of capital that differentiates developed from under-developed countries.

Haiti's government is a primary reason why the country does not possess much capital. The regime has a long record of appropriating wealth wherever it emerges. Obviously, such a situation is not conducive to internal saving or foreign direct investment. This is not an attractive place for capital.

As such, Haiti's government is 'keeping prosperity at bay,' notes Tucker.

Nice observation to end it:

"Now, to be sure, there are plenty of Americans who are firmly convinced that we would all be better off if we grew our own food, bought only locally, kept firms small, eschewed modern conveniences like home appliances, went back to using only natural products, expropriated wealthy savers, harassed the capitalistic class until it felt itself unwelcome and vanished. This paradise has a name, and it is Haiti."

References

Hayek, F.A. 1941. The pure theory of capital. Norwich: Jarrold and Sons.